UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

or

 

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission File Number: 333-227420

 

ICNB_10QIMG1.JPG

 

ICONIC BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

13-4362274

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

44 Seabro Avenue

Amityville, NY

11701

(Address of principal executive offices)

(Zip Code)

 

(631) 464-4050

(Registrant’s telephone number, including area code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

N/A

N/A

N/A

 

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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 August 16, 2021, the registrant had 89,182,764 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 

 

 

ICONIC BRANDS, INC.

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

ITEM 1

Financial Statements

F-1

ITEM 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

15

ITEM 4

Controls and Procedures

16

PART II - OTHER INFORMATION

ITEM 1

Legal Proceedings

17

ITEM 1A

Risk Factors

17

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

18

ITEM 3

Defaults Upon Senior Securities

18

ITEM 4

Mine Safety Disclosures

18

ITEM 5

Other Information

18

ITEM 6

Exhibits

18

Signatures

19

 

 
2

Table of Contents

 

FORWARD-LOOKING STATEMENTS

 

Statements in this Quarterly Report on Form 10-Q may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.

 

Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and “would.” These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, and our other filings with the U.S. Securities and Exchange Commission.

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Any forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable law.

 

 
3

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

ICONIC BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Three and Six Months Ended June 30, 2021 and 2020

  

FINANCIAL STATEMENTS

 

Page(s)

 

 

 

 

 

Consolidated Balance Sheets As of June 30, 2021 and December 31, 2020

 

F-2

 

 

 

 

 

Consolidated Statements of Operations For the three and six months ended June 30, 2021 and 2020

 

F-3

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the three and six months ended June 30, 2021 and 2020

 

F-4

 

 

 

 

Consolidated Statements of Cash Flows For the six months ended June 30, 2021 and 2020

 

F-5

 

 

 

 

 

Notes to Consolidated Financial Statements

 

F-6 to F-22

 

 

 
F-1

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 251,679

 

 

$ 457,041

 

Accounts receivable (less allowance for doubtful accounts of $83,762 and $83,617, respectively)

 

 

271,316

 

 

 

334,458

 

Inventory

 

 

645,773

 

 

 

507,500

 

Loans receivable from officer and affiliated entity-noninterest bearing and due on demand

 

 

7,123

 

 

 

-

 

Total current assets

 

 

1,175,891

 

 

 

1,298,999

 

 

 

 

 

 

 

 

 

 

Right-of-use assets

 

 

22,909

 

 

 

45,381

 

Leasehold improvements, furniture, and equipment (less accumulated depreciation and amortization of $33,177 and $29,196, respectively)

 

 

6,531

 

 

 

10,512

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 1,205,331

 

 

$ 1,354,892

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficiency)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of operating lease liability

 

$ 22,909

 

 

$ 49,147

 

Accounts payable and accrued expenses

 

 

3,604,507

 

 

 

3,089,773

 

Loans payable to officer and affiliated entity-noninterest bearing and due on demand

 

 

-

 

 

 

15,637

 

Notes payable

 

 

954,312

 

 

 

28,458

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

4,581,728

 

 

 

3,183,015

 

 

 

 

 

 

 

 

 

 

Non-current portion of operating lease liability

 

 

-

 

 

 

-

 

Total liabilities

 

 

4,581,728

 

 

 

3,183,015

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity (deficiency):

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value; authorized 100,000,000 shares:

 

 

 

 

 

 

 

 

Series A, 1 and 1 share issued and outstanding, respectively

 

 

1

 

 

 

1

 

Series E, 2,115,224 and 2,115,224 shares issued and outstanding, respectively

 

 

2,115

 

 

 

2,115

 

Series F ($1,000 per share stated value), 2,413.75 and 2,413.75 shares issued and

outstanding, respectively

 

 

2,413,750

 

 

 

2,413,750

 

Series G ($1,000 per share stated value), 1,475 and 1,475 shares issued and outstanding, respectively

 

 

1,475,000

 

 

 

1,475,000

 

Common stock, $.001 par value; authorized 2,000,000,000 shares, 18,170,551 and 17,268,881 shares issued and outstanding respectively

 

 

18,171

 

 

 

17,269

 

 

 

 

 

 

 

 

 

 

Treasury stock, at cost – 0 and 1,000,000 shares common stock respectively

 

 

-

 

 

 

(516,528 )

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

22,682,752

 

 

 

22,430,430

 

 

 

 

 

 

 

 

 

 

Accumulated deficit

 

 

(28,840,322 )

 

 

(26,497,350 )

 

 

 

 

 

 

 

 

 

Total Iconic Brands, Inc. stockholders’ equity (deficiency)

 

 

(2,248,533 )

 

 

(675,313 )

 

 

 

 

 

 

 

 

 

Noncontrolling interests in subsidiaries and variable interest entity

 

 

(1,127,864 )

 

 

(1,152,810 )

 

 

 

 

 

 

 

 

 

Total stockholders’ equity (deficiency)

 

 

(3,376,397 )

 

 

(1,828,123 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity (deficiency)

 

$ 1,205,331

 

 

$ 1,354,892

 

 

See notes to consolidated financial statements.

 

 
F-2

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$ 584,914

 

 

$ 1,055,600

 

 

$ 1,219,447

 

 

$ 1,461,486

 

Cost of Sales

 

 

325,206

 

 

 

328,060

 

 

 

643,839

 

 

 

580,486

 

Gross profit

 

 

259,708

 

 

 

727,540

 

 

 

575,608

 

 

 

881,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Officers compensation

 

 

263,750

 

 

 

103,750

 

 

 

367,500

 

 

 

207,500

 

Professional and consulting fees

 

 

922,429

 

 

 

275,134

 

 

 

1,081,332

 

 

 

461,923

 

Royalties

 

 

107,407

 

 

 

21,584

 

 

 

206,535

 

 

 

37,548

 

Fulfillment

 

 

31,752

 

 

 

196,687

 

 

 

171,752

 

 

 

246,687

 

Marketing and advertising

 

 

91,419

 

 

 

146,528

 

 

 

212,587

 

 

 

275,173

 

Occupancy costs

 

 

28,332

 

 

 

23,911

 

 

 

53,840

 

 

 

46,162

 

Travel and entertainment

 

 

6,185

 

 

 

(279 )

 

 

19,028

 

 

 

19,190

 

Investor relations

 

 

18,855

 

 

 

195,151

 

 

 

199,607

 

 

 

556,840

 

Provision for doubtful accounts

 

 

(13,780 )

 

 

-

 

 

 

145

 

 

 

-

 

Other

 

 

439,851

 

 

 

303,011

 

 

 

579,012

 

 

 

480,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,896,200

 

 

 

1,265,477

 

 

 

2,891,338

 

 

 

2,331,035

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(1,636,492 )

 

 

(537,937 )

 

 

(2,315,730 )

 

 

(1,450,035 )

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forgiveness of Small Business Administration

Paycheck Protection Program loan

 

 

-

 

 

 

-

 

 

 

28,458

 

 

 

-

 

Amortization of debt discounts

 

 

(30,032 )

 

 

-

 

 

 

(30,032 )

 

 

-

 

Interest expense

 

 

(722 )

 

 

-

 

 

 

(722 )

 

 

-

 

Unrealized gain on investment in and receivable

From Can B Corp

 

 

-

 

 

 

73,835

 

 

 

-

 

 

 

73,835

 

Total other income (expense) - net

 

 

(30,754 )

 

 

73,835

 

 

 

(2,296 )

 

 

73,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,667,246 )

 

 

(464,102 )

 

 

(2,318,026 )

 

 

(1,376,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

(8,772 )

 

 

(87,606 )

 

 

(24,946 )

 

 

(13,428 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Iconic Brands, Inc.

 

$ (1,676,018 )

 

$ (551,708 )

 

$ (2,342,972 )

 

$ (1,389,628 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

$ (0.10 )

 

$ (0.03 )

 

$ (0.14 )

 

$ (0.09 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares Outstanding– basic and diluted

 

 

17,447,474

 

 

 

16,514,400

 

 

 

16,878,261

 

 

 

15,965,555

 

 

See notes to consolidated financial statements.

 

 
F-3

Table of Contents

 

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

 

 

 

Series A
Preferred Stock,
$.001 par

 

 

Series E
Preferred Stock,
$.001 par

 

Series F
Preferred Stock,
$1,000 stated value per share

 

 

Series G
Preferred Stock,
$1,000 stated value per share

 

 

Common Stock,
$.001 par

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Noncontrolling

Interests in

Subsidiaries and

Variable Interest

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Entity

 

 

Deficit

 

 

Total

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,414

 

 

$ 2,413,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

17,268,881

 

 

$ 17,269

 

 

 

(1,000,000 )

 

$ (516,528 )

 

$ 22,430,430

 

 

$ (1,152,820 )

 

$ (26,497,350 )

 

$ (1,828,123 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

401,670

 

 

 

402

 

 

 

-

 

 

 

-

 

 

 

180,350

 

 

 

-

 

 

 

-

 

 

 

180,752

 

Retirement of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,000,000 )

 

 

(1,000 )

 

 

1,000,000

 

 

 

516,528

 

 

 

(515,528 )

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,174

 

 

 

(666,954 )

 

 

(650,780 )

Balance, March 31, 2021

 

 

1

 

 

 

1

 

 

 

2,115,224

 

 

 

2,115

 

 

 

2,414

 

 

 

2,413,750

 

 

 

1,475

 

 

 

1,475,000

 

 

 

16,670,551

 

 

 

16,671

 

 

 

-

 

 

 

-

 

 

 

22,095,252

 

 

 

(1,136,636 )

 

 

(27,164,304 )

 

 

(2,298,151 )

Issuance of common stock for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,500,000

 

 

 

1,500

 

 

 

-

 

 

 

-

 

 

 

587,500

 

 

 

-

 

 

 

-

 

 

 

589,000

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,772

 

 

 

(1,676,018 )

 

 

(1,667,246 )

Balance, June 30, 2021

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,414

 

 

$ 2,413,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

18,170,551

 

 

$ 18,171

 

 

 

-

 

 

$ -

 

 

$ 22,682,752

 

 

$ (1,127,864 )

 

$ (28,840,322 )

 

$ (3,376,397 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

1

 

 

$ 1

 

 

 

2,790,224

 

 

$ 2,790

 

 

 

3,156

 

 

$ 3,155,750

 

 

 

-

 

 

$ -

 

 

 

14,576,681

 

 

$ 14,577

 

 

 

-

 

 

 

-

 

 

$ 21,282,679

 

 

$ (1,039,851 )

 

$ (22,925,748 )

 

$ 490,198

 

Sale of Series G Preferred Stock and warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,475

 

 

 

1,475,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,475,000

 

Placement agent fees and stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

375,000

 

 

 

375

 

 

 

-

 

 

 

-

 

 

 

(150,375 )

 

 

-

 

