The following discussion and analysis of the results of operations and financial
condition of Sentient Brands Holdings Inc. for the three months ended March 31,
2022 and 2021 should be read in conjunction with the Sentient Brands Holdings
Inc. unaudited condensed consolidated financial statements and the notes thereto
contained elsewhere in this report. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors, Special Note Regarding Forward-Looking
Statements and Business sections in our Form 10-K as filed with the Securities
and Exchange Commission on April 15, 2021. We use words such as "anticipate,"
"estimate," "plan," "project," "continuing," "ongoing," "expect," "believe,"
"intend," "may," "will," "should," "could," and similar expressions to identify
forward-looking statements .
Unless otherwise indicated, references to the "Company," "us" or "we" refer to
Sentient Brands Holdings Inc. and its subsidiaries.
Overview
Sentient Brands is a next-level product development and brand management company
with a focus on building innovative brands in the Luxury and Premium Market
space. The Company has a Direct-to Consumer business model focusing on the
integration of CBD, wellness and beauty for conscious consumers. The Company
incorporates an omnichannel approach in its marketing strategies to ensure that
its products are accessible across both digital and retail channels. The Company
develops and nurtures Lifestyle Brands with carefully thought-out ingredients,
packaging, fragrance and design. Sentient Brands' leadership team has extensive
experience in building world-class brands such as Hugo Boss, Victoria's Secret,
Versace, and Bath & Body Works. The Company is focused on two key market
segments targeting: wellness and responsible luxury, which the Company believes
represent unique opportunities for its Oeuvre product line. Sentient Brands
intends to leverage its in-house innovation capabilities to launch new products
that "disrupt" adjacent product categories. We plan to grow by leveraging our
deep connections within our existing network and attract consumers through
increased brand awareness and investing in unique social media marketing. The
Company's goal is to create customer experiences that have sustainable resonance
with consumers and consistently implement strategies that result in long-term
profit growth for our investors.
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 OE
Complex: Botanicals + Gemstones + Full flower Hemp infused formulation. Each
product in the Oeuvre Artistry Collection optimizes three functions: cellular
energy, moisture balance, and nutrient utilization. Four products comprise the
Oeuvre collection:
? Purifying Exfoliator
? Replenishing Facial Oil
? Ultra-Nourishing Face Cream
? Revitalizing Eye Cream
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.
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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 $100,000 and $250,000 annually.
They are typically digitally fluent, are frequent online shoppers, and are
discretionary spenders. Therefore, ouvreskincare.com offers inclusive,
aspirationally affordable luxury products positioned for them.
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
Boston Consulting Group. We seek to target such consumer group for the sale of
our Oeuvre products.
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
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 anticipated in approximately 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.
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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, Sentient Brands intends to:
? 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
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 the United States, with a European
trademark application pending. The Company expects to rely on trade secrets and
proprietary know-how protection for our confidential and proprietary
information, however we have not yet taken security measures to protect this
information.
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, St. Jane, Mary's, Lord
Jones, Bluebird Folium Biosciences, Global Cannabinoids, and Pure Kana. In
addition, public and private U.S. and Canadian companies have entered the
hemp-derived CBD consumer market or have announced plans to do so. This market
is highly fragmented, and according to the Hemp Business Journal, the vast
majority of industry participants generate less than $2 million in annual
revenue. We see this an opportunity to create a foothold in the CBD consumer
marketplace with the goal of building Sentient Brands as a major brand name in
this space.
Industry Overview
The market for products based on extracts of hemp and cannabis is expected to
grow substantially over the coming years. Arcview Market Research and BDS
Analytics are forecasting the combined market to reach nearly $45 billion within
the U.S. in the year 2024. While much of this market is expected to be comprised
of high potency THC-based products that will be sold in licensed dispensaries,
certain research firms are still predicting the market to grow to $5.3 billion,
$12.6 billion, and $2.2 billion by 2024 for the product areas of low THC
cannabinoids, THC-free Cannabinoids and pharmaceutical cannabinoids,
respectively.
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On December 20, 2018, President Donald J. Trump signed into law the Agriculture
Improvement Act of 2018, otherwise known as the "Farm Bill." Prior to its
passage, hemp, a member of the cannabis family, and hemp-derived CBD, were
classified as a Schedule I controlled substances, and illegal under the
Controlled Substances Act ("CSA"). Under Section 10113 of the Farm Bill, hemp
cannot contain more than 0.3 percent THC. THC refers to the chemical compound
found in cannabis that produces the psychoactive "high" associated with
cannabis. Any cannabis plant that contains more than 0.3 percent THC would be
considered non-hemp cannabis or marijuana under federal law and would thus face
no legal protection under this new legislation and would be an illegal Schedule
1 drug under the CSA.
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 December 2019 and
has been declared a pandemic. The extent to which Covid-19 will impact our
customers, business, results and financial condition will depend on current and
future developments, which are highly uncertain and cannot be predicted at this
time. While the Company's day-to-day operations beginning March 2020 have been
impacted, we have suffered less immediate impact as most staff can work remotely
and can continue to develop our product offerings.
