UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from ________ to _________
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(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an 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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 May 20, 2024, the registrant had shares of its common stock issued and outstanding.
NETBRANDS CORP.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2024
TABLE OF CONTENTS
| Page | ||
| PART I - FINANCIAL INFORMATION | 3 | |
| Item 1. | Financial Statements. | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 4 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 9 |
| Item 4. | Controls and Procedures. | 9 |
| PART II - OTHER INFORMATION | 10 | |
| Item 1. | Legal Proceedings. | 10 |
| Item 1A. | Risk Factors. | 10 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 10 |
| Item 3. | Defaults Upon Senior Securities. | 10 |
| Item 4. | Mine Safety Disclosure. | 10 |
| Item 5. | Other Information. | 10 |
| Item 6. | Exhibits. | 10 |
| SIGNATURES | 11 | |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
The following unaudited interim condensed consolidated financial statements of NetBrands Corp. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this Quarterly Report on Form 10-Q (the “Quarterly Report”).
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we filed with the SEC on April 15, 2024. 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 periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
| 3 |
NETBRANDS CORP.
Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2024
Index to the Unaudited Condensed Consolidated Financial Statements
| F-1 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Balance Sheets
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other assets | ||||||||
| Total current assets | ||||||||
| Other assets-security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expense | ||||||||
| Convertible Notes | ||||||||
| Notes payable -related party | ||||||||
| Loans payable | ||||||||
| Total current liabilities | ||||||||
| Government loans payable | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| - | - | |||||||
| Stockholders’ (Deficit): | ||||||||
| Preferred stock, Series A $ par value, shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-2 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Sales, net | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Operating expenses: | ||||||||
| Payroll and taxes | ||||||||
| Legal and professional fees | ||||||||
| Rent | ||||||||
| Selling, general and administrative and expenses | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||
| Other (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other (expense) | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes (benefit) | ||||||||
| Net loss | ( | ) | $ | ( | ) | |||
| Basic and diluted (loss) per common share | $ | ) | $ | ) | ||||
| Weighted-average number of common shares outstanding: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-3 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||||||||
| Stock based compensation for services | ||||||||||||||||||||||||||||||||
| Common stock issued for financing fees | ||||||||||||||||||||||||||||||||
| Issuance of warrants for financing costs | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-4 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock based compensation | ||||||||
| Warrants issued for financing costs | ||||||||
| Common stock issued for financing fees | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Right of use assets-net | ||||||||
| Operating lease payable | ( | ) | ||||||
| Inventory | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Notes payable related parties | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from notes | ||||||||
| Payments on loans payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of the year | ||||||||
| Cash and cash equivalents at end of the year | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-5 |
NetBrands Corp.
Notes To Unaudited Condensed Financial Statements for the Periods
Ended March 31, 2024 and 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
NetBrands
Corp., formerly known as Global Diversified Marketing Group Inc. (“NetBrands” or the “Company”), was incorporated
as Dense Forest Acquisition Corporation, in
On November 26, 2018, the Company effected the acquisition of Global Diversified Holdings, Inc. (“GDHI”), a private New York company owned by the Company’s president, with the issuance of shares of the Company’s common stock in exchange for all of the outstanding shares of GDHI. GDHI became a wholly-owned subsidiary of the Company, and its activity for the years 2022 and 2021 is reflected in these condensed financial statements along with the expenses of the Company.
Prior to the acquisition of GDHI, the Company had no business and no operations. Pursuant to the acquisition, the Company acquired the operations and business plan of GDHI, which imports and sells snack food products. For accounting purposes, GDHI is considered to be the acquirer, and the equity is presented as if the business combination had occurred on January 1, 2017.
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which, on the same date, the Company purchased from InPlay all of the assets used in the operation and conduct of its business
relating to the online home fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and
Google ad accounts, for a purchase price of $
On March 29, 2023, the Company filed an Amendment to its Certificate of Incorporation effecting the change of the Company’s name to NetBrands Corp., a name that reflects the planned expansion of the Company’s digital business. On July 31, 2023, the Company’s common stock began trading on the OTC Pink marketplace under its new name, NetBrands Corp., and its new trading symbol “NBND.”
