Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
1. ORGANIZATION AND NATURE OF BUSINESS
Iconic Brands, Inc., formerly Paw Spa, Inc. (“Iconic Brands”), was incorporated in the State of Nevada on October 21, 2005. Our plan was to provide mobile grooming and spa services for cats and dogs. Our services were going to include bathing, hair cutting and styling, brushing/combing, flea and tick treatments, nail maintenance and beautification, ear cleaning, teeth cleaning, hot oil treatments, and massage. We did not have any business operations and failed to generate any revenues. We abandoned this business, as we lacked sufficient capital resources. On June 10, 2009, the Company acquired Harbrew Imports, Ltd. (“Harbrew New York”), a New York corporation incorporated on September 8, 1999 which was a wholly owned subsidiary of Harbrew Imports, Ltd. Corp. (“Harbrew Florida”), a Florida corporation incorporated on January 4, 2007. On the Closing Date, pursuant to the terms of the Merger Agreement, the Company issued to the designees of Harbrew New York 27,352,301 shares of our Common Stock at the Closing, or approximately 64% of the 42,510,301 shares outstanding subsequent to the merger. After the merger, Harbrew New York continued as the surviving company under the laws of the state of New York and became the wholly owned subsidiary of the Company.
In anticipation of the merger between Iconic Brands, Inc. and Harbrew New York, on May 1, 2009 the Board of Directors and a majority of shareholders of Harbrew New York approved the amendment of its Articles of Incorporation changing its name to Iconic Imports, Inc. (“Iconic Imports”). On June 22, 2009, this action was filed with the New York State Department of State.
Prior to the merger on June 10, 2009, Iconic Brands had no assets, liabilities, or business operations. Accordingly, the merger has been treated for accounting purposes as a recapitalization by the accounting acquirer Harbrew New York/Iconic Imports and the financial statements reflect the assets, liabilities, and operations of Harbrew New York/Iconic Imports from its inception on September 8, 1999 to June 10, 2009 and are combined with Iconic Brands thereafter. Iconic Brands and its wholly-owned subsidiary Harbrew New York/Iconic Imports are hereafter referred to as the “Company”.
The Company was a brand owner of self-developed alcoholic beverages. Furthermore, the Company imported, marketed and sold these beverages throughout the United States and globally.
Effective June 10, 2009, prior to the merger, Harbrew Florida affected a 1-for-1,000 reverse stock split of its common stock, reducing the issued and outstanding shares of common stock from 24,592,160 to 24,909, which includes a total of 317 shares resulting from the rounding of fractional shares. All share information has been retroactively adjusted to reflect this reverse stock split.
On August 20, 2010, the Company and Seven Cellos LLC terminated a License Agreement relating to the distribution of an alcoholic beverage known as “Danny DeVito’s Premium Limoncello”. In the year ended December 31, 2010, this brand accounted for approximately 96% of total sales.
On August 20, 2010, Capstone Capital Group I, LLC, a holder of a Promissory Note with a then remaining balance of approximately $233,000, delivered a Formal Notice of Default to the Company demanding payment of the balance on or before September 1, 2010. On September 16, 2010, Capstone delivered a Notification of Disposition of Collateral to the Company notifying the Company of its attachment of the Collateral (including cash, accounts receivable, inventories, equipment, and contract rights) and its intent to sell the Collateral to the highest qualified bidder in a public sale on September 28, 2010. On September 28, 2010, Capstone acquired the Collateral in exchange for the Promissory Note at the public auction sale; there were no other bidders.
On September 14, 2010, the Second District Court of Suffolk County New York issued a Warrant of Eviction removing the Company from its Lindenhurst, New York office and the Company ceased its business operations.
On September 23, 2011, Iconic Imports, Inc. (“Imports”), a wholly owned subsidiary of Iconic Brands, Inc., filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. On March 28, 2013, the Company was advised by counsel that the case (Case No. 8-11-76814) was closed March 13, 2013 and that the claims scheduled were discharged. See Notes 6 and 8.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as of March 31, 2013, the Company had negative working capital of $381,320 and a stockholders’ deficiency of $2,214,526. Further, from inception to March 31, 2013, the Company incurred losses of $11,170,737. These factors create substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition by reorganizing and acquiring a new business. However, there is no assurance that the Company will be successful in accomplishing this objective. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
(b) Interim Financial Statements
The unaudited financial statements as of March 31, 2013 and for the three months ended March 31, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments necessary to present fairly the financial position as of March 31, 2013 and the results of operations and cash flows for the periods ended March 31, 2013 and 2012. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2013. The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2012 included in our Form 10-K filed May 20, 2013.
