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, 2018

Commission file number 000-53707

 
TRIDENT BRANDS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)

Nevada
 
26-1367322
(State orOther Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer 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  o  No  ☑
 
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  ☑
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑  No  ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    ☑  No  ☐

Indicate by check mark 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):

Large accelerated filer ☐
 
Accelerated filer ☐
 
Non-accelerated filer  ☐
(Do not check if a smaller reporting company)
 
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  ☑

As of March 15, 2019, the registrant had 32,311,887 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 15, 2019.




TRIDENT BRANDS INCORPORATED
FORM 10-K
For the year ended November 30, 2018
 
TABLE OF CONTENTS


   
Page
Basis of Presentation
3
Forward Looking Statements
3
     
Part I
   
     
Item 1.
Business
6
Item 1A.
Risk Factors
14
Item 1B.
Unresolved Staff Comments
20
Item 2.
Properties
20
Item 3.
Legal Proceedings
20
Item 4.
Mining Safety Disclosures
20
     
Part II
   
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
21
Item 6.
Selected Financial Data
23
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 8.
Financial Statements
27
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
27
Item 9A(T).
Controls and Procedures
27
Item 9B.
Other Information
28
     
Part III
   
     
Item 10.
Directors, Executive Officers and Corporate Governance
29
Item 11.
Executive Compensation
32
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
33
Item 13.
Certain Relationships and Related Transactions, and  Director Independence
34
Item 14.
Principal Accountant Fees and Services
34
     
Part IV
   
     
Item 15.
Exhibits
35

2

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, 2018 (“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;

·
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;

·
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;

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·
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;

4

·
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 their common stock at or above their purchase price if at all, which may result in substantial losses to you;

·
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.

5

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.

T he Company maintains a compelling portfolio of branded consumer products in the functional nutrition and dietary supplement categories under the Brain Armor® and P2N Peak Performance Nutrition® trademarks, and provides a range of private label sports nutrition items to major retailer accounts. Our products are focused on high growth category segments including performance nutrition and brain health, supported by an established contract manufacturing supply chain, strong research and development infrastructure and a solid and proactive management team, board of directors and business advisors with many years of senior experience in related fields

Corporate Legal Structure and Related Matters

Trident Brands Incorporated has five legal subsidiaries, as detailed below.


Trident Sports Nutrition Inc. is 100% owned by Trident Brands and is organized to deliver shelf ready product solutions in the active nutrition and dietary supplement segment to leading retailers for private label and control brand programs.

Brain Armor Inc. is 94.8% owned by Trident Brands and is organized to develop, market and sell a portfolio of DHA supplements under the Brain Armor® brand targeted at the cognitive health and performance segment.

Sports Nutrition Product Inc. (DBA Everlast Nutrition) is 100% owned by Trident Brands and holds an exclusive license to market and sell products in the nutritional food and supplement category under the Everlast® brand.

Trident Brands Canada Ltd. is 100% owned by Trident Brands Incorporated and holds various banking facilities, and licenses associated with the manufacturing, importation and sale of natural health and nutrition products in Canada.

Trident Brands International Ltd. is 100% owned by Trident Brands and was organized to handle the company’s international operations and sub-license trademarks and/or products in international markets.

6


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. 32,311,887 common shares were issued and outstanding as of November 30, 2018 and 32,311,887 as of March 15, 2019.

History and Evolution 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 with a focus on nutritional products and ingredients.  We are currently in the product introduction and commercialization phase of this 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

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® World’s Boxing Headquarters Corp., International Brand Management & Licensing, to market and sell products in the nutritional foods and supplements category under the Everlast® 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.

On 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.

7

On May 5, 2014, we appointed Robert Campbell as a Special Advisor.

Also on May 5, 2014, we granted an aggregate of 2,875,000 stock options to directors, officers, employees 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.

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 tranches, $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 March 1, 2015, we acquired, through a licensing agreement with DSM Nutritional Products LLC (“DNP”), the exclusive global rights to Brain Armor® 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® 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.

On June 29, 2015, we appointed Dr. Neilank K. Jha, MD, FRCS (C) as a Special Advisor to its Brain Armor® 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. With the issuance of Brain Armor shares to Trident on December 1, 2017 to settle an inter-company debt, Dr. Neilank K. Jha’s ownership of Brain Armor is now 3.39%

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.  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 Dr. Bailes to research and develop line extensions and new products that support cognitive health and performance under the Brain Armor® brand. With the issuance of Brain Armor shares to Trident on December 1, 2017 to settle an inter-company debt, Dr. Julian Bailes  ownership of Brain Armor is now 1.79%.

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.

8

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 September 26, 2016, we entered into a Securities Purchase Agreement with a non-US institutional investor   pursuant to which, in consideration for proceeds of $4,100,000, we issued a secured convertible promissory note in the amount of $4,100,000.  Pursuant to the Securities Purchase Agreement, the investor has agreed, from time to time after January 1, 2017, to make additional investments at our request of up to $5,900,000 ($10,000,000 in the aggregate) in one or more tranches of not less than one tranche during any 60 day period. The funding of any tranche under the agreement (other than the first $4,100,000 which has been funded) is subject to the mutual agreement of the parties as to the use of funds.

Also on September 26, 2016, we entered into a Convertible Promissory Note Amendment Agreement with the same non-US institutional investor whereby we agreed to extend the maturity date and interest payable on $2,300,000 of senior secured convertible debentures which were initially funded on February 5, 2015 and on May 14, 2015.  Under the terms of the amendment the maturity date of the notes were extended through September 30, 2019 and the interest rate was increased from 6% per annum to 8% per annum. The convertible debentures are convertible into shares of the Company’s common stock at an initial conversion price of $0.71 per share.

On May 9, 2017, the Company received the second tranche of funding with proceeds of $4,400,000 and on May 16, 2018 the third tranche of $1,500,000 for a total investment by the investor of $10,000,000. The Company used the proceeds of the secured convertible note for general working capital purposes including settlement of accounts payable and repayment of mature loans.

In consideration of each advance made by the investor pursuant to the Securities Purchase Agreement, the Company issued to the investor a convertible promissory note of equal value, maturing three years after issuance, and bearing interest at the rate of 8% per annum. Each note is secured in first priority against the present and after acquired assets of the Company and is convertible in whole or in part at the option of the holder into common shares of the Company at a conversion price of $0.60 per share, for an aggregate of up to 16,666,667 shares.

Also on September 26, 2016, we entered into a Convertible Promissory Note Amendment Agreement with the same non-US institutional investor whereby we agreed to extend the maturity date and interest payable on $2,300,000 of senior secured convertible debentures which were initially funded on February 5, 2015 and on May 14, 2015.  Under the terms of the amendment the maturity date of the notes were extended through September 30, 2019 and the interest rate was increased from 6% per annum to 8% per annum. The convertible debentures are convertible into shares of the Company’s common stock at an initial conversion price of $0.71 per share.

Effective December 12, 2016 we made the following changes to our officers and directors:

·
Donald MacPhee resigned as a Director of the Board of Directors, Chair of the Audit Committee and as President and Chief Executive Officer, and was appointed Director of Operations;

·
Anthony Pallante was appointed as Director and Chairman of our Board of Directors, and as Chief Executive Officer;

·
Mark Holcombe resigned as Chairman of the Board of Directors and was appointed as President, Director and Chair of the Compensation Committee.

·
Scott Chapman, our Director and Chair of the Corporate Governance Committee, was also appointed as Chair of the Audit Committee.

9


·
Michael Browne resigned as Corporate Secretary of Trident Brands Incorporated and will continue to serve as Brand Director, Chief Financial Officer, and Treasurer; and

·
Peter Salvo, Controller of the Company was also appointed as Corporate Secretary.

On February 15, 2017, we entered into a Letter of Intent (the “LOI”) with The Activation Group, Inc. (“TAG”), an integrated marketing and advertising agency incorporated in Ontario, Canada.  Pursuant to the LOI, we sought to enter into a definitive agreement to purchase all the issued and outstanding common shares of The Activation Group in consideration for a purchase price consisting of $200,000 cash, and $800,000 payable in common shares of Trident.  The cash consideration was inclusive of a $100,000 deposit paid to The Activation Group upon execution of the LOI, and $100,000 payable upon closing a definitive agreement. Stock payments were to be payable in four $200,000 installments, subject to the achievement of earnings targets.  The agreement has been subsequently terminated.  The Company hired the people from TAG directly. The $100,000 deposit was used to pay signing bonuses for the TAG employees the Company hired.

Also, on February 15, 2017 our board of directors appointed Mark Cluett as the Chief Operating Officer at Trident Brands Incorporated, with responsibility for business strategy execution and commercialization.