Basis of Presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. Certain prior year amounts have been reclassified to conform to the presentation in the current year. The Company has adopted a December 31 year-end.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Global Diversified Holdings, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, accounts receivable from customers, accounts payable, and loans payable. The carrying amounts of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these condensed consolidated financial statements.
| F-6 |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, inventories, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these condensed consolidated financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This Section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. During the three months ended March 31, 2024 and March 31,2023 stock-based compensation was $ and $-- respectively.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. On March 31,
2024 and December 31, 2023 the Company had $
Accounts Receivable
Accounts
receivable are generated from sales of snack food products to retail outlets throughout the United States. The Company performs ongoing
credit evaluations of its customers and adjusts credit limits based on customer payment and current creditworthiness, as determined by
review of their current credit information. The Company continuously monitors credit limits for its customers and maintains a provision
for estimated credit losses based on its historical experience and any specific customer issues that have been identified. An allowance
for doubtful accounts are provided against accounts receivable for amounts management believes may be uncollectible. The Company historically
has not had issues collecting on its accounts receivable from its customers. The Company factors certain of its receivables to improve
its cash flow. Bad debt expense for the three months ended March 31, 2024, and March 31, 2023 was $-
Inventory
Inventory, which is comprised of snack food products and packaging supplies is charged to inventory when purchased, is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method. The Company does not carry any raw materials.
The Company evaluates inventory levels quarterly value based upon assumptions about future demand and market conditions. Any inventory that has a cost basis in excess of its expected net realizable value, inventory that becomes obsolete, inventory in excess of expected sales requirements, inventory that fails to meet commercial sale specifications or is otherwise impaired are written down with a corresponding charge to the statement of operations in the period that the impairment is first identified. The Company performed its evaluation on March 31, 2024 and December 31, 2023, and determined that no write-down was required.
| F-7 |
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. Maintenance, repairs, and renewals that do not materially add to the value of the equipment nor appreciably prolong its useful life are charged to expense as incurred.
Revenue Recognition
The Company recognizes revenue from product sales when control of the promised goods are transferred to our clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. To achieve this core principle, the Company applies the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation. Typically, the Company receives a detailed purchase order from large retailers that specify the goods ordered, their price, payment terms and the required delivery date. Once the delivery of items on the purchase order is made to the client and title passes, the Company has met its performance obligation and recognizes revenue.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate the carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Intangible Assets
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter.
The Company performs an annual impairment assessment for intangible assets during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount.
Determining the fair value of intangible assets is judgmental in nature and requires the use of significant estimates and assumptions.
On
September 30, 2022, the Company conducted an impairment analysis and determined that our purchase of Hula Fit was fully impaired. As
a result, the Company recorded an impairment loss of $
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company’s income tax returns are open for examination for up to the past three years under the statute of limitations. There are no tax returns currently under examination.
| F-8 |
Leases
The majority of our lease obligations are real estate operating leases from which the Company conducts its business. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less, or that are on a month-to-month basis are not recorded on our Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. The Company uses a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. The Company recognizes the related rent expense on a straight-line basis from the commencement date to the end of the lease term.
As
of March 31, 2024 we had $-
Comprehensive Income
The
Company has established standards for reporting and displaying comprehensive income, its components, and accumulated balances. If applicable,
the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. As of March 31, 2024, the Company had a balance of $
| F-9 |
Basic income (loss) per share has been calculated based on the weighted average number of shares of common stock outstanding during the period. As of March 31, 2024, the Company had no dilutive instruments that could increase the number of shares if exercised or converted.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.
NOTE 2 – GOING CONCERN
As
of March 31, 2024, the Company had cash and cash equivalents of $
NOTE 3 – CAPITAL STOCK
The Company has authorized shares of common stock, $ par value per share. The Company had and shares of common stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
2024 Common Stock Issuances for Services
During
the three months ended March 31, 2024 the Company issued shares for services. These shares were valued at $
2023 Common Stock Issuances for Services
During
the year ended December 31, 2023, the Company issued shares for services valued at $
2022 Common Stock Issuances for Services
During
the three months ended March 31, 2022, the Company issued shares of its common stock for services, which were valued at $
During the three months ended September 30, 2022, the Company issued an aggregate of (a) shares of common stock to the members of the Company’s board of directors, valued at $ per share, and (b) shares of common stock to the members of its board of directors in lieu of cash payments, valued at $ per share. The Company also issued shares of common stock to a service provider, valued at $ per share.
| F-10 |
During the three months ended September 30, 2022, the Company issued an aggregate of shares of common stock to consultants and to an investor relations firm, valued at an average of approximately $ per share.