(c) Net Income (Loss) per Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options, warrants, and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.
The following table provides a reconciliation of the basic and diluted net income per common share computation for the three months ended March 31, 2013:
Numerator:
|
|
|
|
Net income – basic
|
|
$
|
5,321,992
|
|
Add: Interest expense on convertible notes
|
|
|
10,069
|
|
Net income – diluted
|
|
$
|
5,332,061
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Weighted average shares outstanding – basic
|
|
|
54,361,412
|
|
6% convertible notes and accrued interest
|
|
|
3,533,200,000
|
|
12% convertible notes and accrued interest
|
|
|
9,487,000,000
|
|
Series B preferred stock owned by Capstone Capital Group I, LLC
|
|
|
50,922,389
|
|
Warrants
|
|
|
1,000,000
|
|
Weighted average shares outstanding - diluted
|
|
|
13,126,483,801
|
|
(d) Recently Issued Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.
(e) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
3. DEBT
Debt relating to continuing operations:
Debt relating to Iconic Brands, Inc. consisted of the following at March 31, 2013 and December 31, 2012:
|
|
|
March 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
Convertible promissory note, interest at 7%, due September 13, 2014, net of
|
|
|
|
|
|
|
|
unamortized discount of $0 and $28,131, respectively
|
(A)
|
|
$
|
-
|
|
|
$
|
71,869
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable, interest at 0%, due on demand
|
(C)
|
|
|
144,112
|
|
|
|
137,540
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory note, interest at 6%, due June 30, 2010
|
(B)
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes, interest at 12%, due June 30, 2010
|
(B)
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory note, interest at 8% (default rate of 22%), due
|
|
|
|
|
|
|
|
|
|
February 7, 2011 (in default)
|
(A)
|
|
|
-
|
|
|
|
56,500
|
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory note, interest at 9%, due January 31, 2014, net of
|
|
|
|
|
|
|
|
|
|
unamortized discount of $1,308 at March 31, 2013
|
(D)
|
|
|
15,192
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
259,304
|
|
|
|
365,909
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion of debt
|
|
|
|
(259,304
|
)
|
|
|
(294,040
|
)
|
|
|
|
|
|
|
|
|
|
|
Long term debt
|
|
|
$
|
-
|
|
|
$
|
71,869
|
|
(A) The $100,000 face value of the 7% convertible note outstanding at December 31, 2012 was convertible into shares of the Company’s common stock at a price of $0.50 per share. The $56,500 face value of the 8% convertible note outstanding at December 31, 2012 was convertible into shares of the Company’s common stock at a variable conversion price equal to 60% of the Market Price, as defined. As a result of the discharge of the claims scheduled in the voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code on March 13, 2013 (see Notes 6 and 8), we have reversed this debt and recognized a gain from the United States Bankruptcy Court Discharge of Indebtedness (included in income from discontinued operations).
(B) These promissory notes were issued to the same entity lender on April 15, 2010. The notes provide that upon an event of default that is not cured within the allotted time, the holder shall have the option to convert the outstanding principal and interest into shares of common stock at a conversion price of $0.00001 per share. The Company has defaulted on all three notes and has failed to cure the defaults within the time allotted specified in the note default provisions.
While the Company has not received any notice or indication from the lender of its intention to convert the $100,000 debt (or a portion thereof), if the lender does elect to convert the $100,000 of debt and related accrued interest at March 31, 2013 at the $0.00001 per share conversion rate it would require the Company to issue 13,020,200,000 common shares to this lender (or over 99% of the 13,074,561,412 shares of Company Common Stock outstanding after this lender’s conversion). However, by virtue of his ownership of the 1 share of Series A Preferred Stock, Mr. DeCicco would retain voting control of the Company.
