Our Business
The Company operates in the consumer packaged goods industry and it is focused
on the import, sale and distribution of premium chocolate and snack products
produced in Europe. The Company also serves as a supplier of confectionery
products for major U.S. retailers under private label brands. The Company has
established itself as a vendor of record with national retail chains across the
United States and other well-known international retailers allowing its products
to be sold in thousands of stores in the United States.
Our goal is to develop multiple brands of consumer packaged goods and become one
of the leading suppliers and distributors in the United States of premium
chocolate, snacks and beverage products from Europe. Our wide range of premium
chocolate, snacks and beverage items allowed us to establish strong
relationships with national retail chains across the United States and
international retailers.
The Company is also seeking opportunities to merge with emerging brand companies
that established themselves and their respective brand portfolio of items and
are in need to access our national distribution network. We believe that a
potential merger would give Veroni much bigger presence within national
retailers in the United States and add variety of other products that Veroni can
sell to its retailers and wholesalers in the consumer package goods space.
Products
The Company's product mix is comprised of the following:
CHOCOLATE
Bars
5Bites
Truffles
Sticks
Candies
Cups
Gummies
Chocolate Products
Veroni currently distributes its chocolate products under the Sweet Desire and
Baron Chocolatier brands, as well as private label chocolate bars, cups and
bites.
The Company is also in the process of developing its own brand and line of
products:
? The Company hired CA Fortune to analyze and develop the brand and create a
portfolio of new products. The Company's chocolate products are GMO free and
Kosher and Halal certified, and contain all natural ingredients with zero
trans-fat, no artificial flavors or colors.
? The Company is approved and licensed by Rainforest Alliance to sell its
chocolate products nationwide to its customers The Company believes that its
key competitive advantage is that it can provide premium chocolate products at
mainstream prices. The product is manufactured in Europe and imported via port
in Germany into a warehouse near port of New Jersey and from there its being
shipped across the country to its costumers' distribution centers.
? The Company handles the product design and development phases in-house, in
collaboration with leading product design and development teams who
traditionally serve major retailers in the United States.
Veroni plans to gradually increase chocolate sales by offering products made
with all natural ingredients priced at a slight discount to premium brand
chocolates offered by competitors such as Godiva, Russell Stover, Lindt, and
Ghirardelli. It also plans to incrementally grow chocolate sales by
cross-merchandising chocolate products with its retail partners' wine and coffee
products.
3
Results of Operations
Three Months Ended September 30, 2022 Compared to September 30, 2021.
Revenues
Revenues for the three months ended September 30, 2022 were $112,924 as compared
with $783,343 for the comparable prior year period, a change of ($670,419), or
(85%). In 2022, the Company's revenues were impacted by loss of retail customers
due to significant product cost increase. Therefore, the Company experienced
significant reduction in revenue in the three months ended September 30, 2022.
Cost of Sales
Cost of sales for the three months ended September 30, 2022 was $71,242 as
compared with $405,905 for the comparable prior year period, a change of
($334,663) or (82%). The decrease was primarily due to reduced sales.
Gross Profit
Gross profit for the three months ended September 30, 2022 was $41,682 as
compared with $405,905 for the comparable prior year period, a change of
($334,663) or (82%). The decrease was primarily due to reduced sales.
Operating Expenses
Operating expenses for the three months ended September 30, 2022 were $429,119
as compared with $606,309 for the comparable prior year period, a change of
($177,190) or (29%). The decrease was primarily due to reduced sales.
Net Loss
Our net loss for the three months ended September 30, 2022 was $389,106 as
compared with a net loss of $228,598 for the comparable prior year period, a
change of $160,508 or 70%. The increase was primarily due to reduced sales.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30,
2022 was $423,163 as compared with a $501,586 for the comparable prior year
period, a change of ($78,423) or (19%). The decrease was primarily due to
reduced sales.
Nine Months Ended September 30, 2022 Compared to September 30, 2021.
