The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2021 and 2020 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual 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. See "Forward-Looking Statements."





Overview

Veroni Brands Corp. (formerly "Echo Sound Acquisition Corporation") ("Veroni" or the "Company") was incorporated on December 7, 2016, under the laws of the state of Delaware. The business purpose of the Company is to facilitate the sales and distribution of premium food products from Europe.

Prior to 2018, the Company's operations were limited to issuing shares to its original stockholders and effecting a change in control of the Company. In 2018, the Company commenced its principal operations. The Company originated as a blank check company and qualifies as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act which became law in April 2012.





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On January 30, 2018, the Company entered into a distribution agreement with FoodCare. Under the terms of the Distribution Agreement, the Company became the exclusive importer and distributor of FoodCare's products in the United States, Puerto Rico and the U.S. Virgin Islands (the "U.S. market"). FoodCare is a manufacturer and supplier of desserts, cereals, energy drinks and other beverage products. Notably, FoodCare manufactures the "Iron Energy" drink, a product sponsored by celebrity and former boxer Mike Tyson. The term of the Distribution Agreement was for a period of 10 years during which Veroni was to have the exclusive right to distribute FoodCare products within the U.S. market, so long as Veroni purchased the required quantity of product from FoodCare. The Company failed to meet its minimum purchase requirements under the FoodCare agreement in 2018 in part due to FoodCare's failure to provide promised marketing support. The Company terminated the agreement and relationship with FoodCare in 2020 due to the lack of its ability to support Veroni's brand marketing initiatives.

In summer 2018, the Company introduced the Iron Energy beverage to various retailers and distributors nationwide and since then has been working with many retailers and distributors to bring the product to market.

In January 2019, the Company expanded its product offerings and established a relationship with another manufacturer, Millano Group, a related party, to import chocolate products, as well as snacks, for distribution to major retailers throughout the United States. The Company recently became the vendor of record and successfully delivered these products to several national retailers.

In June 2021, the Company engaged Roadtex Transportation Corporation with 31 facilities nationwide that handles LTL logistics to better serve its customers throughout the United States. Management believes that this partnership will give the Company a tremendous opportunity to support its growth, as it will be able to store and ship products and fulfill its purchase orders received from its customers.

The Company has also established relationships with other European manufacturers that can provide a wide range of "panned" products, meaning those that are coated with a sugar syrup, chocolate, or both, such as nuts, raisins, pretzels, and fruit, as well as healthy snack items, and specialty confection goods.

For the fiscal year ended December 31, 2021, the Company's independent auditors issued a report raising substantial doubt about the Company's ability to continue as a going concern. For the year ending December 31, 2021, the Company has an accumulated deficit of $1,890,174 since its inception. As of December 31, 2021, the Company had a cash balance available of approximately $4,091 and a working capital deficit of $759,088, which is not sufficient to meet its operating requirements for the next twelve months. Therefore, the Company's ability to continue as a going concern is dependent on its ability to grow its revenue and generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its shareholders or other sources, as may be required. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to continue as a going concern.





Results of Operation

Twelve Months Ended December 31, 2021 vs. December 31, 2020





Revenues

Revenues for the twelve months ended December 31, 2021 were $3,205,063 as compared with $5,581,764 for the comparable prior year period, a change of $2,376,701, or 43%. In 2021, the Company's revenues were impacted by the effects of COVID-19 as the pandemic affected transportation logistics. The Company terminated two agreements to import private label chocolate brands products due to significant cost increase in the logistics. The decision was made mainly due to significant risk of cost increase of the product shipment and uncertainty around the logistics experienced due to the pandemic. The decision made with the intention to reduce the exposure to significant price increase and avoid selling the product at loss. During the fourth quarter of 2021 the Company shifted its focus to merger and acquisition opportunities while it continued to negotiate price adjustments of its product with its customers. Therefore, the Company experience significant reduction in revenue in 2021.





Cost of Sales

Cost of sales for the twelve months ended December 31, 2021 was $2,563,088 as compared with $4,426,433 for the comparable prior year period, a change of $1,863,345 or 42%. The decrease was primarily due to reduction of revenue and lower sales.





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Gross Profit

Gross profit for the twelve months ended December 31, 2021 was $641,975 as compared with $1,155,331 for the comparable prior year period, a change of $513,356 or 44%. The decrease was primarily due to reduction of revenue and lower sales.





Operating Expenses

Operating expenses for the twelve months ended December 31, 2021 were $1,562,722 as compared with $1,534,439 for the comparable prior year period, a change of $28,283 or 2%. The decrease was primarily due to lower sales resulting in a reduction of product import and shipping.





Net Loss

Our net loss for the twelve months ended December 31, 2021 was $706,566 as compared with a net loss of $379,108 for the comparable prior year period a change of $327,458 or 86%. The increase was primarily due to discontinued sales of private label chocolate to one of our vendors and damage caused to the products during transportation to the vendor's costumers.

General and Administrative Expenses

General and administrative expenses for the twelve months ended December 31, 2021 was $1,251,034 as compared with a $1,175,040 for the comparable prior year period a change of $75,994 or 6%. The increase was primarily due to stock based compensation offset by the reduction in part time employees and third-party services.

Liquidity and Capital Resources

As of December 31, 2021, the Company had cash and a working capital deficit of $4,091 and $759,088, respectively, as compared to $116,730 and $342,796, respectively, at December 31, 2020. During the year ended December 31, 2021, operating activities provided cash of $499,588, and financing activities used cash of $612,227. In comparison, during fiscal 2020, operating activities provided cash of $573,978 with $556,258 being used by financing activities.

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. As of December 31, 2021, the PPP Loan had a balance of $14,976.91. 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 December 31, 2021, a balance of $14,976.91 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").





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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%. As of December 31, 2021 and 2020, the Company owed $39,897 and $649,502, respectively, for advances on is receivables.

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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