UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-Q








xQuarterly Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934





For the quarterly period ended
December
31, 2009





or





oTransition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934





For
the transition period from _____________ to _____________





Commission
file number 333-123176





Marani
Brands, Inc.


(Exact
Name of Registrant as Specified in its Charter)





Nevada
            20-2008579(State
      or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
      Employer Identification No.)





13152
Raymer Street, Suite 1A


North Hollywood,
CA  91605


(Address
of Principal Executive Offices) (Zip Code)





(818)
503-5200


(Registrant’s
Telephone Number, Including Area Code)





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.   x Yes  o 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





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





The
issuer had 165,556,026 shares of common stock outstanding as of February
16, 2010.








1
 Table of Contents







TABLEOF CONTENTS





PagePART I - FINANCIAL INFORMATIONItem
      1.
            Financial Statements
      (Unaudited)
            F-1Consolidated Balance Sheets as of
      December 31, 2009 and June 30, 2009
            F-2Consolidated
      Statements of Operations for the Three and Six Months Ended December 31,
      2009  and 2008
            F-3Consolidated
      Statements of Cash Flows for the Six Months Ended December 31,
      2009 and 2008
            F-4Notes to Consolidated Financial
      Statements
            F-5Item
      2.
            Management's Discussion and
      Analysis of Financial Condition and Results of
      Operations
            3Item
      3.
            Quantitative and Qualitative
      Disclosures About Market Risk
            9Item
      4T.
            Controls and
      Procedures
            9PART II - OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            11Item
      1A.
            Risk
    Factors
            11Item
      2.
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            19Item
      3.
            Defaults Upon Senior
      Securities
            19Item
      4.
            Submission of Matters to a Vote of
      Security Holders
            19Item
      5.
            Other
      Information
            19Item
      6.
            Exhibits
            19










2
 Table of Contents








PART
I.   FINANCIAL INFORMATION





Item1. Financial Statements





The
condensed financial statements of Marani Brands, Inc. included herein have been
prepared in accordance with the instructions to quarterly reports for a smaller
reporting company, as defined in Exchange Act Rule 12b-2, on Form 10-Q pursuant
to the rules and regulations of the United States Securities and Exchange
Commission (the “SEC”).  Certain information and footnote data
necessary for fair presentation of financial position and results of operations
in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) have been condensed or omitted.  It is therefore
suggested that these financial statements be read in conjunction with the
summary of significant accounting policies and notes to financial statements
included in Marani Brands, Inc.'s Annual Report on Form 10-K for the year ended
June 30, 2009.





In the
opinion of management, all adjustments necessary in order to make the financial
position, results of operations and changes in financial position at December
31, 2009, and for all periods presented, not misleading, have been
made.  The results of operations for the period ended December 31,
2009 are not necessarily indicative of the Company’s actual operating results
for the full year ending June 30, 2010.











F-1
 Table of Contents










MaraniBrands, Inc. and SubsidiariesConsolidated
      Balance SheetsUNAUDITEDDecember
      31,
            
            
            June
      30,2009
            
            
            2009AssetsCurrent
      AssetsCash
      & Equivalents
            
            $
            1,089,372
            
            
            $
            1,116,460Accounts
      Receivable
            
            
            64,415
            
            
            
            138,541Inventory
            
            
            87,658
            
            
            
            170,518Prepaid
      Expenses & Other Current Assets
            
            
            75,255
            
            
            
            30,130Total
      Current Assets
            
            
            1,316,700
            
            
            
            1,455,649Deposits
            
            
            
            10,255
            
            
            
            10,255Total
      Assets
            
            $
            1,326,955
            
            
            $
            1,465,904Liabilities
      & Stockholders' Equity (Deficit)Current
      LiabilitiesAccounts
      Payable
            
            $
            742,669
            
            
            $
            632,819Accrued
      Expenses
            
            
            417,113
            
            
            
            453,816Line
      of Credit
            
            
            999,556
            
            
            
            999,556Notes
      Payable, net
            
            
            636,640
            
            
            
            330,495Convertible
      Note Payable, net
            
            
            18,217
            
            
            
            -Derivative
      Liability
            
            
            92,691
            
            
            
            246,501Total
      Current Liabilities
            
            $
            2,906,886
            
            
            $
            2,663,187Non-Current
      LiabilitiesNotes
      Payable
            
            
            -
            
            
            
            124,680Total
      Non-Current Liabilities
            
            
            -
            
            
            
            124,680Total
      Liabilities
            
            $
            2,906,886
            
            
            $
            2,787,867Commitments
      & Contingencies
            
            
            -
            
            
            
            -Stockholders'
      Equity (Deficit)Common
      Stock, $0.001 par value, 300,000,000 sharesauthorized;
      165,556,026 and 180,891,796 shares issued and outstanding,
      respectively
            
            
            165,556
            
            
            
            181,402Additional
      Paid-in Capital
            
            
            17,270,560
            
            
            
            22,825,893Stock
      Subscriptions Payable
            
            
            -
            
            
            
            60,000Accumulated
      Deficit
            
            
            (19,016,047
            )
            
            
            (24,389,258
            )Total
      Stockholders' Equity (Deficit)
            
            
            (1,579,931
            )
            
            
            (1,321,963
            )Total
      Liabilities & Stockholders' Equity (Deficit)
            
            $
            1,326,955
            
            
            $
            1,465,904The
      accompanying notes are an integral part of these financial
      statements








F-2
 Table of Contents





MaraniBrands, Inc. and SubsidiariesConsolidated
      Statements of OperationsUNAUDITEDFor
      the Three Months Ended
            
            
            For
      the Six Months EndedDecember
      31,
            
            
            December
      31,2009
            
            
            2008
            
            
            2009
            
            
            2008Sales
            
            
            $
            38,564
            
            
            $
            89,188
            
            
            $
            145,301
            
            
            $
            110,762Cost
      of Sales
            
            
            25,573
            
            
            
            55,916
            
            
            
            75,943
            
            
            
            61,533Gross
      Profit
            
            
            
            12,991
            
            
            
            33,272
            
            
            
            69,358
            
            
            
            49,229Operating
      ExpensesMarketing
      and Sales Promotion
            
            
            127,996
            
            
            
            379,515
            
            
            
            202,221
            
            
            
            813,331General
      & Administrative
            
            
            (5,063,621
            )
            
            
            3,031,156
            
            
            
            (5,307,343
            )
            
            
            3,393,171Total
      Operating Expenses
            
            
            (4,935,625
            )
            
            
            3,410,671
            
            
            
            (5,105,122
            )
            
            
            4,206,502Operating
      Income (Loss)
            
            $
            4,948,616
            
            
            $
            (3,377,399
            )
            
            $
            5,174,480
            
            
            $
            (4,157,273
            )Other
      Income (Expense)Interest
      Income
            
            
            2,524
            
            
            
            -
            
            
            
            9,697
            
            
            
            15,083Interest
      Expense
            
            
            (39,767
            )
            
            
            7,537
            
            
            
            (57,467
            )
            
            
            (6,082
            )Derivative
      Expense
            
            
            252,302
            
            
            
            (5,005
            )
            
            
            246,501
            
            
            
            -Total
      Other  Income (Expense)
            
            
            215,059
            
            
            
            2,532
            
            
            
            198,731
            
            
            
            9,001Net
      Income (Loss) Before Income Taxes
            
            $
            5,163,675
            
            
            $
            (3,374,867
            )
            
            $
            5,373,211
            
            
            $
            (4,148,272
            )Provision
      for Income Taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      Income (Loss)
            
            $
            5,163,675
            
            
            $
            (3,374,867
            )
            
            $
            5,373,211
            
            
            $
            (4,148,272
            )Net
      Income per ShareBasic
            
            
            $
            0.03
            
            
            $
            (0.02
            )
            
            $
            0.03
            
            
            $
            (0.02
            )Diluted
            
            $
            0.03
            
            
            $
            (0.02
            )
            
            $
            0.03
            
            
            $
            (0.02
            )Number
      of Shares Used in Per Share CalculationsBasic
            
            
            
            173,223,911
            
            
            
            172,250,274
            
            
            
            177,185,354
            
            
            
            172,125,274Diluted
            
            
            202,159,039
            
            
            
            172,250,274
            
            
            
            206,120,482
            
            
            
            172,125,274The
      accompanying notes are an integral part of these financial
      statements





F-3
 Table of Contents





MaraniBrands, Inc. and SubsidiariesConsolidated
      Statements of Cash FlowsUNAUDITEDFor
      the Six Months EndedDecember
      31,2009
            
            
            2008Cash
      Flows from Operating ActivitiesNet
      Income (Loss)
            
            $
            5,373,211
            
            
            $
            (4,148,272
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      Based Compensation
            
            
            (5,936,179
            )
            
            
            2,364,152Derivative
      Expense
            
            
            (246,501
            )
            
            
            -Amortization
      of Debt Discounts
            
            
            12,962
            
            
            
            -Depreciation
      & Amortization
            
            
            -
            
            
            
            655Changes
      in operating assets and liabilities:Accounts
      Receivable
            
            
            74,126
            
            
            
            1,535Inventory
            
            
            82,860
            
            
            
            (228,872
            )Other
      Current Assets
            
            
            (45,125
            )
            
            
            -Accounts
      Payable
            
            
            109,850
            
            
            
            (44,012
            )Accrued
      Expenses
            
            
            217,708
            
            
            
            (13,613
            )Net
      Cash Used in Operating Activities
            
            
            (357,088
            )
            
            
            (2,068,427
            )Cash
      Flows from Financing ActivitiesProceeds
      from Notes Payable
            
            
            250,000
            
            
            
            775,000Proceeds
      from Convertible Note
            
            
            50,000
            
            
            
            -Payments
      on Notes Payable
            
            
            (20,000
            )
            
            
            -Proceeds
      from Stock Subscriptions
            
            
            50,000
            
            
            
            -Net
      Cash Provided by Financing Activities
            
            
            330,000
            
            
            
            775,000Net
      Increase (Decrease) in Cash
            
            
            (27,088
            )
            
            
            (1,293,427
            )Cash
      Beginning of Period
            
            
            1,116,460
            
            
            
            2,460,663Cash
      End of Period
            
            $
            1,089,372
            
            
            $
            1,167,236Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid during the period for interest
            
            $
            23,996
            
            
            $
            6,082Cash
      Paid during the period for income taxes
            
            
            -
            
            
            
            -Supplemental
      Disclosure of Non-Cash Items:Common
      Stock issued for Conversion of Debt
            
            $
            255,000
            
            
            $
            -Common
      Stock Issued for Subscriptions
            
            
            110,000
            
            
            
            -The
      accompanying notes are an integral part of these financial
      statements







F-4
 Table of Contents




MaraniBrands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED






Note
1 – Organization, Business & Operations




History




The
Company was incorporated in Nevada on May 30, 2001, under the name Elli Tsab,
Inc., which was subsequently changed to Patient Data Corporation, and thereafter
to Fit for Business, Inc.  On March 10, 2008, the Company changed its
name from Fit for Business, Inc. to Marani Brands, Inc.  On March 31,
2008, the common stock underwent a 1-for-250 reverse stock split, and commenced
trading on the Over the Counter Bulletin Board under the new symbol
“MRIB”.




Merger
(see Note 4)




On March
11, 2008, the Company formed FFBI Merger Sub Corp., a California corporation, as
its wholly-owned subsidiary.  FFBI Merger Sub Corp. was formed by the
Company for the purpose of effectuating a merger transaction by and among the
Company and FFBI Merger Sub Corp., on the one hand, and a California corporation
known as Margrit Enterprises International, Inc. “(MEI”), on the other
hand.





On April
4, 2008, the Company, FFBI Merger Sub Corp. and MEI executed, and on April 7,
2008, the parties closed, a three party Merger Agreement.





