UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2016
Commission file number 000-53707
TRIDENT BRANDS INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
200 South Executive Drive, Suite 101
Brookfield, WI 53005
(Address of principal executive offices, including zip code)
(262) 789-6689
(Telephone number, including area code)
Resident Agents of Nevada
711 S. Carson Street, Suite 4
Carson City, NV 89701
(Name and Address of Agent for Service)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer, "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
The number of the registrant's common shares outstanding as of October 14, 2016
was 31,000,000.
TRIDENT BRANDS INCORORATED
FORM 10-Q
For the quarterly period ended August 31, 2016
TABLE OF CONTENTS
Item 1. Financial Statements (Unaudited) 6
Consolidated Balance Sheets as at August 31, 2016 (Unaudited)
and November 30, 2015 7
Consolidated Statements of Operations for the three and nine
month periods ended August 31, 2016 and August 31, 2015 (Unaudited) 8
Consolidated Statements of Cash Flows for the nine month periods
ended August 31, 2016 and August, 31, 2015 (Unaudited) 9
Notes to Consolidated Unaudited Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
PART II OTHER INFORMATION
Item 6. Exhibits 23
2
BASIS OF PRESENTATION
Except where the context otherwise requires, all references in this Quarterly
Report on Form 10-Q ("Form 10-Q") to the "Company", "we", "us", "our", "Trident"
and "Trident Brands" or similar words and phrases are to Trident Brands
Incorporated and its subsidiaries, taken together.
In this report, all currency amounts are expressed in thousands of United States
("U.S.") dollars ("$"), except per share data, unless otherwise stated. Amounts
expressed in other than U.S. dollars are noted accordingly. For example, amounts
if expressed in Canadian dollars are expressed in thousands of Canadian dollars
and preceded by the symbol "Cdn $".
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements which are based on our
current expectations and assumptions and involve a number of risks and
uncertainties. Generally, forward-looking statements do not relate strictly to
historical or current facts and are typically accompanied by words such as
"anticipate", "estimate", "intend", "project", "potential", "continue",
"believe", "expect", "could", "would", "should", "might", "plan", "will", "may",
"predict", the negatives of such terms, and words and phrases of similar impact
and include, but are not limited to references to expected increases in revenues
and margins, growth opportunities, the success of new product launches and line
extensions, our ability to finance our business, potential strategic
investments, business strategies, competitive strengths, goals, references to
key markets where we operate and the market for our securities. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on certain assumptions and analyses we make in light of our
experience and our interpretation of current conditions, historical trends and
expected future developments, as well as other factors that we believe are
appropriate in the circumstance.
Whether actual results and developments will agree with our expectations and
predictions is subject to many risks and uncertainties. Accordingly, there are
or will be important factors that could cause our actual results to differ
materially from our expectations and predictions. We believe these factors
include, but are not limited to, the following:
* we have a limited operating history with significant losses and expect
losses to continue for the foreseeable future;
* there is doubt about our ability to continue as a going concern due to
recurring losses from operations, an accumulated deficit and
insufficient cash resources on hand to meet our business objectives,
all of which means that we may not be able to continue operations;
* we could face intense competition, which could result in lower
revenues and higher expenditures and could adversely affect our
results of operations;
* we are governed by only three persons serving as directors which may
lead to faulty corporate governance;
* we must attract and maintain key personnel or our business may fail;
* we may not be able to secure additional financing to meet our future
capital needs due to changes in general economic conditions;
* our business and operating results could be harmed if we fail to
manage our growth or change;
* we have a limited operating history and if we are not successful in
growing our business, then we may have to scale back or even cease our
ongoing business operations;
* if our intellectual property is not adequately protected, then we may
not be able to compete effectively and we may not be profitable;
3
* if we are the subject of an intellectual property infringement claim,
the cost of participating in any litigation could impact our ability
to stay in business;
* we could lose our competitive advantages if we are not able to protect
any of our food and nutritional products and intellectual property
rights against infringement, and any related litigation could be
time-consuming and costly;
* if we fail to effectively manage our growth our future business
results could be harmed and our managerial and operational resources
may be strained;
* our services may become obsolete and unmarketable if we are unable to
respond adequately to rapidly changing technology and customer
demands;
* our failure to appropriately respond to changing consumer preferences
and demand for new products or product enhancements could
significantly harm product sales and harm our financial condition and
operating results;
* if we do not introduce new products or make enhancements to adequately
meet the changing needs of our customers, some of our products could
fail in the marketplace, which could negatively impact our revenues,
financial condition and operating results;
* we are affected by laws and governmental regulations with potential
penalties or claims, which could harm our financial condition and
operating results;
* since we rely on independent third parties for the manufacture and
supply of certain of our products, if these third parties fail to
reliably supply products to us at required levels of quality and which
are manufactured in compliance with applicable laws, then our
financial condition and operating results would be harmed;
* we may incur material product liability claims, which could increase
our costs and harm our financial condition and operating results;
* unless we can generate sufficient cash from operations or raise
additional funds, we may not be able to meet our debt obligations;
* our customers generally are not obligated to continue purchasing
products from us;
* if we do not manage our supply chain effectively, our operating
results may be adversely affected;
* our stock price may be volatile, which may result in losses to our
shareholders;
* our common shares are thinly traded and our shareholders may be unable
to sell at or near ask prices, or at all;
* the market price for our common stock is particularly volatile given
our status as a relatively small and developing company, which could
lead to wide fluctuations in our share price. Our shareholders may be
unable to sell your common stock at or above their purchase price if
at all, which may result in substantial losses;
4
* we do not anticipate paying any cash dividends to our common
shareholders and as a result shareholders may only realize a return
when the shares are sold;
* we are listed on the OTCQB quotation system and our common stock is
subject to "penny stock" rules which could negatively impact our
liquidity and our shareholders' ability to sell their shares;
* volatility in our common share price may subject us to securities
litigation;
* the elimination of monetary liability against our directors, officers
and employees under Nevada law and the existence of indemnification
rights of our directors, officers and employees may result in
substantial expenditures by our company and may discourage lawsuits
against our directors, officers and employees; and
* our business is subject to changing regulations related to corporate
governance and public disclosure that have increased both our costs
and the risk of noncompliance.