During the three months ended December 31, 2022, the Company issued shares of common stock to a member of the Company’s board of directors valued at $ per share.
Preferred Stock
The
Company has shares of $ par value preferred stock authorized. On February 24, 2020, the Company filed a Certificate of
Designation for a class of preferred stock designated Class A Super Voting Preferred Stock (“A Stock”). There are
shares of A Stock designated. Each share of such stock shall vote with the common stock and have
As
a result of
Warrants
On November 14, 2022 (the “Execution Date”), the “Company, entered into an engagement agreement (“Engagement Agreement”) with Spencer Clarke, LLC (“Spencer Clarke”), pursuant to which the Company engaged Spencer Clarke to serve as its exclusive investment banking firm (the “Services”).
In
consideration for Spencer Clarke providing the Services, (a) upon execution of the Engagement Agreement, the Company issued Spencer Clarke
warrants to purchase
The
On March 22, 2024, the Company and Spencer Clarke executed an addendum to the Engagement Agreement (the “Addendum”), pursuant to which the term of the Engagement Agreement was further extended to June 21, 2024, as such term may be further extended pursuant to the terms and conditions of the Engagement Agreement.
In
addition, in connection with the closing of the Cove Loan described above, the Company (a) paid Spencer Clarke a cash fee of $
The
Warrant is exercisable for a term of from the date of issuance. The Warrant has an exercise price of $ per share, subject
to adjustment. The Warrant may be exercised for cash, or on a cashless basis. Spencer Clarke may not exercise the Warrant with respect
to any number of shares that would cause it to beneficially own in excess of
As of March 31, 2024 these warrants had an intrinsic value of approximately $.
| F-11 |
NOTE 4 – RELATED PARTY TRANSACTIONS
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which the Company purchased from InPlay all of the assets used in the operation its business relating to the online home
fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and Google ad accounts, for a
purchase price of $
On
April 10, 2023, Paul Adler, the President and a director of the Company, made a loan to the Company in the amount of $
On
April 8, 2024, Mr. Adler had advanced an additional $
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The
Company has one lease. The Company leases approximately
NOTE 6 – LOANS PAYABLE
The Company’s subsidiary had various loans outstanding on March 31, 2024 and December 31, 2023. All of these loans were short-term in nature, with varying rates of interest and fees, and no set minimum monthly payments. All of these notes were in default as of May 15, 2024. Not all in default.
| Fundbox (c) | $ | $ | ||||||
| Diagonal Lending (e) | ||||||||
| Other | ||||||||
| Can Capital (d) | ||||||||
| Credit Line – Loan Builder(b) Current | ||||||||
| Credit Line – Webster Bank(a) | ||||||||
| Total loans payable | $ | $ |
| (a) | |
| (b) | |
| (c) | |
| (d) | |
| (e) |
| F-12 |
The
Note has a principal balance of $
This Note was treated as a Promissory Note and no derivative liability was recorded because the conversion feature of the Note only is effective in the event of a default. Since the Company has never defaulted on a liability that conversion was not deemed to probable.
Government loans payable
As
of March 31, 2024 and December 31, 2022, the Company had $
NOTE 7 – CONCENTRATIONS
The Company does substantially all of its business with five customers.
| Three months ended March 31, 2024 (1) | Full year 2023 | |||||||
| Customer A | n/a | % | ||||||
| Customer B | % | |||||||
| Customer C | % | |||||||
| Customer D | % | |||||||
| Customer E | % | |||||||
| Total | n/a | % | ||||||
| (1) | ||
| (2) |
NOTE 8 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2024, to the date these condensed consolidated financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these condensed consolidated financial statements except as follows:
The Company issued shares to its Board of Directors and shares to service providers.
| F-13 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (I) increase in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing, to enter into future agreements with companies, and plans to successfully expand our business operations and the sale of our products. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. All forward-looking statements speak only as of the date of this Quarterly Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.
