10-Q 1 tdnt_10q.htm FORM 10-Q tdnt_10q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2021

 

Commission file number 000-53707

 

TRIDENT BRANDS INCORPORATED

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

200 South Executive Drive, Suite 101

Brookfield, WI 53005

(Address of principal executive offices, including zip code.)

 

(262)789-6689

(Telephone number, including area code)

 

Resident Agents of Nevada

711 S. Carson Street, Suite 4

Carson City, NV 89701

(Name and Address of Agent for Service)

 

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 ☒ 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, 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

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 ☒

 

The number of the registrant’s common shares outstanding as of April 19, 2021 was 32,311,887.

 

 

 

 

TRIDENT BRANDS INCORORATED

FORM 10-Q

For the quarterly period ended February 28, 2021

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (Unaudited)

6

 

 

Consolidated Balance Sheets as at February 28, 2021 and November 30, 2020

6

 

 

Consolidated Statements of Operations for the three months ended February 28, 2021 and February 29, 2020

7

 

 

Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended February 28, 2021 and February 29, 2020

8

 

 

Consolidated Statements of Cash Flows for the three months ended February 28, 2021 and February 29, 2020

9

 

 

Notes to Consolidated Financial Statements

10

 

 

 

 

Item 2

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

16

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

20

 

Item 4

Controls and Procedures

20

 

 

PART II

OTHER INFORMATION

 

 

Item 6

Exhibits

21

 

  

 
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Basis of Presentation

 

Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q (“Form 10-Q”) to the “Company”, “we”, “us”, “our”, “Trident” and “Trident Brands” or similar words and phrases are to Trident Brands Incorporated and its subsidiaries, taken together.

 

In this report, all currency amounts are expressed in thousands of United States (“U.S.”) dollars (“$”), except per share data, unless otherwise stated. Amounts expressed in other than U.S. dollars are noted accordingly. For example, amounts if expressed in Canadian dollars are expressed in thousands of Canadian dollars and preceded by the symbol “Cdn $”.

 

Forward-Looking Statements

 

This Form 10-Q contains forward-looking statements which are based on our current expectations and assumptions and involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as “anticipate”, “estimate”, “intend”, “project”, “potential”, “continue”, “believe”, “expect”, “could”, “would”, “should”, “might”, “plan”, “will”, “may”, “predict”, the negatives of such terms, and words and phrases of similar impact and include, but are not limited to references to expected increases in revenues and margins, growth opportunities, the success of new product launches and line extensions, our ability to finance our business, potential strategic investments, business strategies, competitive strengths, goals, references to key markets where we operate and the market for our securities. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on certain assumptions and analyses we make in light of our experience and our interpretation of current conditions, historical trends and expected future developments, as well as other factors that we believe are appropriate in the circumstance.

 

Whether actual results and developments will agree with our expectations and predictions is subject to many risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from our expectations and predictions. We believe these factors include, but are not limited to, the following:

 

 

we have a limited operating history with significant losses and expect losses to continue for the foreseeable future;

 

 

 

 

we have an urgent need for additional capital to fund our business operations and if we ae unable to secure needed capital, there will be a material adverse effect on our business and financial condition;

 

 

 

 

we could face intense competition, which could result in lower revenues and higher expenditures and could adversely affect our results of operations;

 

 

 

 

we are governed by only three persons serving as directors and officers which may lead to faulty corporate governance;

 

 

 

 

we must attract and maintain key personnel or our business may fail;

 

 

 

 

we may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions;

 

 

 

 

our business and operating results could be harmed if we fail to manage our growth or change;

 

 

 

 

we have a limited operating history and if we are not successful in growing our business, then we may have to scale back or even cease our ongoing business operations;

 

 

 

 

if our intellectual property is not adequately protected, then we may not be able to compete effectively and we may not be profitable;

 

 

 

 

if we are the subject of an intellectual property infringement claim, the cost of participating in any litigation could impact our ability to stay in business;

 

 

 

 

we could lose our competitive advantages if we are not able to protect any of our food and nutritional products and intellectual property rights against infringement, and any related litigation could be time-consuming and costly;

 

 
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if we fail to effectively manage our growth our future business results could be harmed and our managerial and operational resources may be strained;

 

 

 

 

our services may become obsolete and unmarketable if we are unable to respond adequately to rapidly changing technology and customer demands;

 

 

 

 

our failure to appropriately respond to changing consumer preferences and demand for new products or product enhancements could significantly harm product sales and harm our financial condition and operating results;

 

 

 

 

if we do not introduce new products or make enhancements to adequately meet the changing needs of our customers, some of our products could fail in the marketplace, which could negatively impact our revenues, financial condition and operating results;

 

 

 

 

we are affected by laws and governmental regulations with potential penalties or claims, which could harm our financial condition and operating results;

 

 

 

 

since we rely on independent third parties for the manufacture and supply of certain of our products, if these third parties fail to reliably supply products to us at required levels of quality and which are manufactured in compliance with applicable laws, then our financial condition and operating results would be harmed;