Also, the notes provided for the grant of a total of 1,200,000 warrants exercisable at an exercise price of $0.20 per share for 3 years. The $51,600 fair value of the warrants (valued using the Black-Scholes option pricing model and the following assumptions: stock price of $0.092 per share, exercise price of $0.20 per share, term of 3 years, risk-free interest rate of 1.62%, and expected volatility of 100%) and the remaining $45,400 intrinsic value of the beneficial conversion feature arising from the default provisions in the three promissory notes due to this lender described in the two preceding paragraphs (the total debt discounts are limited to the amount of proceeds allocated to the convertible instrument) were recorded initially as a debt discount and amortized as interest expense over the term of the notes ended June 30, 2010.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
(C) For the periods presented, two entity lenders (one holding $134,112 of the 0% loans payable aggregating $144,112 and one holding $10,000 of the 0% loans payable aggregating $144,112, the $30,000 6% convertible promissory note and the $70,000 12% convertible promissory notes at March 31, 2013) paid legal, audit and accounting, and consulting fees on behalf of the Company as follows:
|
|
Three Months ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Legal fees
|
|
$
|
2,500
|
|
|
$
|
5,270
|
|
|
$
|
27,500
|
|
Audit and accounting fees
|
|
|
2,500
|
|
|
|
7,500
|
|
|
|
17,500
|
|
Company’s stock transfer agent
|
|
|
1,872
|
|
|
|
10,432
|
|
|
|
-
|
|
Consulting fees
|
|
|
-
|
|
|
|
2,038
|
|
|
|
4,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,872
|
|
|
$
|
25,240
|
|
|
$
|
49,050
|
|
The amounts advanced bear no interest and are due on demand, but are not evidenced by a promissory note.
(D) On February 14, 2013, the Company issued a Convertible Promissory Note in the amount of $15,000 in exchange for the lender's payment of legal and audit and accounting fees totaling $15,000 on behalf of the Company. The Note bears interest at 9%, is due January 31, 2014, and is convertible at the holder's option into Company common stock at a conversion price of $.02 per share (or a total of 750,000 shares of common stock). Additionally, in consideration for making this loan, the Company shall pay to the holder a Lender Fee equal to 10% of the original principal amount ($1,500) of this Note on the Maturity Date, which is also convertible at a conversion price of $.02 per share (or a total of 75,000 shares of common stock).
At March 31, 2013, the debt relating to Iconic Brands, Inc. is due as follows:
Past due
|
|
$
|
100,000
|
|
Year ending March 31, 2014
|
|
|
160,612
|
|
|
|
|
|
|
Total
|
|
|
260,612
|
|
Less debt discounts
|
|
|
(1,308
|
)
|
Net
|
|
$
|
259,304
|
|
Accrued interest payable on debt relating to Iconic Brands, Inc. consisted of:
|
|
March 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
Convertible note, interest at 7%
|
|
$
|
-
|
|
|
$
|
23,088
|
|
Convertible note, interest at 6%
|
|
|
5,332
|
|
|
|
4,889
|
|
Convertible notes, interest at 12%
|
|
|
24,877
|
|
|
|
22,805
|
|
Convertible note, interest at 8% (default rate of 22%)
|
|
|
-
|
|
|
|
26,451
|
|
Convertible note, interest at 9%
|
|
|
170
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,379
|
|
|
$
|
77,233
|
|
Debt relating to discontinued operations:
On September 23, 2011, Iconic Imports, Inc. (“Imports”), a wholly owned subsidiary of Iconic Brands, Inc., filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. On March 28, 2013, the Company was advised by counsel that the case (Case No. 8-11-76814) was closed March 13, 2013 and that the claims scheduled were discharged.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
Debt relating to the Company’s wholly-owned subsidiary Iconic Imports consisted of the following at March 31, 2013 and December 31, 2012:
|
|
March 31,
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Promissory note, interest at 20%, due January 29, 2009 (in default)
|
|
$
|
-
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes, interest at 10%, due October 25, 2007
|
|
|
|
|
|
|
|
|
to November 27, 2007 (in default) (A)
|
|
|
-
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes, interest at 13%, due May 31, 2010 (in default) (B)
|
|
|
-
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
|
Due Donald Chadwell (5% stockholder at December 31, 2012), interest at 0%,
|
|
|
|
|
|
|
|
|
no repayment terms
|
|
|
-
|
|
|
|
763,000
|
|
|
|
|
|
|
|
|
|
|
Due Richard DeCicco (officer, director and 29% stockholder at December 31,
|
|
|
|
|
|
|
|
|
2012) and affiliates, interest at 0%, no repayment terms
|
|
|
-
|
|
|
|
714,338
|
|
|
|
|
|
|
|
|
|
|
Convertible notes, interest at 7% (default rate of 14%), due August 27, 2012
|
|
|
|
|
|
|
|
|
to November 27, 2012 (in default) (A)
|
|
|
-
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
|
|
2,022,338
|
|
|
|
|
|
|
|
|
|
|
Less current portion of debt
|
|
|
-
|
|
|
|
(545,000
|
)
|
|
|
|
|
|
|
|
|
|
Long term debt
|
|
$
|
-
|
|
|
$
|
1,477,338
|
|
(A) $225,000 total face value of convertible notes outstanding at December 31, 2012 was convertible into shares of the Company’s common stock at a price of $0.50 per share.