Consequently all forward-looking statements made herein are qualified by these
cautionary statements and there can be no assurance that our actual results or
the developments we anticipate will be realized. The foregoing factors should
not be construed as exhaustive and should be read in conjunction with the other
cautionary statements that are included in this report.
CORPORATE LEGAL STRUCTURE AND RELATED MATTERS
Trident Brands Incorporated has three legal subsidiaries and also directly holds
the Supply and License Agreement to purchase, market, sell and distribute Oceans
Omega nutritional emulsions. Detailed below is the legal structure of Trident
Brands Incorporated.
Trident Brands Incorporated
/ | \
/ | \
/ | \
100% 100% 85.5%
Trident Brands Sports Nutrition Brain Armor Inc.
Canada Ltd. Products Inc.
Trident Brands Canada Ltd. is 100% owned by Trident Brands and holds various
banking facilities, Sports Nutrition Product Inc. is 100% owned by Trident
Brands and holds the license to market and sell products in the nutritional
foods and supplemetns categories under the Everlast(R) brand, and Brain Armor
Inc. is 85.5% owned by Trident Brands Incorporated and holds the trademark
related to the Brain Armor(R) brand.
The Company's administrative office is located at 200 South Executive Drive,
Suite 101, Brookfield, Wisconsin, 53005 and its fiscal year end is November
30th.
The Company has authorized capital of 300,000,000 common shares with a par value
of $0.001 per share. 31,000,000 common shares were issued and outstanding as of
August 31, 2016 and 31,000,000 as of October 14, 2016.
5
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements for the quarter ended August 31, 2016
immediately follow.
6
TRIDENT BRANDS INCORPORATED
Consolidated Balance Sheets
--------------------------------------------------------------------------------
(unaudited)
As of As of
August 31, November 30,
2016 2015
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 4,484 $ 187,886
Accounts Receivable 138,763 --
Inventory 307,898 145,480
Prepaid 55,241 55,887
----------- -----------
TOTAL CURRENT ASSETS 506,386 389,253
INTANGIBLE ASSETS - LICENSES, NET 2,500,000 --
----------- -----------
TOTAL ASSETS $ 3,006,386 $ 389,253
=========== ===========
LIABILITIES & STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable $ 964,818 $ 184,680
Accrued Liability 577,647 181,024
Loan Payable - Related Party, net of discount $17,626 and $0, respectively 362,374 180,000
Loan Payable - Third Party, net of discount $18,135 and $0, respectively 531,865 300,000
Convertible Debt, net of discount $0 and $147,230, respectively -- 2,152,770
----------- -----------
TOTAL CURRENT LIABILITIES 2,436,704 2,998,474
Convertible Debt, net of discount $0 2,300,000 --
----------- -----------
TOTAL LIABILITIES 4,736,704 2,998,474
----------- -----------
STOCKHOLDERS' DEFICIT
Common stock, ($0.001 par value, 300,000,000 shares authorized;
31,000,000 shares issued and outstanding as of August 31 2016
and 28,000,000 as of November 30, 2015 31,000 28,000
Additional paid-in capital 4,054,881 1,177,540
Non-Controlling Interest in Subsidiary (25,274) (14,643)
Accumulated Deficit (5,790,925) (3,800,118)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (1,730,318) (2,609,221)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 3,006,386 $ 389,253
=========== ===========
See Notes to unaudited Financial Statements
7
TRIDENT BRANDS INCORPORATED
Consolidated Statements of Operations (unaudited)
--------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
August 31, August 31, August 31, August 31,
2016 2015 2016 2015
------------ ------------ ------------ ------------
REVENUES $ 17,028 $ 9,915 $ 241,053 $ 11,555
Cost of Sales 9,388 5,729 135,364 6,267
------------ ------------ ------------ ------------
GROSS PROFIT 7,640 4,186 105,689 5,288
GENERAL & ADMINISTRATIVE EXPENSES (422,072) (462,214) (1,522,060) (1,282,750)
OTHER INCOME (EXPENSES)
Royalty Fees (80,587) (58,778) (233,714) (166,699)
Interest Expense (79,269) (205,077) (351,353) (461,417)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) (159,856) (263,855) (585,067) (628,116)
------------ ------------ ------------ ------------
NET LOSS $ (574,288) $ (721,883) $ (2,001,438) $ (1,905,578)
============ ============ ============ ============
NET LOSS ATTRIBUTABLE TO TRIDENT (566,582) (721,883) (1,990,807) (1,905,578)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (7,706) -- (10,631) --
BASIC EARNING (LOSS) PER SHARE $ (0.02) $ (0.03) $ (0.07) $ (0.07)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 31,000,000 28,000,000 30,596,364 28,000,000
============ ============ ============ ============
See Notes to unaudited Financial Statements
8
TRIDENT BRANDS INCORPORATED
Consolidated Statements of Cash Flows (unaudited)
--------------------------------------------------------------------------------
Nine Months Nine Months
Ended Ended
August 31, August 31,
2016 2015
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,001,438) $ (1,905,578)
Adjustments to reconcile net loss to net cash
used in operating activities:
Debt issuance cost -- 34,250
Amortization of debt discount 190,245 339,225
Amortization of license 200,000 --
Compensation-Options 101,565 --
Changes in operating assets and liabilities:
Accounts Receivable (138,763) --
Prepaid expenses 646 (71,219)
Inventory (162,418) (233,727)
Accounts payable and accrued liabilities 1,176,761 79,628
------------ ------------
CASH USED IN OPERATING ACTIVITIES (633,402) (1,757,421)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on loan payable - related party -- (140,070)
Proceeds on loan payable - related party 200,000 75,000
Principal payments on loan payable - third party -- (123,000)
Proceeds on loan payable - third party 250,000 100,000
Proceeds on convertible debt -- 2,300,000
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 450,000 2,211,930
------------ ------------
NET CHANGE IN CASH (183,402) 454,509
CASH AT BEGINNING OF PERIOD 187,886 352
------------ ------------
CASH AT END OF PERIOD $ 4,484 $ 454,861
============ ============
NON-CASH TRANSACTIONS
Beneficial conversion features $ -- $ 647,887
Common stock issued for asset acquisition 2,700,000 --
Relative fair value of warrants recorded as debt discount 78,776 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR:
INCOME TAXES $ -- $ --
============ ============
INTEREST $ -- $ 34,250
============ ============
See Notes to unaudited Financial Statements
9
TRIDENT BRANDS INCORPORATED
Notes to (Unaudited) Consolidated Financial Statements
August 31, 2016
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Trident Brands Incorporated (f/k/a Sandfield Ventures Corp.) ("we", "our", "the
Company") was incorporated under the laws of the State of Nevada on November 5,
2007. The Company was formed to engage in the acquisition, exploration and
development of natural resource properties.