On September 12, 2017 the Company entered into a note purchase agreement with Fengate Trident LP pursuant to which, in consideration for the issuance of 811,887 of our common shares to Fengate, we purchased outstanding secured convertible promissory notes of Mycell Technologies LLC having an aggregate balance due and payable of $511,141 in principal and $94,526 in interest accrued as at September 12, 2017.  The purchased notes, which were originally issued to LPF (MCTECH) Investment Corp. on January 22, 2016, February 5, 2016, and May 19, 2016, bear simple interest on unpaid principal at the rate of ten percent per annum.  The outstanding principal and accrued interest is convertible at the option of the note holder into securities of Mycell. We issued the 811,887 common shares to one (1) non-US person (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

Also on September 12, 2017 we entered into a Share Purchase Agreement dated September 6, 2017 among our wholly owned subsidiary, Trident Brands International Ltd. (“Trident International”), a Bahamas corporation, StreamPak Ltd. (“StreamPak”), an Anguilla corporation, and the sole shareholder of StreamPak, pursuant to which, in consideration for the payment of $125,000 in cash and 500,000 of our common shares, Trident International purchased 100% of the issued and outstanding common shares of StreamPak.  As a result of the share purchase StreamPak became a wholly owned subsidiary of Trident International. We issued the 500,000 common shares to one (1) non-US person (as that term is defined in Regulation S of the Securities Act of 1933), in an offshore transaction relying on Regulation S of the Securities Act of 1933, as amended.

On December 6, 2017 Mr. Michael Browne resigned as Chief Financial Officer and Treasurer of the Company.  Mr. Browne’s resignation did not result from any disagreement with the Company regarding our operations, policies, practices, or otherwise.  In light of the resignation, Mark Holcombe, our President and Director, was appointed to serve as Chief Financial Officer.

On December 1, 2017 our Board of Directors appointed Mr. Brian Rola as Vice-President of Trident and General Manager of our wholly owned subsidiary, Trident Sports Nutrition Inc., and Mr. Nick Pili as Vice-President of Trident and General Manager of our wholly owned subsidiary, Brain Armor Inc.

During fiscal 2016 and 2017, Trident advanced approximately $478,539 and $886,999, respectively, in working capital loans with an interest rate of 6% per annum to its 85% owned and controlled subsidiary, Bran Armor Inc.  As at December 1st 2017 Brain Armor owed an aggregate of  $1,394,251 to the Company in respect of the advances.  On December 1, 2017, the boards of directors of Trident and Brain Armor approved the settlement of the inter-company debt by the issuance to Trident of 1,859,001 common shares of Brain Armor at the price of $0.75 per share.  As a result of the settlement, Trident now owns approximately 94.82% of Brain Armor’s issued and outstanding securities.

10


On December 6, 2017, our Board of Directors authorized the issuance to its members and management stock options to purchase up to 2,615,000 share of our common stock.  1,307,500 of the options vest upon issuance and are exercisable for up to five years at $0.85 per share, while the remaining 1,307,500 will vest 12 months following issuance and be exercisable for up to five years at $1.00 per share.  The Options were issued pursuant to the Company’s 2013 Stock Option Plan, which was registered with the Securities and Exchange Commission on Form S-8 in January, 2015.  The 2013 Stock Option Plan authorizes Trident to issue incentive and non-qualified stock options to employees and consultants of the Company to purchase a number of shares not to exceed 15% of the Company’s currently issued and outstanding securities.

Also on December 6, 2017, the Board of Directors authorized the issuance of 250,000 stock options to Sanitas, LLC, a consultant and founding shareholder of Brain Armor.  The options vest immediately and are exercisable for a period of five (5) years to purchase common shares of Brain armor at $0.75 per share.  The options were issued to one US person, relying on Rule 506 under Regulation D and/or Section 4(2) of the Securities Act of 1933.

Key Developments in Fiscal 2018 and Fiscal 2019 to the Date of this Report

Effective December 22, 2017, Trident exercised its option under our Exclusive License Agreement (dated March 1, 2015) to purchase the Brain Armor® brand from DSM Nutrition Products LLC. Subsequently, the parties have executed applicable trademark assignment and purchase agreements necessary to transfer all global intellectual property rights in the Brain Armor brand to Trident.

Effective December 31, 2017, Trident exercised an option to terminate the Trademark License Agreement with Everlast World’s Boxing Headquarters Corp. and International Brand Management Limited (IBML). This strategic decision will allow Trident to focus resources on higher-potential portfolio opportunities. On January 17, 2019, Everlast World’s Boxing Headquarters Corp. (“Everlast”) filed a civil lawsuit against the Company and other defendants (see Legal Proceedings section).

In December 2017, Trident began shipping P2N Peak Performance Nutrition products on an exclusive basis under a Vendor Agreement with Amazon Fulfillment Services Inc.

On June 13, 2018, Trident was accepted into the Wal-Mart Supplier finance program with Wells Fargo Bank. The program offers receivables discounting to cost-effectively accelerate the collection of Accounts Receivable with the benefit of improved cash flow with early payment.

On July 31, 2018, our wholly owned subsidiary, Trident International, entered into a Stock Purchase Agreement with Packaging Lab SAS (“Packaging Lab”), whereby Trident International sold all of the issued and outstanding ordinary shares of StreamPak, a wholly owned subsidiary of Trident International, to Packaging Lab in consideration of 1,000 common shares representing 10% of fully diluted shares in Packaging Innovation Lab. The investment in Packaging Lab was recorded using the cost method of accounting.

On November 30, 2018 the Company and Fengate entered into a Securities Purchase Amendment Agreement pursuant to which the Company has agreed to issue to Fengate an additional convertible promissory (the “2018 Convertible Note”) of up to $10,000,000, subject to certain terms and conditions.  Each portion of the principal amount advanced pursuant to the 2018 Convertible Note will bear interest at the rate of twelve percent (12%) per annum and will be payable monthly in arrears to Fengate.  Outstanding principal and interest will continue to be secured by the general security agreement dated September 26, 2016, which forms a part of the Agreement.  The holder of the note may also elect from time to time to convert all or a portion of the outstanding principal and interest into common shares of the Company at a 25% discount to the average closing price of the common shares during the 10 trading days immediately prior to the applicable conversion date.   The 2018 Convertible Note will mature on November 30, 2019, provided that Fengate may unilaterally postpone the maturity date to May 31, 2020.

On November 30, 2018 the Company received the first tranche of funding with proceeds of $3,400,780.

11

On November 30, 2018 the Company received the first tranche of funding with proceeds of $3,400,780.

On March 11, 2019, each convertible note including the 2018 Convertible Note disclosed in Note 9 to the consolidated financial statements were amended to extend the maturity dates to May 31, 2020.

The Company intends to use the proceeds of the secured convertible note for general working capital purposes including, without limitation, product development, inventory, and marketing and selling expenses.

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 objective is to provide our shareholders with solid returns through strategic investments across multiple consumer product and food ingredient platforms. The platforms we are focusing on include:

·
Life science technologies and related products that have applications to a range of consumer products;

·
Nutritional supplements and related consumer goods providing defined benefits to the consumer; and

·
Functional foods and beverages ingredients with defined health and wellness benefits.

We are building our business through strategic investments in high growth early stage consumer brands and functional ingredients platforms within segment/sectors which we believe offer long term growth potential.  We are focused on three core strategies underpinning our objectives:

·
To execute our multi-tier brand and innovation strategy to drive revenue;

·
To aggressively manage our asset light business model to drive a low cost platform; and

·
To drive disciplines leading to increased investor awareness and ability to finance and govern growing operations.

Ongoing business investment has resulted in significant revenue growth and progress against corporate objectives. We expect revenues and associated margins to increase as we continue to commercialize segments and products within our portfolio. Specifically, Brain Armor ®, P2N Peak Performance Nutrition and private label product lines have demonstrated solid potential in the markets where they compete leading to significant revenue growth. Further research and development investment is also expected to entrench our position in the market and contribute to current platforms and incremental business potential.

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.

12


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

Brain Armor®

In March 2015, we acquired, through a licensing agreement, the exclusive global rights to Brain Armor®, a plant-based Omega-3 dietary supplement formulated to improve cognitive health and well-being. In December 2017, we purchased the Brain Armor® trademark and reformulated Brain Armor® dietary supplements with a proprietary blend of active ingredients clinically-proven to support neuro-nutrition at every stage of life.

P2N Peak Performance Nutrition®

In October 2017, Trident Sports Nutrition developed the P2N Peak Performance Nutrition brand as a control label range for a leading US eCommerce customer. The P2N brand encompasses a full-range of active nutrition products delivering high quality ingredients and proven formulas to support mass-market fitness goals.

13


Control (or Private) Label

In April 2017, we entered into a vendor agreement to formulate and supply whey protein powder under a private label to a leading mass retail customer.

Product Supply

We procure our products utilizing a series of ingredient suppliers and strategic contract manufacturers. All suppliers are pre-qualified and must meet our stringent quality and performance standards.

All novel product formulations and flavor systems are proprietary and formulated in-house by our Chief Science Officer.

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

As of November 30, 2018 the following trademarks have been registered or applications filed on behalf of Trident Brands Incorporated or operating subsidiaries of Trident Brands Incorporated:

Country
 
Title
 
Device
 
Official No.
 