Revenues
Revenues for the nine months ended September 30, 2022 were $272,576 as compared
with $3,266,702 for the comparable prior year period, a change of ($2,994,126),
or (92%). In 2022, the Company's revenues were impacted by impacted by loss of
retail customers due to significant product cost increase. Therefore, the
Company experienced significant reduction in revenue in the nine months ended
September 30, 2022.
Cost of Sales
Cost of sales for the nine months ended September 30, 2022 was $191,913 as
compared with $2,276,721 for the comparable prior year period, a change of
($2,084,808) or (92%). The decrease was primarily due to reduced sales.
4
Gross Profit
Gross profit for the nine months ended September 30, 2022 was $80,663 as
compared with $989,981 for the comparable prior year period, a change of
($909,318) or (92%). The decrease was primarily due to reduced sales.
Operating Expenses
Operating expenses for the nine months ended September 30, 2022 were $1,464,260
as compared with $1,325,308 for the comparable prior year period, a change of
$138,952 or 37%. The increase was primarily due to stock issued to officer for
services.
Net Loss
Our net loss for the nine months ended September 30, 2022 was $1,382,216 as
compared with a net loss of $338,058 for the comparable prior year period, a
change of $1,044,158 or 309%. The increase was primarily due to reduced sales.
General and Administrative Expenses
Liquidity and Capital Resources
During the nine months ended September 30, 2022, the Company's operating
activities used net cash of $4,432, due primarily to the net loss of $1,382,216,
increase in accounts payable related party of $35,879, and decrease in trade
accounts receivable of $9,941, offset by decrease of $48,125 in contract
receivables and $7,724 in inventory, and an decrease in accrued liabilities of
$58,407. In comparison, the Company's operating activities used net cash of
$107,763 during the comparable 2021 period, due primarily to reduction of
accounts receivable of $677,016.
Net cash provided by financing activities was $85,773, from proceeds of notes
payable-related party of 25,170 and proceeds from issuance of common stock of
100,500 less repayment of contract receivables with recourse of 39,897. For the
comparable 2021 period, net cash used by financing activities totaled $547,170,
from the repayment of the Company's contract receivables financing.
The Company had a cash balance of ($251) and a working capital deficit of
$838,389 as of September 30, 2022, as compared to a cash balance of $4,091 and a
working capital deficit of $759,088, as of December 31, 2021.
Under the Small Business Administration ("SBA"), the Company applied for the
Paycheck Protection Program ("PPP") and received a loan from the SBA in the
amount of $56,250 (the "PPP Loan"). These loans are forgiven if used for
payroll, payroll benefits, including health insurance and retirement plans, as
well as certain rent payments, leases, and utility payments, which are limited
to 40% of the loan proceeds, all of which if paid within either 8 weeks or 24
weeks of the receipt of the loan proceeds. On October 14, 2021 we received
notice from the SBA that $38,550.50 of the balance of the PPP Loan has been
forgiven. The Company has elected to record these advances under the debt
treatment for these loans, under GAAP guidance. The remainder of the PPP Loan
will accrue interest at 1% per annum and be paid in monthly payments of
$3,003.05. As of September 30, 2022, a balance of $963 was outstanding under the
PPP Loan.
On August 27, 2020, the Company executed the standard loan documents required
for securing a loan (the "EIDL Loan") from the SBA under its Economic Injury
Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19
pandemic on the Company's business. Pursuant to that certain Loan Authorization
and Agreement (the "SBA Loan Agreement"), the principal amount of the EIDL Loan
is up to $150,000, with proceeds to be used for working capital purposes. On
September 2, 2020, the Company received $149,900. Interest accrues at the rate
of 3.75% per annum. Installment payments, including principal and interest, are
due monthly beginning August 27, 2021 (twelve months from the date of the SBA
Note (defined below)) in the amount of $731. The balance of principal and
interest is payable thirty years from the date of the EIDL Loan.
In connection therewith, the Company executed (i) a note for the benefit of the
SBA (the "SBA Note"), which contains customary events of default and (ii) a
Security Agreement, granting the SBA a security interest in all tangible and
intangible personal property of the Company, which also contains customary
events of default (the "SBA Security Agreement").
