icnb_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

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

For the transition period from ________________ to ________________

Commission File Number: 000-53162

ICONIC BRANDS, INC.

(Exact name of registrant as specified in its charter)

Nevada		13-4362274
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

44 Seabro Avenue Amityville, NY		11701
(Address of principal executive offices)		(Zip Code)

(631) 464-4050

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 22, 2022, the registrant had 106,892,138 shares of common stock, $0.001 par value per share, issued and outstanding.

ICONIC BRANDS, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1	Financial Statements	4

	Condensed Consolidated Unaudited Balance Sheets as of June 30, 2022 and December 31, 2021	4

	Condensed Consolidated Unaudited Statements of Operations for the three and six months ended June 30, 2022 and 2021	5

	Condensed Consolidated Unaudited Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	6

	Condensed Consolidated Unaudited Statements of Cash Flows for the six months ended June 30, 2022 and 2021	7

	Notes to Condensed Consolidated Unaudited Financial Statements	8

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 4	Controls and Procedures	30

PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings	31

ITEM 1A	Risk Factors	31

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	31

ITEM 3	Defaults Upon Senior Securities	31

ITEM 4	Mine Safety Disclosures	31

ITEM 5	Other Information	31

ITEM 6	Exhibits	32

Signatures		33

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FORWARD-LOOKING STATEMENTS

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

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

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

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PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

ICONIC BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash	$	4,697,929		$	2,190,814
Accounts receivable		5,397,624			852,321
Inventory		2,858,992			1,228,351
Prepaid expense and other current assets		526,015			74,517
Total current assets		13,480,560			4,346,003

Right-of-use assets, net		5,312,320			3,074,864
Leasehold improvements, furniture, and equipment, net		7,286,278			5,556,964
Intangible assets		20,016,386			21,609,586
Goodwill		15,976,877			15,976,877
Other assets		421,198			142,362
Total assets	$	62,493,619		$	50,706,656

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	6,221,635		$	2,713,046
Notes payable		5,045,466			5,045,466
Factoring liability		1,470,007			-
Deferred revenue		177,299			135,034
Other current liabilities		177,233			132,234
Current portion of operating lease liability		550,251			380,487
Contingent consideration		-			8,244,642
Total current liabilities		13,641,891			16,650,909

Operating lease liability, long term		5,073,218			2,835,828
Notes payable, long term		147,001			147,001
Contingent consideration, long term		20,204,505			11,959,863
Total liabilities		39,066,615			31,593,601

Stockholders’ and members’ equity:
Preferred stock, $0.001 par value; authorized 100,000,000 shares:
Series A-2, 38,180 shares issued and outstanding at June 30, 2022; 26,623 shares issued and outstanding at December 31, 2021		38			27
Common stock, $0.001 par value; authorized 2,000,000,000 shares, 97,086,968 shares issued and outstanding at June 30, 2022 and 90,542,764 shares issued and outstanding at December 31, 2021		97,088			90,544
Additional paid-in capital		68,300,172			56,749,055
Accumulated deficit		(44,099,244	)		(36,961,344	)
Noncontrolling interests		(871,050	)		(765,227	)
Total stockholders’ equity		23,427,004			19,113,055
Total liabilities and stockholders’ equity	$	62,493,619		$	50,706,656

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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ICONIC BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
REVENUE
Sales	$	6,654,221		$	584,914		$	10,701,018		$	1,219,447

Cost of goods sold		4,920,674			325,206			7,125,713			643,839

Gross Profit		1,733,547			259,708			3,575,305			575,608

OPERATING EXPENSES
General and administrative expenses		5,252,741			1,804,781			9,711,628			2,678,751
Selling and marketing		336,485			91,419			688,462			212,587
Total operating expenses		5,589,226			1,896,200			10,399,590			2,891,338

Loss from operations		(3,855,679	)		(1,636,492	)		(6,824,285	)		(2,315,730	)

Other income (expense):
Gain on forgiveness of PPP loan		-			-			-			28,458
Interest expense		(244,152	)		(30,754	)		(427,286	)		(30,754	)
Other income, net		7,848			-			7,848			-
Total other income (expense)		(236,304	)		(30,754	)		(419,438	)		(2,296	)

Net loss	$	(4,091,983	)	$	(1,667,246	)	$	(7,243,723	)	$	(2,318,026	)

Net (loss) income attributable to noncontrolling interests in subsidiaries		(12,004	)		8,772			(105,823	)		24,946

Net loss attributable to Iconic Brands, Inc.		(4,079,979	)		(1,676,018	)		(7,137,900	)		(2,342,972	)

Basic and diluted loss per share	$	(0.04	)	$	(0.10	)	$	(0.07	)	$	(0.14	)
Weighted average number of shares outstanding		97,086,968			17,447,474			96,009,340			16,878,261

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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ICONIC BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

	Series A Preferred stock				Series E Preferred stock				Series F Preferred stock				Series G Preferred stock				Series A-2 Preferred stock						Common stock						Treasury stock					Additional paid-in					Non-Controlling			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Shares			Amount			Shares		Amount			capital			Subtotal		interests			Deficit			Total
Balance, December 31, 2020		1	$	1		2,115,224	$	2,115		2,414	$	2,413,750		1,475	$	1,475,000		-			-			17,268,881		$	17,269			1,000	$	(516,528	)	$	22,430,430		$	25,822,037	$	(1,152,810	)	$	(26,497,350	)	$	(1,828,123	)
Issuance of common stock in exchange for services rendered and to be rendered		-		-		-		-		-		-		-		-		-			-			1,901,670			1,902			-		-			767,850			769,752		-			-			769,752
Retirement of treasury stock		-		-		-		-		-		-		-		-		-			-			(1,000,000	)		(1,000	)		1,000		516,528			(515,528	)		-		-			-			-
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-		-			-			-		24,946			(2,342,972	)		(2,318,026	)
Balance, June 30, 2021		1	$	1		2,115,224	$	2,115		2,414	$	2,413,750		1,475	$	1,475,000		-			-			18,170,551		$	18,171			-	$	-		$	22,682,752		$	26,591,789	$	(1,127,864	)	$	(28,840,322	)	$	(3,376,397	)