Application Date
 
Case Status
 
Owner
                         
Australia
 
BRAIN ARMOR
     
1818703
 
04-Jan-2017
 
Registered
 
Brain Armor Inc.
Canada
 
BRAIN ARMOR
Logo
     
1,870,806
 
01-Dec-2017
 
Application Filed
 
Brain Armor Inc.
China
 
BRAIN ARMOR
     
22604683
 
13-Jan-2017
 
Application Filed
 
Brain Armor Inc.
China
 
BRAIN ARMOR
     
22909187
 
23-Feb-2017
 
Application Filed
 
Brain Armor Inc.
China
 
BRAIN ARMOR
in Chinese Characters
     
22741430
 
25-Jan-2017
 
Awaiting Further Action or Approval
 
Brain Armor Inc.
China
 
BRAIN ARMOR
in Chinese Characters
     
22741429
 
25-Jan-2017
 
Awaiting Further Action or Approval
 
Brain Armor Inc.

14


Country   Title   Device     Official No.   Application Date   Case Status   Owner
                         
European Union Trademark
 
BRAIN ARMOR
     
016227605
 
04-Jan-2017
 
Application Filed
 
Brain Armor Inc.
U.S.A.
 
BRAIN ARMOR FOCUS FIX
     
87/644,654
 
13-Oct-2017
 
Official Action Received
 
Brain Armor Inc.
U.S.A.
 
BRAIN ARMOR Logo
     
87/705,173
 
01-Dec-2017
 
Official Action Received
 
Brain Armor Inc.
U.S.A.
 
FOCUS FIX
     
87/644,666
 
13-Oct-2017
 
Official Action Received
 
Brain Armor Inc.
United Kingdom
 
BRAIN ARMOR
     
UK00003204840
 
04-Jan-2017
 
Registered
 
Brain Armor Inc.
U.S.A.
 
P2N PEAK
PERFORMANCE
NUTRITION
     
87/626,644
 
28-Sep-2017
 
Official Action Received
 
Trident Brands Incorporated
U.S.A.
 
P2N PEAK
PERFORMANCE
NUTRITION
& Design
   
87/626,631
 
28-Sep-2017
 
Official Action Received
 
Trident Brands Incorporated
U.S.A.
 
WELLGEL
     
87/672,915
 
06-Nov-2017
 
Application Filed
 
Trident Brands Incorporated
Bahamas
 
BAHAMIAN RAIN
     
42002
 
15-Aug-2017
 
Application Filed
 
Trident Brands International Ltd.
Bahamas
 
CARIBBEAN RAIN
     
42003
 
15-Aug-2017
 
Application Filed
 
Trident Brands International Ltd.
Bahamas
 
EVOLUTION2
         
28-Aug-2017
 
Application Filed
 
Trident Brands International Ltd.
Bahamas
 
LOTTERY WATER
         
10-Nov-2017
 
Application Filed
 
Trident Brands International Ltd.
Bahamas
 
LOTTO WATER
         
10-Nov-2017
 
Application Filed
 
Trident Brands International Ltd.
Haiti
 
LOTTERY WATER
     
1290-M
 
15-Nov-2017
 
Application Filed
 
Trident Brands International Ltd.
Haiti
 
LOTTO WATER
     
1292-M
 
15-Nov-2017
 
Application Filed
 
Trident Brands International Ltd.
U.S.A.
 
BAHAMIAN RAIN
     
87/562,266
 
09-Aug-2017
 
Application Advertised
 
Trident Brands International Ltd.
U.S.A.
 
CARIBBEAN RAIN
     
87/562,264
 
09-Aug-2017
 
Application Advertised
 
Trident Brands International Ltd.

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 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.

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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, 2018, have an accumulated deficit of $22,025,441, realized   since our inception on November 5, 2007.  Early in the prior years 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.

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 two of them act as officers of the company which may lead to faulty corporate governance.

Currently our board includes only one independent director and as a result not all of our committees are independent. This could lead to less than preferable governance practices due to this lack of total 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.

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.
 
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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.
 
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.

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.

17

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 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.

18

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 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.

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.

19


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.

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.

20

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; 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.

21


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 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

On January 11, 2019, the Company filed a lawsuit against Everlast World’s Boxing Headquarters Corp. (“Everlast”). This action involves Everlast’s deceptive attempts to prevent the Company from exercising its right to terminate a License Agreement between the parties pursuant to which Trident had the right to market certain Everlast-branded products. In reliance on both Everlast’s promises to modify the royalty structure under the License agreement to support Trident’s changes to the business model for marketing and selling Everlast-branded products, the Company refrained from terminating the hugely unprofitable License Agreement. However, unbeknownst to the Company, Everlast had no intent of honoring its promises, intending only to deceptively induce Trident to continue incurring minimum royalties after the Company had informed Everlast that the business model was broken and should be discontinued. Everlast pretended to support restructuring of the business model and royalty structure to induce the Company to continue paying royalties rather than terminate the License Agreement altogether. During that time, Trident also expended further capital to develop, market and sell Everlast-branded products when in truth Everlast had no intention of supporting a modified royalty structure. If Trident had known that Everlast had no intention of actually right-sizing the royalty structure under the License Agreement, Trident would have terminated the License Agreement and stopped throwing good money after bad. Trident now brings this suit to enforce Everlast’s promises and recover for Everlast’s fraudulent failure to disclose the truth and wrongful actions.

On January 17, 2019, Everlast World’s Boxing Headquarters Corp. (“Everlast”) filed a counter civil lawsuit against the Company and other defendants. In that lawsuit, Everlast seeks payment from the defendants under a License Agreement dated June 4, 2013, for $425,555 in unpaid royalties allegedly due and owing under the License Agreement and interest on the allegedly unpaid royalties of $96,265, which interest allegedly continues to accrue. Everlast has also sought all costs, expenses, and legal fees incurred by Everlast in collecting monies that it claims are due under the License Agreement. The case is at an early stage, and the defendants (including the Company) have not yet appeared or answered in the case.

Item 4.  Mining Safety Disclosures

None.

22

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.

As of November 30, 2018, we had 32,311,887 Shares of $0.001 par value common stock issued and outstanding held by   48 shareholders of record.

Of the 32,311,887 shares of common stock outstanding as of November 30, 2018, 8,441,724 shares are owned by Anthony Pallante, CEO and 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.

23

Securities authorized for issuance under equity compensation plans

As of November 30, 2018, we have issued the following securities under our 2013 Stock Option Plan:

   
Name and Position
 
Number of Options
 
Date of Grant
 
Exercise Price
   
Expiration
 
Vesting from
date of Grant
                                 
 
1.
 
Michael Browne
(former President, CFO, Treasurer and Secretary), Brand Director
   
375,000
125,000
125,000
 
May 5, 2014
Nov 30, 2015
Nov 30, 2015
 
$
$
$
0.75
1.00
1.50
   
May 5, 2019
May 5, 2019
May 5, 2019
 
12 months
August 2016
August 2017
                                       
 
2.
 
Donald MacPhee
(former President & CEO, Director, Chair of the Audit Committee and member of the Corporate Governance Committee)
   
100,000
100,000
100,000
 
May 5, 2014
May 5, 2014
May 5, 2014
 
$
$
$
0.75
1.00
1.50
   
May 5, 2019
May 5, 2019
May 5, 2019
 
12 months
24 months
36 months
                                       
 
3.
 
Scott Chapman
Director, Chair of Corporate  Governance Committee
   
100,000
100,000
100,000
150,000
150,000
 
May 5, 2014
May 5, 2014
May 5, 2014
Dec 6, 2017
Dec 6, 2017
 
$
$
$
$
$
0.75
1.00
1.50
0.85
1.00
   
May 5, 2019
May 5, 2019
May 5, 2019
Dec 6, 2022
Dec 6, 2022
 
12 months
24 months
36 months
Immediate
12 months
                                       
 
4.
 
Mark Holcombe
President, CFO, Director, Chairman of the Compensation Committee
   
100,000
100,000
100,000
150,000
150,000
 
May 5, 2014
May 5, 2014
May 5, 2014
Dec 6, 2017
Dec 6, 2017
 
$
$
$
$
$
0.75
1.00
1.50
0.85
1.00
   
May 5, 2019
May 5, 2019
May 5, 2019
Dec 6, 2022
Dec 6, 2022
 
12 months
24 months
36 months
Immediate
12 months
                                       
 
5.
 
Peter Salvo
Controller
   
50,000
50,000
50,000
75,000
75,000
 
May 5, 2014
May 5, 2014
May 5, 2014
Dec 6, 2017
Dec 6, 2017
 
$
$
$
$
$
0.75
1.00
1.50
0.85
1.00
   
May 5, 2019
May 5, 2019
May 5, 2019
Dec 6, 2022
Dec 6, 2022
 
12 months
24 months
36 months
Immediate
12 months

24


 
6.
 
Anthony Pallante
CEO, Director,
Chairman of the Board
   
375,000
375,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
7.
 