The
acquisition of MEI by the Company was completed by the merger of the Company’s
wholly-owned subsidiary, FFBI Merger Sub Corp. with and into MEI, with MEI
remaining as the surviving entity and wholly-owned subsidiary of the
Company.    The net effect of these transactions is a
reverse merger of the Company with MEI.  MEI subsequently changed its
name to Marani Spirits, Inc., and continues to be the operational arm of the
Company.




Business
and Products




Prior to
the Company’s acquisition of MEI, our only business was that of its wholly-owned
subsidiary, Fit for Business (Australia) Pty Limited, which was engaged in the
development of overall wellness programs for the workplace in
Australia.





Subsequent
to the merger transaction with MEI, the Company’s primary business is the
distribution of wine and spirit products manufactured in Armenia. In the future
the Company may add alcohol beverage products manufactured in other
countries.




Reverse
Stock Split




Effective
March 31, 2008, the Company’s common stock underwent a 1-for-250 reverse stock
split. The Company retained the current par value of $0.001 per share for all
shares of common stock. All references in the financial statements to the number
of shares outstanding, per share amounts, and stock options data of the
Company’s common stock have been restated to reflect the effect of the reverse
stock split for all periods presented.




Note
2 - Going Concern and Management's Plans




The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate continuation of
the Company as a going concern. However, as of December 31, 2009, the Company
has an accumulated deficit of $19,016,047. The Company’s current business plan
requires additional funding beyond its anticipated cash flows from operations.
These and other factors raise substantial doubt about the Company's ability to
continue as a going concern.




F-5
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED





The
ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital and achieve profitable operations. The
accompanying consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.




Note
3 - Summary of Significant Accounting Policies




Recapitalization




The
capital structure of the consolidated enterprise is that of MEI due to reverse
recapitalization accounting. The financial statements presented are a
continuation of MEI, the accounting acquirer, and not FFBI, the accounting
acquiree. The recapitalization and capital structure is now different than that
appearing in historical financial statements for FFBI.




Principles
of Consolidation




The
accompanying consolidated financial statements include the accounts of Marani
Brands, Inc. and its wholly owned subsidiary Marani Spirits, Inc. All
significant inter-company accounts and transactions have been eliminated in
consolidation.\




Cash
and cash equivalents




The
Company considers all liquid investments with a maturity of three months or less
from the date of purchase that are readily convertible into cash to be cash
equivalents.




Inventories




Inventories
are stated at the lower of cost or market. Cost is computed on a
weighted-average basis, which approximates the first-in, first-out method;
market is based upon estimated replacement costs. Costs included in inventory
primarily include finished spirit product and packaging.




Use
of estimates




The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates




Property
& equipment




Property
and equipment are recorded at cost. Depreciation is computed using the
straight-line method over useful lives of 3 to 10 years. The cost of assets sold
or retired and the related amounts of accumulated depreciation are removed from
the accounts in the year of disposal. Any resulting gain or loss is reflected in
current operations. Assets held under capital leases are recorded at the lesser
of the present value of the future minimum lease payments or the fair value of
the leased property. Expenditures for maintenance and repairs are charged to
operations as incurred.




F-6
 Table of Contents





Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED






Impairment
of long-lived assets




In July
2009, the Company adopted FASB ASC Topic 360, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (previously "SFAS 144"). This topic addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with this topic. This topic requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal.




Basic
and Diluted Net Income per Share




Basic
earnings per share is calculated using the weighted-average number of common
shares outstanding during the period without consideration of the dilutive
effect of stock warrants and convertible notes. Diluted earnings per share is
calculated using the weighted-average number of common shares outstanding during
the period after consideration of the dilutive effect of stock warrants, stock
options and convertible notes.




Stock-based
compensation




In July
2009, the Company adopted FASB ASC Topic 718, "Share-Based Payment" (previously
"SFAS 123(R)"). This topic requires that companies account for awards of equity
instruments issued to employees under the fair value method of accounting and
recognize such amounts in their statements of operations. Under this topic, we
are required to measure compensation cost for all stock-based awards at fair
value on the date of grant and recognize compensation expense in our
consolidated statements of operations over the service period that the awards
are expected to vest.





The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of FASB ASC Topic 718,
"Share-Based Payment" (previously "SFAS 123(R)").  Under this topic
common stock issued to non-employees in exchange for services is accounted for
based on the fair value of the services received.




Fair
value of financial instruments




In July
2009, the Company adopted FASB ASC Topic 825, "Disclosures about Fair Value of
Financial Instruments"(previously SFAS No. 107). This topic requires that the
Company disclose estimated fair values of financial instruments. The carrying
amounts reported in the statements of financial position for current assets and
current liabilities qualifying as financial instruments are a reasonable
estimate of fair value.




Revenue
recognition




Sales of
products and related costs of products sold are recognized when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price
is fixed or determinable and (iv) collectability is reasonably assured. These
terms are typically met upon shipment of finished spirit products to the
customer.




F-7
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED






Allowance
for doubtful accounts




We
provide an allowance for estimated uncollectible accounts receivable balances
based on historical experience and the aging of the related accounts receivable.
As of December 31, 2009 and June, 2009, the Company has reserved $35,431 for
doubtful accounts.




Advertising




The
Company expenses advertising costs as incurred. Advertising costs for the six
months ended December 31, 2009 and 2008, was $10,133 and $123,817,
respectively.




Income
Taxes




In July
2009, the Company adopted FASB ASC 749 "Accounting for Income Taxes" (previously
SFAS 109). Under this topic the Company accounts for income taxes using the
liability method where deferred tax assets and liabilities are determined based
on differences between their financial reporting and tax basis of assets and
liabilities. The Company was not required to provide for a provision for income
taxes for the periods ended December 31, 2009 and June 30, 2009, as a result of
net operating losses incurred during the periods. As of December 31, 2009, the
Company has available approximately $19,000,000 of net operating losses ("NOL")
available for income tax purposes that may be carried forward to offset future
taxable income, if any. These carryforwards expire in various years through
2026. At December 31, 2009 and June 30, 2009, the Company has a deferred tax
asset of approximately $7,600,000 and $9,700,000 relating to the Company's net
operating losses, respectively. The Company's deferred tax asset has been fully
reserved by a valuation allowance since realization of its benefit is uncertain.
The Company's ability to utilize its NOL carryforwards may be subject to an
annual limitation in future periods pursuant to Section 382 of the Internal
Revenue Code of 1986, as amended (the “Code”). In addition, other limitations
may be imposed by the Code by virtue of the acquisition outlined in Note
4.




The
provision for income taxes using the federal and state tax rates as compared to
the Company's effective tax rate is summarized as follows:




December
      31,
              
              
              June
      30,2009
              
              
              2009Statutory
      Federal Tax (Benefit) Rate
              
              
              -34.00
              %
              
              
              -34.00
              %Statutory
      State Tax (Benefit) Rate
              
              
              -5.83
              %
              
              
              -5.83
              %Effective
      Tax (Benefit) Rate
              
              
              -39.83
              %
              
              
              -39.83
              %Valuation
      Allowance
              
              
              39.83
              %
              
              
              39.83
              %Effective
      Income Tax
              
              
              0.00
              %
              
              
              0.00
              %






F-8
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Significant
components of the Company's deferred tax assets at December 31, 2009 and June
30, 2009, are as follows:




December
      31,
              
              
              June
      30,2009
              
              
              2009Net
      Operating Loss Carryforward
              
              $
              7,574,092
              
              
              $
              9,714,241Valuation
      Allowance
              
              
              (7,574,092
              )
              
              
              (9,714,241
              )Net
      Deferred Tax Asset
              
              $
              -
              
              
              $
              -








Research
and development costs




Expenditures
for research & development are expensed as incurred. Such costs are required
to be expensed until the point that technological feasibility is established.
The Company incurred no research and development costs for the six months ended
December 31, 2009 and 2008.




Reclassifications




Certain
items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period’s
presentation. These reclassifications have no effect on the previously reported
income (loss).




Recently
Issued Accounting Pronouncements




The
adoption of these accounting standards had the following impact on the Company’s
statements of income and financial condition:




·
            FASB
      ASC Topic 855, “Subsequent Events”. In May 2009, the FASB issued FASB ASC
      Topic 855, which establishes general standards of accounting and
      disclosure of events that occur after the balance sheet date but before
      financial statements are issued or are available to be issued. In
      particular, this Topic sets forth: (i) the period after the balance sheet
      date during which management of a reporting entity should evaluate events
      or transactions that may occur for potential recognition or disclosure in
      the financial statements, (ii) the circumstances under which an entity
      should recognize events or transactions occurring after the balance sheet
      date in its financial statements, and (iii) the disclosures that an entity
      should make about events or transactions that occurred after the balance
      sheet date. This FASB ASC Topic should be applied to the accounting and
      disclosure of subsequent events. This FASB ASC Topic does not apply to
      subsequent events or transactions that are within the scope of other
      applicable accounting standards that provide different guidance on the
      accounting treatment for subsequent events or transactions. This FASB ASC
      Topic was effective for interim and annual periods ending after June 15,
      2009, which was June 30, 2009 for the Company. The adoption of this Topic
      did not have a material impact on the Company’s financial statements and
      disclosures.






·
            FASB
      ASC Topic 105, “The FASB Accounting Standard Codification and the
      Hierarchy of Generally Accepted Accounting Principles”. In June 2009, the
      FASB issued FASB ASC Topic 105, which became the source of authoritative
      GAAP recognized by the FASB to be applied by nongovernmental entities.
      Rules and interpretive releases of the SEC under authority of federal
      securities laws are also sources of authoritative GAAP for SEC
      registrants. On the effective date of this FASB ASC Topic, the
      Codification will supersede all then-existing non-SEC accounting and
      reporting standards. All other non-SEC accounting literature not included
      in the Codification will become non-authoritative. This FASB ASC Topic
      identify the sources of accounting principles and the framework for
      selecting the principles used in preparing the financial statements of
      nongovernmental entities that are presented in conformity with GAAP. Also,
      it arranged these sources of GAAP in a hierarchy for users to apply
      accordingly. In other words, the GAAP hierarchy will be modified to
      include only two levels of GAAP: authoritative and non-authoritative. This
      FASB ASC Topic is effective for financial statements issued for interim
      and annual periods ending after September 15, 2009. The adoption of this
      Topic did not have a material impact on the Company’s disclosure of the
      financial statements




F-9
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




·
            FASB
      ASC Topic 320, “Recognition and Presentation of Other-Than-Temporary
      Impairments”. In April 2009, the FASB issued FASB ASC Topic 320 amends the
      other-than-temporary impairment guidance in GAAP for debt securities to
      make the guidance more operational and to improve the presentation and
      disclosure of other-than-temporary impairments on debt and equity
      securities in the financial statements. This FASB ASC Topic does not amend
      existing recognition and measurement guidance related to
      other-than-temporary impairments of equity securities. The FASB ASC Topic
      shall be effective for interim and annual reporting periods ending after
      June 15, 2009, with early adoption permitted for periods ending after
      March 15, 2009. Earlier adoption for periods ending before March 15, 2009,
      is not permitted. This FASB ASC Topic does not require disclosures for
      earlier periods presented for comparative purposes at initial adoption. In
      periods after initial adoption, this FASB ASC Topic requires comparative
      disclosures only for periods ending after initial adoption. The adoption
      of this Topic did not have a material impact on the Company’s financial
      statements and disclosures.




The
Company is evaluating the impact that the following recently issued accounting
pronouncements may have on its financial statements and
disclosures.