Balance, March 31, 2021		1	$	1		2,115,224	$	2,115		2,414	$	2,413,750		1,475	$	1,475,000		-			-			16,670,551		$	16,671			-	$	-		$	22,095,252		$	26,002,789	$	(1,136,636	)	$	(27,164,304	)	$	(2,298,151	)
Issuance of common stock in exchange for services rendered and to be rendered		-		-		-		-		-		-		-		-		-			-			1,500,000			1,500			-		-			587,500			589,000		-			-			589,000
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-		-			-			-		8,772			(1,676,018	)		(1,667,246	)
Balance, June 30, 2021		1	$	1		2,115,224	$	2,115		2,414	$	2,413,750		1,475	$	1,475,000		-			-			18,170,551		$	18,171			-	$	-		$	22,682,752		$	26,591,789	$	(1,127,864	)	$	(28,840,322	)	$	(3,376,397	)

Balance, December 31, 2021		-		-		-		-		-		-		-				26,623		$	27			90,542,764		$	90,544			-	$	-		$	56,749,055		$	56,839,626	$	(765,227	)	$	(36,961,344	)	$	19,113,055
Common stock and Series A-2 Preferred stock issued for Cash, net of fees		-		-		-		-		-		-		-		-		12,258			12			4,301,004			4,301			-		-			10,993,763			10,998,076		-			-			10,998,076
Conversion of Series A-2 Preferred Stock for Common Stock		-		-		-		-		-		-		-		-		(701	)		(1	)		2,243,200			2,243			-		-			(2,242	)		-		-			-			-
Equity-based compensation		-		-		-		-		-		-		-		-		-			-			-			-			-		-			559,596			559,596		-			-			559,596
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-		-			-			-		(105,823	)		(7,137,900	)		(7,243,723	)
Balance, June 30, 2022		-		-		-		-		-		-		-		-		38,180		$	38			97,086,968		$	97,088			-	$	-		$	68,300,172		$	68,397,298	$	(871,050	)	$	(44,099,244	)	$	23,427,004

Balance, March 31, 2022		-		-		-		-		-		-		-		-		38,180		$	38			97,086,968		$	97,088			-	$	-		$	68,021,374		$	68,118,500	$	(859,046	)	$	(40,019,265	)	$	27,240,189
Equity-based compensation		-		-		-		-		-		-		-		-		-			-			-			-			-		-			278,798			278,798		-			-			278,798
Net loss		-		-		-		-		-		-		-		-		-			-			-			-			-		-			-			-		(12,004	)		(4,079,979	)		(4,091,983	)
Balance, June 30, 2022		-		-		-		-		-		-		-		-		38,180		$	38			97,086,968		$	97,088			-	$	-		$	68,300,172		$	68,397,298	$	(871,050	)	$	(44,099,244	)	$	23,427,004

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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ICONIC BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six months ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,243,723	)	$	(2,318,026	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		341,063			3,981
Amortization of operating lease right-of-use assets		380,018			-
Amortization of debt discount		-			30,032
Gain on forgiveness of PPP loan		-			(28,458	)
Amortization of intangibles		1,593,200			-
Equity based compensation		559,596			769,752
Change in allowance for doubtful accounts		47,000			-
Change in operating assets and liabilities:
Accounts receivable		(4,592,303	)		63,142
Inventory		(1,630,641	)		(138,273	)
Operating lease liabilities		(210,320	)		-
Accounts payable and accrued expenses		3,508,589			510,968
Prepaid expense and other current assets		(451,498	)		-
Other assets		(278,836	)		-
Other current liabilities		44,999			-
Deferred revenue		42,265			-
Net cash used in operating activities		(7,890,591	)		(1,106,882	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to leasehold improvements, furniture, and equipment		(2,070,377	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock and Series A-2 Preferred stock issued for Cash, net of fees		10,998,076			-
Net proceeds from factoring arrangement		1,470,007			-
Proceeds from note payable		-			924,280
Loans payable to officer and affiliated entity		-			(22,760	)
Net cash provided by (used in) financing activities		12,468,083			901,520

Net increase (decrease) in cash		2,507,115			(205,362	)
Cash at beginning of year		2,190,814			457,041
Cash at end of year	$	4,697,929		$	251,679

SUPPLEMENTAL DISCLOSURE OF CASH AND NON-CASH TRANSACTIONS:
Cash paid for interest	$	169,212		$	722
Purchase and retirement of treasury stock		-			516,528
Recognition of right of use asset - operating lease	$	2,617,474		$	-
Conversion of Series A-2 Preferred Stock for Common Stock	$	2,242		$	-

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. ORGANIZATION AND NATURE OF BUSINESS

Iconic Brands, Inc., (“the Company”, or “Iconic”), was incorporated in the State of Nevada on October 21, 2005. As of June 30, 2022, the subsidiaries of Iconic are wholly-owned TopPop LLC (“TopPop”) and United Spirits Inc., (“United”), 54% owned BiVi LLC (“BiVi”) and Bellissima Spirits LLC (“Bellissima”) and 60% owned Empire Wine and Spirits LLC (“Empire”) which was organized on February 4, 2022.

