UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





FORM 10-Q /A




(Mark One)





x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015





OR





o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR THE TRANSITION FROM _______ TO ________.





COMMISSION FILE NUMBER: 000-54300











(Exact Name of Small Business Issuer as Specified in its Charter)





Nevada

75-3260541(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer ID No.)





720 Evans Court, Suite103,Kelowna, BC Canada
V1X 6G4(Address of principal executive offices)
(Zip code)





Issuer's telephone number: (778) 478-9997









(Former name, former address and former fiscal year, if changed since last report.)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o





Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the previous 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No 





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.





Large accelerated filer
o

Accelerated Filer
oNon-accelerated filer
o

Smaller reporting company
x(Do not check if smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x


As of May 8, 2015, 98,471,371 shares of the Registrant's Common Stock were issued and outstanding.


1




EXPLANATORY NOTE
 Reliabrand, Inc. is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015, originally filed with the Securities and Exchange Commission (the “SEC”) on May 20, 2015 (the “Original Report”) to correct a typographical error within the date on the signature page of the Original Report. Other than correcting this typographical error, no changes are made to the Original Report.  This Amendment also includes current certifications as Exhibits 31.1, 31.2 and 32.1.
  Except as expressly set forth above, the Original Report has not been amended, updated or otherwise modified.  This Amendment does not reflect events occurring after the filing of the Original Report or update those disclosures regarding events that occurred subsequent to the end of the fiscal quarter ended March 31, 2015.  All other information is unchanged and reflects the disclosures made at the time of the filing of the Original Report.


RELIABRAND INC.





TABLE OF CONTENTS





Page No.PART I
FINANCIAL INFORMATION
3ITEM 1
Condensed Consolidated Financial Statements
3Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and June 30, 2014
3Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2015 and 2014
4Unaudited Condensed Consolidated Statement of Comprehensive Income
5Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014
6Notes to Condensed Consolidated Financial Statements (unaudited)
7ITEM 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23ITEM 3
Quantitative and Qualitative Disclosures about Market Risk
26ITEM 4T
Controls and Procedures
26PART II
OTHER INFORMATION
26ITEM 2
Unregistered Sales of Equity Securities and Use of Proceeds
26ITEM 6
Exhibits
27SIGNATURE

28








2







Reliabrand Inc.
 Condensed Consolidated Balance Sheet





Note


March 31,2015

$


June 30,2014

$(Unaudited)AssetsCurrent AssetsCash




$
8,628


$
188,763Accounts receivable, net


g.



13,767



58,054Inventory, net


h.



360,787



557,558Prepaid Expenses


i.



403,399



402,927Total Current Assets






786,581



1,207,302Property, plant and equipment, net of accumulated amortization


3.



80,862



134,348Intangibles, net of accumulated amortization


4.



1,122,818



1,166,446Other long term assets






5,278



-Total Assets





$
1,995,539


$
2,508,096






Note


March 31,2015

$


June 30,2014

$(Unaudited)Liabilities and Shareholders' EquityCurrent LiabilitiesAccounts payable and accrued liabilities


l.


$
234,698


$
81,923Taxes payable






-



5,955Due to shareholders/directors


8.



189,302



131,965Royalties Payable - related party


i.



18,890



25,300Current portion of Contingent Royalties Payable


c.



76,107



70,000Royalties Payable


i.



80,144



-Total Current Liabilities






599,141



315,143Contingent Royalties Payable


c.



586,800



592,907Total Liabilities






1,185,941



908,050Commitments & Contingencies






-



-EquityShare capital


6.



9,853



9,853Contributed and other surplus


6.



6,074,746



6,074,746Other comprehensive income






(22,635
))


-Retained earnings (deficit)






(5,252,366
)


(4,484,553
)Total Equity






809,598



1,600,046Total Liabilities and Equity





$
1,995,539


$
2,508,096







3




Reliabrand Inc.
 Condensed Consolidated Statement of Operations
 (Unaudited)


Three months ended


Nine months endedNote


March 31, 2015

$


March 31, 2014

$


March 31, 2015

$


March 31, 2014

$Revenues




$
43,461


$
77,401


$
345,646


$
269,233Cost of goods sold





51,839



28,860



301,647



125,460Gross profit





(8,378
)


48,541



43,999



143,773Operating expensesAdvertising and promotion


n.



5,994



21,785



141,031



163,550Amortization and Depreciation






18,314



28,513



89,503



85,216Accounting, Audit and Legal Fees






5,724



28,877



120,125



104,888Consulting Fees






21,001



16,762



41,283



111,766Consulting Fees - Related Party






44,341



100,245



220,222



287,176Rental


b.



6,569



17,171



42,062



30,038Selling, general and administrative






28,819



(5,346
)


127,238



119,392Shipping and warehouse


o.



-



19,358



8,817



28,175Stock Options Expense






-



14,000



-



21,000Consulting contract benefits - related party






2,719



3,142



8,939



10,065Total operating expenses






133,481



244,507



799,220



961,266Income (loss) from operations






(141,859
)


(195,966
)


(755,221
)


(817,493
)Non operating income and expensesInterest expense






(2,692
)


(2,083
)


(12,592
)


(6,043
)Net loss prior to income taxes






(144,551
)


(198,049
)


(767,813
)


(823,536
)Provision for income taxes






-



-



-



-Net loss





$
(144,551
)

$
(198,049
)

$
(767,813
)

$
(823,536
)




Net Loss Per Share - Basic and Diluted


(0.00
)


(0.00
)


(0.01
)


(0.01
)Weighted Average number of Common Shares Outstanding


98,471,371



98,264,229



98,471,371



94,333,151












4




Reliabrand Inc.
 Condensed Consolidated Statement of Comprehensive Income
 (Unaudited)


Three Months Ended


Nine Months EndedMarch 31,2015

$


March 31,2014

$


March 31,2015

$


March 31,2014

$Net loss

$
(144,551
)

$
(198,049
)

$
(767,813
)

$
(823,536
)Foreign currency translation loss


(33,019
)


-



(22,635
)


-Accumulated Comprehensive Income

$
(177,570
)

$
(198,049
)

$
(790,448
)

$
(823,536
)












5




Reliabrand Inc.
 Condensed Consolidated Statement of Cash Flows
 (Unaudited)


Nine months endedNote

March 31,2015

$


March 31,2014

$CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss) for the period


$
(767,813
)

$
(823,536
)Depreciation and amortization



97,113



128,685Stock issued for services



-



59,000Stock Option Expense



-



21,000Change in account receivables



44,287



(24,673
)Change in prepaid expenses



(473
)


(69,899
)Change in inventories



196,770



(294,390
)Change in accounts payable and accrued expenses



135,105



(70,257
)Change in royalties payable to related parties



(6,410
)


(21,654
)Change in royalties payable - current



86,251



-Change in amounts due to officers/stockholders - current



69,055



-NET CASH USED BY OPERATING ACTIVITIES



(146,115
)