The Company is now focused on the development of high growth consumer brands and
ingredients within the nutritional supplement, life sciences and food and
beverage categories. The Company is in its early growth stage and has
transitioned out of its shell status with the Super-8 filing at the end of
August, 2014. Activities to date have been limited to capital formation,
organization, development of its business plan, and development of an array of
products for sale and initial commercialization efforts.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in Trident's Form 10-K filed with SEC. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for fiscal 2015 as reported on
Form 10-K have been omitted.
NOTE 3. GOING CONCERN
The accompanying financial statements are presented on a going concern basis.
The Company has had minimal revenues during the period from November 5, 2007
(date of inception) to August 31, 2016 and has a working capital deficit as of
August 31, 2016. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The Company is currently in the early
growth stage at product introduction phase and expenses are increasing. The
Company has secured financing to cover these expenses. The current cash of
$4,484 is insufficient to cover the expenses the Company will incur during the
next twelve months. The Company is currently pursuing various financing
alternatives in order to address this issue and as detailed in note 9 entered
into a securities purchase agreement on September 26, 2016 for proceeds of
$4,100,000. The proceeds of this financing are to be used for general working
capital purposes, including without limitation, settlement of accounts payable
and repayment of mature debt.
NOTE 4. WARRANTS AND OPTIONS
On May 1, 2016, 100,000 stock options were granted to Steve Bromley, a Special
Advisor to the Company and Chair of our Advisory Committee, with 50,000 of the
options exercisable at a price of $1.25 per share, vesting May 1, 2017 and the
10
TRIDENT BRANDS INCORPORATED
Notes to (Unaudited) Consolidated Financial Statements
August 31, 2016
--------------------------------------------------------------------------------
remaining 50,000 options exercisable at a price of $1.50 per share, vesting May
1, 2018. All 100,000 options expire on May 1, 2021. On June 1, 2016 the Company
issued to Mr. Bromley an additional 200,000 stock options under the 2013 Stock
Option Plan, with 100,000 of the options exercisable at a price of $1.25 per
share, vesting June 1, 2017 and the remaining 100,000 options exercisable at a
price of $1.50 per share, vesting June 1, 2018. All 200,000 options expire on
June 1, 2021. The total outstanding stock options as of August 31, 2016 are
2,675,000.
The Company uses the Black-Scholes model to value the stock options. Following
are the assumptions used for the shares vested 12 and 24 months from the date of
issuance: Discount rate .9% and 1.29%; Volatility 76.64% and 82.45%; and Term
2.7 and 3.2 .
During the nine months ended August 31, 2016, $101,565 was recognized as options
expense.
The following table represents stock option activity for the period ended August
31, 2016:
Number of Weighted Average Contractual Life Intrinsic
Options Exercise Price in Years Value
------- -------------- -------- -----
Outstanding - Nov. 30, 2015 2,375,000 $1.15 3.5
Exercisable - Nov. 30, 2015 958,334 $2.00 3.4 $354,583
Granted 300,000 $0.73 5.0
Exercised or Vested 0
Cancelled or Expired 0
Outstanding - Aug. 31, 2016 2,675,000 $ .92 2.91
Exercisable - Aug. 31, 2016 1,666,667 $1.17 2.68 $ 0
On January 29, 2016, the Company issued 125,000 warrants to purchase common
shares of the Company along with the $250,000 secured third party promissory
note. The relative fair value is $43,526 which is recognized as debt discount.
As of August 31, 2016, $25,391 of the debt discount is amortized and the
unamortized discount is $18,135.
On March 4, 2016, the Company issued 100,000 warrants to purchase common shares
of the Company along with the $200,000 secured related party promissory note.
The relative fair value is $35,250 which is recognized as debt discount. As of
August 31, 2016, $17,624 of the debt discount is amortized and the unamortized
discount is $17,626.
The exercise price of both warrants is $1.35 with a term of 3 years and these
vested immediately. The Company uses the Black-Scholes model to value the
warrants. Following are the assumptions used: Discount rate .9%; Volatility
76.25% and 77.30% respectively.
The following table represents warrant activity for the period ended August 31,
2016:
11
TRIDENT BRANDS INCORPORATED
Notes to (Unaudited) Consolidated Financial Statements
August 31, 2016
--------------------------------------------------------------------------------
Number of Weighted Average Contractual Life Intrinsic
Warrants Exercise Price in Years Value
-------- -------------- -------- -----
Outstanding - Nov. 30, 2015 0
Exercisable - Nov. 30, 2015 0
Granted 225,000 $1.35 3.01
Exercised or Vested 0
Cancelled or Expired 0
Outstanding - August 31, 2016 225,000 $1.35 2.46
NOTE 5. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The Company
is paying a director $500 per month rent for use of office space and services.
During the quarter ended November 30, 2015, Continental Ingredients Canada, Inc.
("CIC" ) of which the Company's CEO owned a significant interest, loaned the
Company $180,000 bearing interest at the rate of 8% per annum, payable on
maturity, calculated on the principal amount of the loan outstanding. The
$180,000 note was advanced during the year ended November 30, 2015. Unless paid
earlier, the loan and accrued and unpaid interest shall be payable in full on
November 2, 2016. As of August 31, 2016, the full amount of the loan was
outstanding and was subsequently repaid on September 27, 2016.
