Right On Brands, Inc

RTON
Delayed OTC Bulletin Board - Other OTC - 02/24 09:04:50 pm
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RIGHT ON BRANDS : Management's Discussion and Analysis or Plan of Operation (form 10-Q)

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02/14/2020 | 10:30 pm

We urge you to read the following discussion in conjunction with management's
discussion and analysis contained in our Annual Report on Form 10-K for the year
ended March 31, 2019, as well as with our condensed financial statements and the
notes thereto included elsewhere herein.



Company Overview



Our business is conducted through our wholly owned subsidiaries, Humbly Hemp,
Endo Brands, and Humble Water Company. Humbly Hemp sells and markets a line of
hemp enhanced snack foods. Humble Water Company is in a partnership with
Springhill Water Co. to develop a line of High Alkaline, Natural Mineral Water,
and a bottling and packaging facility. Endo Brands creates and markets a line of
CBD consumer products and through ENDO Labs, a joint venture with Centre
Manufacturing, creates white label products and formulations for CBD brands.
Right On Brands is at the focus of health and wellness. We create lasting brands
with emerging functional ingredients, and our focus right now is industrial
hemp, hemp derived CBD, and high alkaline water. As of September 30, 2019, the
Board of Directors of the Company voted to merge Humbly Hemp, Inc. into the
Company in order to have a more efficient and less costly corporate structure.



Basis of Presentation of Financial Information



The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles in the United States of
America
("GAAP"), which contemplate continuation of the Company as a going
concern, which is dependent upon the Company's ability to establish itself as a
profitable business. At December 31, 2019, the Company had an accumulated
deficit of $11,891,860 and for the nine months ended December 31, 2019, incurred
net losses of $1,705,758, as compared to $2,806,395 for the same period in 2018.
Management expects that the Company will need to raise additional capital to
sustain operations until such time as the Company can achieve profitability.
However, there can be no assurance that management will be successful in
obtaining additional funding or in attaining profitable operations.



The financial statements do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should the Company be unable to continue in operation.



Significant Accounting Policies



There have been no changes from the Summary of Significant Accounting Policies
described in our Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission
on July 29, 2019.



Note Conversions to Common Stock



During the nine months ended December 31, 2019 the Company received several
notices of conversion from its noteholders as summarized here:




Average
Noteholder Debt Converted Conversion Price Shares Issued

Noteholder 2 $ 210,663 $ 0.005 44,759,514
Noteholder 3 60,375 $ 0.002 38,415,000
Noteholder 4 104,341 $ 0.003 41,431,396
Noteholder 5 244,650 $ 0.003 75,316,850
Noteholder 6 108,794 $ 0.001 135,652,946
Noteholder 7 81,750 $ 0.004 19,395,570




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Results of Operations


Comparison of Three Months Ended December 31, 2019 and 2018



During the three months ended December 31, 2019, we generated revenue of
$106,434 and our cost of goods sold was $62,220, resulting in gross profit of
$44,214. We incurred total operating expenses of $243,115, interest expense of
$116,783, and a net loss of $182,382. By comparison, during the three months
ended December 31, 2018, we generated revenue of $57,476 and our cost of goods
sold was $41,293, resulting in gross profit of $16,183. We incurred operating
expenses of $480,695, interest expense of $784,892 and we recorded a net loss of
$1,783,791.



Our revenues increased significantly compared to the same period last year due
to increased product distribution and sales. Our operating expenses decreased
significantly due primarily to lower consulting fees. However, this was offset
by higher general and administrative expenses related to contract labor,
commissions, insurance, lease and travel expenses. Other expenses increased
related to debt financing, including interest, financing costs, and default
penalties.



Comparison of Nine Months Ended December 31, 2019 and 2018



For the nine months ended December 31, 2019 and 2018, the Company's revenue
totaled $315,091 and $153,087, respectively, for which our respective costs of
goods sold totaled $200,140 and $105,093. The $162,004 increase in revenue
resulted from additional sales. During 2019 the Company also introduced its
Humbly Hemp line of energy bars and sparkling teas.



For the nine months ended December 31, 2019, the Company had operating expenses
totaling $719,970 compared to $1,363,573 for the same period in 2018, a decrease
of $643,603. This change is primarily a result of lower consulting fees. General
and administrative expenses increased by approximately $197,454, from $141,838
in the nine months ended December 31, 2018 to $339,292 over the same period in
2019 due to increased contract labor, commissions, insurance, lease and travel
expenses. Other expenses increased related to debt financing, including
interest, financing costs, loss on derivatives issued with debt, and default
penalties. The Company also recorded depreciation and amortization expense of
$5,149 for the nine months ended December 31, 2019 compared to $2,822 for the
nine months ended December 31, 2018.



We expect that our expenses, as well as our revenues, will continue to increase
over the current fiscal year as we work to expand sales and distribution of our
products.





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Liquidity and Capital Resources



As of December 31, 2019, we had current assets in the amount of $316,233,
consisting of cash in the amount of $15,616, accounts receivable of $26,879, and
inventory of $258,163. As of December 31, 2019, we had current liabilities of
$1,773,758. The current liabilities consisted of accounts payable of $199,772,
accrued interest payable of $48,922, notes payable net of discount of $754,164,
convertible debt net of discount in the amount of $240,942, and a derivative
liability of $484,358.



We also entered into an office lease April 1, 2019 which resulted in a long-term
asset and lease liabilities of $102,600 at December 31, 2019.



We have funded our operations to date through the issuance of common stock in
offerings exempt under Rule 506, as well as through the issuance of convertible
notes. During the nine months ended December 31, 2019:




· We issued a total of 24,416,666 shares of common stock to an investor for
total proceeds of $125,000.




Our ability to successfully execute our business plan is contingent upon us
obtaining additional financing and/or upon realizing sales revenue sufficient to
fund our ongoing expenses. Until we are able to sustain our ongoing operations
through sales revenue, we intend to fund operations through debt and/or equity
financing arrangements, which may be insufficient to fund our capital
expenditures, working capital, or other cash requirements. We do not have any
formal commitments or arrangements for the sales of stock or the advancement or
loan of funds at this time. There can be no assurance that such additional
financing will be available to us on acceptable terms, or at all.



Off Balance Sheet Arrangements



As of December 31, 2019, there were no off-balance sheet arrangements.



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