(1,095,724
)CASH FLOWS FROM INVESTING ACTIVITIES:Capital additions



-



(6,049
)Change in long term deposits



(5,278
)


-Change in Contingent royalty payable



(6,107
)


-NET CASH USED BY INVESTING ACTIVITIES



(11,385
)


(6,049
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of notes payable



-



(22,656
)Proceeds of shareholder advances/notes



-



1,658Repayment of shareholder advances



-



(12,745
)Proceeds from issuance of common stock



-



1,430,001NET CASH PROVIDED BY FINANCING ACTIVITIES



-



1,396,258OTHER ACTIVITIES:Effect of exchange rate on cash and cash equivalents



(22,635
)


-Net cash increase (decreases) in cash and cash equivalents



(180,135
)


294,485Cash and cash equivalents at beginning of period



188,763



10,488Cash and cash equivalents at end of period


$
8,628


$
304,973



















6
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





1.     Significant Accounting Policiesa.              Nature of business/basis of preparationi. Interim periods




The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-K.  Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements.  In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the nine months ended March 31, 2015 are not necessarily indicative of results for any future period.  The condensed consolidated balance sheet at June 30, 2014 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2014.




During prior periods, the Company's gain/loss realized on the exchange of foreign currency became material.  As such, the company began to identify the amounts and report them in a separate statement of comprehensive income.




ii. Nature of Operations and Basis of Presentation




Reliabrand, Inc. (the Company, we, us, our, RLIA), formerly known as A&J Venture Capital Group, Inc., Alco Energy Corp., and Startale Group, Inc., is a Nevada corporation, formed February 22, 2007 with its head office in Kelowna, BC. Since inception we have had minimal operations and not earned any significant revenues to date. In the previous fiscal year ended June 30, 2014, we had commenced sales of our products, and have started our marketing program. We are in the process of establishing ourselves as a company that will focus its operations on developing the Adiri brand of products and sell them in the open markets.




Adiri was one of the first baby bottle manufacturers to offer BPA-free products when it was launched in 2007. The Adiri Natural Nurser bottle achieved more international design recognition than any other bottle of any kind in history, winning 15 internationally recognized product design competitions including tying for first place in the D&AD Design Award (known as the “Yellow Pencils”) in 2008 with the “Apple iPod Touch” from 23,000 international product submissions. The iconic and patented “natural breast shape” and “petal vent” are among the features that reduced colic and improved the infant feeding experiences which led to Adiri earning the prestigious Gold MDEA (Medical Design Excellence Award) along with the design firm Whipsaw, Inc. in 2008. We are currently developing a newer version of the baby bottle that Adiri was previously producing and it will be free of Estrogenic Activity (EA) as well as being BPA-free. The Company intends to aggressively promote and market the bottles and accessories and plans to secure retail distribution outlets for the bottles. The Company’s fiscal year-end is June 30.





7
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




1.     Significant Accounting Policies - continueda.              Nature of business/basis of preparation - continued




iii. Business Composition




On January 20, 2011, we entered into an Asset Purchase Agreement (the “Agreement”) with 0875505 B.C. Ltd. (“BC Ltd”), a British Columbia, Canadian company.  The Agreement provided for us to acquire multiple patents and trademarks acquired by BC Ltd through a receivership proceeding of Adiri, Inc. (Adiri”). Adiri was granted the initial patents and trademarks.  These patents and trademarks relate to a baby bottle and related components that BC Ltd expended approximately $1,500,000 in cash in acquiring and further development; as of December 31, 2010 the patents, and related expenses to acquire and maintain the patents, had a net book value, which approximates fair value, of $1,436,768.  As part of the Agreement, the Company also acquired $100,000 in cash, total note receivables and accrued interest in the amount of $63,296 owed by Watergeeks, Inc., a related party entity, to BC Ltd, resin inventory of $8,160, pacifier inventory of $6,000, product molds of $5,266, assumed an executory contract with a plastics manufacturer, and assumed accounts payable of approximately $45,176.  In exchange, at the closing on April 26, 2011 we issued 35,000,000 shares of our common stock, par value $.0001, post-split.




On March 16, 2012, we entered into a Share Purchase Agreement (the “agreement 2”) with 0875505 B.C. Ltd. (“BC Ltd”), a British Columbia, Canadian company to acquire the company through a share exchange. As noted above, we had already purchased all the assets and liabilities from the company in the above agreement. We decided to purchase the equity in BC Ltd because while we were beginning the process to transfer the patents and trademarks to our company name, we found the process to be very costly and very lengthy. Whereas if we acquired the BC Ltd as a wholly owned subsidiary we would own the patents and trademarks without completing the transfer process, which was most cost effective for our company with our limited cash reserves, and offered the quickest and most cost effective remedy to protect our interests and our shareholders assets. In exchange for the shares of stock of BC Ltd, we agreed to issue to the shareholders of BC Ltd 50,000 shares of our restricted common stock. We also acquired the remaining cash of approximately $3,705 ($3,675CAD).




b.              Principles of consolidationi. Consolidated - all intercompany transactions eliminated




The financial statements include the accounts of the parent Reliabrand Inc. and its wholly owned  subsidiary.  Our operations are treated as one operating segment. All inter-company balances and transactions have been eliminated.




c.              Use of estimatesi.            Estimates could be significant




The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income, expenses and related disclosures. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates.





8
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)


1.     Significant Accounting Policies - continued




d.             Recently issued accounting standards




Recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on our financial position, results of operations and cash flows, including the below:





In April 2015, the Financial Accountings Standards Board issued ASU 2015-03 Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs .  To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update.  This will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  The Company does not anticipate significant impact upon its financial statements at this time and will continue to evaluation the potential for such impact.







e.             Financial instrumentsi. Exposure to foreign currency exchange risk




The company does business internationally.  At March 31, 2015 the company had some exposure to foreign currency exchange risk.  The company purchases and sells its products in the international market and has exchange risk which is not being hedged.  The relationship of accounting transactions from its Canadian operations has given effect to recognition of other comprehensive income.  The Company continues to monitor these exchange relationships and will consider future plans to reduce any risk as it becomes warranted.  For the nine months ending March 31, 2015, the Company has recognized over $20,000 in translation adjustments from Canadian operations.




ii. Approach to managing liquidity risk




Liquidity risk is the risk that the company will not be able to meet its financial obligations as they become due.  Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price.




The Company anticipates that revenue or income for fiscal year 2015 may be limited, but based upon our historical data we expect to continue to show growth. The Company also expects to continue to incur substantial expenses relating to its marketing and sales efforts. As a result, the Company expects to incur losses over the next year unless it is able to realize additional revenues under any current or future agreements. The timing and amounts of such revenues, if any, cannot be predicted with certainty. Accordingly, results of operations for any period may be unrelated to the results of operations for any other period.










