SENTIENT BRANDS HOLDINGS INC. AND SUBSIDIARIES
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
SENTIENT BRANDS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Business description
The financial statements presented are those
of Sentient Brands Holdings Inc. (the “Company”). The Company was incorporated under the laws of the State of California
on March 22, 2004, and until October 2016, the Company was in the business of media advertising and acquiring high-end computer
and networking equipment from resellers and end-users and then reselling this equipment at discounted prices. The Company is currently
in the business of product development and brand management with a focus on building innovative brands in the Luxury and Premium
Market space. The Company has a Direct-to Consumer business model focusing on the integration of CBD, wellness and beauty for conscious
consumers. The Company incorporates an omnichannel approach in its marketing strategies to ensure that its products are accessible
across both digital and retail channels. The Company develops Lifestyle Brands with carefully thought-out ingredients, packaging,
fragrance and design. The Company’s leadership team has extensive experience in building world-class brands such as Hugo
Boss, Victoria’s Secret, Versace, and Bath & Body Works. The Company is focused on two key market segments targeting:
wellness and responsible luxury, which the Company believes represent unique opportunities for its Oeuvre product line. The Company
intends to leverage its in-house innovation capabilities to launch new products that “disrupt” adjacent product categories.
The Company plans to grow by leveraging its deep connections within its existing network and attract consumers through increased
brand awareness and investing in unique social media marketing. The Company’s goal is to create customer experiences that
have sustainable resonance with consumers and consistently implement strategies that result in long-term profit growth. During
the third quarter of 2022, the Company launched an M&A strategy to identify high-margin, revenue generating businesses within
above-average growth potential industry sectors as potential acquisition targets.
On December 9, 2020, the Company filed a Certificate
of Amendment of Articles of Incorporation (the “Certificate”) with the State of California to (i) effect a forward
stock split of its outstanding shares of common stock at a ratio of 7 for 1 (7:1) (the “Forward Stock Split”), (ii)
increase the number of authorized shares of common stock from 50,000,000 shares to 500,000,000 shares, and (iii) effectuate a name
change (the “Name Change”). Fractional shares that resulted from the Forward Stock Split will be rounded up to the
next highest number. As a result of the Name Change, the Company’s name changed from “Intelligent Buying, Inc.”
to “Sentient Brands Holdings Inc.”. The Certificate was approved by the majority of the Company’s shareholders
and by the Board of Directors of the Company. The effective date of the Forward Stock Split and the Name Change was March 2, 2021.
In connection with the above, the Company filed
an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority. The Forward Stock Split and
the Name Change was implemented by FINRA on March 2, 2021. Our symbol on OTC Markets was INTBD for 20 business days from March
2, 2021 (the “Notification Period”). Our new CUSIP number is 81728V 102. As a result of the name change, our symbol
was changed to “SNBH” following the Notification Period. All share and per share information has been retroactively
adjusted to reflect this forward stock split.
In addition, on January 29, 2021, the Company,
merged with and into its wholly owned subsidiary, Sentient Brands Holdings Inc., a Nevada corporation, pursuant to an Agreement
and Plan of Merger between Sentient Brands Holdings Inc., a California corporation, and Sentient Brands Holdings Inc., a Nevada
corporation. Sentient Brands Holdings Inc., a Nevada corporation, continued as the surviving entity of the migratory merger. Pursuant
to the migratory merger, the Company changed its state of incorporation from California to Nevada and each share of its common
stock converted into one share of common stock of the surviving entity in the migratory merger. No dissenters’ rights were
exercised by any of the Company’s stockholders in connection with the migratory merger.
Following the consummation of the migratory
merger, the articles of incorporation and bylaws of the Nevada corporation that was newly-created as a wholly owned subsidiary
of the Company became the articles of incorporation and bylaws for the surviving entity in the migratory merger.
