Trident Brands Inc - Quarter Report: 2018 August (Form 10-Q)

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, 2018

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 (§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.

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 15, 2018 was 32,311,887.

 

TRIDENT BRANDS INCORORATED

FORM 10-Q

For the quarterly period ended August 31, 2018

TABLE OF CONTENTS

 

 

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 $”.

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;

·	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 and officers which may lead to faulty corporate governance;

 

·	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;

·	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;

·	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;

 

·	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.

Trident Brands Incorporated has five legal subsidiaries, as detailed below.

Trident Sports Nutrition Inc. is 100% owned by Trident Brands and is organized to deliver shelf ready product solutions in the active nutrition and dietary supplement segment to leading retailers for private label and control brand programs.

Brain Armor Inc. is 94.8% owned by Trident Brands and is organized to develop, market and sell a portfolio of DHA supplements under the Brain Armor® brand targeted at the cognitive health and performance segment.

Sports Nutrition Product Inc. (DBA Everlast Nutrition) is 100% owned by Trident Brands and holds an exclusive license to market and sell products in the nutritional food and supplement category under the Everlast® brand.

Trident Brands Canada Ltd. is 100% owned by Trident Brands Incorporated and holds various banking facilities, and licenses associated with the manufacturing, importation and sale of natural health and nutrition products in Canada.

 

Trident Brands International Ltd. is 100% owned by Trident Brands and was organized to handle the company’s international operations and sub-license trademarks and/or products in international markets.

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. 32,311,887 common shares were issued and outstanding as of August 31, 2018 and 32,311,887 as of October 15, 2018.

 

The unaudited financial statements for the quarter ended August 31, 2018 immediately follow.

 

 

TRIDENT BRANDS INCORPORATED

Consolidated Balance Sheets

(Unaudited)

 

 

		As of				As of
		August 31,				November 30,
		2018				2017
ASSETS
Current Assets
Cash and Cash Equivalents		$	1,352,918			$	3,143,788
Accounts Receivable, net of allowance of $95,422 and $29,852, respectively			387,740				1,071,576
Inventory			1,566,986				132,951
Prepaid and other current assets			241,992				236,528
Total Current Assets			3,549,636				4,584,843
Fixed Assets-Furniture & Fixtures, net			33,759				40,046
Note Receivable			638,436				617,010
Intangible Assets - Licenses, IP net			389,643				472,875
Investment in Packaging Innovation Lab			440,542				-
TOTAL ASSETS		$	5,052,016			$	5,714,774
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable		$	1,396,438			$	1,388,393
Accrued Liabilities			2,552,780				1,454,770
Total Current Liabilities			3,949,218				2,843,163
Convertible Debt, net of discount $1,547,484 and $1,954,594, respectively			10,752,516				8,845,406
Total Liabilities			14,701,734				11,688,569
Stockholders' Deficit
Common stock, $0.001 par value, 300,000,000 shares authorized;
32,311,887 shares issued and outstanding as of August 31, 2018 and November 30, 2017			32,312				32,312
Additional paid-in capital			9,430,128				7,869,962
Non-Controlling Interest in Subsidiary			(157,882	)			(124,649	)
Accumulated Deficit			(18,954,276	)			(13,751,420	)
Total Stockholders' Deficit			(9,649,718	)			(5,973,795	)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT		$	5,052,016			$	5,714,774

 

 

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,
		2018				2017				2018				2017
Revenues, net		$	1,642,802			$	3,277,655			$	5,135,435			$	3,305,644
Cost of Sales			1,548,962				3,117,150				4,871,069				3,132,266
Gross Profit			93,840				160,505				264,366				173,378
General & Administrative Expenses			(1,278,933	)			(908,378	)			(3,951,104	)			(2,375,051	)
Loss from Operations			(1,185,093	)			(747,873	)			(3,686,738	)			(2,201,673	)
Other Income (Expenses)
Interest Expense, net			(583,973	)			(489,593	)			(1,549,351	)			(1,048,283	)
Total Other Income (Expenses)			(583,973	)			(489,593	)			(1,549,351	)			(1,048,283	)
Net Loss		$	(1,769,066	)		$	(1,237,466	)		$	(5,236,089	)		$	(3,249,956	)
Net loss attributable to Trident			(1,752,825	)			(1,228,122	)			(5,202,856	)			(3,220,558	)
Net loss attributable to Non-Controlling Interests			(16,241	)			(9,344	)			(33,233	)			(29,397	)
Loss per share - Basic and diluted		$	(0.05	)		$	(0.04	)		$	(0.16	)		$	(0.10	)
Weighted average number of common shares outstanding -
Basic and diluted			32,311,887				31,000,000				32,311,887				31,000,000