On February 29, 2016, the Company entered into a Securities Purchase Agreement
with CIC whereby The Company received proceeds of $200,000 on March 4, 2016 in
return for a $200,000 secured promissory note due 12 months from the issuance
date, bearing interest at the rate of 10% per annum, and 100,000 warrants to
purchase common shares of our Company at an exercise price of $1.35 per share
for three years from the date of issue. As of August 31, 2016, the full amount
of the loan is outstanding. See note 4 for valuation of warrants.
During the year, the Company purchased inventory from Continental Ingredients
Canada, Inc. The total amount of inventory purchased was $316,086.
On September 1, 2016 CIC was sold to an unrelated third party and as a result
the Company's CEO no longer owns a significant interest.
NOTE 6. LOAN PAYABLE - THIRD PARTY
We have three short term loans. One for $200,000, one for $100,000 and the other
for $250,000 bearing interest at the rate of 8.0%, 8.0% and 10.0% per annum
respectively, payable on maturity, calculated on the principle amount of the
loan outstanding. As of August 31, 2016, the full amounts of the loans were
outstanding and the accrued interest expense was $69,170 ($37,436, $16,942 and
$15,000 respectively). The loans for $200,000 and $250,000 were subsequently
repaid on September 29, 2016 and the loan for $100,000 was subsequently repaid
on October 4, 2016.
12
TRIDENT BRANDS INCORPORATED
Notes to (Unaudited) Consolidated Financial Statements
August 31, 2016
--------------------------------------------------------------------------------
NOTE 7. CONVERTIBLE DEBT
On January 29, 2015, the Company entered into a securities purchase agreement
with a non-US institutional investor whereby it agreed to sell an aggregate
principal amount of $2,300,000 of senior secured convertible debentures,
convertible into shares of the company's common stock.
The Company received $1,800,000 of the funds from the transaction on February 5,
2015. The balance of $500,000 was received on May 14, 2015.
The convertible debentures are convertible into shares of the Company's common
stock at an initial conversion price of $.71 per share, for an aggregate of up
to 3,239,437 shares. The debentures bear interest at 6% per annum. As detailed
in note 9, on September 26, 2016 the Company entered into an amendment agreement
related to these convertible debentures whereby the applicable interest rate was
increased from 6% to 8% and provisions added to allow the investor to transfer,
sell or hypothecate the convertible notes subject to applicable securities laws.
The maturity date of the notes was also extended through September 30, 2019.
Due to the note being convertible to the Company's common shares, a beneficial
conversion features analysis was performed. The intrinsic value of the
conversion feature was $647,887 which was recognized as debt discount. During
the nine months ended August 31, 2016, $147,230 of debt discount was amortized
and the unamortized discount is $0.
As of August 31, 2016 and November 30, 2015, the outstanding balance of the
convertible debt is $2,300,000 and $2,152,770, net of discount of $0 and
$147,230, respectively.
The Company analyzed the embedded conversion option for derivative accounting
consideration under ASC 815-15 "Derivatives and Hedging" and determined that the
conversion option should be classified as equity.
NOTE 8. INTANGIBLE ASSETS
On January 22, 2015, pursuant to a Deed of Assignment dated effective January
20, 2015, the Company entered into an Emulsion Supply Agreement with Oceans
Omega LLC which represents the rights acquired pursuant to the Deed of
Assignment. The Emulsion Supply Agreement provides the Company with the
non-exclusive right and license (without the right to sublicense) to purchase,
market, promote, sell and distribute Oceans Omega LLC's omega-3 emulsions for
use in the development, production, processing, manufacture and sale of food and
beverages (exclusive for meats) for human or animal consumption. On January 6,
2016 the Company issued 3,000,000 shares to mark the closing of the Deed of
Assignment and the Emulsion Supply Agreement, which did not specify the amount
of consideration payable by the Company when they were executed on January 20,
2015. The consideration payable was subsequently established by the parties at a
market value of $2,700,000 based on the closing price of the common shares as
quoted on the OTC Markets quotation systems on January 6, 2016. The value of the
license is being amortized over the remaining contractual life which is 9 years.
As of August 31, 2016, the net value of the license was $2,500,000 after
amortizing $200,000.
13
TRIDENT BRANDS INCORPORATED
Notes to (Unaudited) Consolidated Financial Statements
August 31, 2016
--------------------------------------------------------------------------------
NOTE 9. SUBSEQUENT EVENTS
On September 26, 2016, the Company entered into a securities purchase agreement
with a non-US institutional investor, pursuant to which, in consideration for
proceeds of $4,100,000, the Company issued a secured convertible promissory note
in the amount of $4,100,000. Pursuant to the securities purchase agreement, the
investor has agreed, from time to time after January 1, 2017, to make additional
investments at the Company's request of up to $5,900,000 ($10,000,000 in the
aggregate) in one or more tranches of not less than one tranche during any 60
day period. The funding of any tranche under the agreement (other than the first
$4,100,000 which has been funded) is subject to the mutual agreement of the
parties as to the use of funds. The parties have agreed to negotiate in good
faith to pre-approve use of funds with 120 days following September 26, 2016.
The Company intends to use the proceeds of the secured convertible note for
general working capital purposes including, without limitation, settlement of
accounts payable and repayment of mature loans.
In consideration of each advance made by the investor pursuant to the securities
purchase agreement, the Company will issue to the investor a convertible
promissory note of equal value, maturing three years after issuance, and bearing
interest at the rate of 8% per annum. Each note will be secured in first
priority against the present and after acquired assets of the Company, and will
be convertible in whole or in part at the option of the holder into common
shares of the Company at a price per share equal to a 25% discount to the 10 day
average closing price of the Company's common stock for the period immediately
preceding the issuance of the applicable note.