5
The Company's proposed activities will necessitate significant uses of capital
into and beyond 2022, particularly for the financing of inventory. While the
Company has a factoring arrangement, sales of equity securities in the Company
would result in reduced financing costs. Since the beginning of 2018 and through
September 30, 2022, the Company has engaged in sales of its equity securities in
private placements.
Plan of Operations
During 2022 and 2021, sales were concentrated in two customers. One of these
customers notified the Company that they decided to terminate the private label
program going forward. Sales in 2022 are expected to decrease by 63%. As vendor
selection is an annual process with this customer, the Company is planning to
reapply as a vendor for 2023 season and broaden its customer base. For the next
few years, the Company will continue to focus on obtaining visibility for the
products by contacting convenience store locations and small distributors to
those types of locations. In addition, the Company will also continue to expand
the number of products to be imported from Europe and distributed throughout the
United States.
Management believes that while the current COVID-19 crisis has not affected the
volume of sales, it has resulted in the Company experiencing supply chain and
transportation logistics issues. Manufacturers and those providing shipping and
logistics services are increasing prices and/or decreasing the amount of product
and/or services to the Company, thereby making it more difficult to meet the
terms of contracts with retailers. Management believes that for the current
fiscal year, the Company will experience reduced profit margins as a result. It
is not known whether the supply chain and transportation logistics issues will
continue into the future.
There is no assurance that the Company's activities will generate sufficient
revenues to sustain its operations without additional capital, or if additional
capital is needed, that such funds, if available, will be obtainable on terms
satisfactory to the Company. Accordingly, given the Company's limited cash and
cash equivalents on hand, the Company will be unable to implement its business
plans and proposed operations unless it obtains additional financing or
otherwise is able to generate revenues and profits. In 2019, the Company entered
into a factoring agreement covering its accounts receivable (see below). The
Company may raise additional capital through sales of debt or equity, obtain
loan financing or develop and consummate other alternative financial plans. In
the near term, the Company plans to rely on its primary stockholders to continue
to fund the Company's continuing operating requirements. The Company will
require a minimum of $600,000 for the next 12 months to fund its operations,
which will be used to fund expenses related to operations, office supplies,
travel, salaries and other incidental expenses. Management believes that this
capital would allow the Company to meet its operating cash requirements, and
would facilitate the Company's business of selling and distributing its
products. Management also believes that the acquisition of such assets would
generate revenue to cover overhead cost and general liabilities of the Company,
and allow the Company to achieve overall sustainable profitability.
Due to the above-described difficulties, management is seeking other
opportunities outside of the import/distribution business in order to bring
value to the stockholders.
Accounts Receivable Financing
On February 21, 2019, the Company entered into a factoring agreement with an
unrelated third party, Advance Business Capital LLC, dba Interstate Capital
("ICC"), pursuant to which the Company sells the majority of its accounts
receivable to ICC for 85% of the value of the receivable. The term of the
agreement is for 12 months and automatically renews for additional 12-month
periods. The accounts receivable are sold with recourse back to the Company,
meaning that the Company bears the risk of non-payment by the account debtor. To
secure its obligations to ICC, the Company has granted a blanket security
interest in its other assets, such as inventory, equipment, machinery,
furniture, fixtures, contract rights, and general intangibles. The loan is
guaranteed by two major shareholders of the Company. On September 11, 2019, the
lender (which now does business as Triumph Business Capital) entered into an
amended agreement with the Company which lowered the interest charged by the
lender from 0.49% for every 10 days to prime rate (with a floor of 5.5%) plus
3%. On January 27, 2021, the agreement was further amended to include the
factoring of purchase orders at the Wall Street Journal Prime Rate. As of
September 30, 2022 and December 31, 2021, the Company owes $ and $39,897,
respectively for advances on their receivables. The Company bears all credit
risk related to the receivables factored.
6
Alternative Financial Planning
The Company has no alternative financial plans at the moment. If the Company is
not able to successfully raise monies as needed through a private placement or
other securities offering (including, but not limited to, a primary public
offering of securities), the Company's ability to survive as a going concern and
implement any part of its business plan or strategy will be severely
jeopardized.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires making estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. The estimates are based
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
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