Nevada
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20-2008579
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|
(State
or Other Jurisdiction of
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(I.R.S.
Employer
|
|
Incorporation
or Organization)
|
Identification
No.)
|
Large
accelerated filer o
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Accelerated
filer o
|
Non-accelerated
filer o
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Smaller
reporting company x
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Page
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PART
I - FINANCIAL INFORMATION
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||
Item
1. Financial Statements (Unaudited)
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1
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Consolidated
Balance Sheets as of December 31, 2008 and June 30, 2008
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2
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|
Consolidated
Statements of Operations for the Three and Six Months Ended December 31,
2008
and
2007
|
3
|
|
Consolidated
Statements of Cash Flows for the Six Months Ended December 31,
2008
and
2007
|
4
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
|
15
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
20
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|
Item
4T. Controls and Procedures
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21
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PART
II - OTHER INFORMATION
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||
Item
1. Legal Proceedings
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22
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Item
1A. Risk Factors
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22
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|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
28
|
|
Item
3. Defaults Upon Senior Securities
|
28
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
28
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|
Item
5. Other Information
|
28
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|
Item
6. Exhibits
|
28
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UNAUDITED
|
||||||||
December 31,
|
June 30,
|
|||||||
2008
|
2008
|
|||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
& Equivalents
|
$ | 1,161,236 | $ | 2,460,663 | ||||
Accounts
Receivable
|
28,126 | 29,661 | ||||||
Inventory
|
306,179 | 77,307 | ||||||
Total
Current Assets
|
1,501,541 | 2,567,631 | ||||||
Property
& Equipment, Net
|
4,855 | 5,510 | ||||||
Deposits
|
35,255 | 35,255 | ||||||
Goodwill
and Intangibles
|
3,861,280 | 3,861,280 | ||||||
Total
Assets
|
$ | 5,402,932 | $ | 6,469,676 | ||||
Liabilities
& Stockholders' Equity (Deficit)
|
||||||||
Current
Liabilities
|
||||||||
Accounts
Payable
|
$ | 216,882 | $ | 260,894 | ||||
Accrued
Expenses
|
80,450 | 94,063 | ||||||
Notes
Payable
|
980,495 | 80,495 | ||||||
Total
Current Liabilities
|
1,277,827 | 435,452 | ||||||
Non-Current
Liabilities
|
||||||||
Notes
Payable
|
124,816 | 249,816 | ||||||
Total
Non-Current Liabilities
|
124,816 | 249,816 | ||||||
Total
Liabilities
|
$ | 1,402,643 | $ | 685,268 | ||||
Commitments
& Contingencies
|
- | - | ||||||
Stockholders'
Equity (Deficit)
|
||||||||
Preferred
Stock, $0.001 par value, 10,000,000 shares
|
||||||||
authorized;
0 shares issued and outstanding
|
- | - | ||||||
Common
Stock, $0.001 par value, 300,000,000 shares
|
||||||||
authorized;
174,506,796 and 169,743,752 shares issued and outstanding,
respectively
|
174,507 | 169,744 | ||||||
Additional