Brad Caistor
   
150,000
150,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
8.
 
Mark Cluett
   
150,000
150,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
9.
 
Nick Pili
   
75,000
75,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
10.
 
Alan Jones
   
75,000
75,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
11.
 
Brian Rola
   
75,000
75,000
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
12.
 
Landon McCluskey
   
16,250
16,250
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
13.
 
Tony Haddeman
   
16,250
16,250
 
Dec 6, 2017
Dec 6, 2017
 
$
$
0.85
1.00
   
Dec 6, 2022
Dec 6, 2022
 
Immediate
12 months
                                       
 
14.
 
Robert Campbell
Special Advisor
   
116,666
116,667
116,667
 
May 5, 2014
May 5, 2014
May 5, 2014
 
$
$
$
0.75
1.00
1.50
   
May 5, 2019
May 5, 2019
May 5, 2019
 
12 months
24 months
36 months
     
Total:
   
4,640,000
                      

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.

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, 2018.

25


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, 2017 and includes information available to March 12, 2018, 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 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.
 
Accounts Receivable and Allowance for Doubtful Accounts
 
Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary.
 

26


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.
 
Long-Lived Assets
 
We review our long-lived assets, to include intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to:

·   a significant decrease in the market price of the asset;
 
·   a significant change in the extent or manner in which the asset is being used;
 
·   a significant change in the business climate that could affect the value of the asset;
 
·   a current period loss combined with projection of continuing loss associated with use of the asset; and
 
·   a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life. 
 
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our long-lived assets, we may incur charges for impairment in the future.
 
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. Agreed trading terms with customers such as value incentives, rebates, early payment discounts and other discounts are recorded as reductions to revenues at the time of sale.
 
Cost of Sales

Cost of sales includes the direct purchase cost of the product based on the FIFO method.
 
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.
 
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.
 
Results of Operations for the Fiscal Years Ended November 30, 2018 and November 30, 2017

The following summary of our results of operations should be read in conjunction with our audited financial statements for the fiscal years ended November 30, 2018 and 2017.

Our operating results for years ended November 30, 2018 and 2017 are summarized as follows:

   
Year Ended
   
Year Ended
 
   
November 30,
   
November 30,
 
   
2018
   
2017
 
             
Revenues
 
$
5,655,431
   
$
4,743,421
 
Gross Profit
 
$
347,929
   
$
95,399
 
Operating Expenses
 
$
6,152,660
   
$
3,323,369
 
Impairment Loss
 
$
440,542
     
2,125,000
 
Other Expenses
 
$
2,175,098
   
$
1,521,211
 
Net Loss
  $
8,420,371
    $
6,874,181  
EBITDA
 
$
(5,764,015
)
 
$
(2,902,637
)
 
28

Revenues and Gross Profits

While still in the early stages of commercialization, our revenues increased 19% in 2018 to $5,655,431 versus $4,743,421 in the prior year. Revenue growth was primarily attributed to our Trident Sports Nutrition operating subsidiary, associated with a private label supply agreement with a major US-based mass retailer. Gross Profit also increased in 2018 to $347,929 or 6.2% of revenues versus $95,399 or 2.0% of revenues in the prior year. The improvement in margin percentage reflects initial market commercialization of both Brain Armor® and P2N Peak Performance Nutrition® branded products.

Operating Expenses

Our operating expenses for the years ended November 30, 2018 and 2017 are outlined in the table below:
 
    2018     2017  
   
   
 
Professional Fees
 
$
518,086
   
$
177,897
 
General & Administrative Expenses
 
$
4,396,801
   
$
1,964,280
 
Marketing, Selling & Warehousing Expenses
 
$
866,598
   
$
647,982
 
Management Salary
 
$
102,500
   
$
90,000
 
Director's Fees
 
$
90,000
   
$
90,000
 
Rent
 
$
149,925
   
$
10,293
 
Royalty Fees
 
$
28,750
   
$
342,917
 

Operating expenses for the year ended November 30, 2018 were $6,152,660 as compared to $3,323,369 for the comparative period in 2017, an increase of 85.1%.   The increase in our operating expenses is primarily due to increased general and administrative costs as we invest in the operational infrastructure necessary to build out our organization to support current and future growth. Significant increases were in non-cash options expense of $1,194,775, non-cash provision of bad debts of $617,010 and legal expenses of $430,983.

The Company incurred an impairment loss of $440,542 in 2018 as a result of writing off the cost method investment in Packaging Labs and $2,125,000 in 2017 as a result of writing off the book value of the Oceans Omega LLC license.

Other Expenses

Other expenses for the year ended November 30, 2018 were $2,175,098 versus $1,521,211 in the comparative period in 2017, an increase of 43.0%. The increase was due to an increase in interest expense due to higher debt levels and the impact of certain other items including the beneficial conversion feature related to the convertible note entered into in 2017.

EBITDA

Reported net loss for the year ended November 30, 2018 was $8,420,371 compared to $6,874,181 in the comparative period in 2017. After deducting non-cash amounts of interest, depreciation and amortization including impairment loss, EBITDA for the year ended November 30, 2018 was ($5,764,015) compared to ($2,902,637) in 2017.
29

Liquidity and Capital Resources

Our cash and cash equivalents balance at November 30, 2018 was $3,133,303. Management believes the current funds available to the company will be sufficient to fund our operations for the next twelve months from the date the financial statements are issued.

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 $1,800,000 of the funds from the transaction on February 5, 2015 and the balance of $500,000 on May 14, 2015.  On September 26, 2016, we entered into a Convertible Promissory Note Amendment Agreement with this investor whereby we agreed to extend the maturity date and amend the interest payable on the senior secured convertible debentures, whereby we extended the term of the notes through September 30, 2019 and interest rate was increased from 6% per annum to 8% per annum.   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.

On September 26, 2016, we entered into a Securities Purchase Agreement with a non-US institutional investor    pursuant to which, in consideration for proceeds of $4,100,000, we issued a secured convertible promissory note in the amount of $4,100,000.   Pursuant to the Securities Purchase Agreement, the investor has agreed, from time to time after January 1, 2017, to make additional investments at our request of up to $5,900,000 ($10,000,000 in the aggregate) in one or more tranches of not less than one tranche during any 60 day period. The funding of any tranche under the agreement (other than the first $4,100,000 which has been funded) is subject to the mutual agreement of the parties as to the use of funds. The parties have agreed to negotiate in good faith to pre-approve use of funds within 120 days following September 26, 2016.   On May 9, 2017, the Company received the second tranche of funding with proceeds of $4,400,000 and on May 16, 2018 the third tranche of funding with proceeds of $1,500,000 for a total investment by the investor of $10,000,000. The Company intends to use the proceeds of the secured convertible note for general working capital purposes including, without limitation, settlement of accounts payable and repayment of mature loans. In consideration of each advance made by the investor pursuant to the Securities Purchase Agreement, we will issue to the investor a convertible promissory note of equal value, maturing three years after issuance, and bearing interest at the rate of 8% per annum. Each note will be secured in first priority against the present and after acquired assets of the Company, and will be convertible in whole or in part at the option of the holder into common shares of the Company at a conversion price per share of $.60, equal to a 25% discount to the 10 day average closing price of the Company’s common stock for the period immediately preceding the issuance of the applicable note.

On November 30, 2018 the Company and Fengate entered into a Securities Purchase Amendment Agreement pursuant to which the Company has agreed to issue to Fengate an additional convertible promissory (the “2018 Convertible Note”) of up to $10,000,000, subject to certain terms and conditions.  Each portion of the principal amount advanced pursuant to the 2018 Convertible Note will bear interest at the rate of twelve percent (12%) per annum and will be payable monthly in arrears to Fengate.  Outstanding principal and interest will continue to be secured by the general security agreement dated September 26, 2016, which forms a part of the Agreement.  The holder of the note may also elect from time to time to convert all or a portion of the outstanding principal and interest into common shares of the Company at a 25% discount to the average closing price of the common shares during the 10 trading days immediately prior to the applicable conversion date.   The 2018 Convertible Note will mature on November 30, 2019, provided that Fengate may unilaterally postpone the maturity date to May 31, 2020.

On November 30, 2018 the Company received the first tranche of funding with proceeds of $3,400,780. The Company intends to use the proceeds of the secured convertible note for general working capital purposes including, without limitation, product development, inventory, and marketing and selling expenses.

On March 11, 2019, each convertible note including the 2018 Convertible Note disclosed in Note 9 to the consolidated financial statements were amended to extend the maturity dates to May 31, 2020.

30

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
 
90,000
 
Consulting/Advisor fees
   
300,000
 
Management Salary/Personal Services
   
1,750,000
 
Sales, Travel and Marketing
   
1,700,000
 
Other general administrative expenses
   
500,000
 
Rent
   
160,000
 
Total
   
4,500,000
 

We will require net funds of approximately $4,500,000 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.

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.