Basis of Presentation
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited condensed financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such condensed financial statements and the related notes thereto.
The audited condensed financial statements for our fiscal year ended December 31, 2023, contained in our Annual Report, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited condensed financial statements. All such adjustments are of a normal recurring nature.
References in this section to “NetBrands,” “we,” “us,” “our,” “the Company” and “our Company” refer to NetBrands Corp. and its consolidated subsidiary, Global Diversified Holdings, Inc.
Overview
We are an early stage diversified holdings company which sells multiple products under common management with one of them a global multi-line consumer packaged goods (“CPG”) company with branded product lines in the food and snack industry. This division operates as marketer and distributor in the United States, Canada, and Europe. Another division is focused and involved in building and acquiring ecommerce assets as well as private businesses in various verticals with the goal of scaling them up and increasing revenue.
The Company was incorporated on December 1, 2017, as a Delaware corporation under the name “Dense Forest Acquisition Corporation.” On June 13, 2018, in anticipation of its acquisition of Global Diversified Holdings, Inc. (“GDHI”), a private New York snack and gourmet food company, the Company changed its to “Global Diversified Marketing Group Inc.” Prior to consummation of this acquisition, the Company had no business and no operations. On November 26, 2018, the Company acquired the operations and business plan of GDHI, to develop and market healthy snack foods, and it became our wholly owned operating subsidiary.
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On August 31, 2022, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with InPlay Capital Inc., a Delaware corporation (“InPlay”), pursuant to which, on the same date, the Company purchased from InPlay all of the assets used in the operation and conduct of its business relating to the online home fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and Google ad accounts, for a purchase price of $50,000. Paul Adler, the sole executive officer and a director of the Company, and the Company’s majority stockholder, is also the sole officer, director, and 100% stockholder of InPlay. The Company intends to make additional acquisitions of e-commerce businesses and assets in an attempt to grow its digital business.
On March 29, 2023, the Company filed an Amendment to its Certificate of Incorporation effecting the change of the Company’s name to NetBrands Corp., a name that reflected the planned expansion of the Company’s digital business.
Going forward, we intend to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. Further, we may acquire or combine with a venture that is in its preliminary or early stages of development, one that is already in operation, or one that is in a more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex. The analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors, none of whom is a business analyst. Therefore, it is anticipated that outside consultants or advisors may be utilized to assist us in the search for and analysis of qualified target companies.
Recent Developments
Purchase Agreement with 1800 Diagonal
On June 6, 2023, the Company entered into a securities purchase agreement (the “1800 Purchase Agreement”) with 1800 Diagonal Lending LLC, a Virginia limited liability company (“1800 Diagonal”), pursuant to which the Company issued 1800 Diagonal an unsecured convertible promissory note (the “1800 Diagonal Note”). The 1800 Diagonal Note had a principal balance of $117,320, and a stated maturity date of April 15, 2024. A one-time interest charge of 13%, or $15,251, was applied on the date of issuance and was immediately expensed. The 1800 Diagonal Note provided that the interest and outstanding principal shall be paid in nine payments, each in the amount of $14,730.11 (a total payback to 1800 Diagonal of $132,571), starting on July 15, 2023, with eight subsequent payments due each month thereafter.
The Company did not make payments when required under the 1800 Diagonal Note, resulting in a default and the commencement of a lawsuit against the Company by 1800 Diagonal Lending in the Circuit Court of Fairfax County, Virginia (the “Action”) seeking to recover $151,325.08 of outstanding indebtedness due under the 1800 Diagonal Note. As of January 10, 2024, the Company acknowledged the outstanding indebtedness under the 1800 Diagonal Note, and agreed to pay 1800 Diagonal (a) $5,000 on each of March 1, 2024, April 1, 2024, and May 1, 2024, and (b) $7,500 on June 1, 2024, and the 1st day of each successive month thereafter until the indebtedness is paid in full (anticipated to span approximately 18 months). Provided that all payments are timely made, 1800 Diagonal agreed to forbear and not (a) prosecute the Action, or (b) convert all or any part of the outstanding and unpaid amount of the 1800 Diagonal Note into shares of the Company’s common stock. Any payment not timely received shall constitute a default, and upon such default 1800 Diagonal’s forbearance shall immediately be vacated and 1800 Diagonal shall be free, without restriction, to pursue the Action.
