TRIDENT BRANDS INCORPORATED Forward Looking Statements
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with the interim
consolidated financial statements, and notes thereto, for the quarter ended
Certain statements contained in this MD&A may constitute forward-looking statements as defined under securities laws. Forward-looking statements may relate to our future outlook and anticipated events or results and may include statements regarding our future financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives. In some cases, forward-looking statements can be identified by terms such as "anticipate", "estimate", "intend", "project", "potential", "continue", "believe", "expect", "could", "would", "should", "might", "plan", "will", "may", "predict", the negatives of such terms, and other similar expressions concerning matters that are not historical facts. To the extent any forward-looking statements contain future-oriented financial information or financial outlooks, such information is being provided to enable a reader to assess our financial condition, material changes in our financial condition, our results of operations, and our liquidity and capital resources. Readers are cautioned that this information may not be appropriate for any other purpose, including investment decisions.
Forward-looking statements contained in this MD&A are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While we consider these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Forward-looking statements are also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what we currently expect. These factors are more fully described in the "Risk Factors" section at Item 1A of the Form 10-K.
Forward-looking statements contained in this commentary are based on our current estimates, expectations and projections, which we believe are reasonable as of the date of this report. You should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Other than as required under securities laws, we do not undertake to update any forward-looking information at any particular time.
All dollar amounts in this MD&A are expressed in thousands of
Business Developments Note Amendments
On
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The Amendment also amends the outstanding convertible notes issued to the
Purchaser on
On
The "Issuance Date" with respect to the Note for the portion of the Principal
Amount equal to
On
On
The Third Amendment extended the Maturity Dates (as defined) from
• Convertible Promissory Note dated February 5, 2015 in the principal amount
of $1,800,000
• Convertible Promissory Note dated May 14, 2015 in the principal amount of
$500,000
• Convertible Promissory Note dated September 26, 2016 in the principal
amount of $4,100,000
• Convertible Promissory Note dated May 9, 2017 in the principal amount of
$4,400,000
• Convertible Promissory Note dated May 16, 2018 in the principal amount of
$1,500,000 Except as modified by the Third Amendment, the Notes, as previously amended, remain in full force and effect.
Management Changes
On
In connection with his appointment, the Company's Board of Directors determined
that
On
On
Legal Proceedings
On
1.
2. Interest on royalty payments computed to
3. Costs in the sum of
4. Attorneys' fees in the sum of
The Clerk of Court was directed to close the case. The Company has 30 days from
the date of judgement to appeal the case. Management will review the judgement
and explore all its options. The Company has accrued
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Results of Operations
The following summary of our results of operations should be read in conjunction
with our unaudited consolidated financial statements for the three month periods
ended
Our operating results for three month periods endedAugust 31, 2020 and 2019 are summarized as follows: Three Three Months Ended Months Ended August 31, August 31, 2020 2019 Revenues$ 273,044 342,109 Gross Profit$ 107,728 $ 102,462 Operating Expenses$ 962,341 $ 1,499,845 Other Expenses$ 11,846,356 $ 746,749 Net Loss$ (12,700,969 ) $ (2,144,132 ) Add back: Interest Expense$ 833,040 $ 983,745 Depreciation $ 222$ 2,095 Amortization $ -0- $ -0- EBITDA$ (11,867,707 ) $ (1,158,292 ) Add back: Stock Options Expense $ -0- $ -0- Derivative Loss (Gain)$ 11,013,316 $ (236,996 ) Adjusted EBITDA$ (854,391 ) $ (1,395,288 )
Revenues and Gross Profits
Sales in the third quarter of 2020 decreased to
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Operating Expenses
Our operating expenses for the three month period ended
Three Three
Months Ended Months Ended
August 31, August 31,
2020 2019
Professional Fees $ 178,164 $ 58,835
General & Administrative Expenses $ 550,875 $ 937,802
Marketing, Selling & Warehousing Expenses $ 183,903 $ 435,576
Management Salary $ 41,125 $ 38,250
Director's Fees $ -0- $ 6,500
Rent $ 8,274 $ 22,882
Total Operating Expenses $ 962,341 $ 1,499,845 Operating expenses for the three month period ended
Other Expenses
Other expenses for the three month period ended
Non-GAAP Financial Measure
The following non-GAAP financial measures are presented in this quarterly report on Form 10-Q to supplement the financial information we present on a GAAP basis. We monitor and present EBITDA and Adjusted EBITDA because they are key measures used by our management to understand and evaluate our performance.
EBITDA
We define EBITDA as net income (loss), adjusted to exclude: Interest income and
expense, taxes, depreciation and amortization expense including impairment loss.