31


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 not effective due to the material weakness in internal control over financial reporting described below in “Management’s Internal Control Over Financial Reporting”. However, 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 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 November 30, 2018, based on the framework set forth in Internal Control-Integrated Framework (2013) 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 November 30, 2018 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 Financial Expert & Outside Directors on the Company’s Board of Directors: We do not have a financial expert on our audit committee or a fully independent 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.

32

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 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, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.  Other Information

None.

33

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
         
Anthony Pallante (1)
 
61
 
Chief Executive Officer, Director and Chair of the Board of Directors.
         
Mark Holcombe (2)
 
47
 
President, CFO, Director and Chair of the Compensation Committee.
         
Mark Cluett (3)
 
48
 
Chief Operating Officer
         
Scott Chapman (4)
 
55
 
Director, Chair of the Audit Committee and Chair  of the Corporate Governance Committee
         
Peter Salvo (5)
 
64
 
VP Finance, Controller and Secretary .

(1)
Anthony Pallante was appointed CEO, Director and Chair of the Board of Directors on December 2, 2016.
(2)
Mark Holcombe was appointed  President on December 2, 2016. He 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.  He also serves as Chair of the Compensation Committee.
(3)
Mark Cluett was appointed Chief Operating Officer on February 15, 2017.
(4)
Scott Chapman was appointed as Chair of the Audit Committee on December 2, 2016 and as a  Director and Chair of the Governance Committee of our company on March 21, 2014.
(5)
Peter Salvo was appointed as a Controller of our company on March 21, 2014.

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.

Anthony Pallante, Chief Executive Officer, Director and Chair of the Board of Directors

Mr. Anthony M. Pallante is the Founder and Principle of Manchester Capital Inc. and has served as its Chairman and Chief Executive Officer for over 25 years. Prior to Manchester Capital, Mr. Pallante served as a Senior Vice President and Officer at Cott Beverages. Prior to Cott, he served as the President and Principle of Exclusive Beverage, the Ontario Royal Crown Cola franchise, which he sold to Cott. He serves as a Member of Business Advisory Board at Mycell Technologies LLC. He holds a Bachelor of Arts from York University in Toronto and is active in various local and community charities.

Mark Holcombe, President , CFO, Director 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.

34

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.

Mark Cluett, Chief Operating Officer

Mark Cluett has spent over two decades reinventing established global brands and positioning startups for growth by organizing diverse teams and aligning effort toward shared objectives. Most recently, he applied these skills in the successful growth of The Activation Group (TAG), a strategic marketing and communications agency. Mr. Cluett founded TAG in 2014 and continues to serve as its president. Prior to founding TAG, he served as a Business Director with Ogilvy, a global advertising agency where he was responsible for a multinational business portfolio and was based out of New York City, Toronto and Montreal. This was preceded by experience as Director of Strategy with 141 Worldwide, a brand activation and marketing agency.

Scott Chapman, Director, Chair of the Corporate Governance Committee and Chair of Audit Committee

Scott Chapman is an investment professional with over 20 years of experience both in Canada and internationally. Mr. Chapman has acted as senior partner with Lines Overseas Management (Bermuda, Bahamas); and in institutional, retail sales with Midland Walwyn (Montreal, Quebec).

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.

Mr. Chapman is a native of Montreal, Quebec and holds a BA from Concordia University.

Peter Salvo, Controller and Corporate Secretary

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.

Mr. Salvo is a Chartered Professional Accountant (CPA, CMA), 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. Pallante, Mr. H olcombe , and Mr. Chapman.
35

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 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.

36

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, 2016, 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

Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE

Name and
Principal
Position
 
Year
 
Salary
   
Bonus
   
Stock Awards
   
Option Awards
   
Non-
Equity
Incentive
Plan
Compen-
sation
   
Change
in
Pension
Value
and
Non-
qualified
Deferred
Compen-
sation
Earnings
   
All
Other
Compen-
sation
   
Total
 
                                                     
Anthony Pallante,   2018     0     $
3,750
      0     $
317,735       0       0     $ 216,000     $ 537,485
 
Director & CEO
  2017     0     $
0       0     $
0       0       0     $ 216,000     $ 216,000
 
                                                                     
Mark Holcombe,
  2018     0     $
3,000       0     $
127,094       0       0     $ 188,000     $ 318,094  
Director,  President
  2017     0     $
0       0     $
0       0       0     $ 144,000     $ 144,000  
& CFO
                                                                   
                                                                     
Mark Cluett, COO   2018     0     $
1,250       0     $
127,094
      0       0     $ 152,000     $ 280,344  
    2017     0     $
0       0     $
0       0       0     $ 121,000
    $ 121,000
 
                                                                     
Scott Chapman,
  2018     0       0       0     $
127,094
      0       0     $ 24,000     $ 151,094
 
Director
  2017     0       0       0     $
0       0       0     $ 24,000     $ 24,000  
                                                                     
Peter
 
2018
   
0
    $
2,000
     
0
    $
63,547
     
0
     
0
   
$
96,000
   
$
161,547
 
Salvo,
 
2017
   
0
    $
0
     
0
    $
0
     
0
     
0
   
$
78,000
   
$
78,000
 
Controller
                                                                   

37

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 2018, there are presently no personal benefits available to our officers and directors.

DIRECTOR COMPENSATION

Name
 
Fees
Earned or
Paid in
Cash
   
Stock
Awards
   
Option
Awards
   
Non-Equity
Incentive Plan
Compensation
   
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
   
All Other
Compensation
   
Total
 
                                           
Anthony Pallante
 
$
24,000
     
0
    $
317,735
     
0
     
0
   
$
195,750
   
$
537,485
 
                                                         
Mark Holcombe
 
$
24,000
     
0
    $
127,094
     
0
     
0
   
$
167,000
   
$
318,094
 
                                                         
Scott Chapman
  $ 24,000       0     $
127,094
      0       0    
0     $ 151,094  

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 November 30, 2018 (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.
Name and Address
of Beneficial Owner
 
Title of Class
 
Amount and
Nature of
Beneficial
Ownership (1)
   
Percent of
Class (2)
 
   
Officers and Directors
 
Anthony Pallante
 
Common Stock
 
 
8,441,724
     
26.13
%
Mark Holcombe
 
Common Stock
   
500,000
     
1.55
%
Scott Chapman
 
Common Stock
   
400,000
     
1.24
%
Mark Cluett
 
Common Stock
   
52,000
     
.16
%
All officers and directors as a group
 
Common stock,
$0.001 par value
   
9,393,724
     
29.07
%
   
5%+ Security Holders
 
2373539 Ontario Inc
 
Common Stock
   
3,000,000
     
9.28
%
Francesca Pallante
 
Common Stock
   
3,000,000
     
9.28
%
Fengate Trident GP Inc
 
Common Stock
   
2,000,000
     
6.19
%
 All 5%+ Security Holders   
Common stock,
$0.001 par value 
   
8,000,000
     
24.76
%


(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 15, 2019 of 32,311,887.  This total does not include outstanding warrants or options of the Company.
 
Changes in Control
 
We do not currently have any arrangements which if consummated may result in a change of control of our company.

38

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The following includes a summary of transactions since the beginning of the November 30, 2018 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

Our company rents office space from Mr. Holcombe for $750 per month.

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 500,000 or approximately 1.55% 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 November 30, 2018 Mr. Holcombe also has the following options:

Number of
Options
 
Date of Grant
 
Exercise
price
 
Expiration
 
Vesting from
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
  150,000   Dec 6, 2017   $
0.85
  Dec 6, 2022   Immediate
  150,000   Dec 6, 2017   $
1.00
  Dec 6, 2022   12 months

Corporate Governance

We currently act with three directors, consisting of Mark Holcombe, Anthony Pallante 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 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 existing 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 $58,500 and for other services were $Nil during the year ended November 30, 2018.    

The total fees charged to the company for audit services were $35,500 and for other services were $Nil during the year ended November 30, 2017.

39

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.
 