(B) The 13% promissory notes specify that the loan proceeds were for the purpose of purchasing containers of Danny DeVito’s Premium Limoncello and that the holder would have been repaid the principal from the receivables of the sales of the Danny DeVito Premium Limoncello product as they were collected by the Company.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
Accrued interest payable on debt relating to Iconic Imports, Inc (included in current liabilities of discontinued operations in the accompanying consolidated balance sheets) consisted of:
|
|
March 31,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
Convertible note, interest at 7%
|
|
$
|
-
|
|
|
$
|
69,877
|
|
Promissory note, interest at 20%
|
|
|
-
|
|
|
|
70,080
|
|
Promissory notes, interest at 13%
|
|
|
-
|
|
|
|
87,736
|
|
Convertible promissory notes, interest at 10%
|
|
|
-
|
|
|
|
47,270
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
274,963
|
|
4. STOCKHOLDERS’ EQUITY
On June 10, 2009, pursuant to the terms of the Merger Agreement, the Company issued to the designees of Harbrew New York 27,352,301 shares of Common Stock at the Closing. Of this amount:
1)
|
24,909 shares were issued to Harbrew Florida stockholders,
|
2)
|
19,634,112 shares valued at $1,963,411 were issued to Company management and employees for services, including 15,972,359 shares to the Company’s Chief Executive Officer, 100,000 shares to the Company’s Chief Financial Officer, and 2,586,753 shares to Donald Chadwell,
|
3)
|
2,086,973 shares valued at $208,697 were issued to Danny DeVito and affiliates for services,
|
4)
|
4,606,307 shares were issued to noteholders in satisfaction of $2,125,625 of debt and $177,529 of accrued interest, and
|
5)
|
1,000,000 shares were issued to Capstone as part of the Termination Agreement.
|
Also, pursuant to the terms of the Merger Agreement, the Company issued 1 share of Series A Preferred Stock valued at $100,000 to the Company’s Chief Executive Officer for services and 916,603 shares of Series B Preferred Stock valued at $1,833,206 to Capstone as part of the Termination Agreement.
The one share of Series A Preferred Stock entitles the holder to two votes for every share of Common Stock Deemed Outstanding and has no conversion or dividend rights. Each share of the Series B Preferred Stock has a liquidation preference of $2.00 per share, has no voting rights, and is convertible into Common Stock at the lower of (1) $2.00 per share or, (2) the volume weighted average price per share (“VWAP”) for the 20 trading days immediately prior to the Conversion Date. The Series B Preferred Stock has been classified as a liability (pursuant to ASC 480-10-25-14(a)) since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
On January 18, 2011, the Company issued 1,842,105 shares of Iconic common stock to Asher Enterprises, Inc. (“Asher”) pursuant to Asher’s Notice of Conversion to convert $3,500 debt at a price of $0.0019 per share, resulting in the reduction of debt due to Asher from $60,000 to $56,500.
Of the 54,361,412 shares of common stock issued and committed to be issued at March 31, 2013 and December 31, 2012, 4,806,350 shares were committed to be issued but not yet issued, as follows:
|
|
Number of Shares
|
|
April 19, 2010 satisfaction of $455,635 debt in exchange for Company commitment to issue to the respective 5 creditors a total of 4,556,350 shares of its common stock and 4,556,350 three year warrants exercisable at $0.20 per share
|
|
|
4,556,350
|
|
|
|
|
|
|
April 19, 2010 commitment to issue 250,000 shares of its common stock to a noteholder in consideration of the noteholder’s extension of the due date from March 31, 2010 to May 31, 2010 of a $110,000 promissory note
|
|
|
250,000
|
|
|
|
|
|
|
Total
|
|
|
4,806,350
|
|
5. INCOME TAXES
No provision for income taxes was recorded in the three months ended March 31, 2013 and 2012 since the Company incurred net losses in these periods.
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of March 31, 2013 will be realized. Accordingly, the Company has maintained a 100% valuation allowance against the deferred tax asset in the consolidated financial statements at March 31, 2013. The Company will continue to review this valuation allowance and make adjustments as appropriate.