BiVi is the brand owner of “BiVi 100 percent Sicilian Vodka,” and Bellissima is the brand owner of Bellissima sparkling wines. BiVi was organized in Nevada on May 4, 2015. Bellissima was organized in Nevada on November 23, 2015.

On July 26, 2021, the Company acquired 100% of TopPop. TopPop is organized as a limited liability company in the State of New Jersey on September 5, 2019. TopPop’s primary operation is the manufacture and packaging of alcohol and non-alcohol single-serve, shelf-stable, ready-to-freeze ice pops. TopPop began operations in December 2019 (see note 3). On July 26, 2021, the company purchased all the outstanding stock of United.

Empire was organized in the State of Nevada on February 4, 2022. During the three and six months ended June 30, 2022, there was no business activity or transactions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the accounts of Iconic, its two 54% owned subsidiaries BiVi and Bellissima, 60% owned Empire, and its wholly-owned subsidiaries United and TopPop, (collectively, the “Company”). All inter-company balances and transactions have been eliminated in consolidation.

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

(c) Fair Value of Financial Instruments

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

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

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Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy:

Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Based on unobservable inputs that reflect the entity’s own assumptions about the assumptions that a market participant would use in pricing the asset or liability.

We did not have any transfers between levels during the periods presented.

The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy. The only financial instrument measured at fair value is the contingent consideration:

As of June 30, 2022

Quoted

Prices in

active

markets

(Level 1)

Significant

other

observable

inputs

(Level 2)

Significant unobservable

inputs

(Level 3)

Contingent consideration

20,204,505

December 31, 2021

Quoted

Prices in

active

markets

(Level 1)

Significant

other

observable

inputs

(Level 2)

Significant unobservable

inputs

(Level 3)

Contingent consideration

20,204,505

The fair value of the contingent consideration is based on the projected earnings of the business.

(d) Cash

The total amount of bank deposits (checking and savings accounts) that was not insured by the FDIC at June 30, 2022 was approximately $3,757,000.

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

The Company extends unsecured credit to customers in the ordinary course of business but mitigates risk by performing credit checks and by actively pursuing past due accounts. The allowance for doubtful accounts is based on customer historical experience and the aging of the related accounts receivable. At June 30, 2022 and December 31, 2021, the allowance for doubtful accounts was $47,000 and $0, respectively.

(f) Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market, with due consideration given to obsolescence and to slow moving items. Inventories at June 30, 2022 and December 31, 2021 consist of cases of BiVi Vodka and cases of Bellissima sparkling wines purchased from our Italian suppliers and cases of alcoholic beverages. TopPop inventory consists of raw materials, work in process and finished goods relating to the production cycle.

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(g) Revenue Recognition

It is the Company’s policy that revenues from product sales are recognized in accordance with Accounting Standards Codification (“ASC 606”) “Revenue Recognition.” Five basic steps must be followed to recognize revenue; (1) Identify contract(s) with a customer that creates enforceable rights and obligations; (2) Identify performance obligations in the contract, such as promises to transfer goods or services to a customer; (3) Determine the transaction price, (i.e. the amount of consideration in a contract to which an entity believes it is entitled in exchange for transferring promised goods or services to a customer); (4) Allocate the transaction price to the performance obligations in the contract, which requires the Company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation. Adoption of ASC 606 has not changed the timing and nature of the Company’s revenue recognition and there has been no material effect on the Company’s consolidated financial statements.

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

(h) Shipping and Handling Costs

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

(i) Equity-Based Compensation

Equity-based compensation is accounted for at fair value in accordance with ASC Topic 718, “Compensation-Stock Compensation”. For the three and six months ended June 30, 2022, equity-based compensation was $278,798 and $559,596, respectively. For the three and six months ended June 30, 2021, equity-based compensation was and $589,000 and $769,752, respectively.

(j) Income Taxes

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

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(k) Net Loss per Share

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

Diluted net loss per share of common stock is computed on the basis of the weighted average number of shares of common stock and dilutive securities (such as stock options, warrants, and convertible securities) outstanding. As of June 30, 2022 and 2021, the Company had 153,908,668 and 10,655,198 potentially dilutive shares of common stock related to common stock options and warrants, respectively. Dilutive securities having an anti-dilutive effect on diluted net loss per share are excluded from the calculation.

(l) Recently Issued Accounting Pronouncements

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

On August 5, 2020, the FASB issued ASU No. 2020-06 which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 simplifies the guidance in U.S. GAAP on the issuer’s accounting for convertible debt instruments. Such guidance includes multiple disparate sets of classification, measurement, and derecognition requirements whose interactions are complex. ASU 2020-06 is effective for annual periods beginning after December 15, 2021 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of this new guidance did not have a material impact on our financial statements.

(m) Business Acquisition Accounting

The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisition based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses.

(l) Leasehold improvements, furniture, and equipment, net

Leasehold improvements, furniture, and equipment are recorded at cost. Depreciation of furniture and fixtures is provided using the straight-line method, generally over the terms of the lease. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets, are expensed as incurred. Depreciation of machinery and equipment is based on the estimated useful lives of the assets