 

 

 

 

we may incur material product liability claims, which could increase our costs and harm our financial condition and operating results;

 

 

 

 

unless we can generate sufficient cash from operations or raise additional funds, we may not be able to meet our debt obligations;

 

 

 

 

our customers generally are not obligated to continue purchasing products from us;

 

 

 

 

if we do not manage our supply chain effectively, our operating results may be adversely affected;

 

 

 

 

our stock price may be volatile, which may result in losses to our shareholders;

 

 

 

 

our common shares are thinly traded and our shareholders may be unable to sell at or near ask prices, or at all;

 

 

 

 

the market price for our common stock is particularly volatile given our status as a relatively small and developing company, which could lead to wide fluctuations in our share price. Our shareholders may be unable to sell your common stock at or above their purchase price if at all, which may result in substantial losses;

 

 

 

 

we do not anticipate paying any cash dividends to our common shareholders and as a result shareholders may only realize a return when the shares are sold;

 

 

 

 

we are listed on the OTCQB quotation system and our common stock is subject to “penny stock” rules which could negatively impact our liquidity and our shareholders’ ability to sell their shares;

 

 

 

 

volatility in our common share price may subject us to securities litigation;

 

 

 

 

the elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights of our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees;

 

 

 

 

our business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance; and

 

 

 

 

The recent coronavirus outbreak could have an adverse effect on our business.

 

 

 

 

 

Concerns are rapidly growing about the global outbreak of a novel strain of coronavirus (COVID-19). The virus has spread rapidly across the globe, including the U.S. The pandemic is having an unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis, which has created significant uncertainties. These uncertainties include, but are not limited to, the potential adverse effect of the pandemic on the economy, our customers and supply chain.

 

 

 

 

 

As the pandemic continues to grow, consumer fear about becoming ill with the virus and recommendations and/or mandates from federal, state and local authorities to avoid large gatherings of people or self-quarantine may continue. The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the duration of the spread of the outbreak within the U.S., the impact on capital and financial markets and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

 

 
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Consequently all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that our actual results or the developments we anticipate will be realized. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report.

 

Corporate Legal Structure and Related Matters

 

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

 

   

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

 

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

 

Trident Health is 100% owned by Trident Brands and is currently inactive.

 

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

 

The Company’s administrative office is located at 200 South Executive Drive, Suite 101, Brookfield, Wisconsin, 53005 and its fiscal year end is November 30th.

 

The Company has authorized capital of 300,000,000 common shares with a par value of $0.001 per share. 32,311,887 common shares were issued and outstanding as of February 28, 2021 and 32,311,887 as of April 19, 2021.

 

 
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ITEM 1. FINANCIAL STATEMENTS

 

The unaudited financial statements for the quarter ended February 28, 2021 immediately follow.

 

TRIDENT BRANDS INCORPORATED

Consolidated Balance Sheets

(Unaudited)

 

 

 

As of

 

 

As of

 

 

 

February 28,

 

 

November 30,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and Cash Equivalents

 

$ 48,932

 

 

$ 88,007

 

Accounts Receivable, net of allowance of $157,526 and $155,186 respectively

 

 

78,394

 

 

 

63,784

 

Inventory, net of reserves of $195,264 and $195,264 respectively

 

 

1,135,409

 

 

 

1,219,567

 

Prepaid and other current assets

 

 

113,191

 

 

 

155,179

 

 

 

 

 

 

 

 

 

 

Total Current Assets

 

 

1,375,926

 

 

 

1,526,537

 

 

 

 

 

 

 

 

 

 

Intangible Assets, net

 

 

400,000

 

 

 

400,000

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 1,775,926

 

 

$ 1,926,537

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts Payable

 

$ 420,018

 

 

$ 429,009

 

Accrued Liabilities

 

 

7,878,583

 

 

 

7,480,846

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

8,298,601

 

 

 

7,909,855

 

 

 

 

 

 

 

 

 

 

PPP Loan Payable

 

 

135,165

 

 

 

135,165

 

Convertible Debt, net of discount of $0 and $0, respectively

 

 

22,300,000

 

 

 

22,300,000

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

30,733,766

 

 

 

30,345,020

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 32,311,887 shares issued and outstanding as of February 28, 2021 and November 30, 2020

 

 

32,312

 

 

 

32,312

 

Additional paid-in capital

 

 

11,458,630

 

 

 

11,458,630

 

Non-Controlling Interest in Subsidiary

 

 

(391,006 )

 

 

(387,147 )

Accumulated Deficit

 

 

(40,057,776 )

 

 

(39,522,278 )

 

 

 

 

 

 

 

 

 

Total Stockholders' Deficit

 

 

(28,957,840 )

 

 

(28,418,483 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT

 

$ 1,775,926

 

 

$ 1,926,537

 

  

See Notes to Unaudited Consolidated Financial Statements

 

 
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TRIDENT BRANDS INCORPORATED

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months

 

