NetBrands Corp

DECEMBER 31, 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 Delaware on December 1, 2017, and changed its name on June 13, 2018, as part of a change in control. As part of the change in control, its then officers and directors resigned and contributed back to the Company 19,500,000 shares of the 20,000,000 outstanding shares of its common stock, and appointed new officers and directors. On June 14, 2018, the new management of the Company issued 12,500,000 shares of its common stock to Paul Adler, the then president of the Company.

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 200 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 $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.

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.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those 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 years ended December 31, 2023 and December 31,2022 stock-based compensation was $164,500. and $227,361, 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 December 31, 2023 and 2022, the Company had $1,013 and $54,185 of cash and cash equivalents.

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 years ended December 31, 2023, and 2022 was $-0- and $-0-, respectively; the allowance for doubtful accounts on December 31, 2023, and 2022 was $0.

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 December 31, 2023 and December 30, 2022, and determined thatno write-down was required.

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.

Advertising and Marketing Costs

The Company’s policy regarding advertising and marketing is to record the expense when incurred. The Company incurred advertising and marketing expenses of $94,124 and $48,926 during the years ended December 31, 2023, and 2022, respectively.

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 $50,000 for the year ended December 31, 2022.

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.

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 December 31, 2023 we had $0 in right of use assets, $0 in short term operating lease payables and $0 in long-term lease liabilities.

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. During the year ended December 31, 2023, the Company had a balance of $1,895 in accumulated other comprehensive income on its balance sheet which arose from an unrealized gain due to foreign currency fluctuations in prior years.

Basic Income (Loss) Per Share

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 December 31, 2023, 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 December 31, 2023, the Company had cash and cash equivalents of $1,013, negative working capital of $1,369,395, and had an accumulated deficit of $29,951,662. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financials have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The Company is seeking new sources of financing to fund its operations. There can be no assurances that the Company will be able to secure financing. If the Company is unable to secure financing it will have a material adverse impact and may not enable the Company to continue as a going concern. As a result the shareholders may lose some or all of their investment in the Company.

NOTE 3 –CAPITAL STOCK

The Company has authorized 100,000,000 shares of common stock, $0.0001 par value per share. The Company had 16,610,756 and 15,635,756 shares of common stock issued and outstanding as of December 31, 2023 and December 31, 2022, respectively.

2023 Common Stock Issuances for Services

During the year ended December 31, 2023, the Company issued 975,000 shares for services valued at $164,450, or $0.17 per share. The share price was determined based on the trading price of the Company’s common stock on the date of issuance.

2022 Common Stock Issuances for Services

During the three months ended March 31, 2022, the Company issued 15,000 shares of its common stock for services, which were valued at $4,515. All issuances made by the Company are valued based upon the closing trading price of the Company’s common stock on the date when the board of directors authorizes and approves the issuance of such shares.

During the three months ended September 30, 2022, the Company issued an aggregate of (a)250,000 shares of common stock to the members of the Company’s board of directors, valued at $0.18 per share, and (b)350,000 shares of common stock to the members of its board of directors in lieu of cash payments, valued at $0.21 per share. The Company also issued 20,000 shares of common stock to a service provider, valued at $0.106 per share.

During the three months ended September 30, 2022, the Company issued an aggregate of 427,500 shares of common stock to consultants and to an investor relations firm, valued at an average of approximately $0.20 per share.

During the three months ended December 31, 2022, the Company issued 100,000 shares of common stock to a member of the Company’s board of directors valued at $0.151 per share.

Preferred Stock

The Company has 20,000,000 shares of $.0001 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 1,000,000 shares of A Stock designated. Each share of such stock shall vote with the common stock and have 100,000 votes. The A Stock has no conversion, dividend, or liquidation rights. Accordingly, the holders of A Stock will, by reason of their voting power, be able to control the affairs of the Company. The Company has issued 1,000 shares of A Stock to Paul Adler, the Company’s Chief Executive Officer, and majority shareholder giving him effective voting control over the Company’s affairs for the foreseeable future.

As a result ofthe issuance of the A Stock with super-voting rights giving him an aggregate of 100,000,000 votes, combined with the shares of common stock he holds, Mr. Adler has effective voting control of approximately 97% of the Company.

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 310,715 shares of the Company’s common stock, par value $0.0001 per share, and (b) upon the closing of a financing of over $1,000,000 in value, which has not occurred as of the date of this Quarterly Report, the Company will issue to Spencer Clarke additional warrants to purchase shares of the Company’s common stock representing 3% of the Company’s total issued and outstanding shares of common stock as of the Execution Date.