Basis of Presentation
These interim consolidated financial statements
of the Company and its subsidiaries are unaudited. In the opinion of management, all adjustments (consisting of normal recurring
accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been
included. The results reported in the unaudited condensed consolidated financial statements for any interim periods are not necessarily
indicative of the results that may be reported for the entire year. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not
include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting
principles generally accepted in the United States (“U.S. GAAP”). The Company’s unaudited condensed consolidated
financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Certain information and footnote disclosures
normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or
omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited
consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022, filed with the Securities and Exchange Commission on April 17, 2023.
Going concern
The Company currently has limited operations.
These unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.
As reflected in the accompanying unaudited
consolidated financial statements, the Company had an accumulated deficit of $3,131,491 at March 31, 2023, and had a net loss of
$75,845 and net cash flow used in operating activities of $10,264 for the three months ended March 31, 2023, respectively. The
Company has a limited operating history, and its continued growth is dependent upon the continuation of selling its products; hence
generating revenues and obtaining additional financing to fund future obligations and pay liabilities arising from normal business
operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement
its business plan, and generate significant revenues. There are no assurances that the Company will be successful in its efforts
to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.
The Company plans on raising capital through the sale of equity or debt instruments to implement its business plan. However, there
is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory
terms and conditions, if any.
The accompanying unaudited condensed consolidated
financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or
the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Uses of estimates in the preparation of financial statements
The preparation of financial statements in
conformity with generally accepted accounting principles accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 2022 presentation
to make them consistent with 2023.
Cash
The Company considers all short-term highly
liquid investments with an original maturity date of purchase of three months or less to be cash equivalents.
Revenue Recognition
During the three months ended March 31, 2023
and 2022, our revenue recognition policy was in accordance with ASC 606, “Revenue from Contracts with Customers”, which
requires the recognition of sales following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Net loss per common share – basic
and diluted
Authoritative guidance on Earnings per Share
requires dual presentation of basic and diluted earnings or loss per share (“EPS”) for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator
of the diluted EPS computation. Basic EPS excludes dilution; diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity.
Basic loss per share is computed by dividing
net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted
loss per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the
Company, unless the effect is to reduce a loss or increase earnings per share.
Stock-based compensation
In accordance with ASC No. 718, Compensation
– Stock Compensation (“ASC 718”), the Company measures the compensation costs of share-based compensation arrangements
based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are
required to provide services.
During the three months ended March 31, 2023,
and 2022, there were no stock based awards issued or outstanding.
Fair value of financial instruments
We value our financial assets and liabilities
on a recurring basis using the fair value hierarchy established in Accounting Standards Codification (“ASC”) 820, Fair
Value Measurements and Disclosures.
ASC 820 describes three levels of inputs that may be used to measure
fair value, as follows:
Level 1 input, which include quoted
prices in active markets for identical assets or liabilities.
Level 2 inputs, which include observable
inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar
assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the asset or liability; and
Level 3 inputs, which include unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or
liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted
cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.
Income Taxes
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment. The U.S. federal income tax rate is 21%.
Impairment of Long-Lived Assets
Long-lived assets and certain identifiable
intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted
future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived
assets and certain identifiable intangible assets that management expects to hold, and use is based on the fair value of the asset.
Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or
fair value less costs to sell.
Recently Issued and Adopted Accounting
Standards
From time to time, new accounting pronouncements
are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s
accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance
for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact
will not be material to its financial position, results of operations, and cash flows when implemented.
NOTE 3. INVENTORIES
Inventories are stated at the lower of cost
and net realizable value. Cost is determined using the moving average method and net realizable value is the estimated selling
price less costs of disposal in the ordinary course of business. The cost of inventories includes direct costs plus shipping and
packaging materials.
As of March 31, 2023 and December 31, 2022,
Company product inventories valued at approximately $232,434 and $238,016,
respectively were primarily contained in our
storage and fulfilment center located in Fairfield, NJ.