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 15, 2019
Trident Brands Incorporated
   
   
 
/s/ Anthony Pallante
 
 
By: Anthony Pallante
 
(CEO, Director & Chair of the Board)
   
   
 
/s/ Mark Holcombe
 
 
By: Mark Holcombe
 
(President, CFO & Director)
   
   
 
/s/ Scott Chapman
 
 
By: Scott Chapman
 
(Director)
 
40


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of
Trident Brands Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Trident Brands Incorporated and its subsidiaries (collectively, the “Company”) as of November 30, 2018 and 2017, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ MaloneBailey, LLP
 
www.malonebailey.com
We have served as the Company's auditor since 2015.
Houston, Texas
March 15, 2019

F-1


TRIDENT BRANDS INCORPORATED
Consolidated Balance Sheets


   
As of
   
As of
 
   
November 30,
   
November 30,
 
   
2018
   
2017
 
ASSETS
           
             
Current Assets
           
Cash and Cash Equivalents
 
$
3,133,303
   
$
3,143,788
 
Accounts Receivable, net of allowance of $32,383 and $29,852, respectively
   
357,492
     
1,071,576
 
Inventory
   
2,055,063
     
132,951
 
Prepaid and other current assets
   
123,599
     
236,528
 
Total Current Assets
   
5,669,457
     
4,584,843
 
                 
Fixed Assets-Furniture & Fixtures, net
   
31,663
     
40,046
 
Note Receivable, net of allowance of $617,010 and $0, respectively
   
-
     
617,010
 
Intangible Assets, net
   
393,580
     
472,875
 
                 
TOTAL ASSETS
 
$
6,094,700
   
$
5,714,774
 
                 
LIABILITIES & STOCKHOLDERS' DEFICIT
               
                 
Current Liabilities
               
Accounts Payable
 
$
1,289,833
   
$
1,388,393
 
Accrued Liabilities
   
2,994,453
     
1,454,770
 
Derivative Liability
   
892,000
     
-
 
Total Current Liabilities
   
5,176,286
     
2,843,163
 
                 
Convertible Debt, net of discount $2,082,975 and $1,954,594, respectively
   
13,617,805
     
8,845,406
 
                 
Total Liabilities
   
18,794,091
     
11,688,569
 
                 
Stockholders' Deficit
               
Common stock, $0.001 par value, 300,000,000 shares authorized;
               
32,311,887 shares issued and outstanding as of November 30, 2018 and November 30, 2017
   
32,312
     
32,312
 
Additional paid-in capital
   
9,564,737
     
7,869,962
 
Non-Controlling Interest in Subsidiary
   
(170,999
)
   
(124,649
)
Accumulated Deficit
   
(22,125,441
)
   
(13,751,420
)
                 
Total Stockholders' Deficit
   
(12,699,391
)
   
(5,973,795
)
                 
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT
 
$
6,094,700
   
$
5,714,774
 




See Notes to Consolidated Financial Statements

F-2


TRIDENT BRANDS INCORPORATED
Consolidated Statements of Operations


   
Twelve Months
   
Twelve Months
 
   
Ended
   
Ended
 
   
November 30,
   
November 30,
 
   
2018
   
2017
 
             
Revenues, net
 
$
5,655,431
   
$
4,743,421
 
Cost of Sales
   
5,307,502
     
4,648,022
 
Gross Profit
   
347,929
     
95,399
 
                 
                 
General & Administrative Expenses
   
(6,152,660
)
   
(3,323,369
)
Impairment Loss
   
(440,542
)
   
(2,125,000
)
Loss from Operations
   
(6,245,273
)
   
(5,352,970
)
                 
Other Income (Expenses)
               
Interest Expense, net
   
(2,175,098
)
   
(1,521,211
)
Total Other Income (Expenses)
   
(2,175,098
)
   
(1,521,211
)
                 
Net Loss
 
$
(8,420,371
)
 
$
(6,874,181
)
                 
Net loss attributable to Trident
   
(8,374,021
)
   
(6,815,318
)
Net loss attributable to Non-Controlling Interests
    (46,350 )
    (58,863 )
                 
Loss per share - Basic and diluted
 
$
(0.26
)
 
$
(0.22
)
                 
Weighted average number of common shares outstanding - Basic and diluted
   
32,311,887
     
31,295,756
 

 


See Notes to Consolidated Financial Statements

F-3


TRIDENT BRANDS INCORPORATED
Consolidated Statements of Changes in Stockholders' Deficit
From the years ended November 30, 2018 and 2017


   

 
Common
   
Additional
   
   
       
    Common  
Stock
   
Paid-in
    Accumulated     Non-Conrolling    
 
    Stock  
Amount
   
Capital
    Deficit
    Interest     Total  
                                   
Balance, November 30, 2016
   
31,000,000
 
$
31,000
   
$
5,431,976
   
$
(6,936,102
)
 
$
(65,786
)
 
$
(1,538,912
)
                                               
Beneficial Conversion Feature on Convertible Debt
   
-
   
-
     
1,466,667
     
-
     
-
     
1,466,667
 
Shares issued for Acquisition of Streampak Ltd
   
500,000
   
500
     
359,500
     
-
     
-
     
360,000
 
Shares issued for Purchase of Note Receivable
   
811,887
   
812
     
604,855
     
-
     
-
     
605,667
 
Stock Options Expenses
   
-
   
-
     
6,964
     
-
     
-
     
6,964
 
Net loss,  November 30, 2017
   
-
   
-
     
-
     
(6,815,318
)
   
(58,863
)
   
(6,874,181
)
                                               
Balance, November 30, 2017
   
32,311,887
 
$
32,312
   
$
7,869,962
   
$
(13,751,420
)
 
$
(124,649
)
 
$
(5,973,795
)
                                               
Beneficial Conversion Feature on Convertible Debt
   
-
   
-
     
500,000
     
-
     
-
     
500,000
 
Stock Options Expenses
   
-
   
-
     
1,194,775
     
-
     
-
     
1,194,775
 
Net loss,  November 30, 2018
   
-
   
-
     
-
     
(8,374,021
)
   
(46,350
)
   
(8,420,371
)
                                               
Balance, November 30, 2018
   
32,311,887
 
$
32,312
   
$
9,564,737
   
$
(22,125,441
)
 
$
(170,999
)
 
$
(12,699,391
)

 


See Notes to Consolidated Financial Statements

F-4


TRIDENT BRANDS INCORPORATED
Consolidated Statements of Cash Flows


 
 
Twelve Months
   
Twelve Months
 
 
 
Ended
   
Ended
 
 
 
November 30,
   
November 30,
 
 
 
2018
   
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
 
$
(8,420,371
)
 
$
(6,874,181
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Amortization of debt discount
   
1,263,619
     
806,721
 
Amortization of license, IP
   
32,333
     
312,125
 
Depreciation expense
   
8,383
     
1,864
 
Impairment Loss
   
440,542
     
2,125,000
 
Stock options expense
   
1,194,775
     
6,964
 
Provision for bad debts on note receivable
   
617,010
     
-
 
Changes in operating assets and liabilities:
               
Accounts Receivable
   
714,084
     
(1,018,523
)
Interest Receivable
   
-
     
(11,343
)
Prepaid expenses
   
190,334
     
(169,196
)
Inventory
   
(1,922,112
)
   
98,270
 
Accounts payable and accrued liabilities
   
1,213,398
     
2,305,373
 
Cash used in operating activities
   
(4,668,005
)
   
(2,416,926
)
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of Fixed Assets
   
-
     
(41,910
)
Additions of Intangible Assets
   
(243,260
)
   
(125,000
)
Cash used in investing activities
   
(243,260
)
   
(166,910
)
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Principal payments on loan payable - third party
   
-
     
(200,000
)
Proceeds on convertible debt
   
4,900,780
     
4,400,000
 
Cash provided by financing activities
   
4,900,780
     
4,200,000
 
 
               
Net change in cash and cash equivalents
   
(10,485
)
   
1,616,164
 
 
               
Cash and cash equivalents at beginning of period
   
3,143,788
     
1,527,624
 
 
               
Cash and cash equivalents at end of period
 
$
3,133,303
   
$
3,143,788
 
 
               
NON-CASH TRANSACTIONS
               
Unpaid intangible asset acquired
 
$
150,320
   
$
-
 
Beneficial conversion feature
   
500,000
     
1,466,667
 
Common stock issued for Acquisition of Streampak Ltd
    -
     
360,000
 
Common stock issued for Purchase of Note Receivable
    -
     
605,667
 
Nonmonetary exchange of Streampak Ltd for investment in Packaging Innovation Lab
   
440,542
      -
 
Financing of insurance premiums
   
77,405
     
-
 
Debt discount related to derivative liablility
   
892,000
     
-
 
 
               
Supplemental disclosure of cash flow information:
               
                 
Cash paid for:
               
Income taxes
 
$
-
   
$
-
 
Interest
 
$
-
   
$
8,740
 

 


See Notes to Consolidated Financial Statements

F-5

TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Trident Brands Incorporated (f/k/a Sandfield Ventures Corp.) (“we”, “our”, “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 the development of high growth branded and private label consumer products and ingredients within the nutritional supplement, life sciences and food and beverage categories. The Company is in its early growth stage and has transitioned out of its shell status with the Super-8 filing at the end of August, 2014. Activities to date have focused on capital formation, organizational development and execution of its branded and private label consumer products and ingredients business plan.

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.

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.

Principal of Consolidation

The Company consolidated financial statements as of November 30, 2018 include the accounts of Trident Brands Incorporated and its subsidiaries: Trident Brands Canada Ltd, Sports Nutrition Products Inc., Brain Armor Inc., Trident Sports Nutrition Inc. and Trident Brands International Ltd.

Earnings (Loss) Per Share

The Company follows the guidance in ASC No. 260, “Earnings Per Share”, which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

Basic net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Due to net losses during the years ended November 30, 2018 and 2017, diluted earnings (loss) per share are the same as the basic earnings (loss) per share since inclusion of common stock equivalents would have been anti-dilutive.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts
 
Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary. As of November 30, 2018 and 2017, the Company’s accounts receivable was netted against an allowance of $32,383 and $29,852 respectively.