 

 

-

 

 

 

(150,000 )

Issuance of common stock in exchange for Series E Preferred Stock

 

 

-

 

 

 

-

 

 

 

(675,000 )

 

 

(675 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

270,000

 

 

 

270

 

 

 

-

 

 

 

-

 

 

 

405

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in exchange for Series F Preferred Stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(190 )

 

 

(190,000 )

 

 

-

 

 

 

-

 

 

 

304,000

 

 

 

304

 

 

 

-

 

 

 

-

 

 

 

189,696

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in exchange for services rendered and to be rendered

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

460,000

 

 

 

460

 

 

 

-

 

 

 

-

 

 

 

302,308

 

 

 

-

 

 

 

-

 

 

 

302,768

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74,178 )

 

 

(837,920 )

 

 

(912,098 )

Balance at March 31, 2020

 

 

1

 

 

 

1

 

 

 

2,115,224

 

 

 

2,115

 

 

 

2,966

 

 

 

2,965,750

 

 

 

1,475

 

 

 

1,475,000

 

 

 

15,985,681

 

 

 

15,986

 

 

 

-

 

 

 

-

 

 

 

21,624,713

 

 

 

(1,114,029 )

 

 

(23,763,668 )

 

 

1,205,868

 

Issuance of common stock in exchange for Series F Preferred Stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(552 )

 

 

(552,000 )

 

 

-

 

 

 

-

 

 

 

883,200

 

 

 

883

 

 

 

-

 

 

 

-

 

 

 

551,117

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in exchange for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

400,000

 

 

 

400

 

 

 

-

 

 

 

-

 

 

 

254,600

 

 

 

-

 

 

 

-

 

 

 

255,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87,606

 

 

 

(551,708 )

 

 

(464,102 )

Balance at June 30, 2020

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,414

 

 

$ 2,413,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

17,268,881

 

 

$ 17,269

 

 

 

-

 

 

 

-

 

 

$ 22,430,430

 

 

$ (1,026,423 )

 

$ (24,315,376 )

 

$ 996,766

 

 

See notes to consolidated financial statements.

 

 
F-4

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

Net loss income (loss) attributable to Iconic Brands, Inc.

 

$ (2,342,972 )

 

$ (1,389,628 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Net Income (loss) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

24,946

 

 

 

13,428

 

Forgiveness of SBA PPP loan income

 

 

(28,458 )

 

 

-

 

Stock-based compensation

 

 

769,752

 

 

 

517,832

 

Depreciation and amortization

 

 

3,981

 

 

 

9,666

 

Amortization of debt discounts

 

 

30,032

 

 

 

-

 

Unrealized gain on investment in and receivable from Can B Corp

 

 

-

 

 

 

(73,835 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

63,142

 

 

 

60,130

 

Inventories

 

 

(138,273 )

 

 

(82,800 )

Prepaid expenses

 

 

-

 

 

 

(44,373 )

Accounts payable and accrued expenses

 

 

510,968

 

 

 

110,309

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(1,106,882 )

 

 

(879,271 )

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

Loans receivable from officer and affiliated entity

 

 

(7,123 )

 

 

-

 

Furniture and equipment

 

 

-

 

 

 

(8,708 )

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(7,123 )

 

 

(8,708 )

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from sale of Series G Preferred Stock and warrants (net of placement agent fees of $150,000)

 

 

-

 

 

 

1,325,000

 

Proceeds from notes payable

 

 

924,280

 

 

 

28,458

 

Repayment of note payable

 

 

-

 

 

 

(40,000 )

Loans payable to officer and affiliated entity

 

 

(15,637 )

 

 

(16,745 )

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

908,643

 

 

 

1,296,713

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

(205,362 )

 

 

408,734

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

457,041

 

 

 

263,638

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$ 251,679

 

 

$ 672,372

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$ -

 

 

$ -

 

Interest paid

 

$ 722

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in exchange for Series E  Preferred Stock

 

$ -

 

 

$ 270

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in exchange for Series F Preferred Stock

 

$ -

 

 

$ 1,187

 

 

See notes to consolidated financial statements.

 

 
F-5

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

1. ORGANIZATION AND NATURE OF BUSINESS

 

Iconic Brands, Inc., formerly Paw Spa, Inc. (“Iconic Brands” or “Iconic”), was incorporated in the State of Nevada on October 21, 2005. Effective December 31, 2016, Iconic closed on a May 15, 2015 agreement to acquire a 51% interest in BiVi LLC (“BiVi”), the brand owner of “BiVi 100 percent Sicilian Vodka,” and closed on a December 13, 2016 agreement to acquire a 51% interest in Bellissima Spirits LLC (“Bellissima”), the brand owner of Bellissima sparkling wines. These transactions involved entities under common control of the Company’s chief executive officer and represented a change in reporting entity. The financial statements of the Company have been retrospectively adjusted to reflect the operations at BiVi and Bellissima from their inception.

 

BiVi was organized in Nevada on May 4, 2015. Bellissima was organized in Nevada on November 23, 2015.

 

Effective May 9, 2019, Iconic closed on a Share Exchange Agreement to acquire a 51% interest in Green Grow Farms, Inc. (“Green Grow”), an entity organized on February 28, 2019 to grow hemp for CBD extraction. Effective December 31, 2019, Iconic sold its 51% interest in Green Grow Farms, Inc. to Can B Corp (see Note 3).

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a) Principles of Consolidation

 

The consolidated financial statements include the accounts of Iconic, its two 51% owned subsidiaries BiVi and Bellissima, and United Spirits, Inc., a variable interest entity of Iconic (see Note 6) (collectively, the “Company”). All inter-company balances and transactions have been eliminated in consolidation.

 

(b) Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

(c) Fair Value of Financial Instruments

 

Generally accepted accounting principles require disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

 

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and notes payable, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

 

 
F-6

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

(d) Cash and Cash Equivalents

 

The Company considers all liquid investments purchased with original maturities of ninety days or less to be cash equivalents.

 

(e) Accounts Receivable, Net of Allowance for Doubtful Accounts

 

The Company extends unsecured credit to customers in the ordinary course of business but mitigates risk by performing credit checks and by actively pursuing past due accounts. The allowance for doubtful accounts is based on customer historical experience and the aging of the related accounts receivable. At June 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $83,762 and $83,617, respectively.

 

(f) Inventories

 

Inventories are stated at the lower of cost (first-in, first-out method) or market, with due consideration given to obsolescence and to slow moving items. Inventories at June 30, 2021 and December 31, 2020 consists of cases of BiVi Vodka and cases of Bellissima sparkling wines purchased from our Italian suppliers and cases of alcoholic beverages and packaging materials relating to our Hooters line of products introduced in August 2019.

 

(g) Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) which establishes revenue recognition standards. ASU 2014-19 was effective for annual reporting periods beginning after December 15, 2017. We adopted ASU 2014-09 effective January 1, 2018. ASU 2014-09 has not had a significant effect on the Company’s financial position and results of operations.

 

Our revenue (referred to in our financial statements as “sales”) consists primarily of the sale of wine and spirits imported for cash or otherwise agreed-upon credit terms. Our customers consist primarily of retailers. Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution, and shipping terms. We have elected to treat shipping as a fulfillment activity. Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. The Company has no obligation to accept the return of products sold other than for replacement of damaged products. Other than quantity price discounts negotiated with customers prior to billing and delivery (which are reflected as a reduction in sales), the Company does not offer any sales incentives or other rebate arrangements to customers.

 

(h) Shipping and Handling Costs

 

Shipping and handling costs to deliver product to customers are reported as operating expenses in the accompanying statements of operations. Shipping and handling costs to purchase inventory are capitalized and expensed to cost of sales when revenue is recognized on the sale of product to customers.

 

 
F-7

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

(i) Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation”. For the three and six months ended June 30, 2021 and 2020, stock-based compensation was $589,000, $769,752, $274,751, and $517,832, respectively.

 

(j) Income Taxes

 

Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

 

(k) Net Income (Loss) per Share

 

Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period of the financial statements.

 

Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options, warrants, and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.

 

(l) Recently Issued Accounting Pronouncements

 

Effective January 1, 2019, we adopted ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees are required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. We adopted this new accounting guidance using the effective date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption. As such, historical periods were continued to be measured and presented under the previous guidance while current and future periods are subject to this new accounting guidance. Upon adoption we recorded a total of $223,503 for right-of-use assets related to our two operating leases (see Note 12g) and a total of $223,503 for lease liabilities.

 

Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

 

 
F-8

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

(m) Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained significant net losses which have resulted in an accumulated deficit at June 30, 2021 of $28,840,322 and has experienced periodic cash flow difficulties, all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

Continuation of the Company as a going concern is dependent upon obtaining additional working capital and attaining profitable operations. The management of the Company has developed a strategy which it believes will accomplish these objectives and which will enable the Company to continue operations for the coming year. However, there is no assurance that these objectives will be met. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

3. DISCONTINUED OPERATIONS

 

Effective December 31, 2019, the Company sold its 51% equity interest in Green Grow Farms, Inc. (“Green Grow”) to Can B Corp. in exchange for 37,500,000 shares of Can B Corp. common stock and a Can B Corp. obligation to issue additional shares (“Additional Purchases Shares”) of Can B Corp. common stock to the Company on June 30, 2020 in such number so that the aggregate value of the aggregate shares issued to the Company equaled $1,000,000. We acquired this equity interest on May 9, 2019 in exchange for a $200,000 note payable to NY Farms Group Inc. and 2,000,000 shares of Company common stock valued at $1,250,000.

 

Effective March 6, 2020, CANB effected a 1 share for 300 shares reverse stock split resulting in a reduction of the number of the Company’s shares of CANB common stock from 37,500,000 shares to 125,000 shares. On July 8, 2020, CANB delivered 418,714 additional shares of CANB common stock required under the December 31, 2019 agreement. The fair value of the 543,714 shares of CANB common stock at June 30, 2020 was $1,073,835 and the Company recognized an unrealized gain of $73,835 in the quarterly period ended June 30, 2020.

 

On July 29, 2020, the Company executed an exchange agreement with CANB and delivered the 543,714 shares of CANB common stock to CANB in exchange for CANB’s delivery of 1,000,000 shares of common stock to the Company. The July 29, 2020 closing price of CANB common stock was $0.95 per share. In the balance sheet as of September 30, 2020, the Company recorded treasury stock in the amount of $516,528. The Company recognized a loss of $557,307 from the Company’s investment in CANB common stock in the quarterly period ended September 30, 2020.

 

4. INVESTMENT IN BIVI LLC

 

On May 15, 2015, Iconic entered into a Securities Exchange Agreement by and among the members of BiVi LLC, a Nevada limited liability company (“BiVi”), under which Iconic acquired a 51% majority interest in BiVi in exchange for the issuance of (a) 1,000,000 shares of restricted common stock and (b) 1,000 shares of newly created Series C Convertible Preferred Stock.