NOTE 4. CONVERTIBLE NOTES PAYABLE
Since the change
of control of the Company in May 2018, the Company received advances from Pure Energy 714 LLC, an unaffiliated entity, totaling
$240,803. On March 15, 2019, specific terms were reached on $70,757 of the advances pursuant to an unsecured convertible promissory
note entered into between the Company and Pure Energy 714 LLC, the terms call for repayment of the advances including interest
on any unconverted principal amount at a rate of 4% per annum and a repayment date on or before August 15, 2022. Additional terms
include a voluntary conversion option, pursuant to which Pure Energy 714 LLC may convert any outstanding balance at $0.05 per share
into shares of common stock. On January 3, 2020, specific terms were reached on the remaining $170,046 of the advances pursuant
to an unsecured demand note. See Note 6. Accrued interest on this note totaled $11,321 and $10,614 at March 31, 2023 and
December 31, 2022, respectively. The lender agreed to extend the maturity date of the loan to October 14, 2023.
On December 2, 2020, we issued a promissory
note to an accredited investor in consideration for $50,000 with interest at the rate of 10% per annum from the issue date, and
also issued to the accredited investor a common stock purchase warrant (the “Warrant”) to acquire 400,000 shares of
common stock. The Warrant is exercisable for a period of five years at an exercise price of $0.10. This note will mature on the
earlier of (i) closing of the next equity financing of at least $1,000,000 or (ii) September 2, 2021 (maturity date). The holder,
at its sole election, may convert the interest accrued on this note into shares of stock of the company at $0.20 per share. On
November 29, 2021, the Company repaid principal totaling $27,500, reducing the Note balance to $22,500. Accrued interest for this
note as of March 31, 2023 and December 31, 2022 were $3,562 and $3,000 respectively.
On December 3, 2020, we issued a convertible
debenture to an accredited investor in consideration for $50,000 with interest at the rate of 10% per annum from the issue date,
and also issued to the accredited investor a common stock purchase warrant (the “Warrant”) to acquire 400,000 shares
of common stock. The Warrant is exercisable for a period of five years at an exercise price of $0.10. This debenture is convertible
at the election of the holder into shares of common stock at the price per share equal to 120% of the market price of the Company’s
listed common stock on the date of such conversion. Accrued interest for this note as of March 31, 2023 and December 31, 2022 were
$11,667 and $10,417 respectively.
On April 27, 2021 (the “Issuance Date”),
the Company entered into a Securities Purchase Agreement with an accredited investor (the “April 2021 Investor”) providing
for the sale by the Company to the April 2021 Investor of a 10% Senior Secured Convertible Promissory Note in the principal
amount of $315,789 (the “April 2021 Note”, and the “Financing”). The principal amount of the April
2021 Note includes an Original Issue Discount of $15,789, resulting in $300,000 in total proceeds received by the Company
in the Financing. The April 2021 Note is convertible at the option of the April 2021 Investor into shares of common stock of the
Company at $0.40 per share. In addition to the April 2021 Note, the April 2021 Investor also received 250,000 shares
of common stock of the Company (the “Commitment Shares”), and a common share purchase warrant (the “April 2021
Warrant”, and together with the April 2021 Note and the Commitment Shares, the “Securities”) to acquire 500,000 shares
of common stock of the Company. The April 2021 Warrant is exercisable for five years at an exercise price of $0.60. During the
year the company paid monthly interest totaling $21,052. Principal balance as of March 31, 2023 and December 31, 2022 remains at
$315,789. The Original Issue discount was being amortized over the term of the loan of 18 months and was fully during the year
ended December 31, 2022. On March 23, 2023, the Company and the April 2021 Investor entered into an extension agreement pursuant
to which the parties agreed to extend the maturity date of the August 21, 2023. Accrued interest for this note as of March 31,
2023 and December 31, 2022 were $52,631 and $44,736 respectively.