As additional consideration to the investor for entering into the securities
purchase agreement, the Company concurrently entered into an amendment agreement
pursuant to which certain features of convertible promissory notes previously
purchased by the investor in the original principal amounts of US$1,800,000 and
US$500,000, on January 29, 2015 and May 14, 2015, respectively, were amended.
The amendments raise the applicable interest rate from 6% to 8% per annum, and
allow the investor to transfer, sell, or hypothecate the convertible notes
subject to applicable securities laws. The maturity date of the notes was also
extended through September 30, 2019.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with the interim
consolidated financial statements, and notes thereto, for the quarter and three
quarters ended August 31, 2016 and August 31, 2015 contained under Item 1 of
this Quarterly Report on Form 10-Q ("Form 10-Q") and in conjunction with the
annual consolidated financial statements, and notes thereto, contained in the
Annual Report on Form 10-K for the fiscal year ended November 30, 2015 ("Form
10-K"). Unless otherwise indicated herein, the discussion and analysis contained
in this MD&A includes information available to October 14, 2016.
Certain statements contained in this MD&A may constitute forward-looking
statements as defined under securities laws. Forward-looking statements may
relate to our future outlook and anticipated events or results and may include
statements regarding our future financial position, business strategy, budgets,
litigation, projected costs, capital expenditures, financial results, taxes,
plans and objectives. In some cases, forward-looking statements can be
identified by terms such as "anticipate", "estimate", "intend", "project",
"potential", "continue", "believe", "expect", "could", "would", "should",
"might", "plan", "will", "may", "predict", the negatives of such terms, and
other similar expressions concerning matters that are not historical facts. To
the extent any forward-looking statements contain future-oriented financial
information or financial outlooks, such information is being provided to enable
a reader to assess our financial condition, material changes in our financial
condition, our results of operations, and our liquidity and capital resources.
Readers are cautioned that this information may not be appropriate for any other
purpose, including investment decisions.
Forward-looking statements contained in this MD&A are based on certain factors
and assumptions regarding expected growth, results of operations, performance,
and business prospects and opportunities. While we consider these assumptions to
be reasonable, based on information currently available, they may prove to be
incorrect. Forward-looking statements are also subject to certain factors,
including risks and uncertainties that could cause actual results to differ
materially from what we currently expect. These factors are more fully described
in the "Risk Factors" section at Item 1A of the Form 10-K.
Forward-looking statements contained in this commentary are based on our current
estimates, expectations and projections, which we believe are reasonable as of
the date of this report. You should not place undue importance on
forward-looking statements and should not rely upon this information as of any
other date. Other than as required under securities laws, we do not undertake to
update any forward-looking information at any particular time.
All dollar amounts in this MD&A are expressed in thousands of U.S. dollars,
except per share amounts, unless otherwise noted.
BUSINESS DEVELOPMENTS
On December 8, 2015, a Letter of Intent ("LOI") was signed confirming the
intention of Trident Brands Inc. and Continental Ingredients Canada Inc. ("CIC")
to enter into negotiations regarding the potential acquisition by Trident of up
to 43% of the voting securities of CIC with an option to acquire the balance of
all remaining issued and outstanding voting securities at the time of the
closing of the transaction. No agreement was ultimately realized and the parties
are no longer in negotiations.
On December 9, 2015, we entered into a revised Product Development Agreement
("PDA") with Continental Ingredients Canada Inc. ("CIC") pursuant to which we
engaged CIC on an exclusive basis to provide services for the development,
manufacturing, and supply of our Everlast Nutrition(R) and Brain Armor(TM) brand
nutritional supplements, and functional food and beverage products. CIC's
services will include research and development, design, ingredient sourcing,
production, distribution, and inventory management of our planned portfolio of
15
branded products. In addition, CIC will manage all third party suppliers and
manufacturers, and provide us with office space at their Oakville, Ontario,
facility. The term of the PDA is for 5 years, expiring on December 9, 2020,
renewing automatically for successive 12 month periods unless terminated by
either party with 6 months' notice. This PDA replaced our previous agreement
with CIC dated May 5, 2014 regarding our Everlast Nutrition(R) products. On
March 1st 2016, the PDA was further amended to clarify that while neither party
to the agreement can assign its interests or obligations without the prior
written consent of the other party, a change of control in CIC shall not be
considered an assignment of CIC's rights and obligations.
Effective December 15, 2015, Michael Browne resigned as President of our Company
to focus on his Brand Director, Chief Financial Officer, Secretary and Treasurer
responsibilities. Mr. Browne's resignation was not the result of any
disagreement with our Company regarding our operations, policies, practices or
otherwise.
Also, effective December 15, 2015, Donald MacPhee, one of our board members and
Chair of the Audit Committee, was appointed as President and Chief Executive
Officer of our Company.
On January 6, 2016, we issued 3,000,000 common shares pursuant to a Deed of
Assignment dated effective January 20, 2015 among our Company, Oceans Omega LLC,
and the assignor 2298107 Ontario Inc., pursuant to which the assignor assigned
to our Company the assignor's non-exclusive rights to purchase, market, sell and
distribute certain Omega 3 nutritional emulsions produced by Oceans Omega LLC to
the food and beverage industries and exclusive rights to purchase, market, sell
and distribute to the global meat industry.
On January 29, 2016, we entered into a Securities Purchase Agreement with one
investor whereby we received proceeds of $250,000 in return for a $250,000
secured promissory note due 12 months from the issuance date, bearing interest
at the rate of 10% per annum, and 125,000 warrants to purchase common shares of
our Company at an exercise price of $1.35 per share for three years from the
date of issue.
On February 29, 2016, we entered into a Securities Purchase Agreement with CIC
whereby we received proceeds of $200,000 on March 4, 2016 in return for a
$200,000 secured promissory note due 12 months from the issuance date, bearing
interest at the rate of 10% per annum, and 100,000 warrants to purchase common
shares of our Company at an exercise price of $1.35 per share for three years
from the date of issue.