 

Prior to May 15, 2015, BiVi was beneficially owned and controlled by Richard DeCicco, the controlling shareholder, President, CEO and Director of Iconic Brands, Inc.

 

 
F-9

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

5. INVESTMENT IN BELLISSIMA SPIRITS LLC

 

On December 13, 2016, Iconic entered into a Securities Purchase Agreement with Bellissima Spirits LLC (“Bellissima”) and Bellissima’s members under which Iconic acquired a 51% majority interest in Bellissima in exchange for the issuance of a total of 10 shares of newly designated Iconic Series D Convertible Preferred Stock. Each share of Iconic Series D Convertible Preferred Stock was convertible into the equivalent of 5.1% of Iconic common stock issued and outstanding at the time of conversion.

 

Prior to December 13, 2016, Bellissima was controlled by Richard DeCicco, the controlling shareholder, President, CEO and Director of Iconic.

 

6. UNITED SPIRITS, INC.

 

To July 26, 2021, United Spirits, Inc. (“United”) was owned and managed by Richard DeCicco, the former controlling shareholder, President, CEO, and Director of Iconic. United provides distribution services for BiVi and Bellissima (see Note 12d) and is considered a variable interest entity (“VIE”) of Iconic. Since Iconic has been determined to be the primary beneficiary of United, we have included United’s assets, liabilities, and operations in the accompanying consolidated financial statements of Iconic. Summarized financial information of United follows:

 

Balance Sheets:

 

June 30,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 228,807

 

 

$ 448,254

 

Intercompany receivable from Iconic (A)

 

 

2,370,609

 

 

 

1,693,012

 

Right-of-use asset

 

 

-

 

 

 

4,441

 

Total assets

 

$ 2,599,416

 

 

$ 2,145,707

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 191,396

 

 

$ 210,693

 

Loans payable to officer and affiliated entity

 

 

35,865

 

 

 

58,582

 

SBA Paycheck Protection Program loan

 

 

-

 

 

 

28,458

 

Intercompany payable to Bellissima (A)

 

 

2,733,744

 

 

 

2,242,243

 

Intercompany payable to BiVi (A)

 

 

66,876

 

 

 

66,876

 

Operating lease liability

 

 

-

 

 

 

4,441

 

Total Liabilities

 

 

3,027,881

 

 

 

2,611,293

 

Noncontrolling interest in VIE

 

 

(428,465 )

 

 

(465,586 )

Total liabilities and stockholders’ deficiency

 

$ 2,599,416

 

 

$ 2,145,707

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

Statements of operations:

 

2021

 

 

2020

 

Intercompany distribution income (A)

 

$ 9,266

 

 

$ 6,615

 

Forgiveness of SBA PPP loan income

 

 

28,458

 

 

 

-

 

Total income

 

 

37,724

 

 

 

6,615

 

Royalty expense

 

 

-

 

 

 

-

 

Officers’ compensation

 

 

-

 

 

 

-

 

Other operating expenses – net

 

 

603

 

 

 

10,252

 

Total operating expenses

 

 

603

 

 

 

10,252

 

Net income (loss)

 

$ 37,121

 

 

$ (3,637 )

(A) Eliminated in consolidation

 

 

 

 

 

 

 

 

 

 
F-10

Table of Contents

   

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

7. INVENTORIES

 

Inventories consist of:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Finished goods:

 

 

 

 

 

 

Hooters brands

 

$ 232,459

 

 

$ 259,837

 

Bellissima brands

 

 

328,909

 

 

 

163,258

 

BiVi brands

 

 

47,439

 

 

 

47,439

 

Total finished goods

 

 

608,807

 

 

 

470,534

 

 

 

 

 

 

 

 

 

 

Raw materials:

 

 

 

 

 

 

 

 

Hooters brands

 

 

36,966

 

 

 

36,966

 

Total raw materials

 

 

36,966

 

 

 

36,966

 

 

 

 

 

 

 

 

 

 

Total

 

$ 645,773

 

 

$ 507,500

 

 

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Accounts payable

 

$ 1,779,507

 

 

$ 1,444,213

 

Accrued officers compensation

 

 

848,473

 

 

 

843,050

 

Accrued royalties

 

 

978,830

 

 

 

792,295

 

Other

 

 

(2,303 )

 

 

10,215

 

Total

 

$ 3,604,507

 

 

$ 3,089,773

 

 

 
F-11

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

9. NOTES PAYABLE

 

Notes payable consist of:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Small Business Administration Paycheck

Protection Program forgivable loan payable

 

$ -

 

 

$ 28,458

 

Original issue discount promissory note payable to

The Special Equities Opportunity Fund, LLC

(“SEG”), noninterest bearing, due July 16, 2021 –

Less unamortized debt discount of $5,575 and $0,

respectively (A)

 

 

324,425

 

 

 

-

 

Original issue discount promissory note payable to

SEG, noninterest bearing, due September 7, 2021

– Less unamortized debt discount of $7,046 and

$0, respectively (A)

 

 

96,287

 

 

 

-

 

Original issue discount promissory note payable to

Gregory Castaldo, noninterest bearing, due

September 7, 2021 – Less unamortized debt

discount of $9,775 and $0, respectively (A)

 

 

133,600

 

 

 

-

 

Bridge loan payable to SEG, noninterest bearing,

due on demand

 

 

400,000

 

 

 

-

 

Total

 

$ 954,312

 

 

$ 28,458

 

 

(A) These notes were cancelled as part of the July 26, 2021 acquisition of Top Pop LLC. See Note 13,

 

Subsequent Events.

 

10. CAPITAL STOCK

 

Preferred Stock

 

The one share of Series A Preferred Stock, which was issued to Richard DeCicco on September 10, 2009, entitles the holder to two votes for every share of Common Stock Deemed Outstanding and has no conversion or dividend rights.

 

The 1000 shares of Series C Preferred Stock, which were issued to Richard DeCicco on May 15, 2015 pursuant to the Securities Exchange Agreement (see Note 4) for the Company’s 51% investment in BiVi, entitled the holder in the event of a Sale (as defined) to receive out of the proceeds of such Sale (in whatever form, be it cash, securities, or other assets), a distribution from the Company equal to 76.93% of all such proceeds received by the Company prior to any distribution of such proceeds to all other classes of equity securities, including any series of preferred stock designated subsequent to this Series C Preferred Stock. Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco exchanged the 1,000 shares of Series C Preferred Stock for 1,000,000 shares of Company common stock.

 

The 10 shares of Series D Preferred Stock, which were issued to Richard DeCicco and Roseann Faltings (5 shares each) on December 13, 2016 pursuant to the Securities Purchase Agreement (See Note 5) for the Company’s 51% investment in Bellissima, entitled the holders to convert each share of Series D Preferred Stock to the equivalent of 5.1% of the common stock issued and outstanding at the time of conversion. Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco and Ms. Faltings exchanged the 10 shares of Series D Preferred Stock for 1,000,000 shares of Company common stock (500,000 shares each).

 

 
F-12

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

Effective May 21, 2018, the Company entered into a Share Purchase Agreement with the four investors who purchased 480,000 shares of common stock pursuant to a Securities Purchase Agreement dated October 27, 2017. The Exchange Agreement provided for the exchange of the 480,000 shares of common stock for 1,200,000 shares of Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into 0.4 shares of common stock, is entitled to 0.4 votes on all matters to come before the common stockholders or shareholders generally, is entitled to dividends on an as-converted-to-common stock basis, is entitled to a distribution preference of $0.25 upon liquidation, and is not redeemable.

 

Also effective May 21, 2018, the Company sold a total of 1,200,000 shares of Series E Preferred Stock and 480,000 warrants to the four investors referred to in the preceding paragraph for $300,000 cash pursuant to an Amendment No. 1 to Securities Purchase Agreement.

 

Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E Preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500.

 

As a condition to the closing of the first tranche, the Company entered into Securities Exchange Agreements with holders of convertible notes totaling $519,499 who exchanged their convertible notes for an aggregate of 2,077,994 shares of our Series E Preferred stock plus warrants to acquire 831,198 shares of our common stock. Also, holders of convertible notes totaling $76,569 exchanged their notes for an aggregate of 122,510 shares of our common stock and holders of convertible notes totaling $90,296 were paid off with cash.

 

On November 30, 2018 and December 20, 2018, the Company received two payments of $71,875 and $71,875 respectively (totaling $143,750) in exchange for 287,500 and 287,500 shares of Series E Preferred Stock (totaling 575,000 shares) respectively at $0.25 per share. These payments represented advance payments in connection with the second tranche of the Securities Purchase Agreement dated September 27, 2018 which closed on February 7, 2019.

 

Effective February 7, 2019, the Company closed on the second tranche of the Securities Purchase Agreement dated September 27, 2018. The Company received the remaining $243,750 (of the $387,500 total second tranche proceeds) and issued the investors the remaining total of 975,000 shares of Series E Preferred Stock (of the 1,550,000 total second tranche shares) and warrants to acquire 620,000 shares of our common stock.

 

On February 12, 2019 and March 18, 2019, the Company received two payments of $71,880 and $25,000 respectively (totaling $96,880) in exchange for 287,520 and 100,000 shares of Series E Preferred Stock (totaling 387,520 shares) respectively at $0.25 per share. These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. Closing of the third tranche of $387,500 has not occurred.

 

On April 25, 2019 and September 4, 2019, the Company received payments of $71,875 and $96,875 respectively (totaling $168,750) in exchange for 287,500 and 387,500 shares of Series E Preferred Stock (totaling 675,000 shares) respectively at $0.25 per share. These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. Closing of the third tranche of $387,500 has not occurred.

 

 
F-13

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

On April 23, 2019, a holder converted 673,398 shares of Series E Preferred Stock into 269,359 shares of Iconic common stock.

 

On May 17, 2019, a holder converted 800,000 shares of Series E Preferred Stock into 320,000 shares of Iconic common stock.

 

On July 18, 2019, Iconic entered into Securities Purchase Agreements with certain accredited investors (the “Investors”) for the sale of an aggregate of 3,125 shares of newly designated Series F Convertible Preferred Stock plus 5,000,000 warrants at a price of $1,000 per share of Series F Convertible Preferred Stock or for a total of $3,125,000 (which was collected in full from July 18, 2019 to August 2, 2019). On August 2, 2019, Iconic paid $322,500 in commissions and expenses to the placement agent of this offering. Each share of Series F Convertible Preferred Stock has a stated value of $1,000, is convertible into 1,600 shares of common stock (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.