·
            FASB
      ASC Topic 860, “Accounting for Transfer of Financial Asset”., In June
      2009, the FASB issued additional guidance under FASB ASC Topic 860,
      “Accounting for Transfer and Servicing of Financial Assets and
      Extinguishment of Liabilities", which improves the relevance,
      representational faithfulness, and comparability of the information that a
      reporting entity provides in its financial statements about a transfer of
      financial assets; the effects of a transfer on its financial position,
      financial performance, and cash flows; and a transferor’s continuing
      involvement, if any, in transferred financial assets. The Board undertook
      this project to address (i) practices that have developed since the
      issuance of FASB ASC Topic 860, that are not consistent with the original
      intent and key requirements of that statement and (ii) concerns of
      financial statement users that many of the financial assets (and related
      obligations) that have been derecognized should continue to be reported in
      the financial statements of transferors. This additional guidance requires
      that a transferor recognize and initially measure at fair value all assets
      obtained (including a transferor’s beneficial interest) and liabilities
      incurred as a result of a transfer of financial assets accounted for as a
      sale. Enhanced disclosures are required to provide financial statement
      users with greater transparency about transfers of financial assets and a
      transferor’s continuing involvement with transferred financial assets.
      This additional guidance must be applied as of the beginning of each
      reporting entity’s first annual reporting period that begins after
      November 15, 2009, for interim periods within that first annual reporting
      period and for interim and annual reporting periods thereafter. Earlier
      application is prohibited. This additional guidance must be applied to
      transfers occurring on or after the effective
  date.








F-10
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




·
            FASB
      ASC Topic 810, “Variables Interest Entities”. In June 2009, the FASB
      issued FASB ASC Topic 810, which requires an enterprise to perform an
      analysis to determine whether the enterprise’s variable interest or
      interests give it a controlling financial interest in a variable interest
      entity. This analysis identifies the primary beneficiary of a variable
      interest entity as the enterprise that has both of the following
      characteristics: (i) the power to direct the activities of a variable
      interest entity that most significantly impact the entity’s economic
      performance and (ii) the obligation to absorb losses of the entity that
      could potentially be significant to the variable interest entity or the
      right to receive benefits from the entity that could potentially be
      significant to the variable interest entity. Additionally, an enterprise
      is required to assess whether it has an implicit financial responsibility
      to ensure that a variable interest entity operates as designed when
      determining whether it has the power to direct the activities of the
      variable interest entity that most significantly impact the entity’s
      economic performance. This FASB Topic requires ongoing reassessments of
      whether an enterprise is the primary beneficiary of a variable interest
      entity and eliminate the quantitative approach previously required for
      determining the primary beneficiary of a variable interest entity, which
      was based on determining which enterprise absorbs the majority of the
      entity’s expected losses, receives a majority of the entity’s expected
      residual returns, or both. This FASB ASC Topic shall be effective as of
      the beginning of each reporting entity’s first annual reporting period
      that begins after November 15, 2009, for interim periods within that first
      annual reporting period, and for interim and annual reporting periods
      thereafter. Earlier application is
prohibited.




·
            FASB
      ASC Topic 820, “Fair Value measurement and Disclosures”, an Accounting
      Standard Update. In September 2009, the FASB issued this Update to
      amendments to Subtopic 82010, “Fair Value Measurements and Disclosures”.
      Overall, for the fair value measurement of investments in certain entities
      that calculates net asset value per share (or its equivalent). The
      amendments in this Update permit, as a practical expedient, a reporting
      entity to measure the fair value of an investment that is within the scope
      of the amendments in this Update on the basis of the net asset value per
      share of the investment (or its equivalent) if the net asset value of the
      investment (or its equivalent) is calculated in a manner consistent with
      the measurement principles of Topic 946 as of the reporting entity’s
      measurement date, including measurement of all or substantially all of the
      underlying investments of the investee in accordance with Topic 820. The
      amendments in this Update also require disclosures by major category of
      investment about the attributes of investments within the scope of the
      amendments in this Update, such as the nature of any restrictions on the
      investor’s ability to redeem its investments at the measurement date, any
      unfunded commitments (for example, a contractual commitment by the
      investor to invest a specified amount of additional capital at a future
      date to fund investments that will be made by the investee), and the
      investment strategies of the investees. The major category of investment
      is required to be determined on the basis of the nature and risks of the
      investment in a manner consistent with the guidance for major security
      types in GAAP on investments in debt and equity securities in paragraph
      320-10-50-lB. The disclosures are required for all investments within the
      scope of the amendments in this Update regardless of whether the fair
      value of the investment is measured using the practical expedient. The
      amendments in this Update apply to all reporting entities that hold an
      investment that is required or permitted to be measured or disclosed at
      fair value on a recurring or non recurring basis and, as of the reporting
      entity’s measurement date, if the investment meets certain criteria The
      amendments in this Update are effective for the interim and annual periods
      ending after December 15, 2009. Early application is permitted in
      financial statements for earlier interim and annual periods that have not
      been issued.




F-11
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




·
            FASB
      ASC Topic 740, “Income Taxes”, an Accounting Standard Update. In September
      2009, the FASB issued this Update to address the need for additional
      implementation guidance on accounting for uncertainty in income taxes. The
      guidance answers the following questions: (i) Is the income tax paid by
      the entity attributable to the entity or its owners? (ii) What constitutes
      a tax position for a pass-through entity or a tax-exempt not-for-profit
      entity? (iii) How should accounting for uncertainty in income taxes be
      applied when a group of related entities comprise both taxable and
      nontaxable entities? In addition, this Updated decided to eliminate the
      disclosures required by paragraph 740-10-50-15(a) through (b) for
      nonpublic entities. The implementation guidance will apply to financial
      statements of nongovernmental entities that are presented in conformity
      with GAAP. The disclosure amendments will apply only to nonpublic entities
      as defined in Section 740-10-20. For entities that are currently applying
      the standards for accounting for uncertainty in income taxes, the guidance
      and disclosure amendments are effective for financial statements issued
      for interim and annual periods ending after September 15,
      2009.




Note
4 – Merger




On March
11, 2008, the Company formed FFBI Merger Sub Corp., a California corporation, as
its wholly-owned subsidiary.  FFBI Merger Sub Corp. was formed by the
Company for purpose of effectuating a merger transaction by and among the
Company and FFBI Merger Sub Corp., on the one hand, and a California corporation
known as Margrit Enterprises International, Inc. “(MEI”), on the other
hand.





On April
4, 2008, the Company, FFBI Merger Sub Corp. and MEI executed, and on April 7,
2008 the parties closed, a three party Merger Agreement, which the parties
implemented follows:


Merger of
FFBI Merger Sub Corp. and MEI




·
            By
      virtue of this statutory merger, the separate corporate existence of FFBI
      Merger Sub Corp. ceased, with MEI remaining as the surviving
      corporation.






·
            The
      shares of FFBI Merger Sub Corp. held by the Company pre merger were
      converted into the shares of MEI and, post merger, the MEI conversion
      shares remain outstanding and continue to be held by the Company as shares
      of MEI






·
            Since
      MEI was a company with an ongoing business, and since FFBI Merger Sub
      Corp. had no business operations and ceased to exist as a separate
      corporate entity, this merger transaction constituted a “forward
      merger”






F-12
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED


Reverse
Merger MEI and Marani Brands, Inc. (the Company)




·
            Contemporaneous
      with the MEI – FFBI Merger Sub merger described above, MEI merged with the
      Company in a reverse merger.  In this reverse merger, each share
      of MEI common stock held by its stockholders was automatically exchanged
      for shares of the Company, determined by a 10 for 1 exchange
      ratio






·
            The
      Company issued 100,000,000 shares of its common stock to the stockholders
      of MEI in the exchange transaction set for the above, and the 10,000,000
      shares of MEI then held by the Company as a result of the exchange
      transaction were cancelled.






·
            The
      Company thereby holds 100% of the shares of MEI by virtue of the Company’s
      ownership of the MEI shares that it obtained as part of the merger of FFBI
      Merger Sub Corp. and MEI, which shares now represent all of the issued and
      outstanding shares of MEI.






·
            On
      April 7, 2008, the Company sold its entire interest in its subsidiary, Fit
      For Business (Australia) Pty Limited ("FFB Australia"), to its former
      Chief Executive Officer.






·
            Since
      MEI operated an ongoing business and since the Company had pre merger
      business operations that were not pursued by the Company post merger, this
      merger transaction constituted a “reverse
  merger”.






·
            By
      virtue of this “reverse merger,” both MEI and the Company continue to have
      a separate existence, with MEI becoming a wholly owned subsidiary of the
      Company.







Under the
Merger Agreement, as additional consideration for the merger transactions, the
Company issued, at Closing, the following: (i) 42,594,616 shares of the
Company’s common stock to Purrell Partners, LLC, or its assigns (the "Purrell
Group") and (ii) a Warrant to purchase 10,000,000 shares of the Company’s common
stock at an exercise price of $0.10 per share to the Purrell Group.


Following
the Closing, the Company, in a private placement to investors, issued an
aggregate of 15,120,000 shares of common stock, along with warrants to purchase
an additional 15,120,000 shares of common stock at $0.35 per share.





On April
7, 2008, the Company exercised its option under the Subsidiary Acquisition
Option Agreement, that was entered into in connection with the December 31, 2007
Stock Purchase Agreement, to sell its entire interest in its subsidiary, FFB
Australia, to its former Chief Executive Officer, Mark Poulsen. Under the terms
of this Agreement, if Mr. Poulsen complied with certain information and document
requirements then no later than May 15, 2008, Mr. Poulsen will receive the
Company’s entire interest in FFB Australia in exchange for Mr. Poulsen
forfeiting his right to 250,000 shares of the Company’s common stock that he was
otherwise entitled to receive in the event of a restructuring transaction and
merger occurring prior to February 2009. Pursuant to the exercise of the
Company’s options, FFB Australia was sold to Mr. Poulsen. As the FFB Australia
subsidiary was not operational and had no tangible assets or liabilities at the
time this Agreement was exercised, and the exchange was for the forfeiture of
Mr. Poulsen's right to receive 250,000 common shares, it was determined that no
gain on this nonmonetary exchange should be recorded.




F-13
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Recapitalization




The
capital structure of the consolidated enterprise is that of MEI due to reverse
recapitalization accounting. The financial statements presented are a
continuation of MEI, the accounting acquirer, and not FFBI, the accounting
acquiree. The recapitalization and capital structure is now different than that
appearing in historical financial statements for FFBI.




Note
5 - Inventories




At
December 31, 2009 and June 30, 2009, inventories are comprised of finished
bottles/cases of Marani Vodka available for resale and in-transit totaling
$87,658 and $170,518, respectively.




Note
6 – Accrued Expenses




At
December 31, 2009 and June 30, 2009, accrued expenses consist of the
following:




December
      31,
              
              
              June
      30,2009
              
              
              2009Accrued
      Payroll and Taxes
              
              $
              220,443
              
              
              $
              116,854Deferred
      Officer Salaries
              
              
              85,071
              
              
              
              -Credit
      Cards
              
              
              36,497
              
              
              
              38,260Accrued
      Severance
              
              
              -
              
              
              
              255,000Accrued
      Interest & Other
              
              
              75,102
              
              
              
              43,702Total
      Accounts Payable and Accrued Expenses
              
              $
              417,113
              
              
              $
              453,816


Note
7 – Line of Credit




In
October 2008, the Company obtained a $1,000,000 credit line from Citibank
collateralized by the cash in the Company’s money market account.  At
December 31, 2009 the balance outstanding on this credit line was
$999,556.




Note
8 – Notes Payable




The
Company is obligated to a bank for an SBA loan. Terms indicate that the balance
of $124,091 is due and payable in full September 2010. Interest is accrued and
paid monthly at 8.25%.





In 2005,
the Company received a $80,495 short term loan from Searchlight Financial
carrying a 10% interest rate. Accrued interest totaling $32,198 is included in
accrued expenses at December 31, 2009. Subsequent to December 31, 2009, the
parties have reached a verbal agreement to settle this amount (see Note
13).





In
February 2009, the Company received a $200,000 loan from an investor payable
based upon the Company receiving financing of $1,000,000 or in the event that
the Company breaches one of the default provisions. This note carries an 8%
annual interest with both principle and accrued interest payable at maturity.
Accrued interest totaling $14,597 is included in accrued expenses at December
31, 2009.





In June
2009, the Company received a $50,000 loan from an investor payable based upon
the Company receiving financing of $1,000,000 or in the event that the Company
breaches one of the default provisions. This note carries an 8% annual interest
with both principle and accrued interest payable at maturity. Accrued interest
totaling $2,334 is included in accrued expenses at December 31,
2009.