On May 1, 2016, we entered into a Special Advisor Consulting Agreement with
Bromley Consulting & Advisory Inc. ("Bromley Consulting") and Steve Bromley
pursuant to which Bromley Consulting agreed to provide the services of Steve
Bromley as a Special Advisor to the Company and as Chair of our Advisory
Committee. The initial term of the Agreement is for one year and will renew
automatically for successive one year periods unless terminated by either party
with not less than 30 days' notice. In consideration of the engagement, we have
agreed to pay Bromley Consulting an annual retainer of $30,000 payable in
monthly installments of $2,500 plus fees for additional services to be mutually
agreed, and we issued to Mr. Bromley 100,000 stock options under our 2013 Stock
Option Plan, with 50,000 of the options exercisable at a price of $1.25 per
share, vesting May 1, 2017 and the remaining 50,000 options exercisable at a
price of $1.50 per share, vesting May 1, 2018. All 100,000 options expire on May
1, 2021. Effective June 1, 2016 we issued to Mr. Bromley an additional 200,000
stock options under our 2013 Stock Option Plan, with 100,000 of the options
exercisable at a price of $1.25 per share, vesting June 1, 2017 and the
remaining 100,000 options exercisable at a price of $1.50 per share, vesting
June 1, 2018. All 200,000 options expire on June 1, 2021.
On September 26, 2016, we entered into a Securities Purchase Agreement with a
non-US institutional investor pursuant to which, in consideration for proceeds
of $4,100,000, we issued a secured convertible promissory note in the amount of
$4,100,000. Pursuant to the Securities Purchase Agreement, the investor has
agreed, from time to time after January 1, 2017, to make additional investments
at our request of up to $5,900,000 ($10,000,000 in the aggregate) in one or more
tranches of not less than one tranche during any 60 day period. The funding of
any tranche under the agreement (other than the first $4,100,000 which has been
funded) is subject to the mutual agreement of the parties as to the use of
16
funds. The parties have agreed to negotiate in good faith to pre-approve use of
funds with 120 days following September 26, 2016. We intend to use the proceeds
from the $4,100,000 secured promissory note for general working capital purposes
including, without limitation, settlement of accounts payable and repayment of
mature loans. In consideration of each advance made by the investor pursuant to
the Securities Purchase Agreement, we will issue to the investor a convertible
promissory note of equal value, maturing three years after issuance, and bearing
interest at the rate of 8% per annum. Each note will be secured in first
priority against the present and after acquired assets of the Company, and will
be convertible in whole or in part at the option of the holder into common
shares of the Company at a price per share equal to a 25% discount to the 10 day
average closing price of the Company's common stock for the period immediately
preceding the issuance of the applicable note.
Also on September 26, 2016, we entered into a Convertible Promissory Note
Amendment Agreement with the same non-US institutional investor whereby we
agreed to extend the maturity date and interest payable on $2,300,000 of senior
secured convertible debentures which were initially funded on February 5, 2015
and on May 14, 2015. Under the terms of the amendment the maturity date of the
notes were extended through September 30, 2019 and the interest rate was
increased from 6% per annum to 8% per annum. The convertible debentures are
convertible into shares of the Company's common stock at an initial conversion
price of $.71 per share.
Effective September 30, 2016, Karen Arsenault resigned from her role as Special
Advisor to the Company. Ms. Arsenault was appointed as Special Advisor on May 5,
2014.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our unaudited financial statements for the three month and nine month
periods ended August 31, 2016 and August 31, 2015.
THREE MONTH PERIODS ENDED AUGUST 31, 2016 AND AUGUST 31, 2015
Our operating results for the three month periods ended August 31, 2016 and
August 31, 2015 are summarized as follows:
Three Months Three Months
Ended Ended
August 31, August 31,
2016 2015
-------- --------
Revenues $ 17,028 $ 9,915
Gross Profit $ 7,640 $ 4,186
Operating Expenses $422,072 $462,214
Other Expenses $159,856 $263,855
Net Loss $574,288 $721,883
REVENUES AND GROSS PROFITS
While still in the early stages of commercialization, our revenues increased in
the third quarter of 2016 as we have commenced commercialization of our product
offerings and realized increased sales of Brain Armor(R), primarily through
e-retailers. Gross Profit increased accordingly in the third quarter of 2016 to
$7,640 or 44.9% of revenues versus $4,186 or 42.2% of revenues in the prior
year, indicative of increased efficiencies and an improved product mix. During
the quarter we incurred continued manufacturing delays on the production of
certain Everlast(R) products, resulting in reduced revenues in the quarter, and
it is expected that this will also have an impact on Everlast(R) revenues in the
fourth quarter as well. Even so, we expect both Everlast(R) and Brain Armor(R)
revenues to continue to ramp-up over the course of 2016 and into 2017 as
commercial efforts gain traction, new listings are realized and further product
innovation is brought to the market.
OPERATING EXPENSES
Our operating expenses for the three month periods ended August 31, 2016 and
August 31, 2015 are summarized below:
17
Three Months Three Months
Ended Ended
August 31, August 31,
2016 2015
-------- --------
Professional Fees $ 11,716 $ 57,856
General & Administrative Expenses $266,693 $163,922
Marketing, Selling & Warehousing Expenses $111,492 $199,403
Management Salary $ 12,000 $ 21,000
Director's Fees $ 18,000 $ 18,000
Rent $ 2,171 $ 2,033
Operating expenses for the three month period ended August 31, 2016 were
$422,072 as compared to $462,214 for the comparative period in 2015, a decrease
of approximately 9%. The decrease in our operating expenses was primarily due to
reduced marketing and promotional expenses based on the timing of certain
expenditures in the prior year, a focused effort in 2016 to delay certain
marketing and selling costs as a result of manufacturing issues delaying the
roll-out of the new Everlast Nutrition SKU's and reduced professional fees,
offset by increased general and administrative costs including advertising and
promotion, as we build-out our organization and roll-out our product offerings,
as well as incremental non-cash costs of $55,258 due to stock option
compensation expense and amortization of a license acquired during the first
quarter of 2016. Operating costs are expected to continue to increase throughout
2016 and into 2017 as we continue to develop and commercialize our product
offerings.