Paid-in Capital
|
24,988,468 | 22,629,079 | ||||||
Direct
Offering Costs
|
(11,779,577 | ) | (11,779,577 | ) | ||||
Accumulated
Deficit
|
(9,383,110 | ) | (5,234,838 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
4,000,288 | 5,784,408 | ||||||
Total
Liabilities & Stockholders' Equity (Deficit)
|
$ | 5,402,931 | $ | 6,469,676 |
For the Three Months Ended
December 31,
|
For the Six Months Ended
December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Sales
|
$ | 89,188 | $ | 17,058 | $ | 110,762 | $ | 39,777 | ||||||||
Cost
of Sales
|
55,916 | 10,306 | 61,533 | 15,536 | ||||||||||||
Gross
Profit
|
33,272 | 6,752 | 49,229 | 24,241 | ||||||||||||
Operating
Expenses
|
||||||||||||||||
Marketing
and Sales Promotion
|
379,515 | 470,918 | 813,331 | 529,330 | ||||||||||||
General
& Administrative
|
729,504 | 728,255 | 1,029,019 | 801,792 | ||||||||||||
Stock
Based Compensation
|
2,301,652 | 76,120 | 2,364,152 | 76,120 | ||||||||||||
Total
Operating Expenses
|
||||||||||||||||
Operating
Income (Loss)
|
$ | (3,377,399 | ) | $ | (1,275,541 | ) | $ | (4,157,273 | ) | $ | (1,383,001 | ) | ||||
Other
Income (Expense)
|
||||||||||||||||
Other
Income
|
- | 3,225 | - | 3,225 | ||||||||||||
Interest
Income
|
7,537 | 3,660 | 15,083 | 3,660 | ||||||||||||
Interest
Expense
|
(5,005 | ) | (38,386 | ) | (6,082 | ) | (42,712 | ) | ||||||||
Total
Other Income (Expense)
|
2,532 | (31,501 | ) | 9,001 | (35,827 | ) | ||||||||||
Net
Income (Loss) Before Income Taxes
|
$ | (3,374,867 | ) | $ | (1,300,042 | ) | $ | (4,148,272 | ) | $ | (1,418,828 | ) | ||||
Provision
for Income Taxes
|
- | - | - | - | ||||||||||||
Net
Income (Loss)
|
$ | (3,374,867 | ) | $ | (1,300,042 | ) | $ | (4,148,272 | ) | $ | (1,418,828 | ) | ||||
Net
Income per Share
|
||||||||||||||||
Basic
|
$ | (0.02 | ) | $ | (0.15 | ) | $ | (0.02 | ) | $ | (0.17 | ) | ||||
Diluted
|
$ | (0.02 | ) | $ | (0.15 | ) | $ | (0.02 | ) | $ | (0.17 | ) | ||||
Number
of Shares Used in Per Share Calculations
|
||||||||||||||||
Basic
|
172,250,274 | 8,546,834 | 172,125,274 | 8,258,834 | ||||||||||||
Diluted
|
172,250,274 | 8,546,834 | 172,125,274 | 8,258,834 |
For the Six Months Ended December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash
Flows from Operating Activities
|
||||||||
Net
Income (Loss)
|
$ | (4,148,272 | ) | $ | (1,418,828 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Stock
Based Compensation
|
2,364,152 | 76,120 | ||||||
Depreciation
& Amortization
|
655 | 730 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
Receivable
|
1,535 | 8,225 | ||||||
Inventory
|
(228,872 | ) | (46,057 | ) | ||||
Deposits
|
- | (1,175,000 | ) | |||||
Accounts
Payable
|
(44,012 | ) | (59,258 | ) | ||||
Accrued
Expenses
|
(13,613 | ) | - | |||||
Net
Cash Used in Operating Activities
|
(2,068,427 | ) | (2,614,068 | ) | ||||
Cash
Flows from Investing Activities
|
||||||||
Purchase
of Property and Equipment
|
- | 1,389 | ||||||
Net
Cash Used in Investing Activities
|
- | 1,389 | ||||||
Cash
Flows from Financing Activities
|
||||||||
Notes
Payable
|
775,000 | (53,860 | ) | |||||
Convertible
Debenture
|
- | 3,500,000 | ||||||
Notes
Payable Related Parties
|
- | (87,210 | ) | |||||
Common
Stock Issued for Cash
|
- | 361,500 | ||||||
Net
Cash Provided by Financing Activities
|
775,000 | 3,720,430 | ||||||
Net
Increase (Decrease) in Cash
|
(1,293,427 | ) | 1,107,751 | |||||
Cash
Beginning of Period
|
2,460,663 | 35,611 | ||||||
Cash
End of Year
|
$ | 1,161,752 | $ | 10,773 | ||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
Cash
Paid during the period for interest
|
$ | 6,082 | $ | - | ||||
Cash
Paid during the period for income taxes
|
- | - |