F-14
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED


On July
28, 2009, the Company obtained a short term loan in the principal amount of
$200,000 from an individual lender.  The loan is secured by all the
Company's unsecured assets. The loan term matures on November 24, 2009, and the
principal amount of the loan accrues simple interest at the rate of eight (8%)
percent per annum.  Interest is payable monthly in arrears and
principal is payable in three monthly installments of five thousand ($5,000)
dollars with a final payment of one hundred eighty five thousand ($185,000)
dollars at maturity. Accrued interest totaling $4,449 is included in Accrued
Expenses at September 30, 2009. On November 30, 2009, the Company and the Note
holder agreed to extend the maturity date of the Note to May 31,
2010.  Interest and principal payments shall continue, as provided in
the Note, through the extended maturity date, with the final adjusted principal
payment due at maturity. In consideration for the note holder to enter into
several term extensions of the maturity date of the note, the Company issued
7,000,000 warrants to purchase the Company's common stock (5,000,000 warrants at
$.07 expiring July 28, 2014 and 2,000,000 warrants at $.04 expiring December 1,
2014).  Under FASB ASC Topic 815, “Derivatives and Hedging”, this note
does not meet the definition of a “conventional debt instrument” due to the term
extending feature which means that the warrants issued to extend the terms must
be bifurcated from the debt and shown as a separate derivative liability. The
Company recognized a derivative liability of $59,834 on December 1, 2010, with
an offset to debt discount in the same amount. Accrued interest totaling $4,449
is included in accrued expenses at December 31, 2009.





In
October 2009, the Company received a $50,000 loan from an investor payable May
16, 2010. This note carries an 8% annual interest with both principle and
accrued interest payable at maturity. Accrued interest totaling $833 is included
in Accrued Expenses at December 31, 2009.




Note
9 – Convertible Note




On
December 21, 2009, the Company issued a $50,000 convertible note with an
investor. This note carries an 8% annual interest rate with both principle and
accrued interest payable on September 23, 2010. The holder may convert all or
any part of the unpaid principle balance after six months from the date of the
note and prior to the later of (i) the maturity date and (ii) the date of
payment. This note is convertible into fully paid and non-assessable shares of
common stock at 65% of the average market price of the Company’s common stock
during the five trading day period ending one trading day prior to the date the
conversion notice.  Funding was received January 6, 2010.





Under
FASB ASC Topic 815, “Derivatives and Hedging”, this convertible note does not
meet the definition of a “conventional convertible debt instrument” since the
debt is not convertible into a fixed number of shares.  The debt can
be converted into common stock at a conversion price that is a percentage of the
market price; therefore, the number of shares that could be required to be
delivered upon “net-share settlement” is essentially
indeterminate.  Therefore, the convertible note is considered
“non-conventional,” which means that the conversion feature must be bifurcated
from the debt and shown as a separate derivative liability. The Company
recognized a derivative liability of $32,857 on December 21, 2010, with an
offset to debt discount in the same amount.




F-15
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Note
10 – Warrants




The
following is a summary of share purchase warrants for period ended December 31,
2009:




Number
      of Warrants
              
              
              Weighted
      Average Exercise PriceOutstanding
      June 30, 2008
              
              
              29,620,000
              
              
              $
              0.32Granted
              
              
              -
              
              
              $
              -Forfeited
              
              
              -
              
              
              $
              -Exercised
              
              
              -
              
              
              $
              -Outstanding
      June 30, 2009
              
              
              29,620,000
              
              
              $
              0.32Granted
              
              
              7,000,000
              
              
              $
              0.06Forfeited
              
              
              -
              
              
              $
              -Cancelled
              
              
              (13,890,000
              )
              
              $
              0.17Exercised
              
              
              -
              
              
              $
              -Outstanding
      December 31, 2009
              
              
              22,730,000
              
              
              $
              0.34Expiry
              
              Number
      of Warrants
              
              
              Exercise
      PriceNovember
      11, 2010
              
              
              4,700,000
              
              
              $
              0.35November
      29, 2010
              
              
              160,000
              
              
              $
              0.35April
      2, 2011
              
              
              520,000
              
              
              $
              0.35April
      15, 2011
              
              
              250,000
              
              
              $
              1.00June
      1, 2011
              
              
              10,000,000
              
              
              $
              0.50June
      4, 2011
              
              
              100,000
              
              
              $
              1.00July
      28, 2014
              
              
              5,000,000
              
              
              $
              0.07December
      1, 2014
              
              
              2,000,000
              
              
              $
              0.04Total
              
              
              22,730,000
              
              
              $
              0.34


The fair
value of the share purchase warrants as of December 31 and June 30, 2009, was
$59,834 and $246,501, respectively, which was determined using the Black-Scholes
option value model with the following assumptions:




December
      30,
            
            
            June
      30,2009
            
            
            
            2009Expected
      Dividend Yield
            
            
            0.00
            %
            
            
            0.00
            %Risk
      Free Interest Rate
            
            
            3.00
            %
            
            
            3.00
            %Expected
      Volatility
            
            
            60.00
            %
            
            
            60.00
            %Expected
      Life (in years average)
            
            
            2.30
            
            
            
            1.70


F-16
 Table of Contents


Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Warrant
and Share Cancellation-Purell




Purell
and Margrit International Enterprises, Inc., which is now called Marani Spirits,
Inc., are parties to a Consulting Agreement dated November 1, 2007 (the
"Consulting Agreement"). Ten million (10,000,000) warrants were issued to
Purcell in consideration of services, purportedly performed by Purell under the
Consulting Agreement and related to the merger of a subsidiary of the Company in
and to MEl, pursuant to which MEl became a wholly-owned subsidiary of the
Company and the shares were issued in anticipation of Purell assisting the
Company with receiving approximately $10,000,000 of equity financing. However,
no equity financing was arranged by Purell for the Company. Therefore the
warrants were not validly issued since the Company did not receive adequate
consideration for the issuance of those warrants.





In
addition, it has come to the Company's attention that Purell is not a registered
broker-dealer and therefore was not legally permitted to provide certain of the
services set forth in a Consulting Agreement. In particular, since Purell was
not a registered broker-dealer, the various agreements between Purell and the
Company (including the Consulting Agreement) relating to Purell raising
financing for the Company are voidable. In December 2009, the Company cancelled
21,297,309 shares of common stock (issued May 30, 2009 valued at $.25) and
10,000,000 (issued October 1, 2007 at $.10) warrants issued to Purell pursuant
to the Consulting Agreement.




Warrant
Cancellation-Continental Advisors




Continental
Advisors (CA) acted as the placement agent for a private placement of
Convertible Debentures issued by Margrit Enterprises International, Inc.
pursuant to a Consulting Agreement effective as of October 12, 2007. Pursuant to
a merger which occurred a number of months after the day of the placement, a
subsidiary of the Company merged with and into MEl and MEl became a wholly-owned
subsidiary of the Company. As part of the Merger, warrants held by CA became
exercisable into shares of the Company's Common Stock.





It has
come to the Company's attention that CA was not fully licensed and authorized
under applicable European securities regulations to serve as the placement agent
in the Placement and therefore was not entitled to receive compensation for
serving in that capacity. CA did not disclose those facts to the Company in the
Letter Agreement. CA misrepresented to the Company, CA's authority to serve as
the placement agent for the Placement. The warrants were issued as compensation
for CA's purported services in the Placement. Therefore, the warrants should not
have been issued to CA. In December 2009, the Company cancelled the 3,890,000
warrants issued (2,375,000 issued on May 1, 2008 at $.25 and 1,515,000 warrants
(issued on June 4, 2008 at $.35) pursuant to the Consulting
Agreement.  See Note 12 “Agreements”.




Note
11 - Stockholders’ Equity




Common
Stock




Effective
March 31, 2008, the Company’s common stock underwent a 1-for-250 reverse stock
split. All references in the financial statements to the number of shares
outstanding, per share amounts, and stock options data of the Company’s common
stock have been restated to reflect the effect of the stock split for all
periods presented.





Following
the reverse stock split, the Company has authorized the issuance of up to
300,000,000 shares of Common Stock, at $0.001 par value. As of December 31,
2009, the Company had 165,556,026 shares of Common Stock issued and
outstanding.





During
the six months ended December 31, 2009, the Company cancelled 22,932,309 shares
issued for services totaling ($5,945,137); issued 1,125,000 shares for the
conversion of debt totaling $255,000; and issued 5,961,539 shares for stock
subscriptions totaling $110,000.





During
the year ended June 30, 2008, the Company issued a total of 98,223,752 shares of
which 41,179,121 shares were issued for cash totaling $7,814,000; 11,686,670
shares were issued to Officers for services totaling $140,240; 1,281,797 shares
were issued for to non-affiliated parties for services totaling $82,449; 937,339
shares were issued to Marani shareholders in the reverse merger; and 43,138,825
shares for direct offering costs totaling $10,648,654.




Options




In
connection with the reappointment of Ms. Eyraud as CEO and President, Ms. Eyraud
and the Company entered into an Employment Agreement dated as of August 1, 2009,
The Company granted to Ms. Eyraud options to purchase 3,000,000 shares of common
stock of the Company at a price equal to the closing price of the Company’s
common stock on August 3, 2009.




F-17
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED


The
options vest as to 25% of the underlying shares of common stock on the first
anniversary date of the option grant and ratably each quarter thereafter during
the next three years of the term.  The options become fully vested and
exercisable upon the Company’s termination of Ms. Eyraud’s employment under the
terms of the Employment Agreement.





The
following is a summary of stock options for period ended December 31,
2009:




Number
      of Options
              
              
              Weighted
      Average Exercise PriceOutstanding
      June 30, 2008
              
              
              -
              
              
              $
              -Granted
              
              
              -
              
              
              $
              -Forfeited
              
              
              -
              
              
              $
              -Exercised
              
              
              -
              
              
              $
              -Outstanding
      June 30, 2009
              
              
              -
              
              
              $
              -Granted
              
              
              3,000,000
              
              
              $
              0.08Forfeited
              
              
              -
              
              
              $
              -Exercised
              
              
              -
              
              
              $
              -Outstanding
      December 31, 2009
              
              
              3,000,000
              
              
              $
              0.08







The fair
value of these stock options at the date of grant was $108,987, which was
determined using the Black-Scholes option value model with the following
assumptions:




Expected
      Dividend Yield
              
              
              0.00
              %Risk
      Free Interest Rate
              
              
              3.00
              %Expected
      Volatility
              
              
              60.00
              %Expected
      Life (in years average)
              
              
              4.00




Compensation
expense of $8,958 was recorded for the six months ended December 31,
2009.




Note
12– Commitments & Contingencies




Leases




On
November 1, 2009, the Company entered into a three year lease for its 2,100
square feet at its corporate office space in North Hollywood, California at a
monthly lease rate of $1,800 per month.




Agreements




On
November 1, 2007, the Company entered into a Consulting Agreement with Purell
Partners, LLC. to provide various strategic and other services.  This
Agreement provides for the payment of a monthly retainer of $20,000 per month;
the payment of commissions upon the completion of financing transactions and
mergers and acquisitions, and revenue sharing with respect to sales of product
introduced by Purell Partners. This Consulting Agreement has a term ending on
October 31, 2010 subject to earlier termination as provided for therein. For the
six months ended December 31, 2009 and 2008, the Company paid $0 and $100,000,
respectively, to Purell Partners, LLC under this Agreement.





On
October 12, 2007, the Company entered into a Consulting Agreement with
Continental Advisors, SA. to provide placement agent services in connection with
a contemplated $10,000,000 financing through private placements. This consulting
Agreement provides for the payment of commissions and provides warrant coverage
upon the Company completing the private placements with investors introduced by
Continental Advisors. For the six months ended December 31, 2009 and 2008, the
Company paid $0 to Continental Advisors, SA under this agreement.