 

We also entered into separate Registration Rights Agreements with the purchasers of the Series F Preferred Stock, pursuant to which the Company agreed to file a registration statement to register the resale of the shares underlying the Series F Convertible Preferred Stock and Warrants within thirty (30) days following the closing date (the “Filing Date”), to cause such registration statement to be declared effective within 60 days following the earlier of (i) the date that the registration statement is filed with the Securities and Exchange Commission (the “SEC”) and (ii) the Filing Date, and to maintain the effectiveness of the registration statement until all of such shares of Common Stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions. We filed the Form S-1 registration statement on September 9, 2019 which was declared effective by the SEC on September 18, 2019. If we fail to maintain the effectiveness of the registration statement for the required time period, the Company is obligated to pay liquidated damages in the amount of 1% of their subscription amount, per month, until such event is satisfied.

 

Concurrently with the closing of the financing transaction described above, we entered into Securities Exchange Agreements with certain holders of our Series E Convertible Preferred Stock and exchanged their 2,725,000 shares of Series E Convertible Preferred Stock for an aggregate of 681.25 shares of our Series F Convertible Preferred Stock.

 

From July 26, 2019 to August 28, 2019, three holders converted a total of 1,000,000 shares of Series E Preferred Stock into a total of 400,000 shares of Iconic common stock.

 

From September 19, 2019 to September 27, 2019, three holders converted a total of 14.20 shares of Series E Preferred Stock into a total of 227,200 shares of Iconic common stock.

 

On October 25, 2019 and December 28, 2019, two holders converted a total of 651,892 shares of Series E Preferred Stock into a total of 260,757 shares of Iconic common stock.

 

 
F-14

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

From October 2, 2019 to December 31, 2019, six holders converted a total of 508.50 shares of Series F Preferred Stock into a total of 813,600 shares of Iconic common stock.

 

On January 12, 2020, the Company entered into securities purchase agreements with certain accredited investors for the sale of a total of 1,500 shares of Series G Convertible Preferred Stock and warrants o purchase 1,200,000 shares of our common stock for gross proceeds of $1,500,000 (of which $1,475,000 was collected on January 13, 2020 and January 14, 2020). Each share of Series G Convertible Preferred Stock (designated on January 13, 2020) has a stated value of $1,000, is convertible into shares of common stock at a price of $1.25 per share (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.

 

On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.

 

From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.

 

On May 29, 2020 and June 5, 2020, four holders converted a total of 552 shares of Series F Preferred Stock into a total of 883,200 shares of Iconic common stock.

 

Common Stock

 

On January 22, 2020, the Company issued a total of 375,000 shares of its common stock to the placement agent and four associated individuals for services relating to the offering of 1,500 shares of Series G Preferred Stock that concluded on January 14, 2020 (see Preferred Stock above).

 

On January 22, 2020, and February 27, 2020, the Company issued a total of 160,000 shares of its common stock to an investor relations firm for services rendered to the Company. The $101,018 total fair value of the 160,000 shares of Iconic common stock on the respective dates of issuance was expensed as investor relations in the three months ended March 31, 2020.

  

On January 26, 2020, the Company issued 150,000 shares of its common stock to a consulting firm for services rendered to the Company. The $100,500 fair value of the 150,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.

 

On February 24, 2020, the Company issued 100,000 shares of its common stock to William Clyde Elliot II pursuant to an Endorsement Agreement dated February 15, 2020 (see Note 12h). The $67,500 fair value of the 100,000 shares of Iconic common stock was charged to prepaid expenses and was expensed over the term of the Endorsement Agreement.

 

 
F-15

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

On February 24, 2020, the Company issued 50,000 shares of its common stock to a consulting firm for services rendered to the Company. The $33,750 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.

 

On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.

 

From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.

 

On May 1, 2020, the Company issued 275,000 shares of its common stock to an investor relations firm for services rendered to the Company. The $167,750 fair value of the 275,000 shares of Iconic common stock was expensed as investor relations in the three months ended June 30, 2020.

 

On June 1, 2020, the Company issued 75,000 shares of its common stock to a consultant for services rendered to the Company. The $51,750 fair value of the 75,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2020.

 

On June 2, 2020, the Company issued 50,000 shares of its common stock to a consulting firm entity for services rendered to the Company. The $35,500 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2020.

 

On May 29, 2020 and June 5, 2020, four holders converted a total of 552 shares of Series F Preferred Stock into a total of 883,200 shares of Iconic common stock.

 

On March 23, 2021, the Company issued 401,670 shares of its common stock to an investors relations firm for services rendered to the Company. The $180,752 fair value of the 401,670 shares of Iconic common stock was expensed as investors relations in the three months ended March 31, 2021.

 

On May 12, 2021, the Company issued a total of 1,100,000 shares of its common stock to 10 individuals for prior services rendered to the Company. The $429,000 fair value of the 1,100,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2021.

 

On May 19, 2021, the Company issued 300,000 shares of its common stock to Richard DeCicco and 100,000 shares of its common stock to Roseann Faltings for prior services rendered to the Company. The $160,000 fair value of the 400,000 shares of Iconic common stock was expensed as officers compensation in the three months ended June 30, 2021.

 

Warrants

 

A summary of warrants activity for the period January 1, 2019 to June 30, 2021 follows:

 

 

 

Common

shares

Equivalent

 

 

 

 

 

Balance, January 1, 2019

 

 

2,895,198

 

Issued in the three months ended March 31, 2019

 

 

620,000

 

 

 

 

 

 

Balance, March 31, 2019

 

 

3,515,198

 

 

 

 

 

 

Exercise of warrants in connection with Warrant Exercise Agreements dated May 8, 2019

 

 

(960,000 )

 

 

 

 

 

Issuance of New Warrants in connection with Warrant Exercise Agreements dated May 8, 2019

 

 

1,920,000

 

 

 

 

 

 

Balance, June 30, 2019 4,475,198 Issued in the three months ended September 30, 2019

 

 

5,000,000

 

 

 

 

 

 

Balance, September 30, 2019 and December 31, 2019 9,475,198 Issued in the three months ended March 31, 2020

 

 

1,180,000

 

 

 

 

 

 

Balance, March 31, 2020, June 30, 2020, September 30, 2020, and December 31, 2020

 

 

10,655,198

 

 

 

 

 

 

Expired in the three months ended March 31, 2021

 

 

(400,000 )

 

 

 

 

 

Balance, March 31, 2021 and June 30, 2021

 

 

10,255,198

 

 

Issued and outstanding warrants at June 30, 2021 consist of:

 

Year Granted

 

Number Common Shares Equivalent

 

 

Exercise Price Per Share

 

 

Expiration Date

 

2017

 

 

54,000

 

 

$ 2.50

 

 

June 22, 2022 to June 30, 2022

 

2018

 

 

30,000

 

 

$ 2.50

 

 

May 21, 2023

 

2018

 

 

831,198

 

 

$ 1.25

 

 

September 20, 2023

 

2018

 

 

620,000

 

 

$ 1.25 *

 

September 20, 2023

 

2019

 

 

620,000

 

 

$ 1.25 *

 

February 7, 2024

 

2019

 

 

1,920,000

 

 

$ 2.25 *

 

May 8, 2024

 

2019

 

 

5,000,000

 

 

$ 0.625

 

 

August 2, 2024

 

2020

 

 

1,180,000

 

 

$ 1.25

 

 

January 12, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

10,255,198

 

 

 

 

 

 

 

 

 

* These warrants contain a “down round” provision and thus the exercise price is reduceable to $0.625 per share as a result of the Series F Preferred Stock financing that closed on August 2, 2019.

 

 
F-16

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500. The second tranche of $387,500 closed on February 7, 2019 and also was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock.

 

On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants. The holders exercised a total of 960,000 warrants (which were acquired from September 2017 to November 2017 and on May 21, 2018) at an agreed price of $0.32 per share and paid the Company a total of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants that are exercisable into Company common stock at a price of $2.25 per share for a period of five years and contain “down round” price protection.

 

As discussed in Preferred Stock above, the Company issued a total of 5,000,000 warrants to investors as part of the offering of 3,125 shares of Series F Preferred Stock that concluded on August 2, 2019. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share for a period of five years from the date of issuance and contains “down round” price protection.

 

As also discussed in Preferred Stock above, the Company issued a total of 1,180,000 warrants to investors as part of the offering of 1,500 shares of Series G Preferred Stock that concluded on January 14, 2020. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share for a period of five years from the date of issuance and contains “down round” price protection.

 

11. INCOME TAXES

 

No income taxes were recorded in the periods presented since the Company had taxable losses in these periods.

 

The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United States federal income tax rate of 21% for the periods presented to income (loss) before income taxes. The sources of the difference are as follows:

 

 

 

Six months ended

June 30,

 

 

 

2021

 

 

2020

 

Expected tax at 21%

 

$ (486,785 )

 

$ (289,002 )

 

 

 

 

 

 

 

 

 

Nontaxable gain on forgiveness of SBA PPP loan

 

 

5,976

 

 

 

-

 

Nontaxable unrealized gain on investment in and receivable from Can B Corp

 

 

-

 

 

 

(15,505 )

Nondeductible stock-based compensation

 

 

161,648

 

 

 

108,745

 

Increase (decrease) in valuation allowance

 

 

319,161

 

 

 

195,762

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

$ -

 

 

$ -

 

 

 
F-17

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

Significant components of the Company’s deferred income tax assets are as follows:

 

 

 

June 30,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Net operating loss carryforward

 

 

5,168,712

 

 

 

4,849,551

 

 

 

 

 

 

 

 

 

 

Less valuation allowance

 

 

(5,168,712 )

 

 

(4,849,551 )

 

 

 

 

 

 

 

 

 

Deferred income tax assets - net

 

$ -

 

 

$ -

 

 

Based on management’s present assessment, the Company has not yet determined that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of June 30, 2021 and December 31, 2020 will be realized. Accordingly, the Company has maintained a 100% valuation allowance against the deferred tax asset in the financial statements at June 30, 2021 and December 31, 2020. The Company will continue to review this valuation allowance and make adjustments as appropriate.

 

Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

 

All tax years remain subject to examination by major taxing jurisdictions.

 

12. COMMITMENTS AND CONTINGENCIES

 

a. Iconic Guarantees

 

On May 26, 2015, BiVi LLC (“BiVi”) entered into a License Agreement with Neighborhood Licensing, LLC (the “BiVi Licensor”), an entity owned by Chazz Palminteri (“Palminteri”), to use Palminteri’s endorsement, signature and other intellectual property owned by the BiVi Licensor. Iconic has agreed to guarantee and act as surety for BiVi’s obligations under certain sections of the License Agreement and to indemnify the BiVi Licensor and Palminteri against third party claims.

 

On November 12, 2015, Bellissima Spirits LLC (“Bellissima”) entered into a License Agreement with Christie Brinkley, Inc. (the “Bellissima Licensor”), an entity owned by Christie Brinkley (“Brinkley”), to use Brinkley’s endorsement, signature, and other intellectual property owned by the Bellissima Licensor. Iconic has agreed to guarantee and act as surety for Bellissima’s obligations under certain sections of the License Agreement and to indemnify the Bellissima Licensor and Brinkley against third party claims.