9
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





1.     Significant Accounting Policies - continued





e.             Financial instruments - continued




The Company will likely need to raise and is pursuing additional funds through strategic collaborations, public or private equity or debt financing, or other funding sources. This funding may not be available on acceptable terms, or at all, and may be dilutive to shareholder interests. If sufficient capital is not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its product offerings, any of which could have a material adverse effect on its business. If the Company is not able to secure additional capital by the end of its fiscal year, it may be forced to terminate operations altogether in 2015.




f.              Foreign currency translation




The condensed consolidated interim financial statements are presented in United States dollars (USD). We have determined that our functional currency is CDN dollars. Monetary assets and liabilities are re-measured using the foreign exchange rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders’ equity accounts and furniture and equipment are translated by using historical exchange rates. Any net adjustment is shown in the consolidated statements of comprehensive income.




g.             Receivablesi. No allowance required - all collectible




The company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required.




h.             Inventoriesi. Valuation and costing method




The only component of inventory is finished goods inventory, valued on a first in first out basis, and includes production cost, product freight in, and packaging costs. Slow moving and obsolete inventories are written down based on a comparison of on-hand quantities to historical and projected usages. Additionally, reserves for non-cancelable open purchase orders for components the Company is obligated to purchase in excess of projected usage, or for open purchase orders where the market price is lower than the purchase order price, if any, are recorded as other accrued expenses on the balance sheet. As of March 31, 2015 and June 30, 2014, we did not have any such accrued expenses.




i.              Prepaid expensesi. Composition




Prepaid expenses consist of deposit amounts to manufacturers which are deferred and matched against actual receipt of product.




As of March 31, 2015, the Company has placed deposits with its manufacturer for product totaling approximately $403,000. These deposits represent 50% down payment and the Company expects to pay the remaining balance as the products are completed.  The initial product received from the manufacturer was substandard, therefore the balance owing is currently under dispute.





10
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




1.     Significant Accounting Policies - continued




i.              Prepaid expenses - continued




ii. Other Deposits




Prepaid deposits consist of payments made for rent in the amount of $3,677 and utilities in the amount of $1,601 for the warehouse space and are considered long term.




j.              Property, plant and equipmenti. Assets including leasehold improvements




Property, plant and equipment is stated at cost.  Depreciation is provided for over the estimated useful lives of the respective assets, using the percentage of declining balance method.  Estimated useful lives range from 5 to 15 years.  Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset or the life of the lease.




k.            Other identifiable intangiblesi. Patents and intellectual property rights




Patents and intellectual property rights are recorded at cost and are being amortized on a straight-line basis over the legal life of the patent.  The cost of the patents and intellectual property does not reflect their present or future value and the amount ultimately recoverable is dependent upon the successful commercialization of the related products.  Management reviews the unamortized balance on an annual basis and recognizes any impairment in carrying value in the year of impairment.




l.             Payablesi. Royalty payments




The company has agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts.  Royalty payables are accrued based upon historical sales rates adjusted for current sales trends.




Total royalty expenses, net of royalty income, are included in cost of goods sold and amounted to $ 70,188 for the nine months ended March 31, 2015 and $52,293 for the nine months ended March 31, 2014.




m.           Revenue recognition




Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) transfer of goods has been completed or services have been rendered; (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Thus, we generally recognize sales revenue when shipment of the purchased product has occurred. Cash payments received in advance are recorded as deferred revenue. We currently permit our customers to return or exchange defective products. We have analyzed our quality control procedures and feel that our main exposure is from damages in shipping. Accordingly we do not need to establish a reserve for returns at this time. We will continue to analyze this each period and implement one if the need arises.










11
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




1.     Significant Accounting Policies - continued




n.            Advertising cost




The Company expenses advertising costs when incurred. During the nine months ended March 31, 2015 and 2014, we had $141,031 and $163,550 in expenditures on advertising, respectively.




o.             Shipping and handling cost




Net shipping and handling costs of $8,817 and $14,754 for the nine months ended March 31, 2015 and 2014, respectively.




p.             Income taxes





The net operating loss carryforward is the only component of deferred tax assets for income tax purposes as of June 30, 2014, of approximately $58,435 for Federal USA income taxes and $823,128 for Canadian income taxes which was reduced to zero after considering the valuation allowance of $58,435 and $823,128, respectively, since there is no assurance of future taxable income.  For the three and nine months ended March 31, 2015, the approximate additional losses increased by $144,000 and $737,000, respectively.  These losses are expected to be fully reserved against for deferred tax purposes.  As of  June 30, 2014 the Company’s expected deferred tax asset and the offsetting valuation allowance was approximately $267,000, and as of March 31, 2015 the expected deferred tax asset and offsetting valuation allowance was approximately $350,000>





These loss carryovers could be limited under the Internal Revenue Code should a significant change in ownership occur.  For US Federal income taxes the expected rate is 34%, while for Canadian income taxes the expected rate is 25%.  We currently have four years of Federal USA tax returns that are subject to examination, including the fiscal years ended June 30, 2014, 2013, 2012, and 2011, based on their filing dates by taxing authorities. We currently have three years of Canadian tax returns that are subject to examination, including the fiscal years ended June 30, 2014, 2013, 2012 and 2011, based on their filing dates by taxing authorities.





We have adjusted our income tax provision from last year due to the fact that in October 2010, our company relocated to Kelowna, British Columbia, Canada. We have adjusted our figures accordingly, and show the amounts that are allocated to United States Income Tax and Canada Income Tax carryforwards of our net loss. We currently have no uncertainty of the tax positions that we have taken and believe that we can defend them to any tax jurisdiction. In February 2015, the Canada Revenue Agency, began an audit of a purchase agreement which form 2011 concerning the fair value of the patents obtained by the Company.  This is expected to be a lengthy process and the outcome is not known with any certainty at this time.  The Company expects to prevail at this time, but does risk that the value ascribed to the patents could be impaired by this investigation.




2.     Going concern




These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the company will continue to operate in the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. We have sustained operating losses since inception, which raises substantial doubt about the Company’s ability to continue as a going concern.




As of March 31, 2015 we have a working capital surplus of $187,440 and accumulated deficit of $5,252,366. During the nine months ended March 31, 2015, we had a net loss of $767,813 and cash used in operating activities of $146,115. The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Management’s plan is to aggressively pursue its present business plan. Since inception we have funded our operations through the issuance of common stock and related party loans and advances, and will seek additional debt or equity financing as required. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.