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

TRIDENT BRANDS INCORPORATED

Consolidated Statements of Cash Flows

(unaudited)

 

 

		Nine Months				Nine Months
		Ended				Ended
		August 31,				August 31,
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(5,236,089	)		$	(3,249,956	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			907,110				540,850
Amortization of license, IP			32,333				225,000
Depreciation expense			6,287				-
Stock options expense			1,060,166				24,211
Changes in operating assets and liabilities:
Accounts Receivable			683,836				(608,746	)
Interest Receivable			(21,426	)			-
Prepaid expenses			71,941				(143,416	)
Inventory			(1,434,035	)			(43,146	)
Accounts payable and accrued liabilities			828,650				1,935,986
Cash used in operating activities			(3,101,227	)			(1,319,217	)
CASH FLOWS FROM INVESTING ACTIVITIES
Restricted Cash			-				(250,000	)
Purchase of Fixed Assets			-				(28,029	)
Additions of Intangible Assets			(189,643	)			-
Cash used in investing activities			(189,643	)			(278,029	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on loan payable - third party			-				(200,000	)
Proceeds on convertible debt			1,500,000				4,400,000
Cash provided by financing activities			1,500,000				4,200,000
Net change in cash and cash equivalents			(1,790,870	)			2,602,754
Cash and cash equivalents at beginning of period			3,143,788				1,527,624
Cash and cash equivalents at end of period		$	1,352,918			$	4,130,378
NON-CASH TRANSACTIONS
Unpaid intangible asset acquired		$	200,000			$	-
Beneficial conversion feature			500,000				1,466,667
Nonmonetary exchange of Streampak Ltd for investment in Packaging Innovation Lab			440,542				-
Financing of insurance premiums			77,405				-
Supplemental disclosure of cash flow information:
Cash paid for:
Income taxes		$	-			$	-
Interest		$	-			$	20,083

 

 

 

 

See Notes to Unaudited Consolidated Financial Statements

 

 

		Number of Options				Weighted Average Exercise Price				Contractual Life in Years				Intrinsic Value
Outstanding - November 30, 2017			2,025,000			$	0.96				1.43
Exercisable - November 30, 2017			2,025,000			$	0.96				1.43
Granted			2,615,000			$	1.08				4.52
Exercised or Vested			-0-
Cancelled or Expired			-0-
Outstanding - August 31, 2018			4,640,000			$	1.02				2.70
Exercisable - August 31, 2018			3,332,500			$	1.03				2.09			$	-0-

		Number of Warrants				Weighted Average Exercise Price				Contractual Life in Years				Intrinsic Value
Outstanding – November 30, 2017			225,000			$	1.35				1.20
Exercisable - November 30, 2017			-0-
Granted			-0-
Exercised or Vested			-0-
Cancelled or Expired			-0-
Outstanding – August 31, 2018			225,000			$	1.35				0.45

On December 6, 2017 Mr. Michael Browne resigned as Chief Financial Officer and Treasurer of the Company.  Mr. Browne’s resignation did not result from any disagreement with the Company regarding our operations, policies, practices, or otherwise.  In light of the resignation, Mark Holcombe, our President and Director, was appointed to serve as Chief Financial Officer.

On December 1, 2017 our Board of Directors appointed Mr. Brian Rola as Vice-President of Trident and General Manager of our wholly owned subsidiary, Trident Sports Nutrition Inc., and Mr. Nick Pili as Vice-President of Trident and General Manager of our wholly owned subsidiary, Brain Armor Inc.

During fiscal 2016 and 2017, Trident advanced approximately $478,539 and $886,999, respectively, in working capital loans with an interest rate of 6% per annum to its 85% owned and controlled subsidiary, Brain Armor Inc.  As at December 1st 2017 Brain Armor owed an aggregate of approximately $1,394,251 to the Company in respect of the advances.  On December 1, 2017, the boards of directors of Trident and Brain Armor approved the settlement of the inter-company debt by the issuance to Trident of 1,859,001 common shares of Brain Armor at the price of $0.75 per share.  As a result of the settlement, Trident now owns approximately 94.82% of Brain Armor’s issued and outstanding securities.

