SENTIENT BRANDS HOLDINGS INC. The following discussion and analysis of the results of operations and financial
condition of
Unless otherwise indicated, references to the "Company," "us" or "we" refer to
Overview
Principal Products and Services
All of our proprietary formulations contain clean, vegan, ethically and environmentally responsible ingredients. The Company currently has one main product line and two other product lines in development. The Company's current active product line is Oeuvre.
Oeuvre
Oeuvre - "A Body of Art" - is a next generation CBD luxury skin care line and
lifestyle brand. The foundation of our system of products is our proprietary
? Purifying Exfoliator ? Replenishing Facial Oil ? Ultra-Nourishing Face Cream ? RevitalizingEye Cream 13
Drawing inspiration from petals, leaves, roots, minerals, and gemstones, Oeuvre celebrates the artistry of well-being and beauty, inside and out. Oeuvre products are non-toxic, ungendered products made with zero GMO, retinyl palmitate, petroleum, mineral oil, parabens, sulfates, and synthetic colors.
Oeuvre Target Market
Oeuvre is our luxury segment product line. With Oeuvre, we are targeting a large
and influential consumer class of individuals that are "HENRYs" -
High-Earners-Not-Rich-Yet. These individuals have discretionary income and may
be wealthy in the future. HENRYs earn between
We believe the benefit of onboarding this consumer demographic to Oeuvre are
twofold: securing valuable present customers and building relationships and
business with those most likely to be among affluent consumers in the future. By
the year 2025, Millennials and Generation Z reportedly will represent more than
40% of the overall luxury goods market, according to a 2019 report published by
On social media, we will target the following audiences for the Oeuvre brand:
? Women aged 30+ ? Luxury Skincare Enthusiasts ? CBD Enthusiasts ?Crystal Lovers ? Wellness Audience ? Makeup Artists ? Art ? Beauty ? Influencers ? Bloggers ? Stores Future Product Lines
The Company has additional Oeuvre product skews planned for introduction by the end of 2022:
? Oeuvre fragrance amulets
? CBD infused candles
? CBD infused women's fragrance
? OE complex bath and body regime
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Introduction of Recreational THC Beverages
The Company plans on introducing a luxury lifestyle THC beverage brand in the future. Upon development, product formulation, brand concept, packaging, and marketing presentations will be designed to appeal to an upscale, sophisticated target audience. The Company is currently working with a formulator in developing unique formulation attributes to achieve specific desired effects. This product launch is expected during the fourth quarter of 2022.
Integrating the Metaverse
The Metaverse is a 3D experiential internet space focused on social connection in which users can interact with computer-generated virtual worlds across a range of technologies. The Company intends to integrate the Metaverse, including AI, Web 3.0 and non-fungible tokens (NFT's), within our social media platforms and interactive product displays.
Suppliers
The Company has several third-party suppliers and is not reliant on any particular supplier for its product offerings. Many of our products contain CBD derived from industrial hemp or cannabis which we obtain from third parties. Hemp cultivation can be impacted by weather patterns and other natural events, but we have not yet faced any supply issues to date with obtaining raw materials for our products.
Distribution
We have two primary methods through which we sell our products:
1. Direct to Consumer online e-commerce platform 2. Wholesale partners Marketing Strategy
We support brand launches with social media and marketing campaigns, including utilizing influencers. Leading marketing and public relations firms are engaged by the Company to spearhead the launch of Oeuvre, and will likely be engaged for our future planned brand launches as well.
Sentient Brands Growth Strategies:
In order to grow our Company,
? Create a leading consumer packaged goods company;
? Partner with established distributers and retailers;
? Focus on operational excellence and product quality; and
? Establish ongoing communication with the capital markets
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Our mission is to create the next generation of CBD consumer brands. The Company believes it has assembled a highly accomplished team of branding and marketing professionals who have a combined experience and track record of successfully launching and operating major brands in the consumer market space, which the Company believes will provide it with a competitive edge in the industry.
Customers
The Company launched its Oeuvre product line in the fourth quarter of 2021. The Company's sales channels are direct to consumer and wholesale.
Intellectual Property
The Company's Oeuvre brand is trademarked in
Competition
We have experienced, and expect to continue to experience, intense competition from a number of companies.