12
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)







3.     Property, plant and equipment




Property, plant and equipment consist of the following:


Cost

$


Accumulated

Depreciation

$


March 31

2014

Net Book Value

$


June 30

2014

Net Book Value

$Computer equipment

$
7,279


$
(3,777
)

$
3,502


$
4,070Furniture & Fixtures


103,526



(69,340
)


34,186



47,448Product Molds


173,883



(144,277
)


29,606



57,603Leasehold Improvements


46,855



(33,287
)


13,568



25,227Total

$
331,543


$
(250,680
)

$
80,862


$
134,348




4.     Intellectual Properties and Patents




Other assets consist of the following:




Cost

$


March 31

2014

Net Book Value

$


June 30

2014

Net Book Value

$Adiri Patents

$
800,552


$
800,552


$
800,552Adiri Trademarks


359,375



359,375



359,375Adiri patent legal fees


43,828



43,828



43,828Plastic Technology Properties


100,000



100,000



100,000Sippy Straw technology


25,000



25,000



25,000Less: Accumulated Amortization


(205,937
)


(205,937
)


(162,309
)Total

$
1,122,818


$
1,122,818


$
1,166,446
  a.            Asset purchase agreement




On January 2, 2014, we entered into an agreement to purchase certain assets own by an unrelated company in exchange for 250,000 shares of our restricted common stock valued at $0.10 or $25,000, plus a royalty of $0.31 per unit sold if the retail price is below $19.95, and $0.41 per unit sold if the retail price is $19.95 or more. If the Company decides in the future to not utilize the assets any further, the seller has the first right of refusal to repurchase them back for $37,500. The agreement also contains a non-competition clause for the seller. To date there have not been any asset sales.




5.     Commitmentsa.             Minimum salaries and incentive bonuses




The company has employment agreements with certain officers.  Those agreements provide for minimum salary levels as well as for incentive bonuses which are payable if specified performance goals are attained.




b.             Annual rent plus additional rent




On April 1, 2013 the Company entered into a two year term lease agreement of an office and warehouse space located in Kelowna, BC.  The lease commenced on May 1, 2013 and requires a monthly payment of approximately $3,600 including related taxes and a $3,623 security deposit. We paid the first and security deposit on January 30, 2013. On January 2, 2014, the company entered into an addendum to lease additional space for an additional monthly payment of $2,454 CDN. Rent expense was $42,062 and $30,038 for the nine month periods ended March 31, 2015 and 2014, respectively. In the three months ended September 30, 2013, we received certain credits from the lessor for various lack of performance issues totaling $9,809 as an offset of rental payments. As part of the lease we agreed to pay the landlord for leasehold improvements made to the offices and warehouse, work was completed as of June 30, 2013. We capitalized $46,855 in leasehold improvements and began depreciating them according to our policies. On July 26, 2013, in full settlement, we also paid the balance owed for these improvements in shares of our common stock (Note 3).  
 Upon expiration of the terms of the lease, the Company entered into an amended agreement with the lessor on a month-to-month basis (Note 10)





13
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




5.     Commitments - continued







c.             Royalty agreements




The company has entered into agreements which provide for royalty payments based on a percentage of net sales of certain products.  Royalty expense under these agreements was $ 70,188 for the nine months ended March 31, 2015 $52,293 for the nine months ended March 31, 2014




6.     Shareholders' equitya.             Stock Shares - Authorized




The Company has 150,000,000 common shares authorized at a par value of $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share. On April 26, 2012 the Company approved and in December 2012 the Company increased its authorized shares of common stock from 100,000,000 to 150,000,000. All common stock shares have equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all the directors of the Company. There is currently only three designated classes of preferred shares, “A,” “B,” “C,” see below. The holders of the preferred stock shall have such rights, preferences and privileges as may be determined by the Board of Director’s prior to the issuance of such shares. The preferred stock may be issued in such series as are designated by the Board of Director’s and the Board of Director’s may fix the number of authorized shares of preferred stock for each series and the rights, preferences, and privileges of each series of preferred stock. As of the periods ended March 31, 2015 and June 30, 2014, there were 98,471,371 and 98,471,371 shares of our common stock issued and outstanding, respectively. As of the periods ended March 31, 2015 and June 30, 2014, there were 10,000 shares of our preferred “A” stock issued and outstanding. As of the periods ended March 31, 2015 and June 30, 2014, there were no shares of our preferred “B” stock issued and outstanding. As of the periods ended March 31, 2015 and June 30, 2014, there were 50,000 shares of our preferred “C” stock issued and outstanding.




b.              Common Shares - Issued and Outstanding




For the period ended September 30, 2014, the Company continued to sell a private placement at $5,000 per unit. A unit consists of 50,000 shares of our restricted common stock and a royalty agreement for pro-rata share of $1.00 per sale of a specific future product, up to the initial investment, after which this will convert to a 2.5% perpetual royalty on the same product. In connection with this royalty agreement, for the nine months ended March 31, 2014, the Company recorded an additional contingent liability for this agreement in the amount of $124,813 and is based upon projections of our sales on these products. For the period ended March 31, 2015, the Company has not issued any further units, consisting of shares of our restricted common stock and a royalty agreement (Note 8).





14
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





6.     Shareholders' equity - continued


c.            Preferred Stock - Series "A"




On February 26, 2010, we filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series A Preferred Stock (the "Certificate of Designations") designating ten thousand (10,000) of the Company's previously authorized preferred stock.




The 10,000 Series A Preferred Stock shall have an aggregate voting power of 45% of the combined voting power of the entire Company’s shares, Common Stock and Preferred Stock as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote.




Without the vote or consent of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding, the Company may not (i) authorize, create or issue, or increase the authorized number of shares of, any class or series of capital stock ranking prior to or on a parity with the Series A Preferred Stock, (ii) authorize, create or issue any class or series of common stock of the Company other than the Common Stock, (iii) authorize any reclassification of the Series A Preferred Stock, (iv) authorize, create or issue any securities convertible into or exercisable for capital stock prohibited by (i) or (ii), (v) amend this Certificate of Designations or (vi) enter into any merger or reorganization, or disposal of assets involving 20% of the total capitalization of the Company.




Subject to the rights of the holders of any other series of Preferred Stock ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation and any other class or series of capital stock of the Company ranking senior to or on a parity with the Series A Preferred Stock with respect to liquidation, in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of record of the issued and outstanding shares of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company available for distribution to the holders of shares of Series A Preferred Stock, prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock and any other series of Preferred Stock ranking junior to the Series A Preferred Stock with respect to liquidation.




The holders of the Series A Preferred Stock shall not be entitled to receive dividends per share of Series A Preferred Stock.  The Company shall have no rights to redeem Series A Preferred Stock.




On March 1, 2010, we granted and issued our former President 100 series A preferred stock shares with a value of $10,000 for consulting services rendered, and the expense was included in consulting fees in the statements of operations. On September 18, 2010, these shares were returned and cancelled as per the term of the Binding Letter of Intent with our former President.




On May 2, 2011, we  authorized an issue to our President 10,000 shares of Class A Preferred Stock in exchange for him returning and cancelling nine million (9,000,000) shares of our common stock. This Class A preferred stock has the same terms and conditions as discussed above.