On April 18, 2020, the Company, through its subsidiary Jaguaring Company,
entered into Paycheck Protection Program Promissory Note and Agreement with
KeyBank National Association, pursuant to which the Company received loan
proceeds of $231,500 (the "PPP Loan"). The PPP Loan was made under, and is
subject to the terms and conditions of, the PPP which was established under the
CARES Act and is administered by the U.S. Small Business Administration. The
term of the PPP Loan is two years with a maturity date of April 18, 2022 and
contains a favorable fixed annual interest rate of 1.00%. Payments of principal
and interest on the PPP Loan will be deferred for the first six months of the
term of the PPP Loan until November 18, 2020. Principal and interest are payable
monthly and may be prepaid by the Company at any time prior to maturity with no
prepayment penalties. Under the terms of the CARES Act, recipients can apply for
and receive forgiveness for all or a portion of loans granted under the PPP.
Such forgiveness will be determined, subject to limitations, based on the use of
loan proceeds for certain permissible purposes as set forth in the PPP,
including, but not limited to, payroll costs (as defined under the PPP) and
mortgage interest, rent or utility costs (collectively, "Qualifying Expenses"),
and on the maintenance of employee and compensation levels during the eight-week
period following the funding of the PPP Loan. The Company has been using the
proceeds of the PPP Loan, for Qualifying Expenses. On December 8, 2021 the
Company received notification from Key Bank that our forgiveness application has
been approved in full by the Small Business Administration, or SBA.
Forward Stock Split / Increase of Authorized / Name Change / Migratory Merger
On December 9, 2020, the Company filed a Certificate of Amendment of Articles of
Incorporation (the "Certificate") with the State of California to (i) effect a
forward stock split of its outstanding shares of common stock at a ratio of 7
for 1 (the "Forward Stock Split"), (ii) increase the number of authorized shares
of common stock from 50,000,000 shares to 500,000,000 shares, and (iii)
effectuate a name change (the "Name Change"). Fractional shares that resulted
from the Forward Stock Split will be rounded up to the next highest number. As a
result of the Name Change, the Company's name changed from "Intelligent Buying,
Inc." to "Sentient Brands Holdings Inc.". The Certificate was approved by the
majority of the Company's shareholders and by the Board of Directors of the
Company. The effective date of the Forward Stock Split and the Name Change was
March 2, 2021.
In connection with the above, the Company filed an Issuer Company-Related Action
Notification Form with the Financial Industry Regulatory Authority. The Forward
Stock Split and the Name Change was implemented by FINRA on March 2, 2021. Our
symbol on OTC Markets was INTBD for 20 business days from March 2, 2021 (the
"Notification Period"). Our new CUSIP number is 81728V 102. As a result of the
name change, our symbol was changed to "SNBH" following the Notification Period.
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In addition, on January 29, 2021, the Company, merged with and into its wholly
owned subsidiary, Sentient Brands Holdings Inc., a Nevada corporation, pursuant
to an Agreement and Plan of Merger between Sentient Brands Holdings Inc., a
California corporation, and Sentient Brands Holdings Inc., a Nevada corporation.
Sentient Brands Holdings Inc., a Nevada corporation, continued as the surviving
entity of the migratory merger. Pursuant to the migratory merger, the Company
changed its state of incorporation from California to Nevada and each share of
its common stock converted into one share of common stock of the surviving
entity in the migratory merger. No dissenters' rights were exercised by any of
the Company's stockholders in connection with the migratory merger.
Following the consummation of the migratory merger, the articles of
incorporation and bylaws of the Nevada corporation that was newly-created as a
wholly owned subsidiary of the Company became the articles of incorporation and
bylaws for the surviving entity in the migratory merger.
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
The United States Food & Drug Administration ("FDA") is generally responsible
for protecting the public health by ensuring the safety, efficacy, and security
of (1) prescription and over the counter drugs; (2) biologics including
vaccines, blood & blood products, and cellular and gene therapies; (3)
foodstuffs including dietary supplements, bottled water, and baby formula; and,
(4) medical devices including heart pacemakers, surgical implants, prosthetics,
and dental devices.
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 FDA's mandate to regulate drugs, the FDA also regulates dietary
supplement products and dietary ingredients under the Dietary Supplement Health
and Education Act of 1994. This law prohibits manufacturers and distributors of
dietary supplements and dietary ingredients from marketing products that are
adulterated or misbranded. This means that these firms are responsible for
evaluating the safety and labeling of their products before marketing to ensure
that they meet all the requirements of the law and FDA regulations, including,
but not limited to the following labeling requirements: (1) identifying the
supplement; (2) nutrition labeling; (3) ingredient labeling; (4) claims; and,
(5) daily use information.
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 FDA's jurisdiction.
Government Approvals
The Company does not currently require any government approvals for its
operations or product offerings. In August 2019, the DEA affirmed that CBD
preparations at or below the 0.3 percent delta-9 THC threshold, is not a
controlled substance, and a DEA registration is not required. As a result of the
2018 Farm Bill, the FDA has been tasked with developing CBD regulations. The FDA
has not yet published regulations.