Purchase Agreement with Cove Funding
On March 22, 2024, the Company entered into a securities purchase agreement (the “Cove Purchase Agreement”) with Cove Funding LP, a Delaware limited partnership (“Cove Funding”), pursuant to which Cove Funding agreed to loan the Company up to $300,000, in two tranches (the “Cove Loan”), and the Company issued Cove Funding a 12% senior secured convertible promissory note (the “Cove Note”), evidencing the first tranche of the Cove Loan (the “First Tranche”). The Company received net proceeds of $150,000 (after deducting a 5% commitment fee, a 5% diligence fee, and Cove Funding’s fees and expenses related to the transaction, including attorney’s fees). The difference between the amount of the First Tranche and $300,000 (less a 5% commitment fee, a 5% diligence fee, and Cove Funding’s fees and expenses related to the transaction, including attorney’s fees) may be funded in a second tranche (the “Second Tranche” and, together with the First Tranche, the “Principal Amount”), upon the Company’s written request, and subject to certain conditions.
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The Cove Note has a stated maturity date of July 22, 2024 (as such date may be extended by the parties, the “Maturity Date”), and an interest rate of 12% per annum, which begins to accrue on the First Tranche on the Closing Date and will begin to accrue on the Second Tranche if and when such amount is funded by Cove Funding. Any Principal Amount that is not paid when due will bear interest at a rate of the lesser of (a) 24% per annum, or (b) the maximum amount permitted by law. The Cove Convertible Note may not be prepaid in whole or in part, except as otherwise set forth in the Cove Note. Pursuant to the terms of Cove Note, if the Cove Loan is not repaid on or before the Maturity Date, the Company is required to issue Cove Funding shares of its Common Stock, on a monthly basis (subject to a 4.99% beneficial ownership limitation), with a value of 16.67% of the principal amount of the Cove Loan outstanding as of each issuance date, plus a commitment fee equal to 5% of such outstanding principal amount, until the Cove Loan is repaid in full (collectively, the “Penalty Shares”). In addition, commencing on the Maturity Date, Cove Funding may (subject to a 4.99% beneficial ownership limitation) convert amounts due under the Cove Note into shares of the Company’s Common Stock (collectively, the “Conversion Shares”) at a conversion price equal to the lesser of (a) $0.07, or (b) the five-trading day closing price average immediately prior to the conversion date. The number of Conversion Shares issuable upon conversion of the Cove Note will be subject to adjustment from time-to-time in the event of any combination, extraordinary distribution, dilutive issuance, or similar event. Upon the occurrence of an event of default under the Cove Note, 125% of the amounts due under the Cove Note will become immediately due and payable. In addition, as long as the Company has any obligations outstanding under the Cove Note, the Company may not (among other things), without Cove Funding’s written consent, incur any senior or pari passu indebtedness, sell a significant amount of the Company’s assets, or issue equity securities in an amount greater than 10% of the Company’s outstanding Common Stock, subject to certain exceptions.
In order to further induce Cove Funding to make the Cove Loan to the Company, (a) the Company entered into a security agreement with Cove Funding (the “Cove Security Agreement”), pursuant to which Cove Funding was granted a first priority security interest in the Company’s assets, and (b) Paul Adler, the Company’s President, and a director of the Company, entered into a pledge agreement with Cove Funding (the “Cove Pledge Agreement”), pursuant to which Mr. Adler pledged 1,000 shares of the Company’s Class A Super Voting Preferred Stock and 11,568,843 shares of the Company’s common stock that he owns (collectively, the “Adler Shares”). As a result, if the Company defaults on its obligations under the Cove Note, Cove Funding could foreclose on their security interests and liquidate or take possession of some or all of the assets of the Company and/or the Adler Shares, which would harm our business, financial condition and results of operations and could require us to curtail, or even to cease our operations.