 

Three Months

 

 

 

Ended

 

 

Ended

 

 

 

February 28,

 

 

February 29,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Revenues, net

 

$ 144,048

 

 

$ 161,885

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

78,788

 

 

 

84,929

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

65,260

 

 

 

76,956

 

 

 

 

 

 

 

 

 

 

General & Administrative Expenses

 

 

(404,284 )

 

 

(1,313,734 )

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(339,025 )

 

 

(1,236,778 )

 

 

 

 

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

 

 

 

 

Interest Expense, net

 

 

(200,333 )

 

 

(1,446,688 )

Derivative loss

 

 

-

 

 

 

(1,572,713 )

 

 

 

 

 

 

 

 

 

Total Other Income (Expenses)

 

 

(200,333 )

 

 

(3,019,401 )

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (539,357 )

 

$ (4,256,179 )

 

 

 

 

 

 

 

 

 

Net loss attributable to Trident

 

 

(535,498 )

 

 

(4,226,428

)

Net loss attributable to Non-Controlling Interests

 

 

(3,859 )

 

 

(29,751 )

Loss per share - Basic and diluted

 

$ (0.02 )

 

$ (0.13 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - Basic and diluted

 

 

32,311,887

 

 

 

32,311,887

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 
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TRIDENT BRANDS INCORPORATED

Consolidated Statements of Changes in Stockholders' Deficit

From the quarter ended February 28, 2021 and February 29, 2020

(Unaudited)

 

 

 

 

 

 

Common

 

 

Additional

 

 

 

 

 

Non-

 

 

 

 

 

 

Common

 

 

Stock

 

 

Paid-in

 

 

Accumulated

 

 

Controlling

 

 

 

 

 

 

Stock

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2019

 

 

32,311,887

 

 

$ 32,312

 

 

$ 9,945,488

 

 

$ (34,225,630 )

 

$ (288,603 )

 

$ (24,536,433 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APIC reclassified to derivative liability

 

 

-

 

 

 

-

 

 

 

(3,981,220 )

 

 

-

 

 

 

-

 

 

 

(3,981,220 )

Net loss, February 29, 2020

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,226,428 )

 

 

(29,751 )

 

 

(4,256,179 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 29, 2020

 

 

32,311,887

 

 

$ 32,312

 

 

$ 5,964,268

 

 

$ (38,452,058 )

 

$ (318,354 )

 

$ (32,773,832 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, November 30, 2020

 

 

32,311,887

 

 

$ 32,312

 

 

$ 11,458,630

 

 

$ (39,522,278 )

 

$ (387,147 )

 

$ (28,418,483 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss, February 28, 2021

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(539,498 )

 

 

(3,859 )

 

 

(539,357 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 28, 2021

 

 

32,311,887

 

 

$ 32,312

 

 

$ 11,458,630

 

 

$ (40,057,776 )

 

$ (391,006 )

 

$ (28,957,840 )

 

See Notes to Unaudited Consolidated Financial Statements

 

 
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TRIDENT BRANDS INCORPORATED

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months

 

 

Three Months

 

 

 

Ended

 

 

Ended

 

 

 

February 28,

 

 

February 29,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (539,357 )

 

$ (4,256,179 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

-

 

 

 

1,199,797

 

Depreciation expense

 

 

-

 

 

 

2,096

 

Derivative (gain)/loss

 

 

-

 

 

 

1,572,713

 

Provision for bad debts

 

 

2,340

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

(16,950 )

 

 

112,836

 

Prepaid expenses

 

 

41,988

 

 

 

(3,432 )

Inventory

 

 

84,158

 

 

 

128,540

 

Accounts payable and accrued liabilities

 

 

388,746

 

 

 

460,637

 

 

 

 

 

 

 

 

 

 

Cash used in operating activities

 

 

(39,075 )

 

 

(782,992 )

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(39,075 )

 

 

(782,982 )

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

88,007

 

 

 

1,013,674

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$ 48,932

 

 

$ 230,682

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Income taxes

 

$ -

 

 

$ -

 

Interest

 

$ -

 

 

$ -

 

  

See Notes to Unaudited Consolidated Financial Statements

 

 
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TRIDENT BRANDS INCORPORATED

Notes to Consolidated Financial Statements

February 28, 2021

(Unaudited)

 

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Trident Brands Incorporated (“we”, “our”, “the Company”) was incorporated under the laws of the State of Nevada on November 5, 2007.

 

The Company is focused on the development of high growth branded and private label consumer products and ingredients within the nutritional supplement, life sciences and food and beverage categories. The Company is in its early growth stage and has transitioned out of its shell status with the Super-8 filing at the end of August, 2014. Activities to date have focused on capital formation, organizational development and execution of its branded and private label consumer products and ingredients business plan.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2020 as reported in the Form 10-K have been omitted.