F-18
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Severance
and Reappointment Agreements




On
October 1, 2008, Margit Eyraud notified the Company of her intent to resign as
Chief Executive Officer and President of the Company, effective October 1, 2008,
while remaining Chairman of the Board of Directors. Ms. Eyraud served as Chief
Executive Officer and President of the Company under an Employment Agreement,
the term of which expires December 31, 2010. Contemporaneous with her
resignation as reported above, the Company and Ms. Eyraud have agreed to an
early expiration of the Employment Agreement, and have agreed to a severance
package in connection with that early expiration. Under the terms of the
severance package Ms. Eyraud shall receive a cash payment of four hundred five
thousand dollars ($405,000), payable by the Company as follows:




·
            One
      hundred fifty thousand dollars ($150,000) on October 1,
    2008;






·
            Seventy
      five thousand dollars ($75,000) on January 30,
  2009;






·
            Seventy
      five thousand dollars ($75,000) on March 31, 2009;
  and






·
            One
      hundred five thousand dollars ($105,000) on June 30,
  2009




In
addition:




·
            The
      Company shall pay all unreimbursed business expenses, upon submission by
      Ms. Eyraud;






·
            Continuation
      of Ms. Eyraud’s health and life insurance coverage until December 31, 2010
      at levels in place as of September 15,
2008;






·
            The
      ten year stock options to purchase 5,000,000 shares of the Company’s
      common stock at $0.25 per share, granted to Ms. Eyraud pursuant to the
      Employment Agreement, are deemed fully vested
  immediately;






·
            The
      existing Lock-up agreement governing the shares of the Company’s common
      stock beneficially owned by Ms. Eyraud shall continue pursuant to its
      terms, subject to revision, waiver or modification consistent with any
      revision, waiver or modification of other similar Lock-up agreements
      existing between the Company and third parties, including its management
      and affiliates;






·
            The
      Company shall obtain releases of any guarantees Ms. Eyraud has executed to
      the favor of the Company; and






·
            All
      indemnification agreements running in favor of Ms. Eyraud shall be
      maintained for a period of six (6) years, commencing October 2, 2008, and
      the Company shall assume the indemnification of Ms. Eyraud with respect to
      the activities of its wholly owned subsidiary, Marani Spirits, Inc., for a
      like period.




F-19
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED







In
connection with the reappointment of Ms. Eyraud as CEO and President Ms. Eyraud
and the Company entered into an Employment Agreement dated as of August 1,
2009.  The Employment Agreement provides for a four-year employment
term and an initial base salary of $180,000 per annum, subject to upward
adjustment annually based on the consumer price index.  Under the
Employment Agreement, the Board of Directors of the Company is to consider and
propose to Ms. Eyraud a bonus compensation arrangement which will provide for an
incentive bonus payable to Ms. Eyraud based upon the attainment by the Company
of mutually agreeable criteria.





Under the
Employment Agreement, the Company granted to Ms. Eyraud options to purchase
3,000,000 shares of common stock of the Company at a price equal to the closing
price of the Company’s common stock on August 3, 2009.  The options
are to be issued pursuant to a stock option plan to be adopted by the Board of
Directors and approved by the shareholders of the Company and shall by subject
to such other terms as provided in the plan.  The options vest as to
25% of the underlying shares of common stock on the first anniversary date of
the option grant and ratably each quarter thereafter during the next three years
of the term.  The options become fully vested and exercisable upon the
Company’s termination of Ms. Eyraud’s employment under the Employment Agreement
without cause, the termination of such employment by Ms. Eyraud For good reason,
or the Company’s termination of Ms. Eyraud’s employment due to death or
disability. The options shall have a term of 10 years and may be exercised to
the extent vested, (i) by Ms. Eyraud at any time during such 10-year period, if
Ms. Eyraud’s employment is terminated without cause or for good reason or due to
disability or if the employment term expires and Ms. Eyraud does not continue to
be employed by the Company, (ii) by Ms. Eyraud’s personal representative within
one (1) year following the date of Ms. Eyraud’s death, if Ms. Eyraud’s
employment with the Company is terminated due to Ms. Eyraud’s death, and (iii)
by Ms. Eyraud, if Ms. Eyraud’s employment terminates for any other reason (other
than the expiration of the employment term) by Ms. Eyraud, within ninety (90)
days following Ms. Eyraud’s termination of employment.




Arbitration




In
October, 2009, Juggernaut Advertising, Inc. commenced arbitration proceedings
against the Company seeking damages, including legal expenses and interest based
upon an alleged breach of contract by the Company. In December 2009, an
arbitrator ruled that the Company was required to pay Juggernaut $219,777 for
monies owed under the contract, accrued interest, legal fees and
costs.  In addition, the arbitrator also determined that the Company
should reimburse Juggernaut $5,849 in respect of costs of the arbitration that
were previously paid by Juggernaut, based upon the arbitrator’s apportionment of
the costs of the arbitration.  The Company has accrued the entire
$225,626 in accounts payable and accrued expenses and is in the process of
evaluating whether or not to appeal the decision of the arbitrator.




Note
13 - Subsequent Events Review




The
Company has evaluated all subsequent events through February 12, 2010, the date
this Quarterly Report on Form 10-Q was filed with the SEC. The following
recognized or unrecognized events require disclosure as significant subsequent
events.




Searchlight
Financial




In
February 2010, the Company entered into a verbal agreement with Searchlight
Financial to convert the outstanding loan principle and interest balance
totaling $110,000 into shares of Marani S-8 stock at $.10 per share. In 2005,
the Company received a $80,495 short term loan from Searchlight Financial
carrying a 10% interest rate.




F-20
 Table of Contents




Marani
Brands Inc. and Subsidiaries
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED




Convertible
Note and Stock Purchase Agreement




On
February 5, 2010, Marani Brands, Inc. (the “Company”) received a $100,000 one
year loan (the “Loan”) from an institutional investor. The Loan is evidenced by
a convertible note, which is convertible into the Company’s common stock at a
conversion price of $0.04 per share for 180 days and thereafter at the lesser of
(i) $0.04 per share or (ii) 75% of the overage of the three lowest closing bid
prices the Company’s common stock for the 20 trading days prior to the
conversion date. In connection with the Loan, the Company also issued 4,500,000
shares of common stock to the institutional investor.





The
Company also entered into a Common Stock Purchase Agreement with the same
institutional investor, which established an equity line, pursuant to which the
Company, in its discretion, may sell up to $7,500,000 worth of the Company’s
common stock, subject to the terms and provisions of the Common Stock Purchase
Agreement. The Company has entered into a Registration Rights Agreement with the
institutional investor to register the common stock that may be sold pursuant to
the Common Stock Purchase Agreement. The Company is obligated to file the
registration statement for such shares within 60 days from February 5,
2010.





In
connection with these transactions, the Company issued to the institutional
investor warrants to purchase 8,500,000 shares of the Company’s common stock at
an exercise price of $0.04 per share and purchase 4,000,000 shares of the
Company's common stock having a cashless exercise option at $.001.











F-21
 Table of Contents





Item2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In some cases, forward-looking statements are
identified by terms such as “may,” “will,” “should,” “could,” “would,”
“expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,”
“predicts,” “potential,” and similar expressions intended to identify
forward-looking statements. Such statements include, without limitation,
statements regarding:
 
 •
      fluctuations in exchange rates for our products procured for us in
      Armenia;•
      estimates of required capital expenditures;•
      fluctuations in the cost of distribution and/or marking in the United
      States;•
      our inability to meet growth
projections;
 •
      our plans and expectations with respect to future introduction of new
      product;•
      our belief that we will have sufficient liquidity to finance operations
      into through 2009;•
      the amount of cash necessary to operate our business;•
      our ability to raise additional capital when
  needed;
 •
      general economic conditions; and•
      the anticipated future financial performance and business operations of
      our company.
 
 These
forward-looking statements are only predictions and involve known and unknown
risks, uncertainties, and other factors that may cause our actual results,
levels of activity, performance, or achievements to be materially different from
any future results, levels of activity, performance, or achievements expressed
or implied by such forward-looking statements. Also, these forward-looking
statements represent our estimates and assumptions only as of the date of this
Report.  Except as otherwise required by law, we expressly disclaim
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statement contained in this Report to reflect any change in
our expectations or any change in events, conditions, or circumstances on which
any of our forward-looking statements are based or to conform to actual
results.  Factors that could cause or contribute to differences in our
future financial and operating results include those discussed in the risk
factors discussed elsewhere in this Report. We qualify all of our
forward-looking statements by these cautionary statements.
 
 You
should read this section in combination with the section entitled Management’s
Discussion and Analysis of Financial Condition and Results of Operations for the
year ended June 30, 2009 included in our Annual Report on Form 10-K for the year
ended June 30, 2009.
 
 Overview
 
 Our
current business is the distribution of wine and spirit products manufactured in
Armenia.  In the future we may add alcohol beverage products
manufactured in other countries.




3
 Table of Contents




Our
signature product is Marani Vodka, a premium vodka which is manufactured
exclusively for us in Armenia. Marani Vodka is made from winter wheat harvested
in Armenia, distilled three times, aged in oak barrels lined with honey and
skimmed dried milk, then filtered twenty-five times. Bottling of the product
occurs at the Eraskh distillery in Armenia. Our vodka was awarded the gold medal
in the International Spirit Competition, held in San Francisco, California, in
both 2004 and 2007, the 5 Diamond Award by the American Academy of Hospitality
and Sciences in March 2008, and was officially launched in August
2006.
 
 At this
time, and management believes for the foreseeable future, all of the Company’s
products will come from a single supplier, Erashk Winery, Ltd. The Company has
an Exclusive Distribution Agreement with Erashk Winery Ltd., an Armenian
manufacturer of wine and other spirits, to purchase, inventory, promote, and
resell any of its products world-wide. The agreement was renewed on May 3, 2007,
and continues until November 26, 2012 and is subject to automatic five (5) year
renewals.
 
 The
Company is a client of Southern Wine & Spirits of America, Inc.
("Southern"), the largest alcoholic beverage distributor in the United States.
Through Southern, the Company’s Marani Vodka is being distributed in Nevada,
California and Pennsylvania.  In addition, our product is being
distributed by QV Distribution in Arizona, and by Wine Bauer in
Illinois.
 
 Critical
Accounting Policies
 
 Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP"). In connection
with the preparation of the financial statements, we are required to make
assumptions and estimates about future events, and apply judgments that affect
the reported amounts of assets, liabilities, revenues, expenses and the related
disclosure. We base our assumptions, estimates and judgments on historical
experience, current trends and other factors that management believes to be
relevant at the time the financial statements are prepared. On a regular basis,
management reviews our accounting policies, assumptions, estimates and judgments
to ensure that our financial statements are presented fairly and in accordance
with U.S. GAAP. However, because future events and their effects cannot be
determined with certainty, actual results could differ from our assumptions and
estimates, and such differences could be material.
 
 Our
significant accounting policies are discussed in Note 3 of the notes to
financial statements.  Certain critical policies are presented
below.
 
 Stock Based
Compensation
 
 In July
2009, we adopted FASB ASC Topic 718, "Share-Based Payment" (previously "SFAS
123(R)"). This topic requires that companies account for awards of equity
instruments issued to employees under the fair value method of accounting and
recognize such amounts in their statements of operations. Under this topic, we
are required to measure compensation cost for all stock-based awards at fair
value on the date of grant and recognize compensation expense in our
consolidated statements of operations over the service period that the awards
are expected to vest.




4
 Table of Contents






We
account for stock-based compensation issued to non-employees and consultants in
accordance with the provisions of FASB ASC Topic 718, "Share-Based Payment"
(previously "SFAS 123(R)").  Under this topic Common stock issued to
non-employees in exchange for services is accounted for based on the fair value
of the services received.
 
 Fair Value of Financial
Instruments
 
 In July
2009, we adopted FASB ASC Topic 825, "Disclosures about Fair Value of Financial
Instruments"(previously SFAS No. 107). This topic requires that the Company
disclose estimated fair values of financial instruments. The carrying amounts
reported in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value.
 