Addendum to the Engagement Agreement with Spencer Clarke
On March 22, 2024, the Company and Spencer Clarke, LLC (“Spencer Clarke”) executed an addendum to their engagement agreement for investment banking related services, dated November 14, 2022 (the “Engagement Agreement”), pursuant to which the term of the Engagement Agreement was further extended to June 21, 2024, as such term may be further extended pursuant to the terms and conditions of the Engagement Agreement.
In addition, in connection with the closing of the Cove Loan, the Company (a) paid Spencer Clarke a cash fee of $25,000 (for up to $300,000 raised in the financing), and (b) issued Spencer Clarke a Common Stock Purchase Warrant (the “Warrant”) to purchase 814,285 shares of the Company’s Common Stock (for up to $300,000 raised in the financing) (the “Warrant Shares”). The Warrant is exercisable for a term of five years from the date of issuance. The Warrant has an exercise price of $0.07 per share, subject to adjustment. The Warrant may be exercised for cash, or on a cashless basis. Spencer Clarke may not exercise the Warrant with respect to any number of shares that would cause it to beneficially own in excess of 9.99% of the Company’s number of issued and outstanding shares of Common Stock, waivable upon 61 days’ prior notice to the Company. The exercise price of the Warrant is subject to adjustment for subdivision or consolidation of the Company’s shares, or other dilutive issuances. Spencer Clarke has piggyback registration rights with respect to the Warrant Shares.
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Loans from an Officer
On April 10, 2023, Paul Adler, the President and a director of the Company, made a loan to the Company in the amount of $124,000, at an interest rate of 14.9% per annum. The principal amount of the loan, and any accrued and unpaid interest thereon, were due and payable on July 9. 2023, in cash or shares of the Company’s common stock, at Mr. Adler’s sole discretion. The due date of this loan has been extended to July 9, 2024. If repaid in shares of common stock, the number of shares to be issued to be calculated using the closing sale price of the Company’s common stock on the OTC Pink marketplace on the payment date.
On April 8, 2024, Mr. Adler had advanced an additional $54,728.99 to the Company, at an interest rate of 14.9% per annum. The principal amount of the loan, and any accrued and unpaid interest thereon, are due and payable on July 9. 2024, in cash or shares of the Company’s common stock, at Mr. Adler’s sole discretion. If repaid in shares of common stock, the number of shares to be issued to be calculated using the closing sale price of the Company’s common stock on the OTC Pink marketplace on the payment date,
Results of Operations
The information set forth below should be read in conjunction with the financial statements and accompanying notes elsewhere in this Quarterly Report.
Comparison of Results of Operations for the Three Months Ended March 31, 2024 and 2023
Revenues and Cost of Sales
Sales for the three months ended March 31, 2024, were $-0- compared to sales of $317,684 for the three months ended March 31, 2024 .
During 2023 we incurred a significant loss of revenue due to the supply, shipping and logistic issues, transitioning from a public warehouse to our own warehousing facility, and the significant loss of revenue on a product with eight SKUs that was produced in Russia that is no longer available to us. Without having an adequate amount of inventory on hand to fulfill existing and future orders, and our lack of sufficient liquidity, our ability to conduct future business with our customers is materially impaired. We are currently seeking new lines of business, new sources of liquidity and an acquisition target. If we are unsuccessful in our efforts it will have a material adverse impact on our Company and our ability to remain a going concern.
Operating expenses
Operating expenses for the three months ended March 31, 2024 were $211,042 compared to $372,702 during the same three months ended March 31, 2023. The material reduction in expenses is attributable to our lack of sales during the three months ended March 31, 2024
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Other income and (expense)
Other expense is comprised solely of interest expense and finance charges related to our fundings. Other expense was $228,516 for the three months ended December 31, 2023, compared to $27,241 in other expense during the three months ended March 31, 2023, as a result of higher levels of borrowings due to the loss of liquidity from operating activities.
Net loss
As a result of the foregoing, we recorded a net loss of $439,559 or $(0.03) per share for the three months ended March 31, 2024, compared to a loss of $292,020 or $(0.02) per share for the three months ended March 31, 2023.