 

 

On December 6, 2017, our Board of Directors authorized the issuance to its members and management stock options to purchase up to 2,615,000 share of our common stock.  1,307,500 of the options vest upon issuance and are exercisable for up to five years at $0.85 per share, while the remaining 1,307,500 will vest 12 months following issuance and be exercisable for up to five years at $1.00 per share.  The Options were issued pursuant to the Company’s 2013 Stock Option Plan, which was registered with the Securities and Exchange Commission on Form S-8 in January, 2015.  The 2013 Stock Option Plan authorizes Trident to issue incentive and non-qualified stock options to employees and consultants of the Company to purchase a number of shares not to exceed 15% of the Company’s currently issued and outstanding securities.

Also on December 6, 2017, the Board of Directors authorized the issuance of 250,000 stock options to Sanitas, LLC, a consultant and founding shareholder of Brain Armor.  The options vest immediately and are exercisable for a period of five (5) years to purchase common shares of Brain armor at $0.75 per share.  The options were issued to one US person, relying on Rule 506 under Regulation D and/or Section 4(2) of the Securities Act of 1933.

Effective December 22, 2017, Trident exercised its option under our Exclusive License Agreement (dated March 1, 2015) to purchase the Brain Armor® brand from DSM Nutrition Products LLC. Subsequently, the parties have executed applicable trademark assignment and purchase agreements necessary to transfer all global intellectual property rights in the Brain Armor brand to Trident.

Effective December 31, 2017, Trident exercised an option to terminate the Trademark License Agreement with Everlast World’s Boxing Headquarters Corp. and International Brand Management Limited (IBML). This strategic decision will allow Trident to focus resources on higher-potential portfolio opportunities. Subsequently, both parties have actively engaged to explore alternative frameworks that may or may not leverage Everlast® brand equity in the sports and active nutrition category.

In December 2017, Trident began shipping P2N Peak Performance Nutrition products on an exclusive basis under a Vendor Agreement with Amazon Fulfillment Services Inc.

On June 13, 2018, Trident was accepted into the Wal-Mart Supplier finance program with Wells Fargo Bank. The program offers receivables discounting to cost-effectively accelerate the collection of Accounts Receivable with the benefit of improved cash flow with early payment.

The following summary of our results of operations should be read in conjunction with our unaudited consolidated financial statements for the three and nine month periods ended August 31, 2018 and August 31, 2017.

Our operating results for three month periods ended August 31, 2018 and August 31, 2017 are summarized as follows:

 

Revenues and Gross Profits

Sales in the third quarter of 2018 decreased to $1,642,802 versus $3,277,655 in the prior year. The decrease is attributable to higher than typical sales volume in the prior year period relating to private label sports nutrition initial fill inventory and launch promotions associated with a new supply agreement.  Gross profit decreased to $93,840 versus $160,505 with modest margin improvement in the period to 5.7% of revenues versus 4.9% of revenues in the prior year attributable to the market introduction of higher margin items. Management expects profit contribution to improve significantly over the final quarter of 2018 as commercial efforts gain traction with established control label volume growth and branded product innovation market expansion. 

Operating Expenses

Our operating expenses for the three month periods ended August 31, 2018 and August 31, 2017 are summarized below:

Operating expenses for the three month period ended August 31, 2018 were $1,278,933 as compared to $908,378 for the comparative period in 2017, an increase of 40.8%.  The increase in our operating expenses was primarily due to increased general and administrative costs which included an increase in options expense of $136,088 as well as marketing and promotional expenses as we build out our organization and roll-out our product offering.  These costs are expected to continue to increase throughout 2018 as we continue to develop and commercialize our product offerings.

 

Other Expenses

Other expenses for the three month period ended August 31, 2018 increased to $583,973 versus $489,593 in the comparative period in 2017. The increase was due to an increase in interest expense due to higher debt levels and the impact of certain other items including the beneficial conversion feature related to the convertible note entered into in 2016.

EBITDA

Reported net loss for the three month period August 31, 2018 was $1,769,066 compared to $1,237,466 in the comparative period in 2017. After deducting interest, depreciation and amortization, EBITDA for the three month period ended August 31, 2018 was ($1,157,306) compared to ($672,873) in 2017. EBITDA included a non-cash option expense of $136,088 for the three month period August 31, 2018 compared to $0 in 2017.