Reported net loss for the three month period
Adjusted EBITDA
We define Adjusted EBITDA as EBITDA, adjusted to exclude stock options expense
and derivative loss. Reported EBITDA for the three month period
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Nine Month Periods Ended
Our operating results for nine month periods ended
Nine Nine
Months Ended Months Ended
August 31, August 31,
2020 2019
Revenues $ 679,031 $ 1,737,264
Gross Profit $ 261,546 $ 600,791
Operating Expenses $ 3,395,631 $ 5,511,730
Other Expenses $ 23,885,505 $ 4,219,228
Net Loss $ (27,019,590 ) $ (9,130,167 )
Add back:
Interest Expense $ 3,280,847 $ 2,965,106
Depreciation $ 4,413 $ 6,286
Amortization $ -0- $ -0-
EBITDA $ (23,734,330 ) $ (6,158,775 )
Add back:
Stock Options Expense $ -0- $ 380,751
Derivative Loss $ 20,614,658 $ 1,254,122
Adjusted EBITDA $ (3,119,672 ) $ (4,523,902 )
Revenues and Gross Profits
Sales in the first nine months of fiscal 2020 decreased to
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Operating Expenses
Our operating expenses for the nine month period ended
Nine Nine
Months Ended Months Ended
August 31, August 31,
2020 2019
Professional Fees $ 458,007 $ 690,244
General & Administrative Expenses $ 2,027,493 $ 3,293,136
Marketing, Selling & Warehousing Expenses $ 755,287 $ 1,267,103
Management Salary $ 114,500 $ 115,500
Director's Fees $ -0- $ 29,500
Rent $ 40,344 $ 116,247
Total Operating Expenses $ 3,395,631 $ 5,511,730 Operating expenses for the nine month period ended
Other Expenses
Other expenses for the nine month period ended
Non-GAAP Financial Measure
The following non-GAAP financial measures are presented in this quarterly report on Form 10-Q to supplement the financial information we present on a GAAP basis. We monitor and present EBITDA and Adjusted EBITDA because they are key measures used by our management to understand and evaluate our performance.
EBITDA
We define EBITDA as net income (loss), adjusted to exclude: Interest income and
expense, taxes, depreciation and amortization expense including impairment loss.
Reported net loss for the nine month period
Adjusted EBITDA
We define Adjusted EBITDA as EBITDA, adjusted to exclude stock options expense
and derivative loss. Reported EBITDA for the nine month period
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Balance Sheet Data
The following table provides selected balance sheet data as at August 31, 2020
and August 31, 2019 .
August 31, August 31,
Balance Sheet Data: 2020 2019
Cash and cash equivalents $ 82,658 $ 352,982
Total assets $ 2,538,488 $ 3,370,232
Total liabilities $ 58,075,731 $ 24,819,039
Stockholders' (deficit) $ (55,537,243 ) $ (21,448,807 )
Strategic Orientation
Our objective is to provide our shareholders with solid returns through strategic investments across multiple consumer product and ingredient platforms. The platforms we are focusing on include:
? Life science technologies and related products that have applications to a
range of consumer products;
? Nutritional supplements and related consumer goods providing defined
benefits to the consumer; and
? Functional foods and beverages ingredients with defined health and
wellness benefits.
We are building our business through strategic investments in high growth early stage consumer brands and functional ingredient platforms within segment/sectors which we believe offer sustainable commercial potential. We are focused on three core strategies underpinning our objectives:
? To execute a multi-tier brand, supply-chain and innovation strategy to
drive revenue;
? To aggressively manage an asset light business model to drive our low cost
platform; and
? To drive disciplines leading to increased investor awareness and ability
to finance and govern growing operations.
While we have yet to achieve profitability, we believe are making significant progress against our commercial objectives. Subject to receipt of additional funding, which will be used in part for further sales and marketing initiatives, we expect revenue and margin to increase as we continue to strengthen distribution partnerships while capitalizing on product innovation, supply-chain optimization and brand equity within our current portfolio. COVID-19 has thus far adversely affected our revenues and ability to raise additional capital, so there is no assurance we will be able to grow our business or raise sufficient additional capital on acceptable terms or at all.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates
realization of assets and the satisfaction of liabilities in the normal course
of business within one year after the date the consolidated financial statements
are issued. In accordance with
As of
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On
We are currently experiencing an increasing working capital deficiency. As of
Currently, we anticipate that our baseline operating activities will use
approximately
In order to remedy this liquidity deficiency, we are actively seeking to raise additional funds through the sale of equity and debt securities, and ultimately, we will need to generate substantial positive operating cash flows. Our internal sources of funds will consist of cash flows from operations, but not until we begin to realize additional revenues from the sale of our products and services. As previously stated, our operations are generating negative cash flows, and thus adversely affecting our liquidity. If we are able to secure sufficient funding in the near term to fully implement our business plan, we expect that our operations could begin to generate significant cash flows during the middle of 2021, which should ameliorate our liquidity deficiency. If we are unable to raise additional funds in the near term, we will not be able to implement our business plan, in which case there would be a material adverse effect on our results of operations and financial condition.
In the event we do not generate sufficient funds from revenues or financing through the issuance of common stock or from debt financing, we will be unable to fully implement our business plan and pay our obligations as they become due, any of which circumstances would have a material adverse effect on our business prospects, financial condition, and results of operations. The accompanying financial statements do not include any adjustments that might be required should we be unable to recover the value of our assets or satisfy our liabilities.
Based on our limited availability of funds we expect to spend minimal amounts on product development, sales and marketing and capital expenditures. We expect to fund any future product development expenditures through a combination of cash flows from operations and proceeds from equity and/or debt financing. If we are unable to generate positive cash flows from operations, and/or raise additional funds (either through debt or equity), we will be unable to fund our product development expenditures, in which case, there could be an adverse effect on our business and results of operations.
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Cash Flows
Nine months ended
August 31,
2020 2019
Net cash used in operating activities
$ (931,016 ) $ (2,780,321 ) Operating Activities
Cash used in operating activities was (all amounts approximate)
Financing Activities
Cash provided by financing activities was (all amounts approximate)
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
Except for the transactions noted in Business Developments, there have been no material changes outside the normal course of business in our contractual obligations.
Critical Accounting Estimates
The preparation of financial statements in conformity with
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