Liquidity and Capital Resources
As of March 31, 2024, we had $41,990 in cash, compared to $1,013 in cash as of March 31, 2024.
Net cash used in operating activities decreased to $143,469 in the three months ended March 31, 2024, compared to $202,960 in the three months ended March 31, 2023. The decrease in cash used in operating is primarily due to changes in balance sheet accounts.
Net cash provided by financing activities was $184,446 during the three months ended March 31, 2024, compared to $156,996 of net cash used in the three months ended March 31, 2023. The increase in net cash provided in the three-month period ended March 31, 2024, as compared to the same period in 2023, is primarily due to higher proceed from notes.
The Company has historically financed its operations through the cash flow generated from operations, capital investment, notes payable and factoring.
On March 22, 2024, the Company received net proceeds of $150,000 from the Cove Loan. The Company plans to use the net proceeds for working capital should we put of M&A purposes? and general corporate purposes.
On April 10, 2023, Paul Adler, the President and a director of the Company, made a loan to the Company in the amount of $124,000, at an interest rate of 14.9% per annum. The principal amount of the loan, and any accrued and unpaid interest thereon, were due and payable on July 9, 2024, in cash or shares of the Company’s common stock, at Mr. Adler’s sole discretion. As of April 8, 2024, Mr. Adler had advanced an additional $54,728 to the Company on the same terms.
In the event continuing decreased sales and profits continue, our ability to obtain additional financing or factoring for our receivables could be negatively impacted which could have a material adverse impact on our liquidity or our ability to remain as a going concern.
Going Concern
The accompanying consolidated condensed financial statements have been prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed financial statements. On a consolidated basis, we have incurred significant operating losses since inception. The Company’s independent auditor has indicated substantial doubt about the Company continuing as a going concern based on the Company’s accumulated deficit and accrued liabilities. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments and ongoing losses, and ultimately generate profitable operations. If we cannot obtain needed funds, we may be forced to reduce or cease our activities with a consequent loss to investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Estimates
Our condensed financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these condensed financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare our condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of our operations or financial position. Our critical accounting estimates are more fully discussed in Note 2 to our unaudited condensed financial statements contained herein.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable because we are an emerging growth company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our President (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), who is directly involved in the day-to-day operations of the Company, as of March 31, 2024, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of March 31, 2024 to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our President and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
As of March 31, 2024, our disclosure controls and procedures were determined to be effective.
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Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
On January 10, 2024, a lawsuit was commenced against the Company by 1800 Diagonal Lending LLC, a Virginia limited liability company (“1800 Diagonal”), in the Circuit Court of Fairfax County, Virginia (the “Action”), seeking to recover $151,325.08 of outstanding indebtedness due under an unsecured convertible promissory note (the “1800 Diagonal Note”). As of January 10, 2024, the Company acknowledged the outstanding indebtedness under the 1800 Diagonal Note, and agreed to pay 1800 Diagonal (a) $5,000 on each of March 1, 2024, April 1, 2024, and May 1, 2024, and (b) $7,500 on June 1, 2024, and the 1st day of each successive month thereafter until the indebtedness is paid in full (anticipated to span approximately 18 months). Provided that all payments are timely made, 1800 Diagonal agreed to forbear and not (a) prosecute the Action, or (b) convert all or any part of the outstanding and unpaid amount of the 1800 Diagonal Note into shares of the Company’s common stock. Any payment not timely received shall constitute a default, and upon such default 1800 Diagonal’s forbearance shall immediately be vacated and 1800 Diagonal shall be free, without restriction, to pursue the Action.
Other than as set forth above, there are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
During the three months ended March 31, 2024 the Company issued 750,000 shares for services. These shares were valued at $56,250. Additionally, the Company issued 866,302 shares for financing costs valued at $83,165.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| Exhibit No. | Description | |
| 31.1/31.2* | Certification
of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1/32.2* | Certification
Of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Link base Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Link base Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Link base Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Link base Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Filed herewith
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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.
| NETBRANDS CORP | ||
| Date: May 20, 2024 | By: | /s/ Paul Adler |
| Name: | Paul Adler | |
| Title: | Chief Financial Officer, President, Secretary and Treasurer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
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