  

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates. The ultimate impact from COVID-19 on the Company’s operations and financial results during 2020 will depend on, among other things, the ultimate severity and scope of the pandemic, the pace at which governmental and private travel restrictions and public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and whether, and the speed with which the economy recovers. We are not able to fully quantify the impact that these factors will have on our financial results during 2021 and beyond, but expect developments related to COVID-19 to materially affect the Company’s financial performance in 2021.

 

Customer Concentration

 

Two customers accounted for 20.5% and 14.8% of total revenue for the three month period ended February 28, 2021 compared to one customer for 33.2% for the three month period ended February 29, 2020. Four customers accounted for 25.9%, 14.0%, 12.6% and 12.5% of total accounts receivable as of February 28, 2021 compared to three customers for 18.4%, 16.9% and 16.8% as of February 29, 2020.

 

 
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Fair Value of Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures”. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures.

 

Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

 

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

The carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and note payable. The fair value of the Company’s long-term debt is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. As of February 28, 2021 the Company did not have any financial assets or liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis.

 

Recent Accounting Pronouncements

 

The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and believe that there are none that will have a material impact on the Company’s financial statements.

 

NOTE 3. GOING CONCERN

 

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

 

As of February 28, 2021, the Company had $48,932 in cash and a working capital deficit of $6,922,675. The Company also has generated losses and has an accumulated deficit as of February 28, 2021. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless Management is able to obtain additional financing, the Company may not be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
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NOTE 4. WARRANTS AND OPTIONS

 

The following table represents stock option activity for the three month period ended February 28, 2021:

 

 

 

Number of

Options

 

 

Weighted Average Exercise Price

 

 

Contractual

Life in Years

 

 

Intrinsic

Value

 

Outstanding - November 30, 2020

 

 

1,832,500

 

 

$ 0.40

 

 

 

2.02

 

 

 

 

Exercisable - November 30, 2020

 

 

1,832,500

 

 

$ 0.40

 

 

 

2.02

 

 

$ -0-

 

Granted

 

-0-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised or Vested

 

-0-

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or Expired

 

-0-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - February 28, 2021

 

 

1,832,500

 

 

$ 0.40

 

 

 

1.77

 

 

 

 

 

Exercisable - February 28, 2021

 

 

1,832,500

 

 

$ 0.40

 

 

 

1.77

 

 

$

-0-

 

 

As of February 28, 2021, the Company has no outstanding warrants. All the outstanding warrants have expired.

 

NOTE 5. CONVERTIBLE DEBT

 

On January 29, 2015, the Company entered into a securities purchase agreement with a non-US institutional investor whereby it agreed to sell an aggregate principal amount of $2,300,000 of senior secured convertible debentures, convertible into shares of the Company’s common stock.

 

The Company received $1,800,000 of the funds from the transaction on February 5, 2015. The balance of $500,000 was received on May 14, 2015. These convertible notes were subsequently acquired by Fengate Trident, LP (‘Fengate”) on April 28, 2017.

 

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

 

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

 

On September 26, 2016, the Company entered into a securities purchase agreement with a non-US institutional investor, pursuant to which, in consideration for proceeds of $4,100,000, the Company issued a secured convertible promissory note in the amount of $4,100,000. Pursuant to the securities purchase agreement, the investor has agreed, from time to time after January 1, 2017, to make additional investments at the Company’s request of up to $5,900,000. On May 9, 2017, the Company received the second tranche of funding with proceeds of $4,400,000 and on May 16, 2018 the third tranche of $1,500,000 for a total investment by the investor of $10,000,000.

 

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

 

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

 

Due to the notes being convertible to common shares of the Company, a beneficial conversion feature analysis was performed. The intrinsic value of the conversion feature of the notes amounted to $3,333,334 and was recognized as a debt discount. As of November 30, 2020, $3,333,334 of the debt discount was amortized to interest of which $334,988 was amortized during the current year compared to $855,987 in the prior year. As of November 30, 2020, the debt discount was fully amortized.

 

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

  

On November 30, 2018 the Company received the first tranche of funding with proceeds of $3,400,780. The 2nd tranche of $2,804,187 was received on April 13, 2019. The 3rd tranche of $3,795,033 less $936,168 withheld for interest payments up to and including June 30, 2020 was received on November 6, 2019. On March 5, 2020, the 2018 and 2019 Convertible Notes were amended to increase the amount of the 3rd tranche by $936,168 representing the amount previously withheld as interest payment. The withheld interest was subsequently received on March 12, 2020.

 

The Company analyzed the embedded conversion option on the convertible notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option on the 2018 Convertible Note qualified for derivative accounting. The Company used the Black-Scholes model to value the embedded conversion option at $892,000 on the issuance date of November 30, 2018, $1,911,256 on the issuance date of April 13, 2019 and $1,696,933 on the issuance date of November 6, 2019.The assumptions used were a discount rate of 2.80%, 1.96% and 1.96%; volatility rate of 79.57%, 104.70% and 107.3%; and a term of 1.50, 1.13 and 0.57 years respectively. The fair values of the embedded conversion options were recorded as debt discount and were amortized over the term of the 2018 and 2019 Convertible Notes. Amortization of debt discount for the years ended November 30, 2020 and 2019 was $1,885,587 and $1,857,295, respectively. The unamortized discount as of November 30, 2020 is $0.