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
March 31,
2013
|
|
|
March 31,
2012
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
3,798,051
|
|
|
$
|
5,556,669
|
|
Less: variation allowance
|
|
$
|
3,798,051
|
|
|
$
|
5,556,669
|
|
Net provision for Federal income taxes
|
|
$
|
0
|
|
|
$
|
0
|
|
The Company reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination resulting in an uncertain tax position. The Company did not have any material unrecognized tax benefit at March 31, 2013. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the year ended December 31, 2012, the Company recognized no interest and penalties.
The Company is subject to income tax in the U.S., and certain state jurisdictions. The Company has not been audited by the U.S. Internal Revenue Service, or any states in connection with income taxes. The periods from December 31, 2004 to December 31, 2012 remain open to examination by the U.S. Internal Revenue Service, and state authorities. In addition, federal and state tax authorities can generally reduce our net operating loss (but not create taxable income) for a period outside of the statue of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statue of limitations. The Company has not filed its 2011 tax return.
6. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is party to a variety of legal proceedings brought by suppliers and creditors. We accrue for these items as losses become probable and can be reasonably estimated. Most of the amounts sought have already been provided for through previous charges to operations and were included in Company liabilities at December 31, 2012.
Most of the amounts sought relate to our subsidiary Iconic Imports, Inc. (“Imports”). We believe that those claims applicable to Imports have been discharged as a result of the closure of Imports’ Petition for Relief under Chapter 7 of the United States Bankruptcy Code on March 13, 2013 (see Notes 1 and 8). As a result, we have reversed those loss accruals (as well as all other liabilities) applicable to Imports (and recognized a Gain from United States Bankruptcy Court Discharge of Indebtedness of $5,366,639) in the three months ended March 31, 2013.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
7. STOCK OPTIONS AND WARRANTS
A summary of stock option and warrant activity for the years ended December 31, 2011 and 2012 and for the three months ended March 31, 2013 follows:
|
|
Stock
|
|
|
|
|
|
|
Options
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
1,300,000
|
|
|
|
20,722,184
|
|
|
|
|
|
|
|
|
|
|
Granted and Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/expired/cancelled
|
|
|
(300,000
|
)
|
|
|
(1,400,000
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
1,000,000
|
|
|
|
19,322,184
|
|
|
|
|
|
|
|
|
|
|
Granted and issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/expired/cancelled
|
|
|
-
|
|
|
|
(5,162,500
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2012
|
|
|
1,000,000
|
|
|
|
14,159,684
|
|
|
|
|
|
|
|
|
|
|
Granted and issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/expired/cancelled
|
|
|
-
|
|
|
|
(385,000
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2013
|
|
|
1,000,000
|
|
|
|
13,774,684
|
|
Stock options outstanding at March 31, 2013 consist of:
Date
|
|
|
Number
|
|
|
Number
|
|
|
Exercise
|
|
|
Expiration
|
|
Granted
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Price
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2008
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
$
|
0.10
|
(a)
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
(a) Estimated since exercise price is to be determined based on future stock price.