3. ACQUISITION OF TOPPOP

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

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

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Upon consummation of the acquisition contemplated by the TopPop Acquisition Agreement, the TopPop Members received, in the aggregate: (a) $3,694,273 in cash by transfer of immediately available funds, (b) 26,009,600 shares of Company’s common stock, par value $0.001 per share, which shares were valued in the aggregate at $10,143,744, or $0.39 per share, (c) $5,042,467 aggregate principal amount of promissory notes of the Company (the “Promissory Notes”) and (d) future additional cash payments as earnout consideration (the “Total Consideration”). The earn-out payments, if any, will be made (i) following the 12-month period commencing on August 1, 2021 (the “First Year”), in an amount (the “First Year Earn-out Amount”) equal to each TopPop Member’s pro rata portion of the excess, if any, of: (A) 1.96 times TopPop’s EBITDA for the First Year over (B) the aggregate amount of the Promissory Notes repaid in cash during the First Year; provided, however, no First Year Earn-out Amount shall be payable if (i)(A) does not exceed (i)(B); and (ii) following the 12-month period commencing on August 1, 2022 (the “Second Year”), in an amount (the “Second Year Earn-out Amount”) equal to each TopPop Member’s pro rata portion of the excess, if any, of: (A) 1.96 times TopPop’s EBITDA for the Second Year over (B) the aggregate amount of the Promissory Notes repaid in cash during the Second Year; provided, however, no Second Year Earn-out Amount shall be payable if (ii)(A) does not exceed (ii)(B). The earn-out payments shall be made, at the election of each TopPop Member, in cash or in shares of common stock or a combination thereof, less any reserve for possible indemnification payments, provided that not less than 45% of the value of each earn-out payment shall be paid in common stock. If paid in shares of common stock, such shares shall be valued at the then-prevailing market rate.

The Company originally calculated the First Year Earn-out Amount to be $8,244,642 and the Second Year Earn-out Amount to be $11,959,863. In connection with the requirement to record the contingent consideration at fair value for every reporting period, information as of and during the period ended June 30, 2022 required the Company to conclude that there will be no contingent consideration required to be made at the end of the First Year, while the entire amount of contingent consideration previously recorded will be required to be made at the end of the Second Year. This is the result of delays in the revenue targets but no material changes in the underlying projections previously used in connection with the valuation of such contingent consideration. Therefore, the Company estimates that the total contingent consideration is $20,204,505 and will be owed at the end of the Second Year.

The Promissory Notes bear interest at the rate of 10% per annum and mature on July 26, 2022. The Promissory Notes are not subject to pre-payment penalties; however, the Company may not pre-pay any amount on any Promissory Note without pre-paying a pro-rata portion of all Promissory Notes. In connection with the Promissory Notes, the Company granted to the TopPop Members a security interest in all of the Company’s membership interests of TopPop pursuant to certain pledge agreements with each of the TopPop Members, each dated July 26, 2021. The Promissory Notes are not convertible into equity securities of the Company. Under the terms of the Promissory Notes, there is a five-day grace period to July 31, 2022 before an event of default occurs. Upon an event of default, the holders may exercise all rights and remedies available under the terms of the Promissory Notes or applicable laws, including to foreclose on certain collateral consisting of the membership interests of TopPop. Holders of approximately $3.55 million of these notes have agreed to extend the term for 30 days and have indicated that they will not seek cash settlement prior to August 2023. The Company expects to be able get further extension of notes if needed. The Company has not received any demand for payment on any of the other notes.

The Company accounted for the Acquisition of TopPop as a business combination using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, we used our best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.

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Fair value of the acquisition

The following table summarizes the allocation of the purchase price as of the TopPop acquisition:

Purchase price:
Cash, net of cash acquired	$	3,694,273
Fair value of common stock		10,143,744
Contingent consideration		20,204,505
Note payable		5,042,467
Total purchase price		39,084,989

Assets acquired:
Accounts receivable		5,432,608
Furniture and equipment		1,848,580
Inventory		1,194,936
Equipment deposit		320,810
Security deposit		131,529
Tradename / Trademarks		6,867,000
IP/Technology		849,000
Non-compete agreement		807,200
Customer Base		14,414,000
Total assets acquired:		31,865,663

Liabilities assumed:
Accounts payable		(2,435,412	)
Notes payable		(5,927,380	)
Deferred revenue		(394,759	)
Total Liabilities assumed		(8,757,551	)
Net assets acquired		23,108,112
Excess purchase price “Goodwill”	$	15,976,877

The excess purchase price has been recorded as “goodwill” included as part of “Intangible assets” in the amount of $15,976,877. The estimated useful life of the identifiable intangible assets is four to ten years. The goodwill is amortizable for tax purposes.

See Note 14 for the required pro forma information related to the business combination.

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Intangible assets

Intangible assets consist of the following:
	Estimated Useful	June 30,		December 31,
	Lives	2022		2021
Tradename - Trademarks	5 years	$	6,867,000	$	6,867,000
Intellectual Property	5 years		849,000		849,000
Customer Base	10 years		14,414,000		14,414,000
Non-Competes	4 years		807,200		807,200
			22,937,200		22,937,200
Less: accumulated amortization			2,920,814		1,327,614
		$	20,016,386	$	21,609,586

Intangible assets are amortized on a straight-line basis over the useful lives of the assets. Amortization expense amounted to $796,600 and $1,593,200 for the three and six months ended June 30, 2022, respectively. There was no amortization expense during the six months ended June 30, 2021.

Future amortization of intangible assets for the remainder of the current fiscal year and the next five years and thereafter:	Amount
Remainder of the year ended December 31, 2022	$	1,593,200
2023		3,186,400
2024		3,186,400
2025		3,102,317
2026		2,341,600
2027		1,441,400
Thereafter		5,165,069
Total	$	20,016,386

4. LEASEHOLD IMPROVEMENTS, FURNITURE, AND EQUIPMENT, NET

Leasehold improvements, furniture, and equipment, net consisted of the following:
	June 30,			December 31,
	2022			2021
Machinery and equipment	$	7,114,980		$	5,352,009
Leasehold improvements		325,171			154,389
Supplies		238,741			140,004
Furniture and fixtures		74,068			36,181
		7,752,960			5,682,583
Less accumulated depreciation		(466,682	)		(125,619	)
	$	7,286,278		$	5,556,964

Depreciation expense related to leasehold improvements, furniture, and equipment amounted to $262,715 and $341,063 for the three and six months ended June 30, 2022, respectively.