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.
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Employees
We believe that our success depends upon our ability to attract, develop and
retain key personnel. As of May __, 2022, we employed 2 full-time employees. The
Company otherwise currently 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.
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 555 Madison Avenue, 5th Floor,
New York, New York 10022. The Company's telephone number is (646) 202-2897. The
Company's website is https://www.sentientbrands.com/.
RESULTS OF OPERATIONS
Comparison of Results of Operations for the three months ended March 31, 2022
and 2021
Revenue
During the three months ending March 31, 2022 and 2021, we generated minimal
revenue due to the Company's reorganization and focus on the development of our
new product lines and related marketing preparations.
Operating Expenses
For the three months ended March 31, 2022, and 2021, operating expenses
consisted of the following:
2022 2021
Advertising and Marketing 38,248 -
General and Administrative 7,584 5,013
Legal and Professional 107,140 66,807
Management Fees 36,000 21,000
TOTAL OPERATING EXPENSES 188,972 98,820
? Our advertising and marketing costs mainly include consulting fees for
branding, social media and creation of marketing materials for our brand.
The increase in advertising costs of $38,248, or by 100%, during the three
months period ending March 31, 2022 compared to the three months ended March
31, 2021 was attributable to consulting fees for branding and marketing
materials $10,500, Product samples for promotions $14,205, Social Media
advertisement $4,542 and trade show cost $9,000 incurred in 2022 and no such
expenses in the three months ending March 31, 2021.
? 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 ended March 31, 2021, professional fees increased
compared to the same period in 2021 mainly attributable to a increase in
Social Media consulting fees of approximately $63,500 incurred for services
performed by our marketing consultant. 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.
? Our management fees are comprised mainly of salaries paid to our management
staff. During the three months period ending March 31, 2022, management fees
increased by approximately $15,000 compared to the same period in 2021
mainly attributable to fees paid for Sales and marketing executive.
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Loss from Operations
The Company's operating loss for the three month period ended March 31, 2022,
and 2021 was $217,831 and $86,070, respectively. A increased in operating loss
of approximately $131,761 or 65% compared to the previous three months ended
March 31, 2021 was primarily increase in advertising cost $38,248, Legal and
professional fees $29,144, and management fees of $15,000.
Income Taxes
We did not have any income taxes expense for the three months ended March 31,
2022 and 2021 incurred losses in these periods.
Net Loss
The Company's net loss for the three months period ended March 31, 2022 and 2022
was $217,831 and $86,070, respectively.
Liquidity and Capital Resources
As of March 31, 2022, we had total current assets of $254,423, consisting of
$10,428 in cash and $244,467 in inventories. Our total current liabilities as of
March 31, 2022 were $1,4347,675. We had a working capital deficit of $1,152,252
as of March 31, 2022, compared with a working capital deficit of $934,421 as of
December 31, 2021.
Cash Flows from Operating Activities
Operating activities used $190,504 in cash for the three months ended March 31,
2022, compared with cash used of $65,729 for the three months ended March 31,
2022. Our negative operating cash flow for the three months ended March 31,
2022, was largely the result of our net loss of $217,831, decrease in inventory
$14,314 and increase in accrued expenses and payables $11,758. Our negative
operating cash flow of $675,974 for the three months ended March 31, 2021, was
largely the result of the result out net loss of $86,070, increase in
inventories $258,804, offset by decrease in advances to suppliers $154,893 and
increase in accounts payable $122,997.
Cash Flows from Financing Activities
There were no cash flow from investment activities for the three months ended
March 31, 2022 and 2021.
Cash Flows from Financing Activities
Net cash flows provided by financing activities during the three months ended
March 31, 2022, amounted to $104,734 compared with cash flows provided by
financing activities of $10,000 for the previous period ended March 31, 2021.
Our positive cash flows for the three months ended March 31, 2022 and 2021,
consisted of proceeds from short term loans payable of $104,734 and $10,000
respectively.
Going Concern
As of March 31,2022, we have an accumulated deficit of $2,538,740. Our ability
to continue as a going concern is contingent upon the successful completion of
additional financing arrangements and our ability to achieve and maintain
profitable operations. While we are expanding our best efforts to achieve the
above plans, there is no assurance that any such activity will generate funds
that will be available for operations. These conditions raise substantial doubt
about our ability to continue as a going concern. These financial statements do
not include any adjustments that might arise from this uncertainty.
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Covid 19
A novel strain of coronavirus ("Covid-19") emerged globally in December 2019 and
has been declared a pandemic. The extent to which Covid-19 will impact our
customers, business, results and financial condition will depend on current and
future developments, which are highly uncertain and cannot be predicted at this
time. While the Company's day-to-day operations beginning March 2020 have been
impacted, we have suffered less immediate impact as most staff can work remotely
and can continue to develop our product offerings. That said we have seen our
business opportunities develop more slowly as business partners and potential
customers are dealing with Covid-19 issues, working remotely and these issues
are causing delays in decision making and finalization of negotiations and
agreements.
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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SENTIENT BRANDS HOLDINGS INC. 