 

 
F-18

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020

 

b. Royalty Obligations of BiVi and Bellissima

 

Pursuant to the License Agreement with the Bivi Licensor (see Note 12a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year. The Minimum Royalty Fee has been waived until such time as the parties agree to reinstate the Minimum Royalty Fee.

 

Pursuant to the License Agreement and Amendment No. 1 to the License Agreement effective September 30, 2017 with the Bellissima Licensor (see Note 12a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year.

 

c. Brand Licensing Agreement relating to Hooters Marks

 

On July 23, 2018, United Spirits, Inc. (“United”) executed a Brand Licensing Agreement (the “Hooters Agreement”) with HI Limited Partnership (“the Licensor”). The Agreement provides United a license to use certain “Hooters” Marks to manufacture, market, distribute, and sell alcoholic products.

 

The Initial Term of the Hooters Agreement is from July 23, 2018 through December 31, 2020. Provided that United is not in breach of any terms of the Agreement, United may extend the Term for an additional 3 years through December 31, 2023.

 

The Hooters Agreement provides for United’s payment of Royalty Fees (payable quarterly) to the Licensor equal to 6% of the net sales of the licensed products subject to a minimum royalty fee of $65,000 for Agreement year 1 (ending December 31, 2018), $255,000 for Agreement year 2, $315,000 for Agreement year 3 and 4, $360,000 for Agreement year 5, and $420,000 for Agreement year 6.

 

The Hooters Agreement also provided for United’s payment of an advance payment of $30,000 to the Licensor to be credited towards royalty fees payable to Licensor. On September 6, 2018, the $30,000 advance payment was paid to the Licensor. The Hooters Agreement also provides for United’s payment of a marketing contribution equal to 2% of the prior year’s net sales of the Licensed Products. If United fails to spend the required marketing contribution in any calendar year, the deficiency will be paid to Licensor.

 

For the six months ended June 30, 2021 and 2020, royalties expense under this Agreement was $157,500 and $7,186, respectively.

 

d. Marketing and Order Processing Services Agreement

 

During October 2019, United Spirits, Inc. (“United”) executed a Marketing and Order Processing Services Agreement (the “QVC Agreement”) with QVC, Inc. (“QVC”). Among other things, the Agreement provides for United’s grant to QVC of an exclusive worldwide right to promote the Bellissima products through direct response television programs.

 

The Initial License Period commenced October 2019 and expires in December 2021 (i.e., two years after first airing of a Bellissima product). Unless either party notifies the other party in writing at least 30 days prior to the end of the Initial License Period or any Renewal License Period of its intent to terminate the QVC Agreement, the License continually renews for additional two-year periods.

 

 
F-19

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

The QVC Agreement provides for United’s payment of “Marketing Fees” (payable no less than monthly) to QVC in amounts agreed to between United and QVC from time to time. For the six months ended June 30, 2021 and 2020, the Marketing Fees expense (payable to QVC) was $131,450 and $264,472, respectively, and the direct response sales generated from QVC programs was $687,005 and $1,094,869, respectively.

 

e. Distribution Agreements

 

On May 1, 2015, BiVi entered into a Distribution Agreement with United for United to distribute and wholesale BiVi’s product and to act as the licensed importer and wholesaler. The Distribution Agreement provides United the exclusive right for a term of ten years to sell BiVi’s product for an agreed distribution fee equal to $1.00 per case of product sold.

 

In November 2015, Bellissima and United agreed to have United distribute and wholesale Bellissima’s products under the same terms contained in the Distribution Agreement with BiVi described in the preceding paragraph.

 

Effective April 1, 2019, the Company and United agreed to have United distribute and wholesale Hooters brand products under the same terms contained in the Distribution Agreement with BiVi described in the second preceding paragraph.

 

f. Compensation Arrangements

 

Effective April 1, 2018, the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements had a term of 24 months (to June 30, 2020) and have continued thereafter under the same terms. The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum. For the year ended December 31, 2019, we accrued a total of $415,000 officers compensation pursuant to these two Employment Agreements which was allocated 50% to Iconic ($207,500), 40% to Bellissima ($166,000), and 10% to BiVi ($41,500). For the year ended December 31, 2020, we accrued a total of $415,000 officers compensation pursuant to these two Employment Agreements which was allocated 50% to Iconic ($207,500) and 50% to Bellissima ($207,500). For the six months ended June 30, 2021, we accrued a total of $207,500 officers compensation pursuant to these two Employment Agreements which were allocated 50% to Iconic ($103,750) and 50% to Bellissima ($103,750).

 

As of June 30, 2021 and December 31, 2020, accrued officers compensation was $848,473 and $843,050, respectively.

 

g. Lease Agreements

 

On March 27, 2018, United Spirits, Inc. executed a lease extension for the Company’s office and warehouse space in North Amityville New York. The extension had a term of three years from February 1, 2018 to January 31, 2021 and provided for monthly rent of $4,478.

 

On January 1, 2021, Iconic Brands, Inc. executed a cancellable Lease Agreement with Day Kay International (an entity controlled by Richard DeCicco) for the lease of the Company’s office and warehouse space in North Amityville New York. The agreement has a term of three years from January 1, 2021 to January 1, 2024 and provides for monthly rent of $4,893.

 

 
F-20

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

On January 1, 2019, United Spirits, Inc. executed a lease agreement with the two officers of the Company to use part of their residence in Copiague, New York for Company office space. The agreement has a term of three years from January 1, 2019 to December 31, 2021 and provides for monthly rent of $3,930.

 

At June 30, 2021, the future minimum lease payments under the one remaining non-cancellable operating lease were:

 

Year ending December 31, 2021

 

$ 23,580

 

 

 

 

 

 

Total

 

$ 23,580

 

 

The operating lease liabilities totaling $22,909 at June 30, 2021 as presented in the Consolidated Balance Sheets represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of $23,580 at June 30, 2021.

 

h. Endorsement Agreement

 

In February 2020, Iconic executed an Endorsement Agreement with an entity (“CEE”) controlled by Chase Elliott (“Elliott”), driver of the Hendrick Motorsports Number 9 NAPA/Hooter’s Chevrolet in races of the NASCAR Cup Series. The agreement, which has a term ending on December 31, 2021, provides Iconic the right to utilize Elliott’s name in connection with the promotion and distribution of Hooters brand products and requires CEE and Elliott to perform certain specified services for Iconic including certain promotional appearances. The agreement provides for compensation payable to CEE of (1) Initial Share Award of 100,000 shares of Iconic common stock (which was issued on February 24, 2020); (2) $75,000 year 2020 cash compensation (which was paid March 6, 2020); (3) $75,000 year 2021 cash compensation payable on or before February 15, 2021 (which has not yet been paid); and (4) Year 2021 Second Share Award of that number of shares of Iconic common stock equal to $75,000 based upon the average closing price of the common stock for the five trading days immediately preceding February 15, 2021 (which has not yet been issued).

 

For the year ended December 31, 2020, we expensed $142,500 in license fees relating to this Endorsement Agreement.

 

 
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Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three and six months ended June 30, 2021 and 2020 

 

i. Concentration of sales

 

For the six months ended June 30, 2021 and 2020, sales consisted of:

 

 

 

2021

 

 

2020

 

Bellissima product line:

 

 

 

 

 

 

 

 

 

 

 

 

 

QVC direct response sales

 

$ 687,006

 

 

$ 1,094,869

 

Other

 

 

494,856

 

 

 

267,683

 

Total Bellissima

 

 

1,181,862

 

 

 

1,362,552

 

BiVi product line

 

 

-

 

 

 

-

 

Hooters product line

 

 

37,585

 

 

 

98,934

 

 

 

 

 

 

 

 

 

 

Total

 

$ 1,219,447

 

 

$ 1,461,486

 

 

13. SUBSEQUENT EVENTS

 

On July 26, 2021, the Company acquired all of the issued and outstanding membership interests of TopPop LLC (“TopPop”), a brand owner and contract manufacturing and packaging company specializing in flexible packaging solutions in the food, beverage, and health categories, in exchange for (a) $3,995,551 cash; (b) 26,009,600 shares of Company common stock (valued at $0.3125 per share or $8,128,000); (c) $4,900,000 Promissory Notes bearing interest at 10% and due July 26, 2022; and (d) earn-out payments for years ended July 31, 2022 and July 31, 2023 equal to the excess of 1.96 times TopPop’s EBITDA for each year over the amount of Promissory Notes repaid for each year. The earn-out payments shall be made, at the election of each TopPop Member, in cash or in shares of Company common stock or a combination thereof provided that not less than 45% of the value of each earn-out payment shall be paid in common stock.

 

In connection with the TopPop acquisition on July 26, 2021, the Company entered into securities purchase agreements for the sale of 32,303.11 shares of the Company’s newly created Series A-2 Convertible Preferred Stock, 11,320,201 shares of Company common stock, and Warrants to purchase 114,690,150 shares of Company common stock (at an exercise price of $0.3125 per share for a period of five years) for gross proceeds of $35,840,672. The first tranche for 20,724.70 shares of Series A-2 Preferred Stock, 7,019,196 shares of Company common stock, and 73,338,203 Warrants for gross proceeds of $22,918,203 (consisting of $18,147,354 cash and cancellation of a total of $4,770,849 of certain indebtedness) closed on July 26, 2021. The second tranche for 11,578.40 shares of Series A-2 Preferred Stock, 4,301,005 shares of Company common stock, and 41,351,901 Warrants for gross proceeds of $12,690,901 is to close in January 2022. The Placement Agent fee paid for the first tranche was $2,350,000 cash and 2,194 shares of Series A-2 Preferred Stock. The Placement Agent fee to be paid for the second tranche is $1,150,000 cash and 1,096 shares of Series A-2 Preferred Stock.

 

Each share of Series A-2 Convertible Preferred Stock has a par value of $0.001 per share, has a stated value of $1,000 per share, and is convertible at the option of the holder into shares of Company common stock at a conversion price of $0.3125 per share (subject to adjustment under certain circumstances).

 

Also in connection with the TopPop acquisition on July 26, 2021:

 

(1)

Holders of the Company’s Series E, F, and G Convertible Preferred Stock and Series E, F and G Common Stock Purchase Warrants exchanged their existing securities for 3704.80 shares of series A-2 Preferred Stock, 2,449,517 shares of Company common stock, and 14,304,880 Warrants.

 

 

(2)

Richard DeCicco, the Company’s chief executive officer to July 26, 2021, exchanged the one issued and outstanding share of Series A Preferred Stock for 25,600,000 shares of Company common stock.

 

 

(3)

Richard DeCicco, the Company’s chief executive officer to July 26, 2021, sold all of the issued and outstanding capital stock of United Spirits, Inc. to the Company for $1,000,000 cash.