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5. INVENTORIES

Inventories consisted of:

	June 30, 2022		December 31, 2021
Finished goods:
Bellissima brands	$	965,747	$	384,717
TopPop		929,121		728,305
Total finished goods		1,894,868		1,113,022

Work-in-process:
TopPop		64,313		88,066
Raw materials:
TopPop		529,211		27,263
Bellissima brands		370,600		-
Total raw materials		899,811		27,263
Total	$	2,858,922	$	1,228,351

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of:

	June 30, 2022		December 31, 2021
Accounts payable	$	4,477,452	$	1,367,787
Accrued officers’ compensation		731,127		780,701
Accrued interest		470,949		215,056
Accrued commissions		238,755		88,318
Accrued royalties		172,159		178,013
Other		131,193		83,171
Total	$	6,221,635	$	2,713,046

On April 15, 2022, the Company was late in filing its Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on June 15, 2022. On May 20, 2022, the Company was late in filing it Quarterly Report on Form 10-Q for the period ended March 31, 2022, which was filed on August 2, 2022. Under the terms of the Securities Purchase Agreement signed on July 26, 2021, the Company will incur a late filing penalty. The penalty was calculated at $603,000 and is included on the Balance Sheet and of June 30, 2022 in accounts payable and accrued expenses and classified as general and administrative expenses on the Statement of Operations for the three and six months ended June 30, 2022.

7. NOTES PAYABLE

In connection with the July 2021 acquisition of 100% of the equity of TopPop, on July 26, 2021, the Company issued to the sellers promissory notes in the aggregate principal amount of $4,900,000 (the “TopPop Notes”). The TopPop Notes bear interest at the rate of 10% per annum, matured on July 26, 2022 and are secured by all of the outstanding membership interest in TopPop. Holders of approximately $3.55 million of these notes have agreed to extend the term for 30 days and have indicated that they will not seek cash settlement prior to August 2023. The Company expects to be able get further extension of notes if needed. The Company has not received any demand for payment on any of the other notes.

On July 26, 2021, the Company assumed an SBA note from the acquisition of TopPop. The note bears an interest rate of 3.75% per annum and matures on January 22, 2051.

As of June 30, 2022, notes payable consisted of a $150,000 SBA note and the $5,042,467 notes to former owners of TopPop.

The future payments on principal of notes payable are as follows:	Amount
Remainder of the year ending December 31, 2022	$	5,045,466
Year ending December 31, 2023		3,114
Year ending December 31, 2024		3,233
Year ending December 31, 2025		3,356
Year ending December 31, 2026		3,484
Thereafter		133,814
Total	$	5,192,467

Interest expense on these notes for the three and six months ended June 30, 2022 was $125,308 and $249,261, respectively. Interest expense on notes payable for the three and six months ended June 30, 2021 was $30,754 for both periods.

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8. FACTORING LIABILITY

During the six months ended June 30, 2022, the Company entered into a purchase and sale agreement with Prestige Capital Finance, LLC (“Prestige”). Under the agreement, Prestige buys all of the Company’s right, title, and interest in specific accounts receivable. Prestige has full recourse against the Company for advances if payments are not received for any reason. All credit risk is borne by the Company and not by Prestige. Prestige pays a down payment to the Company of 80% of the face value of the specified receivables. The maximum outstanding balance of the advance is $2,000,000. Prestige’s final purchase price of the accounts receivable is at a discount which is deducted from the face value of each account upon collection. The discount fee is based upon the number of days the account receivable is outstanding from the date of the down payment. The discount fee ranges from 1.95% if the receivable is paid within 30 days to 5.85% if paid within 90 days, plus an additional 1.5% for each 10-day period thereafter until the account is paid in full.

The outstanding balance is secured by an interest in virtually all assets of the Company, with a first security interest in accounts receivable. The agreement remains in effect through January 10, 2023 and will be automatically renewed for successive periods of one year each unless either party terminates the agreement in writing at least 60 days prior to the expiration of the initial term or any renewal term. Prestige may cancel the agreement at any time upon 60 days’ notice.

The Company accounts for this agreement as a financing arrangement, with the down payments recorded as debt and repayment made when the applicable receivable is collected. As of June 30, 2022, there was an outstanding balance of $1,470,007 and accrued interest of $6,922. Interest expense for incurred during the three and six months ended June 30, 2022 was $132,905 and $189,787, respectively.

9. CAPITAL STOCK

Treasury Stock

During the first quarter in 2021, the Company retired 1,000,000 shares of treasury stock with a value of $516,528.

Preferred Stock and Common Stock

On July 26, 2021, the Company filed a Certificate of Designation, Preferences and Rights of the Series A-2 Convertible Preferred Stock, par value $0.001 per share (“Series A-2 Preferred Stock”) with the Secretary of State of Nevada, designating up to 45,000 shares of the Company’s preferred stock as Series A-2 Preferred Stock. The holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series A-2 Preferred Stock equal (on an as-if-converted-to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. The Series A-2 Preferred Stock shall have no voting rights.

On January 5, 2022, the Company closed the second tranche of the equity financing and issued 12,258 shares of Series A-2 Preferred Stock, 4,301,004 shares of common stock and warrants to purchase 40,018,583 shares of common stock for gross proceeds of approximately $12.2 million and net proceeds of approximately $10.9 million after deduction of placement agent commissions and expenses of the offering. Such net proceeds are expected to be used by the Company for domestic and international expansion of its Bellissima brand, the expansion of the production facilities of the Company’s TopPop subsidiary, new product launches, marketing, and other general working capital purposes.