On November 18, 2021 (the “Issuance Date”),
the Company entered into a Securities Purchase Agreement with an accredited investor (the “November 2021 Investor”)
providing for the sale by the Company to the November 2021 Investor of a 10% Senior Secured Convertible Promissory Note in
the principal amount of $400,000 (the “November 2021 Note”, and, the “Financing”), to be paid by the
November 2021 Investor to the Company in two tranches (each, a “Tranche”). The first Tranche consists of a payment
by the November 2021 Investor to the Company on the Issue Date of $200,000, from which the November 2021 Investor retained $5,000 to
cover its legal fees. A second Tranche consisting of $200,000 was paid in December 2021, resulting in $395,000 in total proceeds
to be received by the Company in the Financing. In addition to the November 2021 Note, the November 2021 Investor also received
a common share purchase warrant (the “November 2021 Warrant”, and together with the November 2021 Note, the “Securities”)
to acquire 666,667 shares of common stock of the Company. The November 2021 Warrant is exercisable for five years at
an exercise price of $0.45. The closing of the Financing in the amount of $400,000 occurred on December 16, 2021. The maturity
date (“Maturity Date”) for each Tranche is at the end of the period that begins from the date each Tranche is paid
and ends 12 months thereafter, and interest associated with the November 2021 Note is 10% per annum. On March 23, 2023, the Company
and the November 2021 Investor entered into an extension agreement pursuant to which the parties agreed to extend the maturity
date of the August 21, 2023. Accrued interest for this note as of March 31, 2023 and December 31, 2022 were $64,033 and $54,033
respectively.
NOTE 5. NOTES PAYABLE
On January 3, 2020, specific terms were
reached between the Company and Pure Energy 714 LLC on the remaining $170,046 of prior advances made to the Company (See Note
5) pursuant to an unsecured demand note entered into between the Company and Pure Energy 714 LLC. The terms call for
repayment of the advances including interest on any unconverted principal amount at a rate of 12% per annum and a repayment
date on or before June 3, 2021, at the rate of 12% per annum. If the demand note is unpaid by June 3, 2021,
default interest
of 3% monthly will apply. On January 17, 2020, the Company repaid $20,000 of the principal outstanding reducing the note
balance to $150,046. An additional $10,000 was received on March 16, 2021, but subsequently returned in April 20, 2021.
Accrued interest on this note totaled $58,518 and $54,017 at March 31, 2023 and December 31, 2022, respectively. The lender
agreed to extend the maturity date of the loan to October 7, 2023.
During 2021, 2022 and the first three months
of 2023, the Company received proceeds from various loans from Adriatic Advisors LLC. At March 31, 2023 and December 31, 2022,
the Company had $369,746 and $332,825 due to Adriatic Advisors LLC, respectively. The notes mature on the earlier of (i) the closing
of the Company’s next equity financing, or (ii) six months after the date of issue. At the note holder’s sole election
on the maturity date, the note holder may convert the interest accrued on the note into shares of common stock of the Company at
$0.05 per share. The lender has agreed to extend the maturity dates of any overdue Notes to after August 31, 2023. Accrued
interest on these notes totaled $57,019 and $41,411 at March 31, 2023 and December 31, 2022, respectively.
NOTE 6. STOCKHOLDERS’ (DEFICIENCY)
Preferred stock
The Company is authorized to issue 25,000,000
shares of Preferred Stock, par value $.001 per share. As of March 31, 2023 and December 31, 2022, 1,000,000 shares of Series B
Preferred Stock were issued and outstanding.
For five years from the date of issuance, the
Series B Preferred Stock shall have the number of votes equal to fifty-one percent (51%) of the cumulative total vote of all classes
of stock of the Corporation, common or preferred, whether such other class of stock is voting as a single class or the other classes
of stock are voting together as a single group, and with respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, or any other class of preferred stock, and shall be entitled
to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together
with holders of Common Stock and any class of preferred stock entitled to vote, with respect to any question upon which holders
of Common Stock or any class of preferred stock have the right to vote. After five years, the Series B Preferred Stock shall automatically,
and without further action by the Corporation, be cancelled and void, and may not be reissued.
Common stock
On January 29, 2021, the Company, merged with
and into its wholly owned subsidiary, Sentient Brands Holdings Inc., a Nevada corporation, pursuant to an Agreement and Plan of
Merger between Sentient Brands Holdings Inc., a California corporation, and Sentient Brands Holdings Inc., a Nevada corporation.