December 31,
|
June 30,
|
|||||||
2008
|
2008
|
|||||||
Statutory
Federal Tax (Benefit) Rate
|
-34.00 | % | -34.00 | % | ||||
Statutory
State Tax (Benefit) Rate
|
-5.83 | % | -5.83 | % | ||||
Effective
Tax (Benefit) Rate
|
-39.83 | % | -39.83 | % | ||||
Valuation
Allowance
|
39.83 | % | 39.83 | % | ||||
Effective
Income Tax
|
0.00 | % | 0.00 | % |
December 31,
|
June 30,
|
|||||||
2008
|
2008
|
|||||||
Net
Operating Loss Carryforward
|
$ | 3,737,293 | $ | 2,085,036 | ||||
Valuation
Allowance
|
(3,737,293 | ) | (2,085,036 | ) | ||||
Net
Deferred Tax Asset
|
$ | - | $ | - |
December 31,
|
June 30,
|
|||||||
2008
|
2008
|
|||||||
Property
& Equipment
|
$ | 6,969 | $ | 6,969 | ||||
Less:
Accumulated Depreciation
|
(2,114 | ) | (1,459 | ) | ||||
Net
Property & Equipment
|
$ | 4,855 | $ | 5,510 |
Current
Assets
|
$ | 337,130 | ||
Property
and Equipment
|
8,428 | |||
Other
Assets
|
10,255 | |||
Goodwill
and Intangibles
|
3,861,280 | |||
Current
Liabilities
|
(109,642 | ) | ||
Notes
Payable
|
(4,007,451 | ) | ||
Total
Purchase Price
|
$ | 100,000 |
December 31,
|
June 30,
|
|||||||
2008
|
2008
|
|||||||
Accrued
Payroll and Taxes
|
$ | 30,524 | $ | 31,266 | ||||
Credit
Cards Payable
|
29,926 | 22,797 | ||||||
Accrued
Professional Fees
|
20,000 | 40,000 | ||||||
Total
Accounts Payable and Accrued Expenses
|
$ | 80,450 | $ | 94,063 |
Number of
Warrants
|
Weighted
Average Exercise
Price
|
|||||||
Outstanding
June 30, 2008
|
29,620,000 | $ | 0.32 | |||||
Granted
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Exercised
|
- | - | ||||||
Outstanding
December 31, 2008
|
29,620,000 | $ | 0.32 |
Expiry
|
Number of
Warrants
|
Exercise Price
|
||||||
September
30, 2010
|
10,000,000 | $ | 0.10 | |||||
November
11, 2010
|
4,700,000 | $ | 0.35 | |||||
November
29, 2010
|
160,000 | $ | 0.35 | |||||
April
2, 2011
|
520,000 | $ | 0.35 | |||||
April
15, 2011
|
250,000 | $ | 1.00 | |||||
May
1, 2011
|
2,375,000 | $ | 0.25 | |||||
June
1, 2011
|
10,000,000 | $ | 0.50 | |||||
June
4, 2011
|
100,000 | $ | 1.00 | |||||
June
11, 2011
|
1,515,000 | $ | 0.35 | |||||
Total
|
29,620,000 | $ | 0.32 |
|
·
|
One
hundred fifty thousand dollars ($150,000) on October 1,
2008;
|
|
·
|
Seventy
five thousand dollars ($75,000) on January 30,
2009;
|
|
·
|
Seventy
five thousand dollars ($75,000) on March 31, 2009;
and
|
|
·
|
One
hundred five thousand dollars ($105,000) on June 30,
2009
|
|
·
|
The
Company shall pay all unreimbursed business expenses, upon submission by
Ms. Eyraud;
|
|
·
|
Continuation
of Ms. Eyraud’s health and life insurance coverage until December 31, 2010
at levels in place as of September 15,
2008;
|
|
·
|
The
ten year stock options to purchase 5,000,000 shares of the Company’s
common stock at $0.25 per share, granted to Ms. Eyraud pursuant to the
Employment Agreement, are deemed fully vested
immediately;
|
|
·
|
The
existing Lock-up agreement governing the shares of the Company’s common
stock beneficially owned by Ms. Eyraud shall continue pursuant to its
terms, subject to revision, waiver or modification consistent with any
revision, waiver or modification of other similar Lock-up agreements
existing between the Company and third parties, including its management
and affiliates;
|
|
·
|
The
Company shall obtain releases of any guarantees Ms. Eyraud has executed to
the favor of the Company; and
|
|
·
|
All
indemnification agreements running in favor of Ms. Eyraud shall be
maintained for a period of six (6) years, commencing October 2, 2008, and
the Company shall assume the indemnification of Ms. Eyraud with respect to
the activities of its wholly owned subsidiary, Marani Spirits, Inc., for a
like period.