Between January 2022 and March 2022, stockholders converted 701 shares of Series A-2 Preferred Stock into 2,243,200 shares of common stock, par value $.001 per share, at $0.31 per share.

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

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

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

Warrants

In connection with the second tranche of the equity financing, on January 5, 2022, the Company granted 40,018,583 warrants to purchase common stock. The warrants expire in five years and have an exercise price of $0.31 per share.

A summary of warrant activity for the period January 1, 2022, to June 30, 2022, as follows:

	Warrants		Weighted Average Exercise Price		Weighted Average Contractual Term Outstanding
Outstanding at January 1, 2022		87,593,083	$	0.31		4.23
Granted		40,018,583		0.31		4.52
Outstanding at June 30, 2022		127,611,666		0.31		4.21

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Options

During the three and six months ended June 30, 2022, the Company recognized $278,798 and $559,596, respectively, of expense for the option awards. There were no options outstanding as of June 30, 2021.

The following table summarizes the activity of our stock options for the six months ended June 30, 2022:

	Shares		Weighted Average Exercise Price		Weighted Average Contractual Term Outstanding
Outstanding at December 31, 2021		7,408,200	$	0.45		9.79
Granted		-		-		-
Exercised		-		-		-
Forfeited or expired		80,000		0.45		9.29
Outstanding at June 30, 2022		7,328,200		0.45		9.29

The aggregate intrinsic value of outstanding options as of December 31, 2021 was $298,544. The outstanding options had no aggregate intrinsic value as of June 30, 2022. The intrinsic value is calculated as the difference between the market value and the exercise price of the shares on balance sheet date. The market values based on the closing bid price as of June 30, 2022 and December 31, 2021 was $0.28 and $0.49, respectively.

As of June 30, 2022, there was approximately $2,537,000 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately three years.

10. LEASES

On November 12, 2019, TopPop executed a lease agreement with Plymouth 4 East Stow LLC to rent approximately 26,321 square feet of warehouse space in Marlton, NJ. The lease provided a term of five years commencing upon January 1, 2020 and terminating on December 31, 2024. The lease also provided for a monthly payment to Plymouth 4 East Stow LLC for common area use of $4,430 and a security deposit to the Landlord of $45,864.

Effective November 6, 2020, TopPop executed a lease agreement with Warehouse4Biz LLC to rent approximately 14,758 square feet of warehouse space in Bellmawr, NJ. The lease provided a lease term of two years commencing upon December 1, 2020 and terminating on November 30, 2022. The lease provided a security deposit to Warehouse4Biz LLC of $20,734.

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

Effective May 19, 2021, TopPop executed a lease agreement with Industrial Opportunities II LLC to rent approximately 63,347 square feet of warehouse space in Pennsauken, NJ. The lease provided a lease term of 76 months commencing upon September 1, 2021 and terminating on December 31, 2027. The lease provided a security deposit to Industrial Opportunities II LLC of $64,931.

Effective February 9, 2022, TopPop executed a lease agreement to rent approximately 82,000 square feet of warehouse space in Pennsauken, NJ. The lease provided a lease term of 74 months (the first two months are rent free) commencing upon February 9, 2022 and terminating on March 31, 2028. The lease provided a security deposit to the landlord of $92,250 Per the lease agreement, TopPop was also required to post an additional deposit of $184,500. On May 31, 2022, TopPop sent the deposit to an escrow account held by the landlord’s counsel.

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The future undiscounted minimum lease payments under the noncancellable leases for the remainder of the current fiscal year and the next five years and thereafter are as follows:

	As of June 30, 2022
Remainder of the year ending December 31, 2022	$	607,919
Year ending December 31, 2023		1,168,312
Year ending December 31, 2024		1,142,884
Year ending December 31, 2025		1,177,170
Year ending December 31, 2026		1,212,485
Year ending December 31, 2027		1,248,889
Thereafter		1,425,074
Total undiscounted finance lease payments	$	7,982,733
Less: Imputed interest		2,359,264
Present value of finance lease liabilities	$	5,623,469

The operating lease liabilities of $5,623,469 and $3,216,315 as of June 30, 2022 and December 31, 2021, respectively, represents the discounted (at a 10% estimated incremental borrowing rate) value of the future lease payments at June 30, 2022 and December 31, 2021. The Company’s weighted-average remaining lease term relating to its operating leases is 4.29 years.

For the three and six months ended June 30, 2022, occupancy expense attributed to these leases were $395,324 and $845,462, respectively

For the three and six months ended June 30, 2021, occupancy expense was $28,332 and $53,840, respectively,

Effective June 1, 2022, the Company entered into a sublease agreement to rent out 30,000 square feet of space at one of its warehouses. The gross rent is $9 per square foot, or $22,500 per month for 36 months. During the three and six months ended June 30, 2022, the Company recognized $22,500 of rental income that is presented with general and administrative expenses on the Statement of Operations.

11. COMMITMENTS AND CONTINGENCIES

a. Iconic Guarantees

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

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

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b. Royalty Obligations of BiVi and Bellissima

Pursuant to the license agreement with the Bivi Licensor (see Note 11a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year. The Minimum Royalty Fee has been waived until such time as the parties agree to reinstate the Minimum Royalty Fee. As of the date of this filing, the Minimum Royalty Fee was not reinstated.