 Results
of Operations for the Six Months Ending December 31, 2009 Compared to June 30,
2009
 
 Revenues




Period
      Ending December 31
              
              2009
              
              
              2008
              
              
              $
      ChangeRevenues
              
              $
              145,301
              
              
              $
              110,762
              
              
              $
              34,539


The
increase in our revenues for the six months ending December 31, 2009 reflects
our ongoing efforts to grow this business, including a major rebranding of the
Marani Vodka product, the development and augmentation of our internal sales
force, securing additional distributors, expanding our product offering,
increasing our volume per outlet and driving further penetration of our products
into our current customer base, including a major advertising campaign initiated
in prior reporting periods.
 
 Cost of
Sales
 
 Period
      Ending December 31
                
                2009
                
                
                2008
                
                
                $
      ChangeCosts
                
                $
                75,943
                
                
                
                61,533
                
                
                
                14,410
 
 The
increase in cost of sales and cost of sales as a percentage of revenues are the
result of the increase in sales concomitant with the continued development of
our core business.
 
 Operating
Expenses
 
 Period
      Ending December 31
                
                2009
                
                
                2008
                
                
                $
      ChangeMarketing
      and Advertising
                
                $
                202,221
                
                
                
                813,331
                
                
                
                611,110General
      & administrative
                
                $
                (5,307,343
                )
                
                
                3,393,717
                
                
                
                8,701,060Total
      Operating Expenses
                
                $
                (5,105,122
                )
                
                
                4,206,502
                
                
                
                9,311,624
   
 5
 Table of Contents






Marketing
and Advertising
 
 The
decrease in marketing and advertising expenses is the result of the lack of
adequate funds to maintain the prior period aggressive levels of marketing and
sales promotion.  We expect, however, that marketing and advertising
expenses will increase with additional funding and resultant sales
growth.
 
 General
and Administrative
 
 Included
in our general and administrative expenses are payroll for employees, travel for
market development and financing activities, compensation for our restructured
executive management, accounts payable and accrued expenses. The significant
decrease in total general and administrative expenses is primarily the result of
the cancellation of 1,635,000 shares of our common stock issued in payment of
$620,810 for outsourced services, which payments were reported as a general and
administrative expense in the last two quarters of our 2009 fiscal year ending
June 30, 2009.  As such, total general and administrative expenses are
expected to increase in the following quarters as we continue to build the
Company's infrastructure to expand our business.
 
 Other Income
(Expense)
 
 Period
      Ending December 31
              
              2009
              
              
              2008
              
              
              $
      ChangeInterest
      income
              
              $
              9,697
              
              
              
              15,083
              
              
              
              5,386Interest
      expense
              
              $
              (57,467
              )
              
              
              (6,082
              )
              
              
              51,385Derivative
      Expense
              
              $
              (246,501
              )
              
              
              -
              
              
              
              246,501Total
      Other Income (Expense)
              
              $
              (198,731
              )
              
              
              9,001
              
              
              
              207,732
 
 The
increase in interest expense over the six months ending December 31, 2009 is
primarily the result of our pay down of our debt obligations under a long term
SBA loan at an interest rate of 8.25%, and our accrual of interest on three
short term notes in the aggregate principal amount $450,000, each having an
interest rate of 8%.
 
 We
recorded a derivative expense of $246,501 for the six months ending December 31,
2009, based upon the relative fair values of our share purchase warrants
outstanding as of December 31, 2009 and June 30, 2009 respectively, as set forth
in Note 10.
 
 Net Income
(Loss)
 
 Period
      Ending December 31
              
              2009
              
              
              2008
              
              
              $
      ChangeNet
      Income (Loss)
              
              $
              5,373,211
              
              
              
              (4,148,272
              )
              
              
              9,521,483






6
 Table of Contents


Our net
income over the six months ending December 31, 2009 resulted from an
increase in revenue and gross profit over the same period in 2008 and the
significant decrease in total general and administrative expenses as the result
of the cancellation of 1,635,000 shares of our common stock issued in payment of
$620,810 for outsourced services, which payments were reported as a general and
administrative expense in the last two quarters of our 2009 fiscal year ending
June 30, 2009.
 
 Income (Loss) per Common
Share Applicable to Common Stockholders
  Our basic
income/loss per common share applicable to common stockholders for the six
months ending December 31, 2009 and the same period in 2008 was $0.03 and
$(0.02), respectively  We have treated all potential common share
issuances resulting from the exercise of options and warrants as having an
antidilutive impact on earnings per share.
 
 The
number of common shares used in our per share calculations decreased from
180,891,796 for the period ending June 30, 2009 to 165,556,026 for the period
ending December 31, 2009.
 Liquidity
and Capital Resources
 
 Working Capital Needs and
Major Cash Expenditures
 
 Our
footnotes contain an explanatory paragraph that indicates that, with the
exception of the last two reporting periods, we have continuing losses from
operations, and our working capital is insufficient to meet our planned business
objectives. This report also states that, because of these losses, there is
substantial doubt about our ability to continue as a going concern. This report
and the existence of these recurring losses from operations may make it more
difficult for us to raise additional debt or equity financing needed to run our
business, and are not viewed favorably by analysts or investors. Furthermore, if
we are unable to raise a significant amount of proceeds from private placements,
public offerings or other financings, this may cause our cessation of business
resulting in investors losing the value of their investment in us.
 
 A major
factor in the Company’s net losses, as set forth above, was the recent
investments by the Company in expanded operations and a marketing campaign
relating to its primary product, Marani Vodka. Management believes that these
expenses are necessary to expand the business of the Company.
 
 We
currently have reduced our monthly working capital needs to approximately
$75,000.  This amount is expected to increase going forward, primarily
due to the following factors:
 
 •
      expansion of our administrative and operational infrastructure in
      connection with anticipated increase in our business activities,
      and•
      continued expansion of our marketing and sales
  programs.




7
 Table of Contents


External Sources of
Liquidity:
 
 During
the six months ended December 31, 2009, we received proceeds of $50,000 from the
sale of common stock and $300,000 proceeds from notes payable and a convertible
note.
 
 In
October 2008, the Company obtained a $1,000,000 credit line from Citibank
collateralized by the cash in the Company’s money market account.  At
December 31, 2009, the balance due on this credit line was
$999,556.
 
 To date,
we have relied on funding from investors, our officers and directors, and our
limited sales to fund operations. To date, we have generated little revenue and
have extremely limited cash liquidity and capital resources. Our future capital
requirements will depend on many factors, including our ability to market our
products successfully, cash flow from operations, and our ability to obtain
financing in the capital markets. Our business plan requires additional funding
beyond our anticipated cash flow from operations. Consequently, although we
currently have no specific plans or arrangements for financing, we intend to
raise funds through private placements, public offerings or other financings.
Any equity financings would result in dilution to our then-existing
stockholders. Sources of debt financing may result in higher interest expense
and may expose the Company to liquidity problems. Any financing, if available,
may be on unfavorable terms. If adequate funds are not obtained, we may be
required to reduce or curtail operations. We anticipate that our existing
capital resources will be adequate to satisfy our operating expenses and capital
requirements for approximately 6 months. However, this estimate of expenses and
capital requirements may prove to be inaccurate.
 
 Information About Our Cash
Flows for the Three Month Period Ending September 31, 2009 and
2008
 
 Cash
      provided by (used in):
              
              2009
              
              
              2008
              
              
              $
      ChangeOperating
      activities
              
              $
              (357,088)
              
              
              
              (2,068,427)
              
              
              
              1,711,339Financing
      activities
              
              $
              330,000
              
              
              
              775,000
              
              
              
              442,000
 
 Cash
provided by or used in our operating, investing and financing activities is the
result of the continuation of the growth of our core business after the April
2008 merger transaction.  The net decrease in cash used in operating
activities of is due primarily to our net income in the period ending December
31, 2009 compared to a net loss for the same period in 2008.  The net
income for the 2009 period was primarily attributable to the cancellation of
1,635,000 shares of our common stock issued in payment of $620,810 for
outsourced services, which payments were reported as a general and
administrative expense in the last two quarters of our 2009 fiscal year ending
June 30, 2009.   Changes in accounts payable contributed to a
decrease in cash used by operating activities of in 2009, as compared to
2008.   Cash flows generated by our operating activities were
inadequate to cover our cash disbursement needs for the period ending December
31, 2009, and we had to rely on private placement financing to cover operating
expenses.
 
 Net cash
provided by our financing activities for the period ending December 31,
2009 was $330,000, while net cash provided by financing activities for the
same period in 2008 was $775,000.  The decrease in 2009 is attributed
to the decrease in available financing during the 2009
period.




8
 Table of Contents





Off Balance Sheet
Arrangements
 
 We have
no off-balance sheet arrangements.
 
 Effects of
Inflation
 
 We
believe that inflation has not had any material effect on our net sales and
results of operations.
 
 Item3. Quantitative and Qualitative Disclosures About Market
Risk
 
 Not
applicable.
 
 Item4T. Controls and Procedures
 
 Disclosure Controls and
Procedures
 
 Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (“Exchange Act”), as of September 30, 2009.
Disclosure controls and procedures are those controls and procedures designed to
provide reasonable assurance that the information required to be disclosed in
our Exchange Act filings is (1) recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission’s rules
and forms, and (2) accumulated and communicated to management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
 
 We have
conducted a review Items 307 and 308(a) of Regulation S-K, and Rule 13a-15, as
well as the Commission’s Final Rule “Management's Report on Internal Control
Over Financial Reporting and Certification of Disclosure in Exchange Act
Periodic Reports” in connection with the effectiveness of our Disclosure
Controls and Procedures and Internal Controls over Financial Reporting as of the
period ended December 31, 2009 and any remediation plans that have or will be
initiated, as applicable.
 
 Based on
that evaluation and review, the Chief Executive Officer and Chief Financial
Officer concluded that, as the period ended December 31, 2009, our disclosure
controls and procedures were not effective.
 
 Management’s Report on
Internal Control over Financial Reporting
 
 Management,
including our Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a –
15(f).  Management conducted an assessment as the period ended
December 31, 2009 of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).  Based on that evaluation, management
concluded that our internal controls over financial reporting were not effective
as of the period ended December 31, 2009, based on criteria inInternal Control – Integrated
Framework issued by the COSO.
 
 For the
period ended December 31, 2009, we identified certain material weaknesses of the
effectiveness of our internal controls over financial reporting for which we are
implementing remedial procedures, as follows:




9
 Table of Contents





Material
Weakness
 
 We have
examined our financial and transactional information collection processes, and
have determined that, where events during the reporting period have delayed the
collection process and the immediate “closing” of our financial position for the
reporting period, we have not had appropriate time to make effective decisions
regarding the accuracy of our required disclosures.
 
 Remediation
 
 Based on
the review and analysis set forth above, we have concluded that our controls and
procedures needed to be revised to ensure that the information required to be
disclosed by us in the reports we file is timely accumulated and communicated to
management to allow for considered and appropriate decisions regarding both the
collection of information and an analysis of the accounting treatment afforded
the information collected. .  In response to this conclusion, we have
designed and implemented processes of collecting financial and transactional
information on a more expeditious and priority basis, with the goal of “closing”
our quarterly and annual financial positions to allow for the timely analysis,
review and audits by our auditors, and management’s decisions regarding our
required informational and accounting treatment disclosures.
 
 These
processes include the calendaring of target dates for the
following:
 
 •
collection of financial information
 •
analysis of the completeness of information collected
 • review
and analysis of debt
 • review
and analysis of assets
 • review
and analysis of revenues
 • review
and analysis of expenses, by category
 • review
and analysis of our statement of equity
 •
finalization of general ledger and subsidiary reports for the reporting
period
 •
reconciliation of reports
 • review
and analysis of events subsequent to the closing of the last reporting period,
and
 •
preparation of preliminary and final financial statements for review or audit by
our auditors
 
 These
processes will also include where appropriate the increased and early
utilization of accounting and legal service providers to resolve any matters
concerning disclosure or accounting issues.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements should they occur. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or that the
degree of compliance with the control procedure may deteriorate.
 