|
|
•
fluctuations in exchange rates for our products procured for us in
Armenia;
|
|
• estimates
of required capital expenditures;
|
|
•
fluctuations in the cost of distribution and/or marking in the United
States;
|
|
•
our inability to meet growth
projections;
|
|
• our plans
and expectations with respect to future introduction of new
product;
|
|
• our belief
that we will have sufficient liquidity to finance operations into through
2009;
|
|
• the amount
of cash necessary to operate our
business;
|
|
• our ability
to raise additional capital when
needed;
|
|
• general
economic conditions; and
|
|
• the
anticipated future financial performance and business operations of our
company.
|
Period
Ending December 31
|
2008
|
2007
|
$ Change
|
% Change
|
||||||||||||
Revenues
(3months)
|
$ | 89,188 | $ | 17,058 | $ | 72,130 | 422.5 | % | ||||||||
Revenues
(6months)
|
$ | 110,762 | $ | 39,777 | $ | 70,985 | 178.4 | % |
Period
Ending December 31
|
2008
|
% of
Revenues
|
2007
|
% of
Revenues
|
$ Change
|
% Change
|
||||||||||||||||||
Costs
(3 month)
|
$ | 55,916 | 62.7 | % | $ | 10,306 | 60.4 | % | $ | 45,610 | 442.5 | % | ||||||||||||
Costs
(6 months)
|
$ | 61,533 | 55.5 | % | $ | 15,536 | 39 | % | $ | 45,997 | 296 | % |
Period
Ending December 31
|
2008
|
% of
Revenues
|
2007
|
% of
Revenues
|
$ Change
|
%
Change
|
||||||||||||||||||
Marketing
and Advertising (3 months)
|
$ | 379,515 | 425.5 | % | $ | 470,918 | 2,760 | % | $ | 91,403 | 19.4 | % | ||||||||||||
Marketing
and Advertising (6 months)
|
$ | 813,331 | 734.4 | % | $ | 529,330 | 1,330 | % | $ | 284,001 | 53.6 | % | ||||||||||||
General
& administrative (3months)
|
$ | 729,504 | 817.9 | % | $ | 728,255 | 4,269 | % | $ | 1,249 | 0.17 | % | ||||||||||||
General
& administrative (6 months)
|
$ | 1,029,019 | 929 | % | $ | 807,792 | 2,15.7 | % | $ | 227,227 | 28.4 | % | ||||||||||||
Stock
Based Comp (3
months)
|
$ | 2,301,662 | 2,581 | % | $ | 76,120 | 446 | % | $ | 2,225,532 | 2,923 | % | ||||||||||||
Stock
Based Comp (6
months)
|
$ | 2,364,152 | 2,134 | % | $ | 76,120 | 191.3 | % | $ | 2,288,032 | 3,005 | % | ||||||||||||
Total
(3months)
|
$ | 3,410,681 | 3,824 | % | $ | 1,275,293 | 7,476 | % | $ | 2,318,184 | 181.7 | % | ||||||||||||
Total
(6months)
|
$ | 4,206,502 | 3,797 | % | $ | 1,413,242 | 3,552 | % | $ | 2,799,260 | 198 | % |
Period
Ending December 31
|
2008
|
2007
|
$ Change
|
% Change
|
||||||||||||
Interest
income (3 months)
|
$ | 7,537 | $ | 3,660 | $ | 3,877 | 106 | % | ||||||||
Interest
income (6 months)
|
$ | 15,083 | $ | 3,660 | $ | 11,423 | 317 | % | ||||||||
Interest
expense (3 months)
|
$ | (5,005 | ) | $ | (38,386 | ) | $ | (33,381 | ) | 86.2 | % | |||||
Interest
expense(6 months)
|
$ | (6,082 | ) | $ | (42,712 | ) | $ | (36,630 | ) | 85.7 | % | |||||
Other
(3months)
|
3,225 | 3,255 | 0 | 0 | % | |||||||||||
Other
(6months)
|
- | - | - | |||||||||||||
Total
Other Income (Expense) (3months)
|
$ | 2,532 | $ | (31,501 | ) | $ | 34,033 | 108 | % | |||||||
Total
Other Income (Expense) (6months)
|
$ | 9,001 | $ | (35,827 | ) | $ | 26,825 | 74.8 | % |
Period
Ending December 31
|
2008
|
2007
|
$ Change
|
% Change
|
||||||||||||
Net
Income (Loss) (3 months)
|
$ | (3,374,867 | ) | (1,300,042 | ) | 2,074,825 | 159 | % | ||||||||
Net
Income (Loss) (6 months)
|
(4,148,272 | ) | (1,418,828 | ) | 2,729,444 | 192 | % |
•
|
continued
expansion of our administrative and operational infrastructure in
connection with anticipated increase in our business activities,
and
|
•
|
continued
expansion of our marketing and sales
programs.