The current market for hemp-derived CBD products is highly competitive,
consisting of publicly-trade and privately-owned companies, many of which are
more adequately capitalized than the Company. The Company's current publicly
listed competitors include Charlotte's Web, CV Sciences, Elixinol, Abacus, and
Green Growth Brands, and private companies such as BeBoe,
Industry Overview
The market for products based on extracts of hemp and cannabis is expected to
grow substantially over the coming years.
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On
With the passage of the Farm Bill, hemp cultivation is broadly permitted. The Farm Bill explicitly allows the transfer of hemp-derived products across state lines for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.
Recent Developments Covid-19
A novel strain of coronavirus ("Covid-19") emerged globally in
On
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Forward Stock Split / Increase of Authorized / Name Change / Migratory Merger
On
In connection with the above, the Company filed an Issuer Company-Related Action
Notification Form with the
In addition, on
Following the consummation of the migratory merger, the articles of
incorporation and bylaws of the
The foregoing information is a summary of each of the matters described above, is not complete, and is qualified in its entirety by reference to the full text of the exhibits, each of which is attached an exhibit to this Form 10-Q Quarterly Report. Readers should review those exhibits for a complete understanding of the terms and conditions associated with this matter.
Government Regulation
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Regarding its regulation of drugs, the FDA process requires a review that begins with the filing of an investigational new drug (IND) application, with follow on clinical studies and clinical trials that the FDA uses to determine whether a drug is safe and effective, and therefore subject to approval for human use by the FDA.
Aside from the
The FDA has not approved cannabis, marijuana, hemp or derivatives as a safe and
effective drug for any indication. As of the date of this filing, we have not,
and do not intend to file an IND with the FDA, concerning any of our products
that contain CBD derived from industrial hemp or cannabis. Further, our products
containing CBD derived from industrial hemp are not marketed or sold using
claims that their use is safe and effective treatment for any medical condition
subject to the
Government Approvals
The Company does not currently require any government approvals for its
operations or product offerings. In
Research and Development
We are continuously in the process of identifying and/or developing potential new products to offer to our customers. Our expenditures on research and development have historically been small and immaterial compared to our other business expenditures. We are currently developing new formulations for additional product lines.
Employees
We believe that our success depends upon our ability to attract, develop and retain key personnel. We currently employ two full-time employees. The Company relies on the services of independent contractors. None of our employees are covered by collective bargaining agreements, and management considers relations with our employees to be in good standing. Although we continually seek to add additional talent to our work force, management believes that it currently has sufficient human capital to operate its business successfully.
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Our compensation programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
The health and safety of our employees is our highest priority, and this is consistent with our operating philosophy. Since the onset of the COVID-19 pandemic, employees, including our specialized technical staff, are working from home or in a virtual environment unless they have a requirement to be in the office for short-term tasks and projects.
The primary mailing address for the Company is
RESULTS OF OPERATIONS
Comparison of Results of Operations for the three months ended
Revenue
During the three months ending
Operating Expenses For the three months endedSeptember 30, 2022 , and 2021, operating expenses consisted of the following: 2022 2021 Advertising and marketing 4,462 - General and administrative 4,984 25,264 Legal and professional 32,816 104,499 Office rent - 366 Management fees - 21,000 Product development - 268 Interest Expense 43,066 23,524 TOTAL OPERATING EXPENSES 85,328 174,921 20 ? Our advertising and marketing costs mainly include consulting fees for branding, social media and creation of marketing materials for our brand. Advertising and marketing costs were$4,462 for the three months endedSeptember 30, 2022 compared to$0 for the three months endedSeptember 30, 2021 . The increase was attributable to the Company decision to reduce these expenses while management develops its strategy in the second half or 2021. We terminated our relationship with our former marketing executive and are pursuing alternate marketing strategies which we expect to have implemented during the fourth quarter of 2022. ? General and administrative decreased$20,280 to$4 ,984for the three months endedSeptember 30, 2022 from$25,264 for the same period in 2021. The expenses relate to fees associated withSEC filings and stock transfer fees as well as general office expenses. ? Legal and professional fees primarily consisted of accounting fees, legal service fees, consulting fees, investor relations service charges and other fees incurred for service related to becoming and being a public company. For