15
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




6.     Shareholders' equity - continued




d.            Preferred Stock - Series "B"




On March 15, 2014, we filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series B Preferred Stock (the "Certificate of Designations") designating one hundred fifty thousand (150,000) of the Company's previously authorized preferred stock.




The 150,000 Series B Preferred Stock shall accrue a dividend of $4.00 per share per annum as designated by the board of directors. These shares shall be convertible into shares of common stock at the ratio of 200 shares of common stock for each share of preferred “B” for a period of 24 months from the date of issuance. Each holder of the Series B Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, in the equivalent number of the completed converted shares, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote.




e.            Preferred Stock - Series "C"




On March 15, 2014, we filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series C Preferred Stock (the "Certificate of Designations") designating one hundred thousand (100,000) of the Company's previously authorized preferred stock.




The 100,000 Series C Preferred Stock shall accrue annually interest at eight percent (8%) per annum as designated by the board of directors, and shall not accrue dividends. These shares shall be convertible into shares of common stock at the ratio of 100 shares of common stock for each share of preferred “C” for a period of 24 months from the date of issuance. For every three (3) shares of converted common stock the holder shall receive one common stock warrant, with an exercise price of $0.10 per share for a period of twenty four months after the date of conversion. Each holder of the Series C Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, in the equivalent number of the completed converted shares, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Company, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote.




As of the period ended March 31, 2015, the Company has 50,000 shares of our preferred Series “C” stock issued and outstanding.




7.     Stock based compensationa.            2013 Stock Option Plan




Our board of directors adopted and approved our 2013 Stock option Plan (“Plan”) on January 18, 2013, which provides for the granting and issuance of up to 30 million (30,000,000) shares of our common stock.




Our board of directors administers our Plan, however, they may delegate this authority to a committee formed to perform the administration function of the Plan. The board of directors or a committee of the board has the authority to construe and interpret provisions of the Plan as well as to determine the terms of an award. Our board of directors may amend or modify the Plan at any time. However, no amendment or modification shall adversely affect the rights and obligations with respect to outstanding awards unless the holder consents to that amendment or modification.





16
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





7.     Stock based compensation - continueda.             2013 Stock Option Plan - continued




The Plan permits us to grant Non-qualified stock options to our employees, directors and consultants.  The options issued under this Plan are intended to be Non-qualified Stock Options in full compliance with Code Section 409A.




The duration of a stock option granted under our Plan cannot exceed ten years.  The exercise price of an incentive stock option cannot be less than 100% of the fair market value of the common stock on the date of grant.




The Plan administrator determines the term of stock options granted under our Plan, up to a maximum of ten years, except in the case of certain events, as described below.  Unless the terms of an optionee's stock option agreement provide otherwise, if an optionee's relationship with us ceases for any reason other than disability or death, the optionee may exercise any vested options for a period of ninety days following the cessation of service.  If an optionee's service relationship with us ceases due to disability or death the optionee or a beneficiary may exercise any vested options for a period of 12 months in the event of disability or death.




Unless the Plan administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order.  An optionee may designate a beneficiary, however, who may exercise the option following the optionee's death.




During the year ended June 30, 2013, the Company granted 8,381,150 to our current President, the options become fully vested upon grant and contained an exercise price of $0.10 per share. On November 22, 2013, we granted 750,000 stock options to a consultant at an exercise price of $0.10 per share, and these options will expire five years from the grant date, and will vest as follows, upon signing the agreement 50,000 options will vest, and then at the end of each three month period, 100,000 options, per the agreement (Note 8).On February 28, 2014, the consultant and the Company terminated the agreement that granted these options and they were forfeited. As of March 31, 2015 and June 30, 2014, 21,618,850 options were available for future grant.




The value of employee and non-employee stock warrants granted during the years ended June 30, 2014 and 2014 was estimated using the Black-Scholes model with the following assumptions:




Expected volatility (based on historical volatility)


501.71Expected Dividends

noneExpected term in years


10Risk free rate


2.03




The expected volatility assumption was based upon historical stock price volatility measured on a daily basis. The risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the Company’s employee stock options. The dividend yield assumption is based on our history and expectation of dividend payments.





17
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





7.     Stock based compensation - continueda.            2013 Stock Option Plan - continued


A summary of the options granted to employees and non-employees under the plan and changes during the periods ended March 31, 2015 and June 30, 2014 is presented below:




Number of Options


Weighted Average Exercise Price


Weighted AverageRemaining Contractual Terms (In Years)


Aggregate Intrinsic ValueBalance at July 1, 2013

8,381,150


$
0.10



8.58

$
-Granted

750,000



0.10



5.00


-Exercised

-



-



-


-Forfeited or expired

(750,000
)


0.10



5.00


-Balance and Exercisable at June 30, 2014

8,381,150



0.10



7.58


-Weighted average fair value of options granted during the period ended June 30, 2014

-


$
0.10



-

$
-







Number of Options


Weighted Average Exercise Price


Weighted Average Remaining Contractual Terms (In Years)

Aggregate Intrinsic ValueBalance at July 1, 2014

8,381,150


$
0.10



7.58

$
-Granted

-



-



-


-Exercised

-



-



-


-Forfeited or expired

-



-



-


-Balance and Exercisable at March 31, 2015

8,381,150



0.10



6.83


-Weighted average fair value of options granted during the period ended March 31, 2015

-


$
0.10



-

$
-






























18
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




7.     Stock based compensation - continueda.             2013 Stock Option Plan - continued






Range of Exercise Price


Outstanding at March 31, 2015


Weighted Average Remaining Contractual Life (In Years)


Weighted Average Exercise Price


Intrinsic Value


Exercisable at March 31, 2015


Weighted Average Exercise Price


Aggregate Intrinsic ValueOptions Outstanding





Options Exercisable$
0.10


$
8,381,150


$
6.83


$
0.10


$
-


$
8,381,150


$
0.10


$
-




The total value of stock options granted during the periods ended March 31, 2015 and June 30, 2014, was none, respectively. For the nine months ended March 31, 2015 and 2014, the Company recorded no expense in stock option expense relating to stock option grants, and did not have any expense, respectively, in stock compensation – officers on our statement of operations.




At March 31, 2015 there was no unrecognized compensation cost related to stock options granted under the plan.




8.     Related party transactionsa.            Notes Payable to Shareholders




On March 1, 2012 the Company borrowed $151,410 (CDN$150,000) from one of the Company’s shareholders on an uncollateralized, non-interest bearing, demand note that matures on February 28, 2013. On May 17, 2012, we converted $56,156 USD of the above debt’s principal to shares of our restricted common stock at $0.04 per share. On December 14, 2012, we converted $75,137 USD, or 751,368 shares of our restricted common stock, of the above debt’s principal into shares of our restricted common stock at $0.10 per share. As of March 31, 2015 and June 30, 2014, the remaining balance of $20,117 is outstanding.