Nine Month Periods Ended August 31, 2018 and August 31, 2017

Our operating results for nine month periods ended August 31, 2018 and August 31, 2017 are summarized as follows:

Revenues and Gross Profits

Sales for the first nine months of 2018 increased to $5,135,435 versus $3,305,644 in 2017 primarily driven-by private label product sales associated with an established vendor agreement, but further supported by growth in control label volume growth and branded product innovation market expansion. Gross profit increased to $264,366 or 5.1% of revenues versus $173,378 or 5.2% of revenues in the prior year. Management expects profit contribution to improve significantly over the final quarter of 2018 as commercial efforts gain traction with established control label volume growth and branded product innovation market expansion. 

Operating Expenses

Our operating expenses for the nine month periods ended August 31, 2018 and August 31, 2017 are summarized below:

 

Operating expenses for the nine month period ended August 31, 2018 were $3,951,104 as compared to $2,375,051 for the comparative period in 2017, an increase of 66.4%.  The increase in our operating expenses was primarily due to increased general and administrative costs which included an increase in options expense of $1,035,955, as well as marketing and promotional expenses as we build out our organization and roll-out our product offering.  These costs are expected to continue to increase throughout 2018 as we continue to develop and commercialize our product offerings.

Other Expenses

Other expenses for the nine month period ended August 31, 2018 increased to $1,549,351 versus $1,048,283 in the comparative period in 2017. The increase was due to an increase in interest expense due to higher debt levels and the impact of certain other items including the beneficial conversion feature related to the convertible note entered into in 2016.

EBITDA

Reported net loss for the nine month period August 31, 2018 was $5,236,089 compared to $3,249,956 in the comparative period in 2017. After deducting interest, depreciation and amortization, EBITDA for the nine month period ended August 31, 2018 was ($3,596,759) compared to ($1,976,673) in 2017. EBITDA included a non-cash option expense of $1,060,166 for the nine month period August 31, 2018 compared to $24,211 in 2017.

Balance Sheet Data

The following table provides selected balance sheets data as at August 31, 2018 and August 31, 2017.

 

Balance Sheet Data:

Our objective is to provide our shareholders with solid returns through strategic investments across multiple consumer product and ingredient platforms. The platforms we are focusing on include:

·	Life science technologies and related products that have applications to a range of consumer products;

·	Nutritional supplements and related consumer goods providing defined benefits to the consumer; and

·	Functional foods and beverages ingredients with defined health and wellness benefits.

 

 

 

We are building our business through strategic investments in high growth early stage consumer brands and functional ingredient platforms within segment/sectors which we believe offer sustainable commercial potential.  We are focused on three core strategies underpinning our objectives:

·	To execute a multi-tier brand, supply-chain and innovation strategy to drive revenue;

·	To aggressively manage an asset light business model to drive our low cost platform; and

·	To drive disciplines leading to increased investor awareness and ability to finance and govern growing operations.

While we have yet to achieve profitability, we are making significant progress against our commercial objectives. We expect revenue and margin to increase as we continue to strengthen distribution partnerships while capitalizing on product innovation, supply-chain optimization and brand equity within our current portfolio.

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 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 $0.71 per share for an aggregate of up to 3,239,437 shares.

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.  On May 9, 2017, the Company received the second tranche of funding with proceeds of $4,400,000 and on May 16, 2018 the third tranche of funding with proceeds of $1,500,000 for a total investment by the investor of $10,000,000. The Company intends to use the proceeds of the secured convertible note for general working capital purposes including, 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 conversion price per share of $0.60, 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. Due to the note being convertible to the Company common shares, a beneficial conversion feature analysis was performed. The intrinsic value of the conversion feature was $3,333,334 and was recognized as debt discount. As of August 31, 2018, $1,785,850 of debt discount was amortized to interest of which $907,110 was amortized during the current nine month period and $878,740 in prior years. The unamortized discount as of August 31, 2018 is $1,547,484.

 

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.

As a smaller reporting company we are not required to provide this information.

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.

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, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II. OTHER INFORMATION

 

 

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 22, 2018	Trident Brands Incorporated
	/s/ Anthony Pallante
	By: Anthony Pallante
	(Chief Executive Officer & Chair of the Board)
	/s/ Mark Holcombe
	By: Mark Holcombe
	(President, CFO & Director)
	/s/ Scott Chapman
	By: Scott Chapman
	(Director)