F-6
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


Inventory

Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out (FIFO) method. We regularly review inventory for obsolete and slow moving inventory and write it off as necessary.

Cost Method Investment

Our cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant influence over its operating and financial activities. The investment is tested for impairment, at least annually, and more frequently upon the occurrences of certain events.

The Company recognized an impairment on its cost method investment of $440,542 during the year ended November 30, 2018.

Long-Lived Assets
 
We review our long-lived assets, including intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to:

·
a significant decrease in the market price of the asset;
·
a significant change in the extent or manner in which the asset is being used;
·
a significant change in the business climate that could affect the value of the asset;
·
a current period loss combined with projection of continuing loss associated with use of the asset; and
·
a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life. 
 
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset.

Intangible Assets

Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter The Company currently does not have any amortizable intangible assets. The Company’s indefinite-lived intangible assets consist of trademarks.
 
The Company reviews its Indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Impairment losses are recognized only if the carrying amount exceeds its fair value.

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.

F-7
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


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 in 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 factors, and current market andcontractual 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 fromobjective sources. These inputs may be used with internally developed methodologies that result  in management’s best estimate of fair value.

The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and note payable. The fair value of the Company’s long-term debt is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. As of November 30, 2018 and 2017, the Company did not have any financial assets or liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, except for a derivative liability, related to the embedded conversion option on the 2018 convertible note, with a fair value as of November 30, 2018 of $892,000. The derivative liability was fair valued using Level 3 inputs.

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification. The Company’s sequencing policy is to evaluate for reclassification contracts with the earliest inception date first.

F-8
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


Revenue

The Company markets a range of branded and private label consumer products in the active nutrition and dietary supplement categories including Brain Armor® and P2N Peak Performance Nutrition®.

Two customers accounted for 90.5% and 5.2% of total revenue, compared to 94.3% and 3.7% in the prior year. Two customers accounted for 59.7% and 17.4% of total accounts receivable, compared to 82.3% and 16.4% in the prior year.

The Company records revenue when all of the following criteria are met: a) persuasive evidence of an arrangement with the customer exists, b) the price to the customer is fixed and determinable, c) product is shipped or delivery is complete (depending on the terms) and d) collection probability is reasonably assured.

We  record a reduction to gross sales based on estimated customer returns and allowances.

Cost of Sales

Cost of sales includes the direct purchase cost of the product based on the FIFO method.

The Company purchased 97% of its products from one vendor for the year ended November 30, 2018 and one vendor provided 99% of the Company's products for the year ended November 30, 2017.

Employee Stock-Based Compensation

The Company accounts for employee 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 non-employee 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.

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 not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of November 30, 2018 and 2017, the Company had no accrued interest or penalties related to uncertain tax positions.

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, 2018 and 2017


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 Pronouncements

The Company has evaluated the following 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:

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this update affect the guidance in ASU 2014-09. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted in Topic 606. Topic 606 became effective for the Company on December 1, 2018. Management evaluated Topic 606   and t he modified retrospective adoption of ASU 2016-12 did not have any material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

F-10
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


NOTE 3. LIQUIDITY

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued. In accordance with Financial Accounting Standards Board, or the FASB, Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

As of November 30, 2018, the Company had $3,133,303 in cash. However, the Company has generated losses and has a n accumulated deficit as of November 30, 2018. The Company  completed additional long term financing with the non-US institutional investor, receiving proceeds of $3,400,780 through the issuance of secured convertible promissory notes. The investor has agreed to make additional investments of $2,804,187 and $3,795,033 ($10,000,000 in the aggregate). Management believes that substantial doubt of our ability to meet our obligations for the next twelve months from the date these financial statements are issued has been alleviated due to, but not limited to, i) the approval of new financing available to the Company of up to $10,000,000, ii) continued growth of product sales from our current customer base and new customers, iii) introduction of higher margin products; and iv) controlling of our expenses. We believe that our present and available financial resources will be sufficient to meet the Company’s obligations and fund our operations at least through the next twelve months from the date these financial statements are issued.

NOTE 4. ACQUISITION OF STREAMPAK / INVESTMENT IN PACKAGING INNOVATION LAB

On September 12, 2017 we entered into a Share Purchase Agreement dated September 6, 2017 among our wholly owned subsidiary, Trident Brands International Ltd. (“Trident International”), a Bahamas corporation, StreamPak Ltd. (“StreamPak”), an Anguilla corporation, and the sole shareholder of StreamPak, pursuant to which, in consideration for the payment of $125,000 in cash and 500,000 of our common shares valued at $360,000 based on our stock price on September 6, 2017, Trident International purchased 100% of the issued and outstanding common shares of StreamPak . As a result of the share purchase StreamPak became a wholly owned subsidiary of Trident International. The acquisition was not deemed an acquisition of a business but rather an acquisition of a finite-lived intangible asset. The total consideration of $485,000 was recognized as an intangible asset related to intellectual property with an estimated useful life of 10 years. As of July 31, 2018, $44,458 was amortized of which $32,333 was amortized during the current 9 month period and $12,125 in the prior period. The unamortized amount is $440,542.

On July 31, 2018, our wholly owned subsidiary, Trident International, entered into a Stock Purchase Agreement with Packaging Lab SAS (“Packaging Lab”), whereby Trident International sold all of the issued and outstanding ordinary shares of StreamPak, a wholly owned subsidiary of Trident International, to Packaging Lab in consideration of 1,000 common shares representing 10% of fully diluted shares in Packaging Innovation Lab. The investment in Packaging Lab was recorded using the cost method of accounting. The Company elected to measure the nonmonetary transaction based on the recorded amount of StreamPak using the guidance of ASC No. 845 “Non Monetary Transactions” since it was determined that the transaction lacked commercial substance. The investment balance of $440,542 was fully impaired as of November 30, 2018.

NOTE 5. NOTE RECEIVABLE

On September 12, 2017 the Company entered into a note purchase agreement with Fengate Trident LP (“Fengate”) pursuant to which, in consideration for the issuance of 811,887 of our common shares to Fengate, we purchased outstanding secured convertible promissory notes of Mycell Technologies LLC having an aggregate balance due and payable of $511,141 in principal and $94,526 in interest accrued as at September 12, 2017. The purchased notes, which were originally issued to LPF (MCTECH) Investment Corp. on January 22, 2016, February 5, 2016, and May 19, 2016, bear simple interest on unpaid principal at the rate of ten percent per annum. The outstanding principal and accrued interest is convertible at the option of the note holder into securities of Mycell. The accrued interest as at November 30, 2018 is $1 05,869 . The Company reserved a full allowance of $617,010 as of November 30, 2018.

NOTE 6. INTANGIBLE ASSETS

On December 22, 2017, Trident exercised its option under our Exclusive License Agreement (dated March 1, 2015) to purchase the Brain Armor® brand from DSM Nutrition Products LLC (“DSM”). Subsequently, the parties have executed applicable trademark assignment and purchase agreements necessary to transfer all global intellectual property rights in the Brain Armor brand to Trident. In lieu of a $400,000USD cash payment to DSM for the value of the Brain Armor® brand as initially intended, the Company agreed to meet certain conditions, that when satisfied will have an equivalent value of $400,000USD. The costs incurred to meet these conditions are being charged to intangible assets. As of November 30, 2018, the Company has recorded $393,580 of costs to the asset account. Of this amount $200,000 will be paid over time as the Company purchases omega-3 oil from DSM pursuant to its exclusive supply agreement. During the 12 months ended November 30, 2018, payments of $49,680 were made to DSM in connection with this liability.

F-11
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


NOTE 7. WARRANTS AND OPTIONS

On December 6, 2017, our Board of Directors authorized the issuance to its members and management stock options to purchase up to 2,615,000 share of our common stock. 1,307,500 of the options vest upon issuance and are exercisable for up to five years at $0.85 per share, while the remaining 1,307,500 will vest 12 months following issuance and be exercisable for up to five years at $1.00 per share. The Options were issued pursuant to the Company’s 2013 Stock Option Plan, which was registered with the Securities and Exchange Commission on Form S-8 in January, 2015. The 2013 Stock Option Plan authorizes Trident to issue incentive and non-qualified stock options to employees and consultants of the Company to purchase a number of shares not to exceed 15% of the Company’s currently issued and outstanding securities.

On December 6, 2017, the Board of Directors authorized the issuance of 250,000 stock options of Brain Armor to Sanitas, LLC, a consultant and founding shareholder of Brain Armor . The options vest immediately and are exercisable for a period of five (5) years to purchase common shares of Brain Armor at $0.75 per share . The total outstanding Brain Armor stock options as of August 31, 2018 are 250,000. The Company used the Black-Scholes model to value the stock options at $95,814 . The assumption used was a discount rate of 1.60%, volatility of 85.51% and term of  2.5 years.