On October 23, 2012 the Company borrowed $20,130 (CDN$20,000) from a company owned by one of the Company’s shareholders on an uncollateralized, demand note, bearing a 8% interest rate per annum and matures on January 14, 2013. We accrued $403 in interest expense for the nine months ended March 31, 2015 and 2014, in connection with this note, and the principal and interest are outstanding as of March 31, 2015 and June 30, 2014.




On December 14, 2012 the Company received $50,000 USD from the same company as above owned by one of the Company’s shareholders. Initially this transaction was recorded as a subscription agreement. Subsequent to June 30, 2013 the parties renegotiated the agreement and the funds were reclassified as an uncollateralized, demand note, bearing a 8% interest rate per annum and is payable upon demand of the note holder. The related interest was accrued in the current year. As of the nine months ended March 31, 2015 and 2014, we accrued $1,000 in interest expense in connection with this note, and the principal and interest are outstanding as of March 31, 2015 and June 30, 2014.










19
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)




8.     Related party transactionsa.            Notes Payable to Shareholders


which shall be applied to the repayment of this Note, including principal and accrued interest.  Upon satisfaction of this Note, the note holder shall be entitled to a 2.5% royalty on future sales of the Company’s products through WalMart Canada in perpetuity. During the years ended June 30, 2014 and 2013, we accrued $289 and $1,500, respectively, in interest expense in connection with this note, and on June 21, 2013, we converted $50,000 USD, or 500,000 shares of our restricted common stock, of the above debt’s principal into shares of our restricted common stock at $0.10 per share. As of June 30, 2014, we had no remaining balance outstanding.




On April 26, 2013 the Company borrowed $30,000 USD from the same company as above owned by one of the Company’s shareholders on an uncollateralized, demand note, bearing a 8% interest rate per annum and is payable upon demand of the note holder. As of March 31, 2015 and 2014, we accrued $600 in interest expense in connection with this note. As of March 31, 2015 and June 30, 2014 the entire principal amount and interest are outstanding.




On June 26, 2013 the Company borrowed $23,300 USD (CDN $24,500) from the same company as above owned by one of the Company’s shareholders on an uncollateralized, demand note, bearing a 8% interest rate per annum and is payable upon demand of the note holder. As of June 30, 2014 and 2013, we accrued $321 and $21, respectively, in interest expense in connection with this note. On August 2013, we repaid the entire balance due. As of March 31, 2015 and June 30, 2014, only the interest accrued is outstanding.




March 31

2015

$


June 30

2014

$Uncollateralized note to a related entity bearing no interest per annum which matured on February 28, 2013

$
20,117


$
20,117Uncollateralized note to a related entity bearing 8% interest per annum


50,000



50,000Uncollateralized note to a related entity bearing 8% interest per annum


30,000



30,000Uncollateralized note to a related entity bearing 8% interest per annum which matured January 14, 2013

$
20,130


$
20,130




All notes are payable on demand and appropriately classified as current liabilities. Total interest payable related to the notes amounts to $23,083 as of March 31, 2015 and 11.717 as of June 30, 2104.  Accrued interest is classified as an accrued expense.




b.            Related party transactions and balances




On January 18, 2013, the Company entered into a consulting agreement with the son of our current President for his consulting services at a rate of $47,300 USD per annum.  The agreement will be in effect for a period of twelve months, ending on December 31, 2013, and is automatically renewed for successive twelve month terms.  The agreement may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. On March 1, 2014, the Company entered into a new consulting agreement with the same son for his consulting services at a rate of $52,000 USD per annum.  The agreement terminated on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company. For the nine months ended March 31, 2015 and 2014, we recorded $16,000 and $37,621, respectively, in consulting fees – related party expense to this individual. For the nine months ended March 31, 2015 and 2014, the Company accrued a total of $10,484 and $6,720 in royalties payable, respectively.





20
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)





8.     Related party transactions - continued


b.            Related party transactions and balances - continued




On January 18, 2013, the Company entered into a consulting agreement with another son of our current President for his consulting services at a rate of $47,300 USD per annum.  The agreement will be in effect for a period of twelve months, ending on December 31, 2013, and is automatically renewed for successive twelve month terms.  The agreement may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. On March 1, 2014, the Company entered into a new consulting agreement with the same son for his consulting services at a rate of $52,000 USD per annum.  The agreement terminated on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company.  For the nine months ended March 31, 2015 and 2014, we recorded $28,000 and $39,503, respectively, in consulting fees – related party expense to this individual. For the nine months ended March 31, 2015 and 2014, the Company accrued a total of $10,484 and $4,785 in royalties payable, respectively.




On January 18, 2013, the Company entered into a consulting agreement with a third son of our current President for his consulting services at a rate of $47,300 USD per annum.  The agreement will be in effect for a period of twelve months, ending on December 31, 2013, and is automatically renewed for successive twelve month terms.  The agreement may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. On March 1, 2014, the Company entered into a new consulting agreement with the same son for his consulting services at a rate of $52,000 USD per annum.  The agreement terminated on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company.. For the nine months ended March 31, 2015 and 2014, we recorded $28,000 and $39,592, respectively, in consulting fees – related party expense to this individual. For the nine three months ended March 31, 2015 and 2014, the Company accrued a total of $10,484 and $4,785 in royalties payable, respectively.




On January 18, 2013, the Company entered into a consulting agreement with a fourth son of our current President, for his consulting services at a rate of $35,200 USD per annum.  The agreement will be in effect for a period of twelve months, ending on December 31, 2013, and is automatically renewed for successive twelve month terms.  The agreement may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. On March 1, 2014, the Company entered into a new consulting agreement with the same son for his consulting services at a rate of $45,000 USD per annum.  The agreement terminated on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company.  For the nine months ended March 31, 2015 and 2014, we recorded $25,000 and $30,918, respectively, in consulting fees – related party expense to this individual. For the nine months ended March 31, 2015 and 2014, the Company accrued a total of $10,484 and $4,785 in royalties payable, respectively.










21
 
 Reliabrand Inc.
 Notes to Condensed Consolidated Interim Financial Statements
 For the three and nine months ended March 31, 2015 and 2014
 (Unaudited)


8.     Related party transactions - continued
 b.            Related party transactions and balances - continued




On May 1, 2011, the Company entered into a consulting agreement with a company controlled by our President and Chief Executive Officer, for his consulting services at a rate of $10,000 per month, and he received a 3.00% royalty on all gross sales of the Company. On January 18, 2013, the Company entered into an amendment of the above consulting agreement, dated May 1, 2011, with the same Company as above, the prior agreement remains in force except for the following provisions, his consulting services will be at a rate of $11,000 per month, and he will also be granted an option to purchase an amount of shares to represent 10% of our issued and outstanding common stock as of December 31st of the prior year. On March 1, 2014, the Company entered into a second amendment of the above consulting agreement, dated May 1, 2011, with the same Company as above, the prior agreement remains in force except for the following provisions, his consulting services will be at a rate of $12,100 per month, and he will also be granted an option to purchase an amount of shares to represent 10% of our issued and outstanding common stock as of December 31st of the prior year. On March 1, 2014 the President received a second option to purchase 9,722,387 shares of the Company’s common stock for $0.10 per share (Note 11). For the nine months ended March 31, 2015 and 2014, we recorded $109,000 and $102,300, respectively, in consulting fees – related party expense in connection with these contracts. For the nine months ended March 31, 2015 and 2014, the Company accrued a total of $12,580 and $5,742 in royalties payable, respectively.