Pursuant to the license agreement and Amendment No. 1 to the license agreement effective September 30, 2017 with the Bellissima Licensor (see Note 11a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year. These appropriate thresholds were met during the year.

c. Brand Licensing Agreement relating to Hooters Marks

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

On November 1, 2021, the Company amended its agreement with Hooters (the “Amended Hooters Agreement”) which will be effective until December 31, 2025 with an option to extend until 2028. Under the Amended Hooters Agreement, the Company must pay Hooters 10% of net sales of all products during the term.

d. Marketing and Order Processing Services Agreement

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

The initial license period commenced October 2019 and expires in December 2021 (i.e., two years after first airing of a Bellissima product). Unless either party notifies the other party in writing at least 30 days prior to the end of the Initial License Period or any Renewal License Period of its intent to terminate the QVC Agreement, the License continually renews for additional two-year periods. The license automatically renewed on January 1, 2022.

The QVC Agreement provides for United’s payment of “Marketing Fees” (payable no less than monthly) to QVC in amounts agreed to between United and QVC from time to time. For the six months ended June 30, 2022 and 2021, the Marketing Fees expense (payable to QVC) was $86,153 and $131,450, respectively, and the direct response sales generated from QVC programs was $414,567 and $687,006, respectively.

e. Concentration of sales

For the three and six months ended June 30, 2022 and 2021, sales consisted of:

	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2022		2022		2021		2021
Bellissima product line:
QVC direct response sales	$	271,878	$	414,567	$	281,497	$	687,006
Other		638,084		1,028,490		288,124		494,857
Total Bellissima		909,962		1,443,057		569,620		1,181,862
BiVi product line		-		-		-		-
TopPop		5,744,259		9,257,961		-		-
Hooters product line		-		-		15,294		37,585
Total	$	6,654,221	$	10,701,018	$	584,914	$	1,219,447

TopPop’s sales to one customer consisted of 63% and 51% of its total sales for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and December 31, 2021, 82% and 9%, respectively, of TopPop’s accounts receivables were from that same customer.

f. Commission Agreements

On July 10, 2019, the Company executed a Commission Agreement with CAA-GBA USA, LLC (“CAA-GBG”). The agreement provides CAA-GBG to receive 5% revenue generated with respect to the co-packing or related manufacturing deal for Anheuser-Busch, LLC. Additionally, CAA-GBG is also entitled to receive 5% of revenue for new business identified. The initial agreement expired on July 31, 2021 and automatically renews every year. No commissions were incurred under this agreement since the date of acquisition of TopPop (July 26, 2021) through June 30, 2022. On May 23, 2022,CAA-GBG received notice of termination and the Commission Agreement ended on July 31, 2022.

Effective December 11, 2019, the Company executed a Commission Agreement with Christopher J. Connolly. Mr. Connolly had agreed to provide sales representation services to Company for alcohol ice pop packing opportunities in exchange for commission. The agreement provides a commission 5% of gross revenue collected. The initial term is one year from the effective date. The agreement will renew automatically for 1-year terms unless the agreement is terminated. The Company has decided to keep this agreement in place and no commissions were incurred under this agreement since the date of acquisition of TopPop (July 26, 2021) through June 30, 2022.

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12. RELATED PARTY TRANSACTIONS

On December 6, 2019 the Company executed a Financial Services Agreement with InnoAccel, a controlling member of the TopPop. InnoAccel had agreed to provide financial and administrative services for the company in exchange for hourly compensations.

The Company has agreed to keep this agreement in place and for the six months ended June 30, 2022 the Company has recorded consulting expense of $92,894.

13. SEGMENT REPORTING

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: sale of branded alcoholic beverages and specialty packaging. The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, segment selling, general and administrative expenses, research and development costs and stock-based compensation. It does not include other charges (income), net and interest and other, net.

	Branded Beverages			Specialty Packaging (TopPop)			Corporate			Total
Balance sheet at June 30, 2022
Assets	$	6,647,516		$	55,846,103		$	-		$	62,493,619
Liabilities	$	3,059,337		$	36,007,278		$	-		$	39,066,615

Balance sheet at December 31, 2021
Assets	$	2,925,694		$	47,780,962		$	-		$	50,706,656
Liabilities	$	2,447,005		$	29,146,596		$	-		$	31,593,601

Income Statement for the six months ended June 30, 2022:		Branded Beverages			Specialty Packaging			Corporate			Total
Net Sales	$	1,391,995		$	9,309,023		$	-		$	10,701,018
Cost of sales	$	597,503		$	6,528,210		$	-		$	7,125,713
Total operating expenses	$	4,066,371		$	5,695,860		$	637,359		$	10,399,590
Loss from operations	$	(3,271,879	)	$	(2,915,047	)	$	(637,359	)	$	(6,824,585	)
Interest expense	$	-		$	427,286		$	-		$	427,286
Depreciation and amortization	$	5,628		$	335,437		$	-		$	341,065

Income Statement for the six months ended June 30, 2021:
Net Sales	$	1,219,447		$	-		$	-		$	1,219,447
Cost of Goods Sold	$	643,839		$	-		$	-		$	643,839
Total operating expenses	$	2,649,965		$	-		$	241,373		$	2,891,338
Loss from operations	$	(2,074,357	)	$	-		$	(241,373	)	$	(2,315,730	)
Depreciation and amortization	$	3,981		$	-		$	-		$	3,981

Income Statement for the three months ended June 30, 2022:	Branded Beverages			Specialty Packaging			Corporate			Total
Net Sales	$	858,900		$	5,795,321		$	-		$	6,654,221
Cost of sales	$	383,162		$	4,537,512		$	-		$	4,920,674
Total operating expenses	$	2,448,486		$	2,860,955		$	279,785		$	5,589,226
Loss from operations	$	(1,972,748	)	$	(1,603,146	)	$	(279,785	)	$	(3,855,679	)
Interest expense	$	-		$	244,152		$	-		$	244,152
Depreciation and amortization	$	4,487		$	258,228		$	-		$	262,715