 

On January 9, 2020 the Company and Fengate entered into an Amendment to Convertible Promissory Notes Agreement to amend the terms of the convertible notes issued on February 5, 2015 (US$1,800,000), May 14, 2015 (US$500,000), September 26, 2016 (US$4,100,000), May 9, 2017 (US$4,400,000) and May 16, 2018 (US$1,500,000) (collectively the “2016 Convertible Notes”). Pursuant to the Amendment, Fengate has agreed to convert all of the 2016 Notes on or before the earlier to occur of (i) the maturity date of the 2016 Convertible Notes and (ii) the Company raising new equity investment of not less than US$2,000,000, on terms mutually acceptable to Fengate and the Company (subject to Fengate’s regulatory considerations). Conversion of the 2016 Notes will occur in a single conversion transaction at a price that is equal to a 25% discount to the average closing price of the Company’s common stock for the 10 trading days immediately prior to the conversion date, with the exact structure of the conversion to be determined by the parties. On June 3, 2020 the maturity date was extended from May 31 to December 31, 2020. The Amendment also extended the maturity date of the 2018 and 2019 Convertible Notes to December 1, 2021.

 

 
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The Company analyzed the embedded conversion option on the amended “2016 Convertible Notes” for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the conversion option qualified for derivative accounting. On January 9, 2020 the Company used the Black-Scholes model to value the embedded conversion options at $7,965,083. The assumptions used were a discount rate of 1.96%, volatility rate of 148.8%; and a term of 0.39 years respectively. The modification resulted in $3,981,221 of APIC previously recorded for beneficial conversion feature of these convertible notes being reclassified as derivative liability.

 

On November 30, 2020, the Company entered into a fourth amendment of the 2016 Convertible Notes and the 2018 and 2019 Convertible Notes wherein the Company will issue to Fengate 29,432,320 shares of Company Preferred Stock (representing $17,659,392 of principal and interest converted into Preferred Stock at the rate of $0.60 per share), in full and complete satisfaction of (i) all amounts owing under the 2016 Convertible Notes through November 30, 2020 (including accrued interest thereon) and (ii) all accrued interest on the 2018 and 2019 Convertible Notes through November 30, 2020. The conversion is expected to occur by the end of June, 2021. The 2018 and 2019 Convertible Notes were further amended to (i) eliminate the conversion feature of such notes, (ii) provide for a simple interest rate of 8% per annum, with the first 2 years of interest payable at maturity of the 2018 and 2019 Convertible Notes and the last three years of interest payable quarterly beginning February 28, 2023; and (iii) extend the maturity of such notes until November 30, 2025. Pursuant to this amendment, all notes no longer qualified for derivative accounting. As such, the value of the embedded conversion options of all notes of $5,494,363 was credited to additional paid in capital. The issuance of the Preferred Shares is subject to stockholder approval.

 

We considered ASC Topic 470-50, Debt Modifications and Extinguishments in connection with the amendment of the interest rate and maturity date of the 2018 and 2019 Convertible Notes and determined that the modification would be considered a debt extinguishment. The unamortized discount of $1,092,295 at the date of amendment was recognized as a loss on debt extinguishment for the year ended November 30, 2020.

 

NOTE 9. PAYCHECK PROTECTION PROGRAM (PPP) LOAN

 

On May 28, 2020, the Company obtained a Paycheck Protection Program (PPP) loan in the amount of $135,165. These business loans were established by the 2020 US Federal government Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help certain businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses continue paying their workers.

 

The CARES Act was established in order to enable small businesses to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans to qualifying businesses for up to 2.5 times their average monthly payroll costs. The amount borrowed under the CARES Act and used for payroll costs, rent, mortgage interest, and utility costs during the 24 week period after the date of loan disbursement is eligible to be forgiven provided that (a) we use the PPP Funds during the eight week period after receipt thereof, and (b) the PPP Funds are only used to cover payroll costs (including benefits), rent, mortgage interest, and utility costs. While the full loan amount may be forgiven, the amount of loan forgiveness will be reduced if, among other reasons, we do not maintain staffing or payroll levels or less than 60% of the loan proceeds are used for payroll costs. Principal and interest payments on any unforgiven portion of the PPP Funds will be deferred to the date the SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness period for six months and will accrue interest at a fixed annual rate of 1.0% and carry a two year maturity date. There is no prepayment penalty on the CARES Act Loan.