 Changes in internal
controls
 
 We have
designed and implemented processes of collecting financial and transactional
information on a more expeditious basis with the goal of “closing” our quarterly
and annual financial positions to allow for timely analysis, review and audits
by our auditors and management decisions regarding our required
disclosure.
  
 10
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PART
II - OTHER INFORMATION





Item1. Legal Proceedings





Our
former subsidiary, Fit For Business (Australia) Pty. Ltd. is plaintiff in legal
proceedings against one of our licensees, L.R. Global Marketing Pty. Ltd, for
outstanding licensing fees owed in the amount of $443,263. The subsidiary was
recently sold, as detailed in Note 1 to our Consolidated financial Statements 1
above, and to the knowledge of management, Marani Brands has no further
interests or liabilities stemming from this proceeding as of the time of this
filing.




In
October, 2009, Juggernaut Advertising, Inc. commenced arbitration proceedings
against the Company seeking damages, including legal expenses and interest based
upon an alleged breach of contract by the Company. In December 2009, an
arbitrator ruled that the Company was required to pay Juggernaut $219,777 for
monies owed under the contract, accrued interest, legal fees and
costs.  In addition, the arbitrator also determined that the Company
should reimburse Juggernaut $5,849 in respect of costs of the arbitration that
were previously paid by Juggernaut, based upon the arbitrator’s apportionment of
the costs of the arbitration.  The Company has accrued the entire
$225,626 in accounts payable and accrued expenses and is in the process of
evaluating whether or not to appeal the decision of the arbitrator.


Other
than these claims, the Company is not a party to any pending legal proceeding.
We are not aware of any contemplated proceeding by a governmental authority.
Also, we do not believe that any director, officer, or affiliate, any owner of
record or beneficially of more than five per cent (5%) of the outstanding common
stock, or security holder, is a party to any proceeding in which he or she is a
part adverse to us or has a material interest adverse to us.





Item1A.  Risk Factors





If
we are unable to meet our future capital needs, we may be required to reduce or
curtail operations.





To date,
we have relied on funding from investors, our officers and directors, and our
limited sales to fund operations.  Our future capital requirements
will depend on many factors, including our ability to market our products
successfully, cash flow from operations, and our ability to obtain financing in
the capital markets. Our business plan requires additional funding beyond our
anticipated cash flow from operations. Consequently, we intend to raise funds
through private placements, public offerings or other financings to fund our
future capital requirements, including the potential acquisition of Eraskh
Winery, Ltd., the current single supplier of our products.  Any equity
financings would result in dilution to our then-existing stockholders. Sources
of debt financing may result in higher interest expense and may expose us to
liquidity problems. Any financing, if available, may be on unfavorable terms. If
adequate funds are not obtained, we may be required to reduce or curtail
operations. We anticipate that our existing capital resources will be adequate
to satisfy our operating expenses and capital requirements for approximately six
(6) months. However, this estimate of expenses and capital requirements may
prove to be inaccurate.




11
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We
have a limited operating history and limited historical financial information
upon which you may evaluate our performance.





You
should consider, among other factors, our prospects for success in light of the
risks and uncertainties encountered by companies that, like us, have a limited
operating history.  We may not successfully address these risks and
uncertainties or successfully market our existing products or successfully
introduce and market new products.  If we fail to do so, it could
materially harm our business, adversely impact our financial performance and
impair the value of our common stock.  Even if we accomplish these
objectives, we may not generate the positive cash flows or profits we anticipate
in the future.  Our operating subsidiary, Marani Spirits, Inc., has
generated little revenue since it commenced operations.  Unanticipated
problems, expenses and delays are frequently encountered in establishing and
developing new products in the beverage alcohol industry.  These
include, but are not limited to, inadequate funding, lack of consumer
acceptance, competition, product development, and inadequate sales and
marketing.  Any one of these potential problems could have a
materially adverse effect upon our results of operations and financial
condition.  No assurance can be given that we can or will ever operate
profitably.





We
rely on third-party suppliers and distilleries to provide raw materials for and
to produce our products, and we have limited control over these suppliers and
distilleries and may not be able to obtain quality products on a timely basis or
in sufficient quantity.





All of
our wine and spirits are currently produced by Eraskh, an unaffiliated producer,
based in Armenia. There can be no assurance that there will not be a significant
disruption in the supply of wheat and other raw materials from current sources
or, in the event of a disruption, that Eraskh would be able to locate
alternative sources of materials of comparable quality at an acceptable price,
or at all.  In addition, we cannot be certain that Eraskh will be able
to fill our orders in a timely manner.  There can be no assurance that
we will be able to enter into arrangements with other manufacturers for new
products.  If we experience significant increased demand for any of
our products, or need to replace our existing distiller, there can be no
assurance that additional supplies of raw materials or additional distilling
capacity will be available when needed on terms that are acceptable to us, or at
all, or that any supplier or distiller would allocate sufficient capacity to us
in order to meet our requirements.  In addition, even if we are able
to expand existing or find new distilling or raw material sources, we may
encounter delays in production and added costs as a result of the time it takes
to train our new distillers in our methods, products and quality control
standards.  Any delays, interruption or increased costs in the supply
of raw materials or production of our products could have an adverse effect on
our ability to meet retail customer and consumer demand for our products and
result in lower revenues both in the short and long-term.





We have
entered into a Letter of Intent (the “LOI”) to acquire Eraskh.  There
can be no assurance that we will enter into a definitive agreement to acquire
the distillery as contemplated by the LOI or that the distillery will be
acquired.  In addition, there can be no assurance that our suppliers
and distillers will continue to source raw materials and to produce products
that are consistent with our standards.  We may in the future receive
shipments of product that fail to conform to our quality control
standards.  In that event, unless we are able to obtain replacement
products in a timely manner, we risk the loss of revenues which could have a
material adverse affect upon our results of operations and financial
condition.





12
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Competition
could have a material adverse effect on our business.





We are in
a highly competitive industry and the dollar amount and unit volume of our sales
could be negatively affected by our inability to maintain or increase prices,
changes in geographic or product mix, a general decline in beverage alcohol
consumption or the decision of wholesalers, retailers or consumers to purchase
competitive products instead of our products.  Wholesaler, retailer
and consumer purchasing decisions are influenced by, among other things, the
perceived absolute or relative overall value of our products, including their
quality or pricing, compared to competitive products.  Unit volume and
dollar sales could also be affected by pricing, purchasing, financing,
operational, advertising or promotional decisions made by wholesalers, state and
provincial agencies, and retailers which could affect their supply of, or
consumer demand for, our products.  We could also experience higher
than expected selling, general and administrative expenses if we find it
necessary to increase the number of our personnel or our advertising or
promotional expenditures to maintain our competitive position or for other
reasons.





Nearly
all of our significant competitors have greater market presence, marketing
capabilities as well as greater financial, technological and personnel resources
than we do.  In spirits, the major global competitors are Diageo,
Pernod Ricard, Bacardi and Brown-Forman, each of which has many brands in many
market segments, including vodka, which give them the ability to leverage their
marketing relationship.  In addition, we face competition from local
and regional companies in the United States and world-wide.





An
increase in excise taxes or government regulations could have a material adverse
effect on our business.





The U.S.
and certain other countries in which we operate impose excise and other taxes on
beverage alcohol products in varying amounts which are subject to
change.  Significant increases in excise or other taxes on beverage
alcohol products could materially and adversely affect our results of operations
and financial condition.  Many states in the United States have
considered proposals to increase, and some of these states have increased, state
alcohol excise taxes. In addition, federal, state, local and foreign
governmental agencies extensively regulate the beverage alcohol products
industry concerning such matters as licensing, trade and pricing practices,
permitted and required labeling, advertising and relations with wholesalers and
retailers.  Certain federal, state and foreign regulations also
require warning labels and signage.  New or revised regulations or
increased licensing fees, requirements or taxes could also have a material
adverse effect on our financial condition and results of
operations.





We
rely on the performance of wholesale distributors, major retailers and chains
for the success of our business.





We
currently sell our products principally to wholesalers for resale to retail
outlets including grocery stores, package liquor stores, chain and boutique
hotels, bars and restaurants.  In the future, in addition to selling
our products to wholesalers, we may we sell our products directly to major
retailers and chains.  The replacement or poor performance of our
major wholesalers, retailers or chains could materially and adversely affect our
results of operations and financial condition.  Our inability to
collect accounts receivable from our limited number of major wholesalers,
retailers or chains could also materially and adversely affect our results of
operations and financial condition Selling to major wholesalers and large
retailers results in concentration of our accounts receivable, and the
bankruptcy or insolvency of any such wholesaler or retailer could impact the
collectability a large amount of our receivables and could adversely affect our
financial condition.




13
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The
beverage alcohol distribution industry is being affected by the trend toward
consolidation in the wholesale and retail distribution channels, particularly in
Europe and the U.S.  If we are unable to successfully adapt to this
changing environment, our revenues, share of sales and volume growth could be
negatively affected.  In addition, wholesalers and retailers of our
products offer products of other companies which compete directly with our
products for retail shelf space and consumer purchases.  It is
possible that, wholesalers or retailers may give higher priority to products of
our competitors.  In the future, our wholesalers and retailers may not
continue to purchase our products or provide our products with adequate levels
of promotional support.





Our
business could be adversely affected by a decline in the consumption of products
we sell.





Since
1995, there have been modest increases in consumption of beverage alcohol in
most geographic markets.  In the past, however, in which there were
substantial declines in the overall per capita consumption of beverage alcohol
products in the U.S. and other markets in which we participate.  A
limited or general decline in consumption in one or more of our product
categories could occur in the future due to a variety of factors,
including:





·
            A
      general decline in economic conditions;·
            Increased
      concern about the health consequences of consuming beverage alcohol
      products and about drinking and driving;·
            A
      general decline in the consumption of beverage alcohol products in
      on-premise establishments;·
            A
      trend toward a healthier diet including lighter, lower calorie beverages
      such as diet soft drinks, juices, energy and vitamin drinks and water
      products;





·
            The
      increased activity of anti-alcohol groups; and·
            Increased
      federal, state or foreign excise or other taxes on beverage alcohol
      products.





We must continue
to introduce new products in order to stay competitive.





Our
success depends, in large part, on our ability to effectively brand and market
our Marani Vodka, and develop new products for the
marketplace.  Marani Vodka is our only product at this time. The
launch and ongoing success of new products are inherently uncertain especially
with regard to the ultimate appeal to, and acceptance of, new products by
consumers.  The launch of new products can give rise to a variety of
costs and an unsuccessful launch, among other things, can affect consumer
perception of existing brands as well as our results of operations and financial
condition.





Our
operations subject us to risks relating to currency rate fluctuations, interest
rate fluctuations and geopolitical uncertainty which could have a material
adverse effect on our business.





We or do
business in different countries throughout the world and, therefore, are subject
to risks associated with currency fluctuations.  We are also exposed
to risks associated with interest rate fluctuations.  We intend to
manage our exposure to foreign currency and interest rate risks through various
means including possible utilizing derivative instruments.  We,
however, could experience changes in our ability to hedge against or manage
fluctuations in foreign currency exchange rates or interest rates and,
accordingly, there can be no assurance that we will be successful in reducing
those risks.  We could also be affected by nationalizations or
unstable governments or legal systems or intergovernmental
disputes.  These currency, economic and political uncertainties could
have a material adverse effect on our results of operations and financial
condition.





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Class
action or other litigation relating to alcohol abuse or the misuse of alcohol
could adversely affect our business.





There has
been increased public attention directed at the beverage alcohol industry, which
we believe is due to concern over problems related to alcohol abuse, including
drinking and driving, underage drinking and health consequences from the misuse
of alcohol. Several beverage alcohol producers have been sued in several courts
regarding alleged advertising practices relating to underage
consumers.  Adverse developments in these or similar lawsuits or a
significant decline in the social acceptability of beverage alcohol products
that results from these lawsuits could have a material adverse affect on our
results of operations and financial condition.