The 310,715 warrants outstanding as of December 31, 2023 are exercisable for a term offive years from the date of issuance and have an exercise price of $0.001 per share, subject to adjustment. As of December 31, 2023, these warrants had an intrinsic value of approximately $22,500.

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 $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 assets were recorded as intangible assets on the Company’s balance sheet then impaired for the full amount of $50,000.

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, which date has been extended to October 9, 2023, 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 were to be calculated using the closing sale price of the Company’s common stock on the OTC Pink marketplace on the payment date. In addition to providing additional financing to the Company, Mr. Adler has foregone his biweekly salary for the last sixteen pay periods. The Company has accrued this amount due to Mr. Adler. In November 2023, Mr. Adler extended the maturity date of the loan for six months to April 9, 2024.

NOTE 5 –COMMITMENTS AND CONTINGENCIES

The Company has one lease. The Company leases approximately 1,500 square feet of office space at 4042 Austin Boulevard, Suite B, Island Park, New York on a month to month basis. On October 1, 2021, the Company entered into a 60-month lease for $20,976 per year for the first two years, with 3% annual escalation clauses for the last three years of the lease. The lease contains onefive-year renewal option. Management believes that its present office facilities are adequate for its corporate needs.

NOTE 6 –LOANS PAYABLE

The Company’s subsidiary had various loans outstanding on December 31, 2023 and December 31, 2022. All of these loans were short-term in nature, with varying rates of interest and fees, and no set minimum monthly payments. Except for Loan Builder, all of these notes were in default as of April 1, 2024.

The Note has 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. 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). The first payment was due July 15, 2023, with eight subsequent payments due each month thereafter. The Note may not otherwise be prepaid in whole or in part. In the event the Company fails to pay any amount when due under the Note, the interest rate will increase to 22%. Upon the occurrence and during the continuation of any event of default under the Note (“Event of Default”), the Note will become immediately due and payable and the Company is required to pay to 1800 Diagonal an amount equal to 150% times the sum of (a) the then outstanding principal amount of the Note, plus (b) any accrued and unpaid interest on the unpaid principal amount of this Note, plus (c) default interest, if any, plus (d) any other amounts owed to the 1800 Diagonal pursuant to the Note. Following any Event of Default, 1800 Diagonal may convert any amount due under the Note into shares of the Company’s common stock (the “Conversion Shares”) at a conversion price equal to 75% multiplied by the lowest trading price for the Company’s common stock during the ten trading days prior to the conversion date (representing a discount rate of 25% to market);provided, however, that 1800 Diagonal may not convert any portion of the Note that would cause it, together with its affiliates, to beneficially own in excess of 4.99% of the Company’s common stock. The Company has agreed to reserve from its authorized and unissued common stock four times the number of shares that are actually issuable upon full conversion of the Note to provide for the issuance of the Conversion Shares. The conversion price and number of shares of the Company’s common stock issuable upon conversion of the Note will be subject to adjustment from time to time in the event of any combinations, recapitalization, reclassifications, extraordinary distribution, or similar event.

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 December 31, 2023 and December 31, 2022, the Company had $500,000 and $524,033, respectively, in government EIDL loans outstanding related to Covid-19. These loans are repayable over a 30-year period with an interest rate of 3.75%.

NOTE 7 –CONCENTRATIONS

The Company does substantially all of its business with five customers. These customers accounted for 100% and 91% of revenues for the nine months ended September 30, 2023, and 2022, respectively.

NOTE 8 –SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2023, 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:

Purchase Agreement with Cove Funding

On March 22, 2024, the Company entered into the Cove Purchase Agreement with Cove Funding, pursuant to which Cove Funding agreed to extend the Cove Loan to the Company in the amount of up to $300,000, in two tranches. On March 22, 2024, the Company issued the Cove Note to Cove Funding in the principal amount of $187,777, evidencing the First Tranche of the Cove Loan. 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.

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 tothe 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 the Cove Security Agreement with Cove Funding, pursuant to which Cove Funding was granted a first priority security interest in the Company’s assets, and (b) Paul Adler, the Company’s Chief Executive Officer, and a director of the Company, entered into the Cove Pledge Agreement with Cove Funding, pursuant to which Mr. Adler pledged the Adler Shares.

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 offive 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.