 

NOTE 10. COMMITMENTS AND CONTINGENCIES

 

Everlast License Agreement

 

On December 23, 2013, the Company entered into a Deed of Assignment Agreement with Everlast World’s Boxing Headquarters Corporation, International Brand Management Limited, Sports Nutrition Products Incorporated and Manchester Capital Incorporated wherein Everlast, International Brand, Sports Nutrition and Manchester Capital are parties to a trade mark license and Sports Nutrition, a New York corporation, has assigned its interest in the trade mark license to the Company. Pursuant to the terms of the assignment agreement, Sports Nutrition Products Incorporated, a wholly owned subsidiary of Trident Brands Incorporated, assigned all of its rights, title, interest and benefit to the trade mark license to the Company effective December 23, 2013 and the Company assumed all of the obligations of Sports Nutrition Products Incorporated under the license agreement. The Company shall remain responsible to Everlast and International Brand for all acts and omissions of the subsidiary, Sports Nutrition Products Inc.

  

The Everlast License Agreement includes a clause stating that Manchester Capital Incorporated will guarantee that the Licensee shall perform all of its obligations and duties under the License Agreement. If the Licensee defaults in the payment when due of any amount it is obliged to pay to Licensor under the License Agreement, or arising from its termination, Manchester Capital is unconditionally responsible to pay that amount to Licensor in the manner prescribed in the License Agreement as if it were the Licensee.

 

 
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The Royalty Calculation, as per the terms of the agreement, are as follows: In 2013, 7% of Net Retail Sales and 7% of 60% of Direct Response Sales Revenue; in 2014, 8% of Net Retail Sales and 8% of 60% of Direct Response Sales Revenue; in 2015, 9% of Net Retail Sales and 9% of 60% of Direct Response Sales Revenue; in 2016 onwards, 10% of Net Retail Sales and 10% of 60% of Direct Response Sales Revenue. The Annual Minimum Guaranteed Royalty is $120,000 in 2014, $235,000 in 2015, $320,000 in 2016, $345,000 in 2017 and in 2018 onwards, if the Agreement remains in force, will be 75% of the previous Year’s Royalty Calculation or the previous Year’s Annual Minimum Guaranteed Royalty plus 10%, whichever is greater.

 

The agreement was terminated on December 31, 2017. On January 17, 2019, Everlast World’s Boxing Headquarters Corp. (“Everlast”) filed a counter civil lawsuit against the Company and other defendants. In that lawsuit, Everlast seeks payment from the defendants under a License Agreement dated June 4, 2013, for $425,555 in unpaid royalties allegedly due and owing under the License Agreement and interest on the allegedly unpaid royalties of $96,265, which interest allegedly continues to accrue. Everlast has also sought all costs, expenses, and legal fees incurred by Everlast in collecting monies that it claims are due under the License Agreement. On February 26, 2020, the court in the Everlast matter issued an Opinion and Order granting a motion to dismiss all of the Company’s claims against Everlast and granting a motion for judgment on the pleadings as to liability against the Company. The Court left open the question of damages to be awarded to Everlast. The Company had requested that the parties participate in settlement discussions before a magistrate judge or, in the alternative, that Everlast engage in limited discovery on these matters. No settlement was reached. On October 15, 2020, the Court in the Everlast case ordered, adjudged and decreed that Plaintiff Everlast have judgment and recover a total of $738,946 from the Company as follows:

 

1. $425,000 representing royalty payments due to Everlast;

2. Interest on royalty payments computed through October 15, 2020, in the sum of $242,920;

3. Costs and attorneys’ fees in the sum of $71,026

 

The Company has fully accrued the $738,946 liability as of November 30, 2020.

 

Banc of America Leasing and Capital

 

On December 1, 2020, Bank of America Leasing and Capital, LLC filed a legal action against the Company in the Superior Court for the State of California, County of San Mateo (Case NO. 20-CIV-05306), alleging breach of contract. The claim arises out of a software services contract between the Company and Oracle Corporation. Bank of America Leasing and Capital, LLC acquired Oracle’s rights under the agreement. The plaintiff claims the Company is liable for damages in the amount of $217,000 plus interests and costs. The Company has not filed an answer to this complaint. On February 22, 2021, the plaintiff requested that the Court enter a default judgment against the Company. The Company intends to engage counsel and defend against this claim.

  

PIT Mycell

 

On June 3, 2019, the Company filed a lawsuit against PIT Mycell, LLC, William E. Peterson III, New Age Ventures, LLC, Volker Berl, and Mycell Technologies, LLC (“Mycell”) in the Superior Court in Bergen County, New Jersey, Civil Action No. BER-L-004198-19, in which the Company seeks to require the defendants to perform under and allow the enforcement of certain notes made by Mycell and acquired by the Company in September 2017. The notes are past their stated maturity date of December 31, 2016. The Company also alleges that the parties had entered into a written Settlement Agreement Letter of Intent dated March 14, 2019 (the “Settlement”), but that the defendants repudiated it shortly thereafter. The notes had been the subject of an earlier lawsuit in Virginia in state court in Fairfax County between the Company and PIT Mycell, LLC that the Settlement was intended to resolve. The Company seeks to enforce the notes and the Settlement in the New Jersey lawsuit and requests actual damages in an amount to be proven at trial, attorneys’ fees and litigation costs, specific performance requiring certain defendants to enforce obligations under the notes against Mycell, specific performance requiring the defendants to execute a final Settlement Agreement consistent with the Settlement, an order permitting foreclosure on the collateral for the notes, and declaratory relief. On January 24, 2020, the New Jesey court denied Defendant’s Motions to dismiss the case. The parties have engaged in written discovery and exchanged productions of documents. Mycell filed for bankruptcy on November 25, 2020.