OTHER EXPENSES
Other expenses for the three month period ended August 31, 2016 decreased to
$159,856 versus $263,855 in the comparative period in 2015. The decrease was due
to the reduction in interest expense related to the beneficial conversion
feature on the convertible debt offset by an increase in interest expense due to
higher debt levels plus an increase in royalties as per the terms of the
Everlast(R) License Agreement.
NINE MONTH PERIODS ENDED AUGUST 31, 2016 AND AUGUST 31, 2015
Our operating results for the nine month periods ended August 31, 2016 and
August 31, 2015 are summarized as follows:
Nine Months Nine Months
Ended Ended
August 31, August 31,
2016 2015
---------- ----------
Revenues $ 241,053 $ 11,555
Gross Profit $ 105,689 $ 5,288
Operating Expenses $1,522,060 $1,282,750
Other Expenses $ 585,067 $ 628,116
Net Loss $2,001,438 $1,905,578
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REVENUES AND GROSS PROFITS
While still in the early stages of commercialization, our revenues increased in
the first nine months of 2016 as we have commenced commercialization of our
product offerings and realized increased sales of both Everlast(R) and Brain
Armor(R) product lines, primarily through retailers. Gross Profit increased
accordingly in the third quarter of 2016 to $105,689 or 43.8% of revenues versus
$5,288 or 45.8% of revenues in the prior year. During the second and third
quarters we incurred manufacturing delays on the production of certain
Everlast(R) products, resulting in reduced revenues in those quarters, and it is
expected that this will also have an impact on Everlast(R) revenues in the
fourth quarter as well. Even so, we expect both Everlast(R) and Brain Armor(R)
revenues to continue to ramp-up over the course of 2016 and into 2017 as
commercial efforts gain traction, new listings are realized and further product
innovation is brought to the market.
OPERATING EXPENSES
Our operating expenses for the nine month periods ended August 31, 2016 and
August 31, 2015 are summarized below:
Nine Months Nine Months
Ended Ended
August 31, August 31,
2016 2015
-------- --------
Professional Fees $111,469 $220,126
General & Administrative Expenses $842,754 $367,688
Marketing, Selling & Warehousing Expenses $475,321 $571,066
Management Salary $ 32,500 $ 63,000
Director's Fees $ 54,000 $ 54,000
Rent $ 6,016 $ 6,870
Operating expenses for the nine month period ended August 31, 2016 were
$1,522,060 as compared to $1,282,750 for the comparative period in 2015, an
increase of approximately 19%. The increase in our operating expenses is
primarily due to increased general and administrative costs as we build out our
organization and roll-out our product offerings, as well as incremental non-cash
costs of $101,565 due to stock option compensation expense and amortization
costs of $200,000 related to a license acquired during the first quarter of
2016. Operating costs are expected to continue to increase throughout 2016 and
into 2017 as we continue to develop and commercialize our product offerings.
OTHER EXPENSES
Other expenses for the nine month period ended August 31, 2016 decreased to
$585,067 versus $628,116 in the comparative period in 2015. The decrease was due
to the reduction in interest expense related to the beneficial conversion
feature on the convertible debt offset by an increase in interest expense due to
higher debt levels plus an increase in royalties as per the terms of the
Everlast(R) License Agreement.
BALANCE SHEET DATA
The following table provides selected balance sheet as at August 31, 2016.
Balance Sheet Data: August 31, 2016 November 30, 2015
------------------- --------------- -----------------
Cash $ 4,484 $ 187,886
Total assets $ 3,006,386 $ 389,253
Total liabilities $ 4,736,704 $ 2,998,474
Shareholders' deficit $(1,730,318) $(2,609,221)
19
During the first three quarters of 2016 total assets increased significantly due
to the value of the license agreement for the rights to purchase, market, sell
and distribute certain Omega 3 emulsions produced by Oceans Omega LLC.
Stockholders equity also increased as this license was acquired for shares, thus
increasing the Additional Paid in Capital.
STRATEGIC ORIENTATION
Our objective is to provide our shareholders with solid returns through
strategic investments across multiple consumer product and food 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 ingredients platforms within
segment/sectors which we believe offer long term growth potential. We are
focused on three core strategies underpinning our objectives:
* To execute our multi-tier brand and innovation strategy to drive
revenue;
* To aggressively manage our asset light business model to drive a 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 realize break even cash flows or profitability, we believe
we are making progress against our goals and objectives, and expect revenues and
margins to increase as we begin commercializing the products within our
portfolio. All three of our product platforms show solid potential in the
markets where they compete and both our Everlast(R) and Brain Armor(R) product
lines are now in the market and generating revenues. Our strategy was to first
establish listings for these products with non-bricks and mortar accounts, and
this has been successful. Brain Armor(R) has now been listed at a large retail
account as well, and we expect listings for Everlast(R) to follow. The
development of Oceans Omega as an ingredient for food and beverage products is
ongoing, and given the longer sales cycle for ingredients, we expect to realize
revenues later in fiscal 2106 both through external customer product development
and also internally via potential line extensions for both the Everlast(R) and
Brain Armor(R) product lines.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at August 31, 2016 was $ 4,484 with $ 4,736,704 in outstanding
liabilities including loans payable and convertible debt. On September 26, 2016
we received proceeds of $4,100,000 through the issuance of senior secured
convertible debentures.
As at August 31, 2016 we had two loans payable to a related party (CIC), one for
$180,000 bearing interest at a rate of 8% per annum, due November 2, 2016 and
the other one for $200,000 at a rate of 10%, due March 4, 2017. As at August 31,
2016, the full amount of the loans and interest were outstanding. The loan for
$180,000 plus outstanding interest was repaid in full on September 27, 2016.
As at August 31, 216, we had three short term loans from third parties. One for
$200,000, one for $100,000 and the other for $250,000 bearing interest at the
rate of 8.0%, 8.0% and 10.0% per annum respectively, payable on maturity,
calculated on the principle amount of the loan outstanding. As at August 31,
2016, the full amount of the loans and interest were outstanding. The loans for
$200,000 and $250,000 plus outstanding interest were repaid in full on September
29, 2016. The loan for $100,000 plus outstanding interest was repaid in full on
October 4, 2016.