We
depend upon our trademarks and proprietary rights, and any failure to protect
our intellectual property rights or any claims that we are infringing upon the
rights of others may adversely affect our competitive position.





Our
future success depends significantly on our ability to protect our current brand
and future brands and products, to the extent developed, and to defend our
intellectual property rights.  We have registered the trademark
Marani® in the United States for distilled spirits and brandy and we have filed
trademark applications seeking to protect the Marani trademark in certain
countries outside the United States.  We know that a third-party that
markets and sells wine products has trademarked the Marani name in numerous
countries outside of the United States and has registered the name Marani in a
number of countries. We are in the process of negotiating an agreement with that
third party which would, if entered into, allow to each company to use the
Marani trademark in connection with its respective products on a world-wide
basis.  There can be no assurance that we will be able to reach an
agreement with that third party which, if no agreement is entered into, could
prevent us from using the Marani trademark in certain jurisdictions. There can
be no assurance that we will be able to protect the intellectual property rights
associated with new products that we introduce. There is also a risk that we
could, by omission, fail to timely renew one of our trademarks or that our
competitors will challenge, invalidate or circumvent any existing or future
trademarks issued to, or licensed by, us.





An
increase in the cost of energy or materials could affect our
profitability.





We have
experienced significant increases in energy costs, and energy costs could
continue to rise, which would result in higher transportation, freight and other
operating costs.  There have also been increases in commodities
necessary for our products, such as wheat.  Our future operating
expenses and margins will be dependent on our ability to manage the impact of
cost increases.  We cannot guarantee that we will be able to pass
along such increased costs to our customers through increased
prices.




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Changes
in accounting standards and taxation requirements could affect our financial
results.





New
accounting standards or pronouncements that may become applicable to us from
time to time, or changes in the interpretation of existing standards and
pronouncements, could have a significant effect on our reported results for the
affected periods.  We may become subject to income tax in numerous
jurisdictions as we attempt to expand our sales to outside of the United
States.  In addition, our products are subject to import and excise
duties and/or sales or value-added taxes in many jurisdictions in which we
operate.  Increases in income tax rates could reduce our after-tax
income from affected jurisdictions, while increases in indirect taxes could
affect our products’ affordability and therefore reduce our sales.





The
loss of key executives and failure to attract qualified management could limit
our growth and negatively impact our results of operations.





We depend
highly upon our senior management team, primarily Ms. Margrit Eyraud, our
Chairman, President and Chief Executive Officer, and other members of our senior
management.  As our operations grow, we will need to expand our
management to include people skilled and experienced in the distribution of
beverage alcohol products.  At this time, we do not know of the
availability of such experienced management personnel or how much it may cost to
attract and retain such personnel.  The loss of the services of any
member of senior management or the inability to hire experienced personnel as
outlined above could have a material adverse effect on our results of operations
and financial condition.





We
may not be able to effectively manage our growth and operations, which could
materially and adversely affect our business.





We may
experience rapid growth and development in a relatively short period of time by
aggressively marketing our products.  The management of this growth
will require, among other things, continued development of our financial and
management controls and management information systems, stringent control of
costs, increased marketing activities, the ability to attract and retain
qualified management personnel and the training of new personnel.  We
intend to hire additional personnel in order to manage our expected growth and
expansion.  Failure to successfully manage our possible growth and
development could have a material adverse effect on our results of operations
and financial condition.





If
we fail to maintain an effective system of internal controls or discover
material weaknesses in our internal controls over financial reporting, we may
not be able to report our financial results accurately or timely or detect
fraud, which could have a material adverse effect on our business.





An
effective internal control environment is necessary for us to produce reliable
financial reports and is an important part of our effort to prevent financial
fraud.  We are required to periodically evaluate the effectiveness of
the design and operation of our internal controls over financial
reporting.  Based on these evaluations, we may conclude that
enhancements, modifications or changes to internal controls are necessary or
desirable. While management evaluates the effectiveness of our internal controls
on a regular basis, these controls may not always be effective.  There
are inherent limitations on the effectiveness of internal controls, including
collusion, management override and failure of human judgment.  In
addition, control procedures are designed to reduce rather than eliminate
business risks.  If we fail to maintain an effective system of
internal controls, or if management or our independent registered public
accounting firm discovers material weaknesses in our internal controls, we may
be unable to produce reliable financial reports or prevent fraud, which could
have a material adverse effect on our business, including subjecting us to
sanctions or investigation by regulatory authorities, such as the Securities and
Exchange Commission.  Any such actions could result in an adverse
reaction in the financial markets due to a loss of confidence in the reliability
of our financial statements, which could cause the market price of our common
stock to decline or limit our access to capital.




16
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Our
common stock may be affected by limited trading volume and may fluctuate
significantly.





There has
been a limited public market for our common stock and there can be no assurance
an active trading market for our common stock will develop.  This
could adversely affect the ability of our shareholders’ ability to sell our
common stock in short time periods or possibly at all.  Our common
stock has experienced and is likely to experience significant price and volume
fluctuations that could adversely affect the market price of our common stock
without regard to our operating performance.  The price of our common
stock could fluctuate significantly in the future based upon any number of
factors such as: general stock market trends; announcements of developments
related to our business; fluctuations in our operating results; announcements of
technological innovations, new products or enhancements by us or our
competitors; general conditions in the markets we serve; general conditions in
the U.S. and/or global economies; developments in patents or other intellectual
property rights; and developments in our relationships with our customers and
suppliers.  Substantial fluctuations in our stock price could
significantly reduce the price of our common stock.





Our
common stock is traded on the "Over-the-Counter Bulletin Board," which may make
it more difficult for investors to resell their shares due to suitability
requirements.





Our
common stock is currently traded on the Over the Counter Bulletin Board (OTCBB)
where we expect it to remain in the foreseeable
future.  Broker-dealers often decline to trade in OTCBB stocks given
the market for such securities are often limited, the stocks are more volatile,
and the risk to investors is greater.  In addition, OTCBB stocks are
often not eligible to be purchased by mutual funds and other institutional
investors.  These factors may reduce the potential market for our
common stock by reducing the number of potential investors.  This may
make it more difficult for investors in our common stock to sell shares to third
parties or to otherwise dispose of their shares.  This could cause our
stock price to decline.





The
Company’s common stock trades on the OTC Bulletin Board.  At present
there is limited trading volume for our common stock. There can be no assurance
that an investor will be able to liquidate his or her investment without
considerable delay, if at all.  Given the limited trading in our
common stock, the price of our common stock may be highly
volatile.  Factors discussed herein may have a significant impact on
the market price of the shares of our common stock.  Moreover, due to
the relatively low price of our common stock, many brokerage firms may not
effect transactions in our common stock.  Rules enacted by the
Securities and Exchange Commission increase the likelihood that many brokerage
firms will not participate in a potential future market for our common
stock.  Those rules require, as a condition to brokers effecting
transactions in certain defined securities (unless such transaction is subject
to one or more exemptions), that the broker obtain from its customer or client a
written representation concerning the customer’s financial situation, investment
experience and investment objectives.  Compliance with these
procedures tends to discourage most brokerage firms from participating in the
market for certain low-priced securities.




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Our
common stock is governed under The Securities Enforcement and Penny Stock Reform
Act of 1990.





The
Securities Enforcement and Penny Stock Reform Act of 1990 require additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock.  The Securities and Exchange
Commission has adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions.  Such exceptions include any equity security
listed on NASDAQ and any equity security issued by an issuer that has
(i) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average annual revenue of at least $6,000,000, if such
issuer has been in continuous operation for less than three
years.  Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith.





The forward looking statements
contained in this Report may prove incorrect.





This
report contains certain forward-looking statements, including among
others:  (i) anticipated trends in our financial condition and results
of operations; (ii) our business strategy for expanding distribution, directly
manufacturing products based upon the possible acquisition of Eraskh; and (iii)
our ability to distinguish our products and services from our current and future
competitors.  These forward-looking statements are based largely on
our management’s current expectations and are subject to a number of risks and
uncertainties.  Forward-looking statements include the information
concerning our possible or assumed future results of operations, business
strategies, financing plans, competitive position, industry environment,
potential growth opportunities, and the effects of future regulation and the
effects of competition.  Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words “believe,” “expect,” “anticipate,”
“intend,” “plan,” “estimate” or similar expressions.  These statements
are only predictions and involve known and unknown risks and uncertainties,
including the risks outlined under “Risk Factors” and elsewhere in this
prospectus.





Actual
results could differ materially from these forward-looking
statements.  In addition to the other risks described elsewhere in
this “Risk Factors” discussion, important factors to consider in evaluating such
forward-looking statements include: (i) changes to external competitive
market factors or in our internal budgeting process which might impact trends in
our results of operations; (ii) anticipated working capital or other cash
requirements; (iii) changes in our business strategy or an inability to execute
its strategy due to unanticipated changes in the web development and web hosting
industry; and (iv) various competitive factors that may prevent us from
competing successfully in the marketplace.  In light of these risks
and uncertainties, many of which are described in greater detail elsewhere in
this “Risk Factors” discussion, there can be no assurance that the events
predicted in forward-looking statements contained in this prospectus will, in
fact, transpire.





Although
we believe that the expectations reflected in our forward-looking statements are
reasonable, we cannot guarantee future results, events, levels of activity,
performance or achievement. We are not under any duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results, unless required by law





IN
ADDITION TO THE FOREGOING RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS THAT ARE
NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT.  POTENTIAL INVESTORS
SHOULD KEEP IN MIND THAT OTHER IMPORTANT RISKS COULD ARISE.





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Item2.  Unregistered Sales of Equity Securities and Use
of Proceeds





During
the three months ended September 30, 2009, the Company cancelled 1,635,000
shares issued for services totaling $620,810; issued 1,125,000 shares for the
conversion of debt totaling $255,000; and received $50,000 under a stock
purchase agreement under which a total of 2,500,000 shares were be issued to an
accredited investor subsequent to September 30, 2009.





In
connection with the reappointment of Ms. Eyraud as CEO and President Ms. Eyraud
and the Company entered into an Employment Agreement dated as of August 1, 2009,
The Company granted to Ms. Eyraud options to purchase 3,000,000 shares of common
stock of the Company at a price equal to the closing price of the Company’s
common stock on August 3, 2009.  The options vest as to 25% of the
underlying shares of common stock on the first anniversary date of the option
grant and ratably each quarter thereafter during the next three years of the
term.  The options become fully vested and exercisable upon the
Company’s termination of Ms. Eyraud’s employment under the terms of the
Employment Agreement.




During
the six months ended December 31, 2009, the Company cancelled 22,932,309 shares
issued for services totaling ($5,945,137); issued 1,125,000 shares for the
conversion of debt totaling $255,000; and issued 5,961,539 shares for stock
subscriptions totaling $110,000.





Item3.  Defaults Upon Senior Securities





None





Item4.  Submission of Matters to a Vote of Security
Holders





None





Item 5.  Other Information









Item6.  Exhibits





Exhibit Number
            
            DESCRIPTION31.1
            
            Certification of CEO, Rules
      13a-14(a) & 15d-14(a), filed herewith31.2
            
            Certification of CAO, Rules
      13a-14(a) & 15d-14(a) filed herewith32.1
            
            Certifications of CEO, 18
      U.S.C. Sec. 1350, filed herewith32.2
            
            Certifications of CFO, 18
      U.S.C. Sec. 1350, filed
herewith








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SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.





Marani
Brands, Inc.


(Registrant)








Date:
February 16,
2010





By: /s/ Margrit
Eyraud


Margrit
Eyraud


Chief
Executive Officer, President


Director





Date:
February 16,
2010





By: 
/s/ Ani
Kevorkian


Ani
Kevorkian


Chief
Financial Officer


Principal
Accounting Officer


Director








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