 

 

F-22

 

 

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

You should read the following discussion and analysis of our financial condition and plan of operations together with and our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

Summary Overview

 

Overview

 

Iconic Brands, Inc. (the “Company,” “we,” “us,” or “our”) is a lifestyle branding company with expertise in developing, from inception to completion, and branding alcoholic beverages for ourselves and third parties. We market and place products into national distribution through long-standing industry relationships. We believe we are a leader in “Celebrity Branding” of beverages in which we procure superior and unique products from around the world and brand such products with internationally-recognized celebrities. We currently market and sell the following products:

 

·

Bellissima Prosecco - these products comprise a line of all-natural and Vegan Prosecco and Sparkling Wine made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose;

·

Bella Sprizz Apertifs - these products comprise a line of aperitifs consisting of three different expressions, a classic Italian aperitif an all-natural elderflower aperitif and a classic Italian bitter; and

·

Hooters Spirits - these products comprise a line of private-label premium spirits that are sold under the Hooters brand. The full line of Hooters Spirits includes Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey.

 

 
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In addition, we also develop private label spirits for established domestic and international chains. Our mission is to be an industry leader in brand development, marketing, and sales of alcoholic beverages by capitalizing on our ability to procure products from around the world. We plan to leverage our relationships with internationally-recognized celebrities to add value to products and create brand awareness in unbranded niche categories.

 

We market and sell a line of line of all-natural and Vegan Prosecco and Sparkling Wine made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose, pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, Bellissima Spirits LLC (“Bellissima”) and Christie Brinkley, Inc., an entity owned by supermodel and entrepreneur Christie Brinkley.

 

We also market and sell a Vodka product, under the brand “BiVi 100 percent Sicilian Vodka,” pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, BiVi LLC (“BiVi”) and Neighborhood Licensing, LLC, an entity owned by Chazz Palminteri.

 

In addition, we market and sell a line of private-label premium spirits under the Hooters brand, including Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey, pursuant to a Marketing and Distribution Agreement entered into between us and United Spirits, Inc., a company owned and managed by Richard DeCicco, the controlling shareholder, President, Chief Executive Officer, Chief Financial Officer and Director of the Company, which we treat as a variable interest entity.

 

Recent Developments

 

COVID-19

 

As a result of COVID-19, we have seen a shift away from the traditional brick-and-mortar business to a direct-to-consumer business. Although we expect brick-and-mortar to rebound, we also expect the director-to-consumer model to stay post-COVID-19, as consumers embrace the convenience of having their alcoholic beverages delivered to their doorstep. As we expand our relationship with QVC and our own direct-to-consumer platform through our website, we believe we are well positioned to execute on this opportunity.

 

TopPop Acquisition

 

On July 26, 2021, the Company entered into an acquisition agreement (the “TopPop Acquisition Agreement”) with TopPop LLC, a New Jersey limited liability company (“TopPop”), and each of FrutaPop LLC (“Frutapop”), Innoaccel Investments LLC (“Innoaccel”) and Thomas Martin (“Martin” and, together with Frutapop and Innoaccel, the “TopPop Members”), pursuant to which the TopPop Members sold to the Company and the Company acquired, all of the issued and outstanding membership interests of TopPop.

 

TopPop is a brand owner and contract manufacturing and packaging company specializing in flexible packaging solutions in the food, beverage and health categories. Its first branded and contract products are alcohol-infused ice pops. Its manufacturing facility in Marlton, New Jersey is registered by the Federal Drug Administration and holds a Safe Quality Food certification.

 

 
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Upon consummation of the acquisition contemplated by the TopPop Acquisition Agreement, the TopPop Members received, in the aggregate: (a) $3,995,551 in cash by transfer of immediately available funds, (b) 26,009,600 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), which shares were valued in the aggregate at $8,128,000, or $0.3125 per share, (c) $4,900,000.00 aggregate principal amount of promissory notes of the Company (the “Promissory Notes”) and (d) future additional cash payments as earnout consideration (the “Total Consideration”). The earn-out payments, if any, will be made (i) following the 12-month period commencing on August 1, 2021 (the “First Year”), in an amount (the “First Year Earn-out Amount”) equal to each TopPop Member’s pro rata portion of the excess, if any, of: (A) 1.96 times TopPop’s EBITDA for the First Year over (B) the aggregate amount of the Promissory Notes repaid in cash during the First Year; provided, however, no First Year Earn-out Amount shall be payable if (i)(A) does not exceed (i)(B); and (ii) following the 12-month period commencing on August 1, 2022 (the “Second Year”), in an amount (the “Second Year Earn-out Amount”) equal to each TopPop Member’s pro rata portion of the excess, if any, of: (A) 1.96 times TopPop’s EBITDA for the Second Year over (B) the aggregate amount of the Promissory Notes repaid in cash during the Second Year; provided, however, no Second Year Earn-out Amount shall be payable if (ii)(A) does not exceed (ii)(B). The earn-out payments shall be made, at the election of each TopPop Member, in cash or in shares of Common Stock or a combination thereof, less any reserve for possible indemnification payments, provided that not less than 45% of the value of each earn-out payment shall be paid in Common Stock. If paid in shares of Common Stock, such shares shall be valued at the then-prevailing market rate.

    

Series A-2 Convertible Preferred Stock Financing

 

On July 26, 2021, the Company entered into securities purchase agreements dated as of July 26, 2021 (collectively, the “Purchase Agreement”) with certain accredited investors (each an “Investor” and collectively, the “Investors”) for the sale of an aggregate of 32,303.11 shares of the Company’s newly-created Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred Stock”), 11,320,201 shares of Common Stock, and warrants (the “Warrants”) to purchase 114,690,150 shares of Common Stock, for gross proceeds of $35,840,672, before deducting placement agent and other offering expenses. Pursuant to the Purchase Agreement, the shares of Series A-2 Preferred Stock, Common Stock and Warrants are to be sold in two tranches, the first of which closed on July 26, 2021 for gross proceeds of $22,918,203 for the sale of 20,724.70 shares of Series A-2 Preferred Stock, 7,019,196 shares of Common Stock, and Warrants to purchase 73,338,203 shares of Common Stock. Of the $22,918,203 gross proceeds received by the Company upon the closing of the first tranche, $18,147,354 was paid in cash, $676,708 was paid by assignment to the Company of $676,708 aggregate principal and interest amount of the Company’s outstanding original issue discount promissory notes and $3,762,000 was paid by assignment to the Company of $3,762,000 aggregate principal amount of TopPop’s outstanding original issue discount promissory notes, all of which notes were cancelled by the Company. A $332,141 discount was applied to the cash component of the purchase price received upon the closing of the first tranche.

 

Pursuant to the Purchase Agreement, the closing of the second tranche, which will include the sale of an additional 11,578.40 shares of Series A Preferred Stock, 4,301,005 shares of Common Stock, and Warrants to purchase an additional 41,351,901 shares of Common Stock for gross proceeds of $12,690,901, all of which will be paid in cash, will occur within five trading days of the six-month anniversary of the closing of the first tranche. The closing of the transactions contemplated by the Purchase Agreement are subject to the satisfaction of certain closing conditions, including the execution of the Registration Rights Agreement (as defined below), and the consummation of the transactions contemplated by the TopPop Acquisition Agreement, the Exchange Agreement (as defined below), and the United Purchase Agreement (as defined below). The terms of the Series A-2 Preferred Stock are set forth under Items 3.02 and 5.03 below.

 

 
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The Warrants are exercisable for a period of five years from the date of issuance at an exercise price of $0.3125 per share. The Investors may exercise the Warrants on a cashless basis if the shares of Common Stock underlying the Warrants are not then registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”).

  

In connection with this transaction, the Company entered into a Placement Agency Agreement (the “Placement Agency Agreement”) with Dawson James Securities, Inc. (the “Placement Agent”), pursuant to which at the closing of the first tranche under the Purchase Agreement the Company paid to the Placement Agent a cash fee in the amount of $2,350,000 and the Company agreed to pay to the Placement Agent in connection with the closing of the second tranche under the Purchase Agreement a cash fee in the amount of $1,150,000. In addition, the Company agreed to pay to the Placement Agent a fee in connection with any cash exercise of any of the Warrants in an amount equal to 10% of the cash amount received by the Company upon any such exercise. Pursuant to the Placement Agency Agreement, as additional consideration for the services of the Placement Agent, the Company also issued to the Placement Agent or its designees in connection with the closing of the first tranche under the Purchase Agreement 2,194 shares of Series A-2 Preferred Stock and agreed to issue to the Placement Agent or its designees in connection with the closing of the second tranche under the Purchase Agreement as additional 1,096 shares of Series A-2 Preferred Stock.

 

Exchange of Issued and Outstanding Series E, F and G Convertible Preferred Stock and Series E, F and G Common Stock Purchase Warrants

 

On July 26, 2021, the Company entered into securities exchange agreements (collectively, the “Exchange Agreement”) with the holders (each a “Holder” and collectively, the “Holders”) of the Company’s outstanding (a) Series E Convertible Preferred Stock, Series F Convertible Preferred Stock and Series G Convertible Preferred Stock (the “Existing Preferred Stock”), and (b) Series E Common Stock Purchase Warrants, Series F Common Stock Purchase Warrants and Series G Common Stock Purchase Warrants (the “Existing Warrants” and together with the Existing Preferred Stock, collectively, the “Existing Securities”), pursuant to which the Holders exchanged (the “Exchange”) (i) all Existing Preferred Stock held by each Holder for shares of Series A-2 Preferred Stock and Warrants, and (ii) all Existing Warrants held by each Holder for shares of Common Stock. In connection with the Exchange, the Holders exchanged all of their Existing Securities for an aggregate of 3,704.80 shares of Series A-2 Preferred Stock, Warrants to purchase 14,304,880 shares of Common Stock, and 2,449,517 shares of Common Stock. Upon the Exchange, the Existing Securities were cancelled and all contractual (or similar) rights, preferences and obligations relating to such Existing Securities became null and void and of no further effect whatsoever. 

 

 
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Redemption of Series F Convertible Preferred Stock

 

On July 26, 2021, the Company entered into a redemption agreement with Jason DiPaola, pursuant to which the Company redeemed and purchased from Mr. DiPaola, and Mr. DiPaola sold and delivered to the Company, 75 uncertificated shares of the Company’s Series F Convertible Preferred Stock owned by Mr. DiPaola, for an aggregate purchase price of $75,000 in accordance with the terms of such redemption agreement.

 

On July 26, 2021, the Company entered into a redemption agreement with 32 Entertainment LLC, pursuant to which the Company redeemed and purchased from 32 Entertainment LLC, and 32 Entertainment LLC sold and delivered to the Company, 150 uncertificated shares Series F Convertible Preferred Stock owned by 32 Entertainment LLC, for an aggregate purchase price of $150,000 in accordance with the terms of such redemption agreement.