 

 
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the interim consolidated financial statements, and notes thereto, for the quarter ended February 28, 2021 contained under Item 1 of this Quarterly Report on Form 10-Q (“Form 10-Q”) and in conjunction with the annual consolidated financial statements, and notes thereto, contained in the Annual Report on Form 10-K for the fiscal year ended November 30, 2020 (“Form 10-K”). Unless otherwise indicated herein, the discussion and analysis contained in this MD&A includes information available through April 19, 2021.

  

Certain statements contained in this MD&A may constitute forward-looking statements as defined under securities laws. Forward-looking statements may relate to our future outlook and anticipated events or results and may include statements regarding our future financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives. In some cases, forward-looking statements can be identified by terms such as “anticipate”, “estimate”, “intend”, “project”, “potential”, “continue”, “believe”, “expect”, “could”, “would”, “should”, “might”, “plan”, “will”, “may”, “predict”, the negatives of such terms, and other similar expressions concerning matters that are not historical facts. To the extent any forward-looking statements contain future-oriented financial information or financial outlooks, such information is being provided to enable a reader to assess our financial condition, material changes in our financial condition, our results of operations, and our liquidity and capital resources. Readers are cautioned that this information may not be appropriate for any other purpose, including investment decisions.

 

Forward-looking statements contained in this MD&A are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While we consider these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Forward-looking statements are also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors are more fully described in the “Risk Factors” section at Item 1A of the Form 10-K.

 

Forward-looking statements contained in this commentary are based on our current estimates, expectations and projections, which we believe are reasonable as of the date of this report. You should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Other than as required under securities laws, we do not undertake to update any forward-looking information at any particular time.

 

All dollar amounts in this MD&A are expressed in thousands of U.S. dollars unless otherwise noted.

 

Business Developments

 

Note Amendments

 

Management Changes

 

Legal Proceedings

 

Results of Operations

 

The following summary of our results of operations should be read in conjunction with our unaudited consolidated financial statements for the three month periods ended February 28, 2021 and February 29, 2020.

  

 
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Table of Contents

 

Our operating results for three month periods ended February 28, 2021 and February 29, 2020 are summarized as follows:

    

 

 

Three

Months Ended

 

 

Three

Months Ended

 

 

 

February 28,

 

 

February 29,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Revenues

 

$ 144,048

 

 

$ 161,885

 

Gross Profit

 

$ 65,260

 

 

$ 76,956

 

Operating Expenses

 

$ 404,284

 

 

$ 1,313,734

 

Other Expenses

 

$ 200,333

 

 

$ 3,019,401

 

Net Loss

 

$ (539,357 )

 

$ (4,256,179 )

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

Interest Expense

 

$ 200,333

 

 

$ 1,446,688

 

Depreciation

 

$

-0-

 

 

$ 2,096

 

Amortization

 

$

-0-

 

 

$

-0-

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$ (339,024 )

 

$ (2,807,395 )

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

Derivative Loss

 

$

-0-

 

 

$ 1,572,713

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$ (339,024 )

 

$ (1,234,682 )

  

 
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Table of Contents

  

Revenues and Gross Profits

 

Sales in the first quarter of 2021 decreased to $144,048 versus $161,885 in the prior period. The decrease was the result of the inability to fulfill various purchase orders due to out of stock (OOS) of certain SKU’s. Gross profit decreased to $65,260 (45.3% of revenues) versus $76,956 (47.5% of revenues).

  

Operating Expenses

 

Our operating expenses for the three month period ended February 28, 2021 and February 29, 2020 is summarized below:

 

 

 

Three

Months Ended February 28,

 

 

Three

Months Ended February 29,

 

 

 

2021

 

 

2020

 

Professional Fees

 

$ 13,649

 

 

$ 159,608

 

General & Administrative Expenses

 

$ 324,946

 

 

$ 854,029

 

Marketing, Selling & Warehousing Expenses

 

$ 27,030

 

 

$ 244,827

 

Management Salary

 

$ 37,500

 

 

$ 38,250

 

Rent

 

$ 1,159

 

 

$ 17,020

 

 

Operating expenses for the three month period ended February 28, 2021 were $404,284 as compared to $1,313,734 for the comparative period in 2020, a decrease of 69.2%. The decrease in our operating expenses was primarily due to a decrease in general & administrative expenses as a result of cost reductions and in marketing and selling expenses related to the decrease in sales. Legal expenses also decreased by $139,000.

