STARCO BRANDS, INC. The following information should be read in conjunction with our financial statements and related notes thereto included in Part I, Item 1, above. We also urge you to review and consider our disclosures describing various risks that may affect our business, which are set forth under the heading "Risk Factors," below.
Forward Looking Statements
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
? our future strategic plans;
? our future operating results;
? our business prospects;
? our contractual arrangements and relationships with third parties;
? the dependence of our future success on the general economy;
? our possibility of not successfully raising future financings; and
? the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we "believe," "anticipate," "expect," "estimate" or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Executive Overview
In
We are a company whose mission is to create behavior-changing products and brands. Our core competency is inventing brands, marketing, building trends, pushing awareness and social marketing. The licensing agreement with TSG provided the Company with certain products on exclusive and royalty-free basis and other products on a non-exclusive and royalty basis; in the following categories: food, household cleaning, air care, spirits and personal care. TSG is predominantly an aerosol and liquid fill private label and branded manufacturer with manufacturing assets in the following verticals: DIY/Hardware, paints, coatings and adhesives, household, air care, disinfectants, automotive, motorcycle, arts & crafts, personal care cosmetics, personal care FDA, sun care, food, cooking oils, beverage, spirits and wine.
The current CEO and owner of TSG,
The Company conducted extensive research and has identified specific channels to
penetrate with its portfolio of novel technologies. The Company intends to raise
capital to assist in launching and marketing these products through debt and
equity financing. The Company is now executing on this vision and is in market
with four product lines, including the Breathe® Household cleaning aerosol line.
Breathe is an environmentally friendly line of household cleaning aerosol
products. It is the world's first aerosol household cleaning line to be approved
by the
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The Breathe line is predominantly in 300 to 400 stores serviced through United
Natural Foods, Inc. ("UNFI") as well as in almost 500 Home Depots through a
distributor called Central Garden Excel ("Central"), one of the largest
distributors to the DIY/Hardware retail channel. Central will be handling all
of the Company's distribution for the Breathe household cleaning aerosol line to
Home Depot. The Breathe Hand Sanitizer Spray was recently named the exclusive
hand sanitizer spray at all Home Depots, and the 1oz size is now at every check
out. The Breathe line is available on Amazon and
The Company also launched the Breathe Hand Sanitizer Spray in
The product is being manufactured by BOV Solutions, a division of TSG that is an
at scale FDA, CFR210/211 manufacturer of aerosol and OTC products. The Breathe
Hand Sanitizer Spray can only be made in an FDA facility that has at scale
aerosol capabilities. The product is being sold through BOV Solutions and TSG's
existing distribution footprints in
The Company is also the marketer of record, but not the owner of, Betterbilt Chemical's Kleen Out® branded drain opener and for the Winona® Butter Flavor Popcorn Spray. The Company provides marketing services to these brands as per the terms of the agreement. Both products are available in all Walmart stores.
Through the Company's relationship with TSG and their marketing partner Deutsch
Marketing, the Company launched a new label in
In addition, as long as the Company can raise capital, the Company plans to launch other products in spray condiments, air care, sun care, hair care, personal care, spirits and beverages over the next 48 months. Although the initial market reception to our new lines has been encouraging, the Company may encounter a number of hurdles that could prevent this and future product launches from achieving sustained commercial success. Financing growth and launching of new products is key and the Company's ability to raise further capital is critical.
We will need to rely on sales of our common stock in order to raise additional capital. The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions to the registration requirements of the Securities Act of 1933. The Company is planning to utilize, as best as possible with limited financing, the services of Deutsch Marketing in order to help support the Company's plan. The Company will also utilize the marketing capabilities of Hearst Media with its co-branding arrangement on some of its products. This provides significant support for its current retail and online distribution.
The Company is also planning to launch new products over the next year that are viewed as disruptive in their market and leading edge, again as long as its financing plans come to fruition. The Company has now engaged and contracted with a financial advisory firm to assist the Company in procuring future financing.
The Company's ultimate goal is to become a leading brand owner and third-party marketer of cutting edge technologies in the consumer products marketplace whose success is expected to increase shareholder value. The Company will continue to evaluate this and other opportunities to further set its strategy for 2021 and beyond.
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For more information please visit our websites at www.starcobrands.com, www.breathecleaning.com, and www.breathesanitizer.com.
Results of Operation for the Three Months Ended
Revenues
For the three months ended
Operating Expenses
For the three months ended
For the three months ended
For the three months ended
Other income and expense
For the three months ended
Net loss
For the three months ended
Results of Operation for the Six Months Ended
Revenues
For the six months ended
Operating Expenses
For the six months ended
For the six months ended
For the six months ended
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Other income and expense
For the six months ended
Net loss
For the six months ended
Liquidity and Capital Resources
As reflected in the accompanying unaudited condensed financial statements, the
Company had an accumulated deficit of
We used
In the comparative period in 2020 the Company was operating at a net gain of
On
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Revenue recognition
The Company earns its revenue as royalties from the licensing agreements it has
with TSG, a related entity, and other related parties. The Company licenses the
right for TSG to manufacture and sell certain
The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
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Off-Balance Sheet Arrangements
We have not entered into 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 and would be considered material to investors.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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