Income Statement for the three months ended June 30, 2021:
Net Sales	$	584,914		$	-		$	-		$	584,914
Cost of Goods Sold	$	325,206		$	-		$	-		$	325,206
Total operating expenses	$	1,758,577		$	-		$	137,623		$	1,896,200
Loss from operations	$	(1,498,869	)	$	-		$	(137,623	)	$	(1,636,492	)
Depreciation and amortization	$	435		$	-		$	-		$	435

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14. PROFORMA FINANCIAL STATEMENTS (UNAUDITED)

Unaudited Supplemental Pro Forma Data

Unaudited pro forma results of operations for the quarters ended June 30, 2022 and 2021:

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2022			2021			2022
Sales	$	6,441,386		$	6,654,221		$	9,443,983		$	10,701,018
Cost of sales		3,989,510			4,920,674			5,742,526			7,125,713
Gross Profit		2,451,876			1,733,547			3,701,457			3,575,305

General and administrative expenses		3,732,607			5,252,741			6,506,315			9,711,128
Selling and marketing		258,951			336,485			455,980			688,462
Total Operating expenses		3,991,558			5,589,226			6,962,295			10,399,590
Operating income (loss)		(1,539,682	)		(3,855,679	)		(3,260,838	)		(6,824,285	)
Amortization of intangibles		-			-			-			-
Interest expense		(274,879	)		(244,152	)		(659,423	)		(427,286	)
Other income		-			7,848			-			7,848
Gain on forgiveness of PPP loan		-			-			28,458			-
Total other expense		(274,879	)		(244,152	)		(630,965	)		(419,438	)
Net Loss	$	(1,814,561	)	$	(4,091,983	)	$	(3,891,803	)	$	(7,243,723	)
Net (loss) income attributable to noncontrolling interests in subsidiaries		8,772			(12,004	)		24,946			(105,823	)
Net Loss attributable to common stockholders:		(1,823,333	)		(4,079,979	)		(3,916,749	)		(7,137,900	)

Basic and Diluted Loss Per Common Share	$	(0.02	)	$	(0.04	)	$	(0.05	)	$	(0.07	)

Weighted Average Shares Outstanding- basic and diluted		87,532,764			97,086,968			86,336,883			95,850,224

These pro forma results are based on estimates and assumptions, which the Company believes are reasonable. They are not necessarily indicative of our consolidated results of operations in future periods or the results that actually would have been realized had we been a combined company during the periods presented. The pro forma results include adjustments in the quarter ended June 30, 2021, related to amortization of acquired intangible assets of $1,593,200, interest expense on notes payable of $246,361, and officer compensation of $254,800. There are no proforma adjustments for the three and six months ended June 30, 2022.

15. SUBSEQUENT EVENTS

On July 1, 2022, under the terms of the Certificate of Designation for the Series A-2 Preferred Stock filed on July 26, 2021, the Company calculated that it is obligated to pay a one-time 6% dividend on the subscription value of the initially issued Series A-2 Preferred Stock. On July 19, 2022, the Company issued shares of common stock to satisfy this dividend requirement and has calculated the number of shares to be issued as 8,810,826 at $0.37 per share.

As of July 1, 2022 the Company was late in filing it Quarterly Report on Form 10-Q for the period ended March 31, 2022 and under the terms of the Securities Purchase Agreement signed on July 26, 2021, the Company will incur a late filing penalty. On August 2, 2022, the Company was in compliance with this requirement. There is an additional penalty of $105,000 that will be accrued as of and for the three month period ended September 30, 2022.

During the period from July 1, 2022 to August 22, 2022 the Company issued 981,344 shares of restricted common stock in connection with three shareholders converting Series A-2 Preferred Stock into common stock.

On August 8, 2022 the Company issued 13,000 shares of restricted common stock to an employee as part of an employment agreement.

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

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

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

You should read the following discussion and analysis of our financial condition and plan of operations together with and our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. All amounts in this report are in U.S. dollars, unless otherwise noted.

Summary Overview

We are engaged in the development and sale of alcohol and non-alcohol brands that are “better-for-you” (“BFY”) and “better-for-the-planet”. TopPop, our wholly owned subsidiary, produces low calorie, “ready to go” products, ready-to-freeze (“RTF”) products and ready-to-drink (“RTD”) products in sustainable, flexible and stand-up pouch packaging. TopPop also produces “cocktails-to-go” pouches and alcohol ice-pops. Our brands include “Bellissima” by Christie Brinkley, a premium BFY collection of Prosecco, Sparkling Wines, and Still Wines, all certified vegan and made with organic grapes. Bellissima is strategically positioned with its Zero Sugar Wines. We operate in multiple states, sell and distribute across the globe and have Fortune 500 customers that include some of the world’s largest alcohol beverage companies and brands. United is our 100% owned subsidiary that sells our Bellissima, Bella, Sonja Sangria and other alcohol beverages to state distributors. United holds all applicable state and federal licenses in order to sell these products to state distributors in accordance with the United States three tier distribution platform.

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We have expertise in developing, from product inception to wholesale distribution or direct to consumer through the QVC distribution channel, and in branding alcohol beverages for our company and for third parties. We market and place products into national distribution through long-standing industry relationships approximately 45 national or regional alcoholic beverage distributors. We currently market and sell the following product lines:

	·	Bellissima Prosecco – these products comprise a line of all-natural and vegan Prosecco and Sparkling Wines made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose. The Bellissima line of Prosecco and Sparkling Wines includes two new flavor profiles, a Zero Sugar/Zero Carb Sparkling Rose and a Rose Prosecco;

	·	Bellissima Zero Sugar Still Wines – this line of five still wines was launched in March 2022 and are certified vegan and are made with organic grapes;

	·