|
•
|
$70,449
for services rendered by third
parties,
|
•
|
$422,216
for certain debt obligations, and
|
•
|
$10,648,654
for direct offering services.
|
Cash
provided by (used in):
|
2008
|
2007
|
$ Change
|
% Change
|
||||||||||||
Operating
activities
|
$ | (2,068,427 | ) | (2,614,068 | ) | 545,641 | 20.8 | % | ||||||||
Financing
activities
|
$ | 775,000 | 3,720,430 | 2,945,430 | 79 | % |
|
·
|
A
general decline in economic
conditions;
|
|
·
|
Increased
concern about the health consequences of consuming beverage alcohol
products and about drinking and
driving;
|
|
·
|
A
general decline in the consumption of beverage alcohol products in
on-premise establishments;
|
|
·
|
A
trend toward a healthier diet including lighter, lower calorie beverages
such as diet soft drinks, juices, energy and vitamin drinks and water
products;
|
|
·
|
The
increased activity of anti-alcohol groups;
and
|
|
·
|
Increased
federal, state or foreign excise or other taxes on beverage alcohol
products.
|
Exhibit
Number
|
DESCRIPTION
|
||
2.1
|
Agreement
and Plan of Merger dated April 4, 2008, filed with the SEC on April 14,
2008 in our Form 8-K, incorporated herein by reference.
|
||
3.1
|
Articles
of Incorporation of Elli Tsab, Inc. filed July 31, 2001, filed with the
SEC on April 14, 2008 in our Form 8-K, incorporated herein by
reference.
|
||
3.2
|
Certificate
of Amendment of Articles of Incorporation filed April 15, 2004, changing
name to Patient Data Corporation, filed with the SEC on April 14, 2008 in
our Form 8-K, incorporated herein by reference.
|
||
3.3
|
Certificate
of Amendment of Articles of Incorporation filed January 13, 2005, changing
name to Fit for Business International, Inc. , filed with the SEC on April
14, 2008 in our Form 8-K, incorporated herein by
reference.
|
||
3.4
|
Certificate
of Amendment of Articles of Incorporation filed March 10, 2008, changing
name to Marani Brands, Inc. and effectuating reverse stock split , filed
with the SEC on April 14, 2008 in our Form 8-K, incorporated herein by
reference.
|
||
3.5
|
By-Laws
filed on August 1, 2005with Amendment No. 3 to Form SB-2 registration
statement, incorporated herein by reference.
|
||
4.1
|
Form
of Warrant Agreement for Investors, filed with the SEC on April 14, 2008
in our Form 8-K, incorporated herein by reference.
|
||
4.2
|
2008
Stock Option Plan filed with the SEC on May 21, 2008 as an exhibit to Form
S-8, incorporated herein by reference.
|
||
10.1
|
Employment
Agreement for Margrit Eyraud, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
||
10.2
|
Termination
of Employment Agreement for Margrit Eyraud, filed on Form 8-K with the SEC
on October 7, 2008, incorporated herein by reference
|
||
10.2
|
Employment
Agreement for Ara Zartarian, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
||
10.3
|
Employment
Agreement for Ani Kevorkian, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
||
31.1
|
Certification
of CEO, Rules 13a-14(a) & 15d-14(a), filed herewith
|
||
31.2
|
Certification
of CAO, Rules 13a-14(a) & 15d-14(a) filed herewith
|
||
32.1
|
Certifications
of CEO, 18 U.S.C. Sec. 1350, filed herewith
|
||
32.2
|
Certifications
of CFO, 18 U.S.C. Sec. 1350, filed herewith
|
Marani Brands, Inc. | |||
(Registrant) | |||
Date:
February 17, 2009
|
By:
|
/s/
Ara Zartarian
|
|
Ara
Zartarian
|
|||
Chief
Executive Officer, President
|
|||
Director
|
|||
Date:
February 19, 2008
|
By:
|
/s/
Ani Kevorkian
|
|
Ani
Kevorkian
|
|||
Chief
Financial Officer
|
|||
Chief
Operating Officer
|
|||
Director
|