The Company used the Black-Scholes model to value the stock options at $1,107,836. For the 12 months ended November 30, 2018, the Company expensed $1,194,775 as compensation expense compared to $6,964 in the previous comparable period. Following are the assumptions used for the options that vested immediately and 12 months from the date of issuance: Discount rate 1.60% and 2.10%; Volatility 85.51% and 79.75%; and Term 2.5 and 3.0 years.

The following table represents stock option activity as of and for the years ended November 30, 2018 and 2017:

   
Number of
Options
   
Weighted Average
Exercise Price
   
Contractual
Life in Years
   
Intrinsic
Value
 
                         
Outstanding - November 30, 2016
   
2,358,333
   
$
0.96
     
2.51
       
Exercisable - November 30, 2016
   
1,666,667
   
$
1.17
     
2.43
   
$
57,500
 
Granted
   
0
                         
Exercised or Vested
   
0
                         
Forfeited or Expired
   
(333,333
)
                       
                                 
Outstanding - November 30, 2017
   
2,025,000
   
$
0.96
     
1.43
         
Exercisable - November 30, 2017
   
2,025,000
   
$
0.96
     
1.43
   
$
84,167
 
Granted     2,615,000                          
Exercised or Vested     0
                         
Forfeited or Expired     0
                         
                                 
Outstanding - November 30, 2018     4,640,000     $
1.02
      2.45
         
Exercisable - November 30, 2018     3,332,500     $
1.03
      1.84
      0
 

As of November 30, 2018, t he Company has 225,000 outstanding warrants. The exercise price of the warrants is $1.35 with a term of 3 years and these vested immediately. The Company uses the Black-Scholes model to value the warrants. Following are the assumptions used: Discount rate 0 .9%; Volatility 76.25% and 77.30% respectively.

The following table represents warrant activity for the years ended November 30, 2018 and 2017:


   
Number of
Warrants
   
Weighted
Average
Exercise Price
   
Contractual
Life in Years
   
Intrinsic
Value
 
                         
Outstanding – November 30, 2016     225,000
    $
1.35
   
2.21
      -
 
Exercisable – November 30, 2016
    225,000
                         
Granted
   
0
   


     

         
Exercised or Vested
   
0
                         
Cancelled or Expired     0
                         
                                 
Outstanding – November 30,  2017
   
225,000
      1.35    
1.20
      -
 
Exercisable - November 30, 2017
   
225,000
                         
Granted
   
0
                         
Exercised or Vested
   
0
                         
Cancelled or Expired
   
0
                         
                                 
Outstanding – November 30, 2018
   
225,000
   
$
1.35
   
.20
      -
 
    
F-12
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


NOTE 8. RELATED PARTY TRANSACTIONS

The Company does not own any real or personal property. The Company is paying a director $750 per month rent for use of office space and services.

NOTE 9. CONVERTIBLE DEBT

On January 29, 2015, the Company 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. These convertible notes were subsequently acquired by Fengate on April 28, 2017.

The convertible debentures are convertible into shares of the Company’s common stock at an initial conversion price of $0.71 per share, for an aggregate of up to 3,239,437 shares. The debentures originally accrued interest at 6% per annum. On September 26, 2016 the Company entered into an amendment agreement related to these convertible debentures whereby the applicable interest rate was increased from 6% to 8% and provisions added to allow the investor to transfer, sell or hypothecate the convertible notes subject to applicable securities laws. The maturity date of the notes was also extended through September 30, 2019. We considered ASC Topic 470-50, Debt Modifications and Extinguishments, and determined that the modification was not deemed substantial.


Due to the note being convertible to common shares of the Company, a beneficial conversion feature analysis was performed. The intrinsic value of the conversion feature was $647,888 which was recognized as debt discount. As of November 30, 2017, the full amount of the debt discount has been amortized.

On September 26, 2016, the Company entered into a securities purchase agreement with a non-US institutional investor, pursuant to which, in consideration for proceeds of $4,100,000, the Company issued a secured convertible promissory note in the amount of $4,100,000. Pursuant to the securities purchase agreement, the investor has agreed, from time to time after January 1, 2017, to make additional investments at the Company’s request of up to $5,900,000 ($10,000,000 in the aggregate) in one or more tranches of not less than one tranche during any 60 day period. The funding of any tranche under the agreement (other than the first $4,100,000 which has been funded) is subject to the mutual agreement of the parties as to the use of funds.

On May 9, 2017, the Company received the second tranche of funding with proceeds of $4,400,000 and on May 16, 2018 the third tranche of $1,500,000 for a total investment by the investor of $10,000,000.

The Company used the proceeds of the secured convertible note for general working capital purposes including settlement of accounts payable and repayment of mature loans.

In consideration of each advance made by the investor pursuant to the securities purchase agreement, the Company issued to the investor a convertible promissory note of equal value, maturing on September 30, 2019 , and bearing interest at the rate of 8% per annum. Each note is secured in first priority against the present and after acquired assets of the Company and is convertible in whole or in part at the option of the holder into common shares of the Company at a conversion price of $0.60 per share, for an aggregate of up to 16,666,667 shares. These convertible notes were subsequently acquired by Fengate on April 28, 2017.

Due to the notes being convertible to common shares of the Company, a beneficial conversion feature analysis was performed. The intrinsic value of the conversion feature of the notes amounted to $3,333,33 4 and was recognized as a debt discount. Amortization of the debt discount charged to interest amounted to $1,263,61 9 and $797,9 09 for the years ended November 30, 2018 and 2017, respectively. As of November 30, 2018 and 2017 the unamortized discount amounted to $1,190,97 5 and $1,954,59 4 , respectively.

F-13
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


On November 30, 2018 the Company and Fengate entered into a Securities Purchase Amendment Agreement pursuant to which the Company has agreed to issue to Fengate an additional convertible promissory note (the “2018 Convertible Note”) of up to $10,000,000, subject to certain terms and conditions. Each portion of the principal amount advanced pursuant to the 2018 Convertible Note will bear interest at the rate of twelve percent (12%) per annum and will be payable monthly in arrears to Fengate. Outstanding principal and interest will continue to be secured by the general security agreement dated September 26, 2016, which forms a part of the Agreement. The holder of the note may also elect from time to time to convert all or a portion of the outstanding principal and interest into common shares of the Company at a 25% discount to the average closing price of the common shares during the 10 trading days immediately prior to the applicable conversion date. The 2018 Convertible Note will mature on November 30, 2019, provided that Fengate may unilaterally postpone the maturity date to May 31, 2020.

On November 30, 2018 the Company received the first tranche of funding with proceeds of $3,400,780. The 2 nd tranche of $2,804,187 will be made available to the Company once certain funding conditions have been met while the balance of $3,795,033 shall be funded and issued in one or more tranches within 30 days of receipt of written request from the Company.

The Company intends to use the proceeds of the secured convertible note for general working capital purposes including, without limitation, product development, inventory, and selling expenses.

The Company analyzed the embedded conversion option on the convertible notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option on the 2018 Convertible Note qualified for derivative accounting . The Company used the Black-Scholes model to value the embedded conversion option at $892,000 . The assumptions used were a discount rate of 2.8%, volatility of 79.57% and a term of 1.5 years . The fair value of the embedded conversion option was recorded as debt discount and will be amortized over the term of the 2018 Convertible Note .

NOTE 10. COMMITMENTS AND CONTINGENCIES

Everlast License 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 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, assigned all of its rights,  title, interest and benefit to the trade mark license to the Company effective December 23, 2013 and the Company assumed 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 License 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.
F-14
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2018 and 2017


The agreement was terminated on Dec 31, 2017. On January 17, 2019 Everlast filed a civil lawsuit against the Company. In that lawsuit, Everlast seeks payment under the License Agreement for $425,555 in unpaid royalties and interest on the unpaid royalties. The Company has accrued the unpaid royalties as of November 30, 2018 .

Contingencies

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. If any legal matter, that may arise, were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s would reflect any potential claim in the consolidated financial statements for that reporting period.

NOTE 11. INCOME TAXES

Deferred tax assets consist of :

   
As of
November 30,
2018
   
As of
November 30,
2017
 
Deferred tax assets:
           
Net operating tax carryforwards
 
$
1 3 , 622 , 442
   
$
8,915,112
 
Tax Rate
   
21
%
   
35
%
Gross deferred tax assets
   
2,860,713
     
3,120,289
 
Valuation allowance
   
( 2,860,713
)
   
(3,120,289
)
Net deferred tax assets
 
$
0
   
$
0
 

As of November 30, 2018, the Company has a net operating loss carryforward of approximately $ 14 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 has recorded a valuation allowance.

Due to the enactment of the Tax Reform Act of 2018, the corporate tax rate for those tax years beginning with 2018 was reduced to 21%.

NOTE 12. SUBSEQUENT EVENTS

On March 11, 2019, each convertible n ote including the 2018 Convertible Note disclosed in Note 9 were amended to extend the maturity dates to May 31, 2020.


F-15
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