ICNB----AUG 16th Quarterly Report (10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-53162
ICONIC BRANDS, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
1174 Route 109
Lindenhurst, New York 11757
(Address of principal executive offices, including zip code.)
(631) 991-3174
(Registrant’s telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. Yes x No o
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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨ Accelerated Filer ¨
Non-accelerated Filer ¨ Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 52,519,307 as of May 11, 2010.
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ICONIC BRANDS INC.
FORM 10-Q
June 30, 2010
TABLE OF CONTENTS
PART I— FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4T. Controls and Procedures 26
PART II— OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 29
Item 4. Submission of Matters to a Vote of Security Holders 29
Item 5. Other Information 29
Item 6. Exhibits 30
SIGNATURES 31
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Iconic Brands, Inc. and Subsidiary
Consolidated Balance Sheets
June 30,
2010 December 31,
2009
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,283 $ 23,889
Accounts receivable, net of allowance for doubtful accounts of $35,000 and $35,000, respectively 107,930 254,268
Inventories 419,401 393,811
Prepaid expenses and other current assets 728,439 391,140
Total current assets 1,257,053 1,063,108
Property, plant and equipment, net 5,144 7,273
License agreement costs, net of accumulated amortization of $16,488 and $0, respectively 128,312 —
Restricted cash and cash equivalents 50,000 75,000
Total assets $ 1,440,509 $ 1,145,381
Liabilities and Stockholders’ Equity (Deficiency)
Current liabilities:
Current portion of debt $ 874,616 $ 803,064
Accounts payable 1,331,126 1,290,680
Accrued expenses and other current liabilities 1,821,312 1,500,652
Total current liabilities 4,027,054 3,594,396
Long term debt 1,594,244 1,774,944
Total liabilities 5,621,298 5,369,340
Stockholders’ equity (deficiency):
Preferred stock, $.00001 par value; authorized 100,000,000 shares:
Series A, designated 1 share, issued and outstanding 1 and 1 shares, respectively 1 1
Series B, $2.00 per share stated value; designated 1,000,000 shares, issued and outstanding 916,603 and 916,603 shares, respectively 1,833,206 1,833,206
Common stock, $.00001 par value; authorized 100,000,000 shares, issued and committed to be issued and outstanding 52,519,307 and 44,810,411 shares, respectively 525 448
Additional paid-in capital 8,790,988 7,327,955
Retained earnings (deficit) (14,805,509 ) (13,385,569 )
Total stockholders’ equity (deficiency) (4,180,789 ) (4,223,959 )
Total liabilities and stockholders’ equity (deficiency) $ 1,440,509 $ 1,145,381
See notes to consolidated financial statements.
1
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Iconic Brands, Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)
Six Months Ended
June 30, Three Months Ended
June 30,
2010 2009 2010 2009
Sales $ 338,450 $ 336,170 $ 72,103 $ 252,233
Cost of goods sold 213,527 228,371 51,364 163,010
Gross profit 124,923 107,799 20,739 89,223
Selling, general and administrative expenses:
Selling, marketing and promotion 383,416 123,795 114,861 31,370
Administrative compensation and benefits 414,208 606,498 213,791 425,154
Stock-based compensation issued in connection with merger — 2,063,411 — 2,063,411
Professional fees 318,645 288,518 198,474 139,368
Occupancy and warehousing 68,555 101,208 30,507 24,646
Travel and entertainment 60,664 36,237 28,240 11,187
Office 16,281 19,776 10,845 7,261
Licenses and permits 31,195 1,670 1,050 400
Other 13,746 23,220 5,192 18,014
Total 1,306,710 3,264,333 602,960 2,720,811
Income (loss) from operations (1,181,787 ) (3,156,534 ) (582,221 ) (2,631,588 )
Interest expense (238,153 ) (572,208 ) (74,299 ) (373,936 )
Income (loss) before income taxes (1,419,940 ) (3,728,742 ) (656,520 ) (3,005,524 )
Income taxes — — — —
Net income (loss) $ (1,419,940 ) $ (3,728,742 ) $ (656,520 ) $ (3,005,524 )
Net income (loss) per common share - basic and diluted $ (0.03 ) $ (0.76 ) $ (0.01 ) $ (0.31 )
Weighted average number of common shares outstanding - basic and diluted 48,684,334 4,930,669 51,568,601 9,782,833
See notes to consolidated financial statements.
2
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Iconic Brands, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Six Months Ended June 30, 2010
(Unaudited)
Series A
Preferred Stock,
$.00001 par Series B
Preferred Stock,
$2.00 stated value Common Stock,
$.00001 par Additional
Paid-In
Shares Amount Shares Amount Shares Amount Capital Deficit Total
Balance at December 31, 2009 1 $ 1 916,603 $ 1,833,206 44,810,411 $ 448 $ 7,327,955 $ (13,385,569 ) $ (4,223,959 )
Issuance of common stock and warrants in connection with $220,000 promissory notes — — — — 200,000 2 78,928 — 78,930
Issuance of common stock in satisfaction of convertible notes and accrued interest — — — — 152,546 2 76,271 — 76,273
Issuance of common stock and warrants in connection with License Agreement with Tony Siragusa — — — — 250,000 2 144,798 — 144,800
Issuance of common stock to consulting firm in February 2010 — — — — 300,000 3 68,997 — 69,000
Issuance of common stock and warrants to consulting firm in March 2010 — — — — 2,000,000 20 595,980 — 596,000
Issuance of common stock in connection with extension of due date of $110,000 promissory note — — — — 250,000 2 21,398 21,400
Issuance of common stock and warrants in satisfaction of debt and accrued interest — — — — 4,556,350 46 455,589 455,635
Stock options and warrants compensation expense — — — — — — 21,072 — 21,072
Net loss — — — — — — — (1,419,940 ) (1,419,940 )
Balance at June 30, 2010 1 $ 1 916,603 $ 1,833,206 52,519,307 $ 525 $ 8,790,988 $ (14,805,509 ) $ (4,180,789 )
See notes to consolidated financial statements.