On January 29, 2015, we entered into a securities purchase agreement with a
non-US institutional investor whereby we agreed to sell an aggregate principal
amount of $2,300,000 of senior secured convertible debentures, convertible into
20
shares of the company's common stock. We received $1,800,000 of the funds from
the transaction on February 5, 2015 and the balance of $500,000 on May 14, 2015.
On September 26, 2016, we entered into a Convertible Promissory Note Amendment
Agreement with this investor whereby we agreed to extend the maturity date and
amend the interest payable on the senior secured convertible debentures, whereby
we extended the term of the notes through September 30, 2019 and interest rate
was increased from 6% per annum to 8% per annum. The convertible debentures are
convertible into shares of the Company's common stock at an initial conversion
price of $.71 per share for an aggregate of up to 3,239,437 shares.
On January 29, 2016 and February 29, 2016, we entered into Securities Purchase
Agreements whereby we received proceeds of $250,000 on February 3, 2016 and
$200,000 on March 4, 2016 in return for secured promissory notes of $250,000 and
$200,000 due 12 months from the issuance date, bearing interest at the rate of
10% per annum, and 125,000 and 100,00 warrants respectively to purchase common
shares of our Company at an exercise price of $1.35 per share for three years
from the date of issue. The promissory note and outstanding interest for
$250,000 was repaid in full on September 29, 2016. The $200,000 promissory note
(due to a related party, as disclosed previously) remains outstanding and is
subordinate to the senior secured convertible debentures.
On September 26, 2016, we entered into a Securities Purchase Agreement with a
non-US institutional investor pursuant to which, in consideration for proceeds
of $4,100,000, we issued a secured convertible promissory note in the amount of
$4,100,000. Pursuant to the Securities Purchase Agreement, the investor has
agreed, from time to time after January 1, 2017, to make additional investments
at our request of up to $5,900,000 ($10,000,000 in the aggregate) in one or more
tranches of not less than one tranche during any 60 day period. The funding of
any tranche under the agreement (other than the first $4,100,000 which has been
funded) is subject to the mutual agreement of the parties as to the use of
funds. The parties have agreed to negotiate in good faith to pre-approve use of
funds within 120 days following September 26, 2016. We intend to use the
proceeds of the secured convertible note for general working capital purposes
including, without limitation, settlement of accounts payable and repayment of
mature loans. In consideration of each advance made by the investor pursuant to
the Securities Purchase Agreement, we will issue to the investor a convertible
promissory note of equal value, maturing three years after issuance, and bearing
interest at the rate of 8% per annum. Each note will be secured in first
priority against the present and after acquired assets of the Company, and will
be convertible in whole or in part at the option of the holder into common
shares of the Company at a price per share equal to a 25% discount to the 10 day
average closing price of the Company's common stock for the period immediately
preceding the issuance of the applicable note.
Going forward we will need to continue to raise funds via both debt and equity
offerings to support the anticipated growth of our business. While funds on hand
are likely not sufficient to fund our operations for the next twelve months,
management are actively assessing and developing a number of financing
alternatives to raise funds as required in addition the amounts to be funded
under the September 26, 2016 Securities Purchase Agreement with a non-US
institutional investor.
Required funds may be raised through equity financing, debt financing, or other
sources, some of which may lead to dilution in the equity ownership of our
shares. Without these funds, there is no assurance that we will be able to
maintain operations at a level sufficient for an investor to obtain a return on
their investment in our common stock.
GOING CONCERN
The accompanying financial statements included in this Form 10-Q are presented
on a going concern basis. There is substantial doubt about our ability to
continue as a going concern.
As shown in the accompanying financial statements, we have incurred net losses
of $5,790,925 since inception. This condition raises substantial doubt as to our
ability to continue as a going concern. In response to these conditions, we may
raise additional capital through the sale of equity securities, through an
offering of debt securities or through borrowings from financial institutions or
individuals. The financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
21
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
CONTRACTUAL OBLIGATIONS
Except for the transactions noted in Business Developments, there have been no
material changes outside the normal course of business in our contractual
obligations since November 30, 2015.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities, related revenues and expenses, and disclosure
of gain and loss contingencies at the date of the financial statements. The
estimates and assumptions made require us to exercise our judgment and are based
on historical experience and various other factors that we believe to be
reasonable under the circumstances. We continually evaluate the information that
forms the basis of our estimates and assumptions as our business and the
business environment generally changes. The use of estimates is pervasive
throughout our financial statements. There have been no material changes to the
critical accounting estimates disclosed under the heading "Critical Accounting
Estimates" in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations", of the Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the evaluation date that
our disclosure controls and procedures were not effective such that the material
information required to be included in our Securities and Exchange Commission
reports is accumulated and communicated to our management, including our
principal executive and financial officer, recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms relating to
our company, particularly during the period when this report was being prepared.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
Our management, with the participation of our principal executive officer and
principal financial officer have concluded that there have been no changes in
our internal control over financial reporting that occurred during the last
fiscal quarter ended August 31, 2016 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
22
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are included with this quarterly filing:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Sec. 302 Certification of Chief Executive Officer
31.2 Sec. 302 Certification of Chief Financial Officer
32.1 Sec. 906 Certification of Chief Executive Officer
32.2 Sec. 906 Certification of Chief Financial Officer
101 Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* Document is incorporated by reference and can be found in its entirety in
our Registration Statement on Form SB-2, SEC File Number 333-148710, at the
Securities and Exchange Commission website at www.sec.gov.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
October 14, 2016 Trident Brands Incorporated
/s/ Donald MacPhee
----------------------------------------------
By: Donald MacPhee
(President, Chief Executive Officer, Director)
/s/ Mike Browne
----------------------------------------------
By: Mike Browne
(Chief Financial Officer)
/s/ Mark Holcombe
----------------------------------------------
By: Mark Holcombe
(Director & Chair of the Board)
/s/ Scott Chapman
----------------------------------------------
By: Scott Chapman
(Director)
24