the three months endedSeptember 30, 2022 , professional fees decreased compared to the same period in 2021 by$71,683 . This decrease is attributed to austerity measures taken by the Company as we reduce expenses while we pursue our new strategy. We expect professional fees to increase again as we implement our strategy. ? Our management fees are comprised mainly of salaries paid to our management staff. During the three month period endingSeptember 30, 2022 , management fees decreased by$21,000 compared to the same period in 2021 due to the departure of our former marketing executive and the remaining members of the management team waiving any amounts due for the remainder of 2022. ? Interest expense is related to our convertible and other notes payable. During the three months endingSeptember 30, 2022 , interest expense increased by$19,542 compared to the same period in 2021. We have taken on additional short term higher interest debt during 2022. Loss from Operations
The Company's operating loss for the three-month period ended
Income Taxes
We did not have any income taxes expense for the three months ended
Net Loss
The Company's net loss for the three month period ended
Comparison of Results of Operations for the Nine Months ended
Revenue
During the nine months ending
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Operating Expenses
For the nine months ended September 30, 2022 and 2021, operating expenses
consisted of the following:
2022 2021
Advertising and Marketing 43,075 12,800
General and Administrative 24,871 35,748
Legal and Professional 343,855 250,376
Office rent - 824
Management Fees 69,000 63,000
Product development cost - 3,153
Interest expenses 113,098 45,420
TOTAL OPERATING EXPENSES 593,899 411,219
? Our advertising and marketing costs mainly include consulting fees for
branding, social media and creation of marketing materials for our brand.
Advertising and marketing costs were $43,075 for the nine months ended
September 30, 2022 compared to $12,800 for the nine months ended September 30,
2021 . The increase of $30,275 was attributable to extensive marketing efforts
taken by the Company during the first three months of 2022. We have recently
made an effort to reduce these expenses while management develops an alternate
strategy. We terminated our relationship with our former marketing executive
and are pursuing alternate marketing strategies which we expect to have
implemented during the fourth quarter of 2022.
? General and administrative decreased $10,877 to $24,871 for the nine months
ended September 30, 2022 from $35,748 for the same period in 2021. The
expenses relate to fees associated with SEC filings and stock transfer fees as
well as general office expenses.
? Legal and professional fees primarily consisted of accounting fees, legal
service fees, consulting fees, investor relations service charges and other
fees incurred for service related to becoming and being a public company.
Legal and professional fees increased $93,279 to $343,855 for the nine months
ended September 30, 2022 from $250,376 for the same period in 2021. This
increase is primarily to the accrual of severance costs totaling $85,000 for
James Mansour who resigned in May 2022 . We also accrued unpaid amounts to an
employee and consultant totaling $64,500 . The remaining increase is due to
increased legal and accounting fees related to the Company's SEC filings and
other organizational matters. We expect professional fees to increase as we
incur significant costs associated with our public company reporting
requirements, and costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission .
? Office rent are monthly lease payments for our principal executive offices in
New York . These were discontinued during 2021.
? Our management fees are comprised mainly of salaries paid to our management
staff. During the nine months period ending September 30, 2022 , management
fees increased by $6,000 compared to the same period in 2021 as we hired
executives to assist with our product sales and management during the first
quarter of 2022. We terminated our former marketing director as we developed
our new strategy. The remaining members of the senior management team agreed
to waive their fees for the remainder of 2022.
? Interest expense is related to our convertible and other notes payable. During
the nine months ending September 30, 2022 , interest expense increased by
$67,678 compared to the same period in 2021 due to the increase in debt and
higher interest rates over that time.
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Loss from Operations
The Company's operating loss for the nine month period ended
Other Income
We had other income of
Income Taxes
We did not have any income taxes expense for the nine months ended
Net Loss
The Company's net loss for the nine month period ended
Liquidity and Capital Resources
As of
Cash Flows from Operating Activities
Operating activities used
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Cash Flows from Financing Activities
There were no cash flow from investment activities for the nine months ended
Cash Flows from Financing Activities
Net cash flows provided by financing activities during the nine months ended
Going Concern
As of
Covid 19
A novel strain of coronavirus ("Covid-19") emerged globally in
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We presently do not have any contractual obligations.
Off-balance Sheet Arrangements
We presently do not have off-balance sheet arrangements.
Inflation
The effect of inflation on our revenue and operating results was not significant.
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