The aggregate intrinsic value of the 1,000,000 fully vested stock options at March 31, 2013 is $0.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
Warrants outstanding at March 31, 2013 consist of:
Date
|
|
Number
|
|
|
Number
|
|
|
Exercise
|
|
Expiration
|
Issued
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Price
|
|
Date
|
June 10, 2008
|
|
|
27,500
|
|
|
|
27,500
|
|
|
$
|
1.00
|
|
June 10, 2013
|
June 10, 2008
|
|
|
27,500
|
|
|
|
27,500
|
|
|
$
|
1.50
|
|
June 10, 2013
|
June 10, 2008
|
|
|
25,000
|
|
|
|
25,000
|
|
|
$
|
1.00
|
|
December 10, 2013
|
June 10, 2008
|
|
|
25,000
|
|
|
|
25,000
|
|
|
$
|
1.50
|
|
December 10, 2013
|
June 11, 2008
|
|
|
30,000
|
|
|
|
30,000
|
|
|
$
|
1.00
|
|
December 11, 2013
|
June 11, 2008
|
|
|
30,000
|
|
|
|
30,000
|
|
|
$
|
1.50
|
|
December 11, 2013
|
July 2, 2008
|
|
|
110,000
|
|
|
|
110,000
|
|
|
$
|
1.00
|
|
January 2, 2014
|
July 2, 2008
|
|
|
110,000
|
|
|
|
110,000
|
|
|
$
|
1.50
|
|
January 2, 2014
|
July 23, 2008
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
1.00
|
|
January 23, 2014
|
July 23, 2008
|
|
|
50,000
|
|
|
|
50,000
|
|
|
$
|
1.50
|
|
January 23, 2014
|
August 11, 2008
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
$
|
1.00
|
|
August 11, 2013
|
August 12, 2009
|
|
|
400,000
|
|
|
|
400,000
|
|
|
$
|
1.00
|
|
August 12, 2014
|
August 12, 2009
|
|
|
533,334
|
|
|
|
533,334
|
|
|
$
|
1.50
|
|
August 12, 2014
|
August 19, 2009
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
$
|
0.01
|
|
August 19, 2014
|
August 19, 2009
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
$
|
1.00
|
|
August 19, 2014
|
September 14, 2009
|
|
|
200,000
|
|
|
|
200,000
|
|
|
$
|
1.00
|
|
September 14, 2014
|
September 14, 2009
|
|
|
200,000
|
|
|
|
200,000
|
|
|
$
|
1.50
|
|
September 14, 2014
|
January 6, 2010
|
|
|
100,000
|
|
|
|
100,000
|
|
|
$
|
0.22
|
|
January 6, 2015
|
January 13, 2010
|
|
|
100,000
|
|
|
|
100,000
|
|
|
$
|
0.23
|
|
January 13, 2015
|
February 8, 2010
|
|
|
500,000
|
|
|
|
500,000
|
|
|
$
|
1.00
|
|
February 8, 2015
|
February 8, 2010
|
|
|
500,000
|
|
|
|
500,000
|
|
|
$
|
1.50
|
|
February 8, 2015
|
March 16, 2010
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
$
|
0.25
|
|
March 16, 2015
|
April 15, 2010
|
|
|
1,200,000
|
|
|
|
1,200,000
|
|
|
$
|
0.20
|
|
April 15, 2013
|
April 19, 2010
|
|
|
4,556,350
|
|
|
|
4,556,350
|
|
|
$
|
0.20
|
|
April 19, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,774,684
|
|
|
|
13,774,684
|
|
|
|
|
|
|
8. DISCONTINUED OPERATIONS
On September 14, 2010 (see Note 1), the Company ceased operations of the Company’s wholly owned subsidiary Iconic Imports. Accordingly, the assets and liabilities and operations of Iconic Imports, Inc. have been presented as discontinued operations in the accompanying consolidated financial statements for the periods presented.
On September 23, 2011, Iconic Imports, Inc. (“Imports”), a wholly owned subsidiary of Iconic Brands, Inc., filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. On March 28, 2013, the Company was advised by counsel that the case (Case No. 8-11-76814) was closed March 13, 2013 and that the claims scheduled were discharged.
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
For the three months ended March 31, 2013 and 2012, income (loss) from discontinued operations consisted of:
|
|
2013
|
|
|
2012
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gain from United States Bankruptcy Court discharge of indebtedness
|
|
|
5,366,639
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Interest expense (including amortization of debt discounts of $0 and $3,143, respectively)
|
|
|
(13,138
|
)
|
|
|
(19,746
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision
|
|
|
5,353,501
|
|
|
|
(19,746
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
5,353,501
|
|
|
$
|
(19,746
|
)
|
Iconic Brands, Inc. and Subsidiary
(a development stage company)
Notes to Consolidated Financial Statements
March 31, 2013
(Unaudited)
The assets and liabilities of Iconic Imports at March 31, 2013 and December 31, 2012 consisted of:
|
|
2013
|
|
|
2012
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$
|
-
|
|
|
$
|
545,000
|
|
Accounts payable
|
|
|
-
|
|
|
|
1,219,768
|
|
Accrued interest payable
|
|
|
-
|
|
|
|
274,963
|
|
Other accrued expenses and other current liabilities
|
|
|
-
|
|
|
|
1,651,092
|
|
Current liabilities
|
|
|
-
|
|
|
|
3,690,823
|
|
Long – term debt
|
|
|
-
|
|
|
|
1,477,338
|
|
Total liabilities
|
|
|
-
|
|
|
|
5,168,161
|
|
|
|
|
|
|
|
|
|
|
Net liabilities
|
|
$
|
-
|
|
|
$
|
(5,168,161
|
)
|