3
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Iconic Brands, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2010 2009
Cash flows from operating activities
Net income (loss) $ (1,419,940 ) $ (3,728,742 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation 2,129 1,530
Amortization of license agreement costs 16,488 —
Amortization of debt discounts charged to interest expense 178,673 284,177
Stock -based compensation 263,565 2,462,892
Changes in operating assets and liabilities:
Accounts receivable, net 146,338 295,803
Inventories (25,590 ) 147,314
Prepaid expenses and other current assets 85,208 247,406
Restricted cash and cash equivalents 25,000 25,000
Accounts payable 40,446 (120,393 )
Accrued expenses and other current liabilities 334,433 474,936
Net cash provided by (used in) operating activities (353,250 ) 89,923
Cash flows from investing activities:
Property, plant and equipment additions — (5,142 )
Cash flows from financing activities:
Increases in debt, 529,705 —
Repayment of debt (199,061 ) (194,596 )
Sale of common stock — 100,000
Net cash provided by (used in) financing activities 330,644 (94,596 )
Increase (decrease) in cash and cash equivalents (22,606 ) (9,815 )
Cash and cash equivalents, beginning of period 23,889 10,970
Cash and cash equivalents, end of period $ 1,283 $ 1,155
Supplemental disclosures of cash flow information:
Interest paid $ — $ 231,621
Income taxes paid $ — $ —
Non-cash investing and financing activities:
Issuance of common stock and warrants in connection with $220,000 promissory notes $ 78,930 $ —
Shares of common stock issued to noteholders in satisfaction of debt and accrued interest $ 531,908 $ 2,203,154
Issuance of common stock and warrants in connection with License Agreement with Tony Siragusa $ 144,800 $ —
Securities issued to Capstone in connection with Termination Agreement and satisfaction of debt:
Unsecured promissory note $ — $ 500,000
Series B preferred note — 1,833,205
Common Stock — 500,000
Total $ — 2,833,205
See notes to consolidated financial statements.
4
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Iconic Brands, Inc. and Subsidiary
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
1. ORGANIZATION AND NATURE OF BUSINESS
Iconic Brands, Inc., formerly Paw Spa, Inc. (“Iconic Brands”), was incorporated in the State of Nevada on October 21, 2005. Our plan was to provide mobile grooming and spa services for cats and dogs. Our services were going to include bathing, hair cutting and styling, brushing/combing, flea and tick treatments, nail maintenance and beautification, ear cleaning, teeth cleaning, hot oil treatments, and massage. We did not have any business operations and failed to generate any revenues. We abandoned this business, as we lacked sufficient capital resources. On June 10, 2009, the Company acquired Harbrew Imports, Ltd. (“Harbrew New York”), a New York corporation incorporated on September 8, 1999 which was a wholly owned subsidiary of Harbrew Imports, Ltd. Corp. (“Harbrew Florida”), a Florida corporation incorporated on January 4, 2007. On the Closing Date, pursuant to the terms of the Merger Agreement, the Company issued to the designees of Harbrew New York 27,352,301 shares of our Common Stock at the Closing, or approximately 64% of the 42,510,301 shares outstanding subsequent to the merger. After the merger, Harbrew New York continued as the surviving company under the laws of the state of New York and became the wholly owned subsidiary of the Company.
In anticipation of the merger between Iconic Brands, Inc. and Harbrew New York, on May 1, 2009 the Board of Directors and a majority of shareholders of Harbrew New York approved the amendment of its Articles of Incorporation changing its name to Iconic Imports, Inc. (“Iconic Imports”). On June 22, 2009, this action was filed with the New York State Department of State.
Prior to the merger on June 10, 2009, Iconic Brands had no assets, liabilities, or business operations. Accordingly, the merger has been treated for accounting purposes as a recapitalization by the accounting acquirer Harbrew New York/Iconic Imports and the financial statements reflect the assets, liabilities, and operations of Harbrew New York/Iconic Imports from its inception on September 8, 1999 to June 10, 2009 and are combined with Iconic Brands thereafter. Iconic Brands and its wholly-owned subsidiary Harbrew New York/Iconic Imports are hereafter referred to as the “Company”.
The Company is a brand owner of self-developed alcoholic beverages. Furthermore, the Company imports, markets and sells these beverages throughout the United States and globally.
Effective June 10, 2009, prior to the merger, Harbrew Florida affected a 1-for-1,000 reverse stock split of its common stock, reducing the issued and outstanding shares of common stock from 24,592,160 to 24,909, which includes a total of 317 shares resulting from the rounding of fractional shares. All share information has been retroactively adjusted to reflect this reverse stock split.
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