Sentient Brands Holdings Inc., a Nevada corporation, continued as the surviving entity of the migratory merger. Pursuant to the
migratory merger, the Company changed its state of incorporation from California to Nevada and each share of its common stock converted
into one share of common stock of the surviving entity in the migratory merger. No dissenters’ rights were exercised by any
of the Company’s stockholders in connection with the migratory merger.
On January 5, 2023, the Company issued 771,242
restricted shares of its common stock in full settlement of an amount due of $59,000 under an employment agreement to George Furlan,
the Company’s Chief Operating Officer.
On January 5, 2023, the Company issued 888,889
restricted shares of its common stock in full settlement of an amount due of $68,000 to an independent contractor.
On January 5, 2023, the Company issued 500,000
restricted shares of its common stock to Dante Jones, the Company’s interim Chief Executive Officer. The Company took a charge
of $13,900 for this stock issuance in the first quarter of 2023 which is included in general and administrative expenses.
There were no other issuances of common stock
during the three months ended March 31, 2023.
On August 16, 2022, the Company entered into
a Settlement and Release Agreement with Anthony L.G., PLLC (“ALG”) and Laura Anthony, Esq. (“LA”) pursuant
to which ALG agreed to forgive $23,182 (the “Debt Amount”) owed by to the Company to ALG for services rendered to the
Company in consideration of an issuance to LA of 400,000 shares common stock of the Company registered on the Form S-8 pursuant
to the Plan.
On August 30, 2022, the Company entered into
a Consulting Agreement with a contractor to provide investor relation services in exchange for 100,000 shares of the Company’s
common stock.
There were no other issuances of common stock
during the year ended December 31, 2022.
On March 3, 2021, the Company implemented a
forward stock split its outstanding shares of common stock at a ratio of 7 for 1, resulting in the number of authorized shares
of common stock of the Company going from 50,000,000 shares to 500,000,000 shares. All share and per share information has been
retroactively adjusted to reflect this forward stock split.
NOTE 7. COMMITMENTS AND CONTINGENCIES
On December 26, 2019, the Company entered into
an Employment Agreement (the “Furlan Agreement”) with George Furlan pursuant to which Mr. Furlan was appointed as the
Company’s Chief Executive Officer. The Furlan Agreement provides for a base salary of $60,000 per year with such base salary
being increased to $120,000 per year beginning on the one (1) year anniversary of the completion of a financing by the Company
of no less than $3,000,000. The Furlan Agreement also contains an annual bonus based on the amount of revenue generated by the
Company from the sale of certain products. The Furlan Agreement has a term of three years from the effective date. Pursuant to
the Furlan Agreement, the Company and Mr. Furlan also entered into a into a Restricted Stock Agreement to purchase 718,403 shares
of the Company’s Common Stock. This agreement expired in December 2022 and has not been renewed.
On January 8, 2020, the Company entered into
an Executive Consulting Agreement (the “Mansour Agreement”) with James Mansour pursuant to which Mr. Mansour was appointed
as an Executive Consultant. The Mansour Agreement provides for a base salary of $60,000 per year. The Mansour Agreement has a term
of three years from the effective date. Pursuant to the Mansour Agreement, the Company and Mr. Mansour also entered into a into
a Restricted Stock Agreement to purchase 718,403 shares of the Company’s Common Stock. This agreement expired in January
2023 and has not been renewed.
NOTE 8. SUBSEQUENT EVENTS
Through May 15, 2023, the Company received
short term loans (collectively, the “Loans”) from an accredited investor in the aggregate amount of $13,400. The maturity
date of each Loan is at the end of the period that begins on the date each Loan was made and ends six months thereafter, and interest
on each of the Loans is 18% per annum.
The Company has evaluated subsequent
events for recognition and disclosure through May 17, 2023, which is the date the financial statements were available to be issued.
No other matters were identified affecting the accompanying financial statements and related disclosures.