 

Other Expenses

 

Other expenses for the three month period ended February 28, 2021 in the amount of $200,333 consisted of interest expense. This compared to $3,019,401 in the comparative period in 2020 which consisted of interest expense of $248,734; non-cash interest expense of $1,199,797 related to the impact of the amortization of debt discount from convertible notes entered into in 2016, 2017 and 2018; interest revenue of 1,843, and non-cash derivative loss of $1,572,713 on the revaluation of the embedded conversion option of all the convertible notes.

 

Non-GAAP Financial Measure

 

The following non-GAAP financial measures are presented in this quarterly report on Form 10-Q to supplement the financial information we present on a GAAP basis. We monitor and present EBITDA and Adjusted EBITDA because they are key measures used by our management to understand and evaluate our performance.

 

EBITDA

 

We define EBITDA as net income (loss), adjusted to exclude: Interest income and expense, depreciation and amortization expense including impairment loss. Reported net loss for the three month period February 28, 2021 was $539,357 compared to $4,256,179 in the comparative period in 2020. After deducting interest, depreciation and amortization, EBITDA for the three month period ended February 28, 2021 was ($339,024) compared to ($2,807,395) in 2020.

 

Adjusted EBITDA

 

We define Adjusted EBITDA as EBITDA, adjusted to exclude: stock options expense and derivative loss. Reported EBITDA for the three month period February 28, 2021 was ($339,024) compared to ($2,807,395) in the comparative period in 2020. After deducting non-cash stock options expense and derivative loss, Adjusted EBITDA for the three month period ended February 28, 2021 was ($339,024) compared to ($1,234,682) in 2020.

 

 
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Table of Contents

  

Balance Sheet Data

 

The following table provides selected balance sheets data as at February 28, 2021 and February 29, 2020.

 

Balance Sheet Data:

 

February 28,

2021

 

 

February 29,

2020

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 48,932

 

 

$ 230,682

 

Total assets

 

$ 1,775,926

 

 

$ 2,926,555

 

Total liabilities

 

$ 30,733,766

 

 

$ 35,700,388

 

Stockholders' (deficit)

 

$ (28,957,840 )

 

$ (32,773,832 )

 

Strategic Orientation

 

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

 

 

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

 

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

 

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

 

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

 

 

To execute a multi-tier brand, supply-chain and innovation strategy to drive revenue;

 

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

 

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

 

While we have yet to achieve profitability, we are making significant progress against our commercial objectives. We expect revenue and margin to increase as we continue to strengthen distribution partnerships while capitalizing on product innovation, supply-chain optimization and brand equity within our current portfolio.

 

Liquidity and Capital Resources

 

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

 

As of February 28, 2021, the Company had $48,932 in cash and a working capital deficit of $6,922,675. The Company also has generated losses and has an accumulated deficit as of February 28, 2021. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Unless management is able to obtain additional financing, the Company may not be able to meet its funding requirements during the next 12 months. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
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Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Contractual Obligations

 

Except for the transactions noted in Business Developments, there have been no material changes outside the normal course of business in our contractual obligations since January 3, 2015.

 

Critical Accounting Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. The estimates and assumptions made require us to exercise our judgment and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. We continually evaluate the information that forms the basis of our estimates and assumptions as our business and the business environment generally changes. The use of estimates is pervasive throughout our financial statements. There have been no material changes to the critical accounting estimates disclosed under the heading “Critical Accounting Estimates” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of the Form 10-K.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company we are not required to provide this information.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.

 

Changes in Internal Controls Over Financial Reporting

 

Our management, with the participation of our principal executive officer and principal financial officer have concluded that there have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended February 28, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II. OTHER INFORMATION

 

ITEM 6. EXHIBITS.

 

The following exhibits are included with this quarterly filing:

 

Exhibit No.

 

Description

 

 

 

3.1

 

Articles of Incorporation*

 

 

 

3.2

 

Bylaws*

 

 

 

31.1

 

Sec. 302 Certification of Chief Executive Officer

 

 

 

31.2

 

Sec. 302 Certification of Chief Financial Officer

 

 

 

32.1

 

Sec. 906 Certification of Chief Executive Officer

 

 

 

32.2

 

Sec. 906 Certification of Chief Financial Officer

 

 

 

101

 

Interactive data files pursuant to Rule 405 of Regulation S-T.

__________ 

*Document is incorporated by reference and can be found in its entirety in our Registration Statement on Form SB-2, SEC File Number 333-148710, at the Securities and Exchange Commission website at www.sec.gov.

 

 
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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.

 

Trident Brands Incorporated

 

 

 

 

April 19, 2021

By:

/s/ Anthony Pallante

 

 

Anthony Pallante

 

 

 

(Chief Executive Officer & Chair of the Board)

 

 

 

 

 

 

By:

/s/ Peter Salvo

 

 

 

Peter Salvo

 

 

 

(Principal Financial Officer)

 

 

 

 

 

 

By:

/s/ Scott Chapman

 

 

 

Scott Chapman

 

 

 

(Director)

 

 

 

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