On September 1, 2013, the Company entered into a consulting agreement with a son of a current shareholder, for his consulting services at a rate of $34,171 USD ($36,000 CAD) per annum, and we will issue him 20,000 shares of our restricted common stock per month of service rendered.  The agreement terminated on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  For the nine months ended March 31, 2015 and 2014 we recorded $11,691 and $19,683 in consulting fees – related party expense to this individual. For the periods March 31, 2015 and 2014, we paid this individual his fees in cash and stock, including $11,691 and $15,683 paid in cash and none and $4,000 paid in shares of common stock, respectively.




c.            Shareholder Advances




In the nine month period ended March 31, 2015, our current President/Shareholder paid operating bills on behalf of the Company totaling $23,370, and was not repaid. In the nine month period ended March 31, 2014, our current President paid operating bills on behalf of the Company totaling $1,658, and was repaid $1,658 in cash.




9.     Reclassifications




Certain amounts in the period ended March 31, 2014 financial statements have been reclassified to conform to the current period ended March 31, 2015 presentation.




10.   Subsequent Events




In accordance with ASC 855-10 “Subsequent Events”,the Company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the date the financial statements were issued and found there were none  that warranted disclosure, except for the below:




In April 2015, the lease agreement for the Company’s warehouse space expired.  To settle the final month’s lease payment, the Company utilized its lease and utility deposits, as well as gave up the racking system it had built within the warehouse. The Company and lessor agreed to a 90-day extension.  In lieu of cash, lease payments will be settled with common shares for the 90-day period.  The expected lease payments are expected to be $3,600 CDN per month, but the terms and conditions of a long-term lease are still being negotiated.




In May 2015, legal proceedings were brought against the Company by a shareholder for settlement of outstanding and unpaid royalties and interest of less than $10,000.  Because the lawsuit was filed in British Columbia, the Company currently disagrees with any and all claims due to jurisdictional issues.




22


ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations





You should read this section in conjunction with our financial statements and the related notes included in this Form 10-Q.  Some of the information contained in this section or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements.





The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.





The following discussion and analysis of the Company’s financial condition and results of operations are based on the Company’s financial statements, which the Company has prepared in accordance with U.S. generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.





Plan of Operations





Presently, the Company is selling the baby bottles through its online website and has begun limited retail distribution as well.  The Company is presently in discussion with distributors of baby bottles and related products in over 20 countries worldwide.   The Company has entered into agreements with Walmart of Canada to sell the Company’s products in the 338 Walmart stores in Canada.  The Company is also in the process of entering into additional agreements with distributors and retailers to sell its products domestically and internationally.  The Company also sells its products through its website, www.reliabrand.com.





Overall, during the next 12 months, we cannot predict accurately the amount of capital that we will need to accomplish our plan of operations. The capital needed will vary depending on the projects that we seek.  If during the next 12 months, we are unsuccessful in effectuating our plan of operations as described above, we expect to incur total expenditures of at least $1,000,000. In this regard and during such period, we anticipate spending $100,000 on professional fees attributable to fulfilling our reporting obligations under the federal securities laws and $50,000 on general administrative costs and expenditures associated with complying with reporting obligations.  We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing plan and operations. We believe that debt financing will not be an alternative for funding the marketing plan. We do not have any agreements or arrangements in place for any future equity financing event. If we are required to raise additional funds, substantial dilution may result to existing shareholders.





Results of Operations for the Three Months Ended March 31, 2015 and the Three Months Ended March 31, 2014





We have revenue of $43,461 for the period ended March 31, 2015 compared to revenue of $77,401 for the period ended March 31, 2014. The decrease in our revenue can be attributed to delays in obtaining our product due to a change of manufacturer. We anticipate that sales will continue to increase as we continue to pursue our business plan, and develop additional sales of our product line.





As of March 31, 2015, we had total assets of $1,995,539 and total liabilities of $1,185,941 compared to total assets of $2,508,096 and total liabilities of $908,050 as of June 30, 2014. The main changes in our balance sheet items are attributable to an increase in accounts payable and sums due to related parties for advances made to the Company.





During the three months ended March 31, 2015, we incurred operating expenses in the amount of $133,481. These operating expenses were comprised of consulting fees to related parties, consulting contract benefits, accounting, auditing and legal fees, selling, general and administrative expenses, consulting fees, rent expenses and amortization and depreciation compared to operating expenses of $244,507 for the three months ended March 31, 2014.  The decrease in expenses is because we ceased paying certain consultants that the Company had previously utilized. For the three months ended March 31, 2015, we paid consulting fees of $44,341 to related parties compared to consulting fees to related parties of $100,245 for the three months ended March 31, 2014.





23


ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations- continued





For the three months ended March 31, 2015, we paid rent expense of $6,569 compared to rent expense of $17,171 for the three months ended March 31, 2014.





We have begun generating revenues but are dependent upon obtaining financing to pursue marketing and distribution activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.





Results of Operations for the Nine Months Ended March 31, 2015 and the Nine Months Ended March 31, 2014





During the nine months ended March 31, 2015, we incurred operating expenses in the amount of $799,220 and had revenues of $345,646. These operating expenses were comprised of accounting and audit fees, legal fees, general and management expenses, rent expense, and amortization expense, compared to operating expenses of $961,266 and revenues of $269,233 for the nine months ended March 31, 2014. The decrease in expenses is due to the Company pursuing its business plan but trimming some expenses for additional consultants to assist with operations, additional travel and marketing to attend trade shows and meet with potential retailers.





For the nine months ended March 31, 2015, we paid related party consulting fees of $220,222 to sons of the Company’s President and an entity controlled by our current President compared to consulting fees to the same related parties of $287,176 for the nine months ended March 31, 2014.





Liquidity and Capital Resources





As of March 31, 2015, the Company had a cash balance of $8,628, and as of June 30, 2014, the Company had a cash balance of $188,763.





For the nine months ended March 31, 2015, the Company issued no shares nor raised any capital.





If the Company is not successful in generating sufficient liquidity from operations or in raising sufficient capital resources on terms acceptable to it, this could have a material adverse effect on its business, results of operations liquidity and financial condition.





The Company presently does not have any available credit, bank financing or other external sources of liquidity. Due to its brief history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the Company will be successful in obtaining additional funding.





The Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of the Company’s common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company’s common stock. If additional financing is not available or is not available on acceptable terms, the Company will have to curtail its operations.





Critical Accounting Policies





Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the recognition of revenues and expenses for the reporting periods. These estimates and assumptions are affected by management's application of accounting policies.








24





ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued





Contractual Obligations





On April 1, 2013, the Company entered into a two year term lease agreement for office and warehouse space located in Kelowna, BC.  The lease commenced on May 1, 2013 and the monthly rental payment is approximately $3,600 including taxes. Rent


expense was $42,062 and $30,038 for the nine months ended March 31, 2015 and 2014, respectively. In the six months ended December 31, 2013, we received certain credits from the landlord for various lack of performance issues totaling $9,809 as an offset of rental payments. As part of the lease, we agreed to pay the landlord for leasehold improvements made to the offices and warehouse and the work was completed as of June 30, 2013. We capitalized $46,855 in leasehold improvements and began depreciating them according to our policies. On July 26, 2013, we paid the balance owed for these improvements in shares of our common stock.





On May 1, 2011, we entered into a consulting agreement with a company controlled by our President and Chief Executive Officer, for his consulting services at a rate of $10,000 per month. The terms of the consulting agreement also call for the Company to provide health insurance, vacation, a company credit card, and reimbursement for all reasonable business expenses incurred by him in the performance of his duties.  The agreement will be in effect for a five year period ending on May 1, 2016 and is renewable after that period; however, the Company has the option to cancel with or without “cause”.  To cancel with “cause” means that there is a breach of fiduciary duties or felonious conduct, and under the agreement the Company may terminate the contract with a 90 day notice. To cancel without “cause”, the Company would be liable for a lump sum payment equal to the balance of the consulting fees remaining under the current year’s consultant agreement.





On January 18, 2013, the Company entered into an amendment of the above consulting agreement with the same Company as above, the prior agreement remains in force except for the following provisions: Mr. Markus’ consulting services will be at a rate of $11,000 per month, and Mr. Markus also received an option to purchase 8,131,150 shares of the Company’s common stock for $0.10 per share. On January 1st of each year that the consulting agreement is in force, Mr. Markus will be granted an option to purchase an amount of shares to represent 10% of our issued and outstanding common stock as of December 31st of the prior year. On March 1, 2014, the President received an option to purchase 9,722,387 shares of the Company’s common stock at $0.10 per share.  For the nine month periods ended March 31, 2015 and March 31, 2014, we recorded $109,000 and $102,300, respectively, in consulting fees – related party expense in connection with these contracts. As of March 31, 2015 and 2014, the Company accrued a total of $12,580 and $5,742, respectively, in royalties payable.





On May 1, 2012, the Company entered into consulting agreements with three sons of its President, for their respective consulting services at a rate of $43,000, respectively, USD per annum.  The agreements were each for a period of twelve months, ending on December 31, 2012, and are automatically renewed for successive twelve month terms.  The agreements may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. They each received one month’s salary as a signing bonus, and will each also receive a 2.50% royalty on all gross sales of the Company. On January 18, 2013, the Company entered into new consulting agreements with each of the same three sons as above, increasing their respective annual compensation to $47,300 each. All others terms remained the same. On March 1, 2014, the Company entered into new consulting agreements with these sons for their consulting services at a rate of $52,000 USD per annum.  The Agreements were in effect for a period of twelve months ending on December 31, 2014 and were not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company.  For the nine month periods ended March 31, 2015 and 2014, we recorded $72,000 and $116,716, respectively, in consulting fees – related party expense in connection with each of these contracts. As of March 31, 2015 and 2014, the Company accrued a total of $31,452 and $16,290, in royalties payable for each agreement.





On January 18, 2013, the Company entered into a consulting agreement with the fourth son of our current President, for his consulting services at a rate of $35,200 USD per annum.  The agreement is in effect for a period of twelve months, ending on December 31, 2013, and is automatically renewed for successive twelve month terms.  The agreement may be terminated by the Company at any time, or by mutual consent, without consequence with a ninety day written notice. He also received one month’s salary as a signing bonus, and he will also receive a 2.50% royalty on all gross sales of the Company. On March 1, 2014, the Company entered into a new consulting agreement with the same son for his consulting services at a rate of $45,000 USD per annum.  The agreements was in effect for a period of twelve months, ending on December 31, 2014 and was not renewed by the Company.  Until such a time when the Company has achieved stable and profitable operations, any and all services provided by the son of our current President will be on an as-needed basis.  The termination of this agreement has no bearing on the perpetual 2.5% royalty that he will receive on gross sales of the Company.  For the nine month periods ended March 31, 2015 and 2014, we recorded $25,000 and $30,918, respectively, in consulting fees – related party expense in connection with this contract and fees charged previous to this contract. For the nine months ended March 31, 2015 and 2014, the Company accrued a total of $10,484 and $4,785, respectively, in royalties payable.





In the nine month period ended March 31, 2015, our current President paid operating bills on behalf of the Company totaling $23,370 and was not repaid.  In the nine month period ended March 31, 2014, our current President paid operating bills on behalf of the Company totaling $1,658 and was not repaid.








25





ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued





Off-Balance Sheet Commitments and Arrangements





We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.


In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.





Inflation





Inflation has not materially impacted our results of operations in recent years.





ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk





As a “smaller reporting company” (as defined by Item 10 of Regulation S-K), the Company is not required to provide information required by this Item, as defined by Regulation S-K Item 305(e).





ITEM 4T - Controls and Procedures





Disclosure controls and procedures





As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report, being March 31, 2015, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer. Based upon that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures are not effective as at the end of the period covered by this report. There have been no significant changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.





Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer to allow timely decisions regarding required disclosure.





Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.





Changes in Internal Control over Financial Reporting





There were no changes in our internal controls over financial reporting during the three month period ended March 31, 2015 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





PART II OTHER INFORMATION





ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds





For the nine months ended March 31, 2015, the Company issued no shares of unregistered common shares.







26





ITEM 6 - Exhibits





ExhibitNumber

Description of Exhibit31.1


Section 302 Certification of Chief Executive Officer31.2


Section 302 Certification of Chief Financial Officer32.1


Section 906 Certification of Chief Executive Officer32.2


Section 906 Certification of Chief Financial Officer





101.INS
*

XBRL Instance Document101.SCH
*

XBRL Taxonomy Extension Schema Document101.CAL
*

XBRL Taxonomy Extension Calculation Linkbase101.DEF
*

XBRL Taxonomy Extension Definition Linkbase101.LAB
*

XBRL Taxonomy Extension Label Linkbase101.PRE
*

XBRL Taxonomy Extension Presentation Linkbase

















27







SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.














RELIABRAND INC.Date: May 22, 2015
By:
/s/ Antal MarkusName: Antal MarkusTitle: CEO, CFO













































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