 

Exchange of Issued and Outstanding Series A Preferred Stock

 

On July 26, 2021, the Company entered into a securities exchange agreement dated as of July 26, 2021 (the “Series A Preferred Exchange Agreement”), with Richard DeCicco, who, at the time of execution and delivery of such agreement, was the Company’s Chief Executive Officer, Chief Financial Officer, chairman of the Company’s board of directors (the “Board”) and the holder of the Company’s one issued and outstanding share of Series A Preferred Stock. Pursuant to the Series A Preferred Exchange Agreement, Mr. DeCicco exchanged his one share of Series A Preferred Stock for 25,600,000 shares of Common Stock. Upon such exchange, the Series A Preferred Stock, which previously gave Mr. DeCicco two votes for every one vote of the Company’s outstanding voting securities, was cancelled and all contractual (or similar) rights, preferences and obligations relating to such Series A Preferred Stock became null and void and of no further effect whatsoever.

 

Purchase of all Issued and Outstanding Capital Stock of United Spirits, Inc.

 

On July 26, 2021, the Company entered into a securities purchase agreement (the “United Purchase Agreement”) with Mr. DeCicco pursuant to which the Company purchased from Mr. DeCicco, and Mr. DeCicco sold, all of the issued and outstanding capital stock of United Spirits, Inc., a New York corporation (“United”). Pursuant to the United Purchase Agreement, upon the closing of the transactions contemplated thereby, Mr. DeCicco transferred, and the Company acquired, 100% of the issued and outstanding capital stock of United in exchange for a purchase price of $1,000,000. The United Purchase Agreement contains customary representations, warranties and covenants of the parties thereto, and the closing of the transactions contemplated by the United Purchase Agreement was subject to the satisfaction of certain closing conditions, including, without limitation, certain approvals from various state liquor authorities. Prior to the closing of the transactions contemplated by the United Purchase Agreement, the Company marketed and sold its wine and spirts products pursuant to an exclusive marketing and distribution agreement between the Company and United.

 

 
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Amended and Restated LLC Agreements of Bellissima Spirits LLC and BiVi LLC

 

On July 26, 2021, the Company, and each other member identified therein, including Mr. DeCicco and Rosanne Faltings, the Company’s vice president of sales and a member of the Board, entered into an Amended and Restated Limited Liability Company Agreement dated as of July 26, 2021 (the “Bellissima LLC Agreement”) of Bellissima Bellissima. The Bellissima LLC Agreement provides that the manager of Bellissima, currently Mr. DeCicco, may cause Bellissima to make distributions of available cash flow to the members pro rata in accordance with their cash flow ratios, of which the Company is entitled to 100% of any such distribution of available cash flow. The Bellissima LLC Agreement also provides that the manager shall cause Bellissima to make distributions of net proceeds attributable to certain capital events to members pro rata in accordance with their membership interest percentage, of which the Company is entitled to 54% of any such distribution of net proceeds and Mr. DeCicco and Ms. Faltings are entitled to 15.34% and 15.33%, respectively. Transfers of membership interests in Bellissima are generally restricted and the Bellissima LLC Agreement provides for preemptive rights, rights of first refusal, and rights of co-sale, in each case, in accordance with the terms and conditions set forth therein.

 

On July 26, 2021, the Company, and each other member identified therein, including Mr. DeCicco and Ms. Faltings, entered into an Amended and Restated Limited Liability Company Agreement dated as of July 26, 2021 (the “BiVi LLC Agreement”) of BiVi. The BiVi LLC Agreement provides that the manager of BiVi, currently Mr. DeCicco, may cause BiVi to make distributions of available cash flow to the members pro rata in accordance with their cash flow ratios, of which the Company is entitled to 100% of any such distribution of available cash flow. The BiVi LLC Agreement also provides that the manager shall cause BiVi to make distributions of net proceeds attributable to certain capital events to members pro rata in accordance with their membership interest percentage, of which the Company is entitled to 54% of any such distribution of net proceeds and Mr. DeCicco and Ms. Faltings are entitled to 15.34% and 15.33%, respectively. Transfers of membership interests in BiVi are generally restricted and the BiVi LLC Agreement provides for preemptive rights, rights of first refusal, and rights of co-sale, in each case, in accordance with the terms and conditions set forth therein.

   

Going Concern

 

As a result of our current financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2020 and 2019 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this, we may not be able to continue as an operating company. Until we can grow revenues sufficient to meet our operating expenses, we must continue to raise capital by issuing debt or through the sale of our stock. There is no assurance that our cash flow will be adequate to satisfy our operating expenses and capital requirements. However, on July 26, 2021 we completed a financing that we believe will provide sufficient operating capital and funds to purchase capital equipment, both of which are required in order to achieve our growth and cash flow estimates.

 

 
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Results of Operations for the Three months Ended June 30, 2021 and 2020

 

Introduction

 

We had sales of $584,914 for the three months ended June 30, 2021 and $1,055,600 for the three months ended June 30, 2020, a decrease of $470,686. Our operating expenses were $1,896,200 for the three months ended June 30, 2021, compared to $1,265,477 for the three months ended June 30, 2020, an increase of $630,723 or approximately 50%. Our net operating (loss) was ($1,636,492) for the three months ended June 30, 2021, compared to ($537,937) for the three months ended June 30, 2020, an increase of $1,098,555 or approximately 204%. During this quarter we began to incur operating expenses associated with hiring sales and marketing personnel along with increased professional fees in preparation of our planned business expansion, financing and restructuring and completing an acquisition.

 

Revenues and Net Operating Loss

 

Our operations for the three months ended June 30, 2021 and 2020 were as follows:

 

 

 

June 30,

 

 

June 30,

 

 

Increase /

 

 

 

2021

 

 

2020

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$ 584,914

 

 

$ 1,055,600

 

 

$ (470,686 )

Cost of Sales

 

 

325,206

 

 

 

328,060

 

 

 

2,854

 

Gross Profit

 

 

259,708

 

 

 

727,540

 

 

 

(467,832 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Officers compensation

 

 

263,750

 

 

 

103,750

 

 

 

160,000

 

Professional and consulting

 

 

922,429

 

 

 

275,134

 

 

 

647,295

 

Royalties

 

 

107,407

 

 

 

21,584

 

 

 

85,823

 

Investor relations

 

 

18,855

 

 

 

195,151

 

 

 

(176,296 )

Marketing and advertising

 

 

91,419

 

 

 

146,528

 

 

 

(55,109 )

Travel and entertainment

 

 

6,185

 

 

 

(279 )

 

 

6,464

 

Other operating expenses, including occupancy

 

 

486,155

 

 

 

523,609

 

 

 

(37,454 )

Total operating expenses

 

 

1,896,200

 

 

 

1,265,477

 

 

 

630,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (loss)

 

 

(1,636,492 )

 

 

(537,937 )

 

 

1,098,555

 

Other income (expense)

 

 

(30,754 )

 

 

73,835

 

 

 

104,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

(8,772 )

 

 

(87,606 )

 

 

(78,834 )

Net income (loss) attributable to Iconic Brands, Inc

 

 

(1,676,018 )

 

 

551,708

 

 

 

1,124,310

 

 

Sales

 

Our sales are comprised of sales of BiVi Sicilian Vodka, Bellissima Prosecco and Sparkling Wine, and the line of Hooters brand products. Sales were $584,914 for the three months ended June 30, 2021 and $1,055,600 for the three months ended June 30, 2020, a decrease of $470,686 or approximately 44%. The decrease is due to $590,000 lower sales from our QVC network compared to the same quarter last year offset by increased sales through our distributors.

 

 
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Cost of Sales

 

Cost of sales was $325,206, or approximately 56% of sales, for the three months ended June 30, 2021 and $328,060, or approximately 31%% of sales, for the three months ended June 30, 2020. Cost of sales includes the cost of the products purchased from our suppliers, freight-in costs and import duties. The increase in cost of sales as a percentage of sales was due to pricing associated with quantity purchased and increase in international freight and transportation costs.

 

Officers Compensation

 

Officers compensation was $263,750 for the three months ended June 30, 2021 and $103,750 for the three months ended June 30, 2020. The increase of $160,000 is due to the hiring of additional executive personnel (Chief Executive Officer and Chief Operating Officer) in order to begin execution of the Company’s growth strategy along stock based compensation for the issuance of shares for terms relating to employment contracts.

 

Professional and Consulting Fees

 

Professional and consulting fees were $922,429 for the three months ended June 30, 2021 and $275,134 for the three months ended June 30, 2020, an increase of $647,295. Professional and consulting fees consist primarily of legal and accounting and auditing services. The increase of approximately $647,295 from 2020 to 2021 was related primarily to increased legal of approximately $400,000, accounting services of $30,000 and consulting fees associated with securing financing and pursuing a possible merger transaction..

 

Royalties

 

We expensed royalties of $107,407 for the three months ended June 30, 2021 compared to $21,584 for the three months ended June 30, 2020, an increase of $85,823, or 397%. Royalties increased due to primarily to recognition of minimum royalties due on certain products.

 

Investor relations

 

Investor relation expenses were $18,855 for the three months ended June 30, 2021 and $195,151 for the three months ended June 30, 2020, a decrease of  $176,296 or approximately 90%. The decrease was primarily related to non-renewal of certain investor relation contracts that expired during the quarter.

 

Marketing and Advertising

 

Marketing and advertising expenses were $91,419 for the three months ended June 30, 2021 and $146,528 for the three months ended June 30, 2020, a decrease of $55,109 or approximately 37%%. The decrease is related to lower marketing activity in the quarter as sales through our QVC platform were lower in the quarter.

 

Travel and Entertainment

 

Travel and entertainment expenses were $6,185 for the three months ended June 30, 2021 and $(279) for the three months ended June 30, 2020, an increase of $6,464. The increase was a result of limited to no travel during the three months ended June 30, 2020 due to the COVID-19 environment.

 

Other Operating Expenses

 

Other operating expenses were $486,155 for the three months ended June 30, 2021 and $523,609 for the three months ended June 30, 2020, a decrease of $37,454 or approximately 7%%. The decrease was primarily related to lower fulfillment costs associated with QVC sales.

 

 
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Net Operating Income/Loss

 

We had a (loss) from operations of ($1,636,492) for the three months ended June 30, 2021 and ($537,937) for the three months ended June 30, 2020, an increase of $1,098,555 or approximately 200%. Net operating (loss) increased, as set forth above, primarily because lower sales and higher operating costs.

 

Net (income) Loss attributable to Noncontrolling Interests in Subsidiaries and Variable Interest Entity

 

Net income attributable to noncontrolling interests in subsidiaries and variable interest entity represented 49% of the net loss of Bellissima and BiVi (of which we own 51%) and 100% of United Spirits (of which we own 0%) and is accounted for as an increase in the net loss attributable to our company. Net income for the three months ended June 30, 2021 was $8,772 compared to a net loss of $87,606 for the three months ended June 30, 2020.

 

Net Loss Attributable to Iconic Brands, Inc.

 

The net loss attributable to Iconic Brands, Inc. was $1,676,018 for the three months ended June 30, 2021 and ($551,708) for the three months ended June 30, 2020, an increase of $1,124,310 or approximately 203%. The net loss from Iconic Brands increased primarily as a result of lower sales and higher operating costs for the quarter.

 

Results of Operations for the Six Months Ended June 30, 2021 and 2020

 

Our operations for the six months ended June 30, 2021 and 2020 were as follows:

 

 

 

June 30,

 

 

June 30,

 

 

Increase /

 

 

 

2021

 

 

2020

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$ 1,219,447

 

 

$ 1,461,486

 

 

$ (242,039 )

Cost of Sales

 

 

643,839

 

 

 

580,486

 

 

 

63,353

 

Gross Profit

 

 

575,608

 

 

 

881,000

 

 

 

(305,392 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Officers compensation

 

 

367,500

 

 

 

207,500

 

 

 

160,000

 

Professional and consulting

 

 

1,081,332

 

 

 

461,923

 

 

 

619,409

 

Royalties

 

 

206,535

 

 

 

37,548

 

 

 

168,987

 

Investor relations

 

 

199,607

 

 

 

556,840

 

 

 

(357,233 )

Marketing and advertising

 

 

212,587

 

 

 

275,173

 

 

 

(62,586 )

Travel and entertainment

 

 

19,028

 

 

 

19,190

 

 

 

(162 )

Other operating expenses, including fulfillment and occupancy

 

 

804,749

 

 

 

772,861

 

 

 

31,888

 

Total operating expenses

 

 

2,891,338

 

 

 

2,331,035

 

 

 

560,303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (loss)

 

 

(2,315,730 )

 

 

(1,450,035 )

 

 

865,695

 

Other Income (Expense)

 

 

(2,296 )

 

 

73,835

 

 

 

76,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

(24,946 )

 

 

(13,428 )

 

 

11,518

 

Net income (loss) attributable to Iconic Brands, Inc

 

 

(2,342,972 )

 

 

(1,389,628 )

 

 

953,344

 

 

Sales

 

Our sales are comprised of sales of BiVi Sicilian Vodka, Bellissima Prosecco and Sparkling Wine, and the line of Hooters brand products introduced in August 2019. Sales were $$1,219,447 for the six months ended June 30, 2021 and $1,461,486 for the six months ended June 30, 2020, a decrease of $242,039or approximately 16%. The decrease in sales was primarily due to lower sales from QVC network.

 

 
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Cost of Sales

 

Cost of sales was $643,839, or approximately 53% of sales, for the six months ended June 30, 2021 and $580,486, or approximately 40% of sales, for the six months ended June 30, 2020. Cost of sales includes the cost of the products purchased from our suppliers, freight-in costs and import duties. The increase in cost of sales as a percentage of sales is due primarily to higher production costs and transportation costs.

 

Officers Compensation

 

Officers compensation was $367,500 for the six months ended June 30, 2021 and $207,500 for the six months ended June 30, 2020, increase of $160,000. The increase of $160,000 is due to the hiring of additional executive personnel (Chief Executive Officer and Chief Operating Officer) in order to begin execution of the Company’s growth strategy and stock based compensation costs associated with employment contracts.

 

Professional and Consulting Fees

 

Professional and consulting fees were $1,081,332 for the six months ended June 30, 2021 and $461,923 for the six months ended June 30, 2020, an increase of $619,409. Professional and consulting fees consist primarily of legal and, accounting and auditing services. The increase of approximately $619,409 from 2020 to 2021 was related primarily to increased legal of approximately $400,000, accounting services of $30,000 and consulting fees associated with securing financing and pursuing a possible merger transaction.

 

Royalties

 

Royalties were $206,535, or approximately 17% of sales, for the six months ended June 30, 2021 and $37,548, or approximately 3% for the six months ended June 30, 2020, an increase of $168,987. Royalties increased primarily due to minimum royalties on certain products.

 

Marketing and Advertising

 

Marketing and advertising expenses were $212,587 for the six months ended June 30, 2021 and $275,173 for the six months ended June 30, 2020, a decrease of $62,586, or approximately 22%. The decrease was a result of lower activity compared to the same period last year.

 

Travel and Entertainment

 

Travel and entertainment expenses were $19,028 for the six months ended June 30, 2021 and $19,190 for the six months ended June 30, 2020, a decrease of $162. Company travel has been limited for the last 14 months due to COVID 19 travel restrictions.

 

Investor relations

 

Investor relation expenses were $199,607 for the six months ended June 30, 2021 and $556,840 for the six months ended June 30, 2020, a decrease of $357,233. The decrease was primarily related to non-renewal of certain investor relation contracts that expired during the period.

 

Other Operating Expenses

 

Other operating expenses were $804,749 for the six months ended June 30, 2021 and $772,861 for the six months ended June 30, 2020, an increase of $31,888 or approximately 4%. The increase was not related to any specific item but rather small increases in certain expenditures.

 

 
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Income (Loss) from Operations

 

We had a (loss) from operations of ($2,315,730) for the six months ended June 30, 2021 and ($1,450,035) for the six months ended June 30, 2020, an increase of $865,695, or approximately 60%. Our loss from operations increased, as set forth above, primarily because of lower sales and increased operating costs.

 

Net Loss attributable to Noncontrolling Interests in Subsidiaries and Variable Interest Entity

 

The net income attributable to noncontrolling interests in subsidiaries and variable interest entity represents 49% of the net loss of Bellissima, BiVi and Green Grow (which we own 51%) and 100% of United Spirits (which we own 0%) and is accounted for as an increase in the net loss attributable to the Company. This net income was $24,943 for the six months ended June 30, 2021 and was $13,948 for the six months ended June 30, 2020, an increase of $11,518

 

Net Loss Attributable to Iconic Brands, Inc.

 

The net loss attributable to Iconic Brands, Inc. was ($2,342,972) for the six months ended June 30, 2021 and ($1,389,628) for the six months ended June 30, 2020, an increase of $953,344, or approximately 69%. The net loss from Iconic Brands increased primarily because of the factors listed above, including lower sales and higher operating costs.

 

Liquidity and Capital Resources

 

Introduction

 

During the six months ended June 30, 2021 and June 30, 2020, we had negative operating cash flows. Our cash on hand as of June 30, 2021 was $251,679. Our monthly cash flow burn rate for 2021 was approximately $300,000, and our monthly burn rate through the three months ended June 30, 2021 was approximately $400,000. We have strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs. On July 26, 2019, we closed on a financing that provided funds sufficient to meet our working capital needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2021 and December 31, 2020, respectively, were as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 251,679

 

 

$ 457,041

 

 

$ (205,362 )

Total Current Assets

 

 

1,175,891

 

 

 

1,298,999

 

 

 

(114,108 )

Total Assets

 

 

1,205,331

 

 

 

1,354,892

 

 

 

(149,561 )

Total Current Liabilities

 

 

4,581,728

 

 

 

3,183,015

 

 

1,398,713

 

Total Liabilities

 

$ 4,581,728

 

 

$ 3,183,015

 

 

$ 1,398,713

 

 

Our cash decreased $205,362 and total current assets decreased $114,108. Our total current liabilities increased $1,398,713 as our accounts payable and accrued expenses increased. Our total liabilities increased $1,398,713. Our stockholders’ equity decreased from $(1,828,123) to $(3,376,397) due primarily to our operating loss for the six-month period.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts. Please see the Risk Factors beginning on page 17.

 

 
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Cash Requirements

 

Our cash on hand as of June 30, 2021 was $251,679. We anticipate that the funding from financing activities and product sales will be enough to sustain us for the next 12 months.

 

Sources and Uses of Cash

 

Operations

 

Our net cash (used in) operating activities for the six months ended June 30, 2021 and 2020 was $1,106,882 and $879,271, respectively, a decrease of $227,611. The decrease in cash used in operations was primarily due to an increase in our operating loss over the same period last year.

 

Investments

 

For the six months ended June 30, 2021 we used cash for investing activities of $7,123. For the six months ended June 30, 2020, we used cash for investing activities of $8,708 for the purchase of furniture and equipment.

 

Financing

 

Our net cash provided by financing activities for the six months ended June 30, 2021 was $908,643 compared to $1,296,713 of cash provided by financing activities for the six months ended June 30, 2020, which consisted principally of proceeds from short term notes payable used to finance our growth plans. These notes were paid off in conjunction with our financing on July 26, 2021.

 

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

 

As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

 

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

 
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Table of Contents

 

ITEM 4 Controls and Procedures

 

(a) Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a - 15(c) and 15d - 15(e). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Our Principal Executive Officer and Principal Financial Officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our Principal Executive Officer and Principal Financial Officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

  

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

(b) Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
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Table of Contents

 

PART II - OTHER INFORMATION

 

ITEM 1 Legal Proceedings

 

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

 

ITEM 1A Risk Factors

 

There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 except as set forth in “Part II. Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 and as described below. The risk factors described in our Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q, in addition to other information set forth below and in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.

 

We face significant risks relating to our recent acquisition.

 

We recently completed a merger transaction in which the TopPop LLC, a New Jersey limited liability company (“TopPop”), and certain other parties, sold to us and we acquired, all of the issued and outstanding membership interests of TopPop. This recent transformative acquisition involves a number of significant risks and uncertainties that may adversely affect us, including the following:

 

 

·

inability to realize anticipated synergies or other expected benefits or cost savings;

 

 

 

 

·

diversion of financial resources to the new operations or acquired businesses;

 

 

 

 

·

failure to successfully integrate acquired systems, business processes, policies and procedures;

 

 

 

 

·

exposure to unknown liabilities and unforeseen costs that were not discovered during due diligence;

 

 

 

 

·

potential loss of key employees, suppliers or customers; and

 

 

 

 

·

other challenges associated with managing the larger, more complex and integrated combined businesses.

 

If one or more of these risks and uncertainties were to materialize, we could experience reduced sales, higher costs, lower profitability and other adverse impacts to our operations and businesses.

 

 
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Table of Contents

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

Except as previously reported on our Current Reports on Form 8-K, we had no unregistered sales of equity securities during the period from May 24, 2021 to August 16, 2021

 

ITEM 3 Defaults Upon Senior Securities

 

None.

 

ITEM 4 Mine Safety Disclosures

 

Not applicable.

 

ITEM 5 Other Information

 

None.

 

ITEM 6 Exhibits

 

(a) Exhibits

 

Exhibit No.

Description of Exhibits

31.1

 

Certification by Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification by Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

 

 
18

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Iconic Brands, Inc.

Dated: August 16, 2021

By:

/s/ Larry Romer

Larry Romer

Its:

Chief Executive Officer

 

Dated: August 16, 2021

By:

/s/ David Allen

 

David Allen

 

Its:

Chief Financial Officer

 

 

 
19

 

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