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
September
30, 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 183,853,335 shares of common stock outstanding as of November 16,
2009.








Table of Contents







TABLE OF CONTENTS





PagePART
      I - FINANCIAL INFORMATIONItem
      1.
            Financial Statements
      (Unaudited)
            F-1Consolidated Balance Sheets as of
      September 30, 2009 and June 30, 2009
            F-2Consolidated Statements of
      Operations for the Three Months Ended September 30, 2009  and
      2008
            F-3Consolidated Statements of
      Cash Flows for the Three Months Ended September 30, 2009and 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
            6Item
      4T.
            Controls and
      Procedures
            7PART
      II - OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            8Item
      1A.
            Risk
    Factors
            8Item
      2.
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            12Item
      3.
            Defaults Upon Senior
      Securities
            12Item
      4.
            Submission of Matters to a Vote of
      Security Holders
            12Item
      5.
            Other
      Information
            12Item
      6.
            Exhibits
            12




Table of Contents





PART
I.   FINANCIAL INFORMATION





Item 1. 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 September
30, 2009, and for all periods presented, not misleading, have been
made.  The results of operations for the period ended September 30,
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


Marani
      Brands, Inc. and SubsidiariesConsolidated Balance SheetsUNAUDITEDSeptember
      30,
              
              
              June
      30,2009
              
              
              2009AssetsCurrent
      AssetsCash
      & Equivalents
              
              $
              1,094,965
              
              
              $
              1,116,460Accounts
      Receivable
              
              
              126,192
              
              
              
              138,541Inventory
              
              
              158,525
              
              
              
              170,518Prepaid
      Expenses & Other Current Assets
              
              
              30,130
              
              
              
              30,130Total
      Current Assets
              
              
              1,409,812
              
              
              
              1,455,649Deposits
              
              
              10,255
              
              
              
              10,255Total
      Assets
              
              $
              1,420,067
              
              
              $
              1,465,904Liabilities
      & Stockholders' Equity (Deficit)Current
      LiabilitiesAccounts
      Payable
              
              $
              642,122
              
              
              $
              632,819Accrued
      Expenses
              
              
              300,259
              
              
              
              453,816Line
      of Credit
              
              
              999,556
              
              
              
              999,556Notes
      Payable
              
              
              649,586
              
              
              
              330,495Derivative
      Liability
              
              
              252,302
              
              
              
              246,501Total
      Current Liabilities
              
              
              2,843,825
              
              
              
              2,663,187Non-Current
      LiabilitiesNotes
      Payable
              
              
              -
              
              
              
              124,680Total
      Non-Current Liabilities
              
              
              -
              
              
              
              124,680Total
      Liabilities
              
              $
              2,843,825
              
              
              $
              2,787,867Commitments
      & Contingencies
              
              
              -
              
              
              
              -Stockholders'
      Equity (Deficit)Common
      Stock, $0.001 par value, 300,000,000 sharesauthorized;
      180,891,796 and 181,401,796 shares issued and outstanding,
      respectively
              
              
              180,892
              
              
              
              181,402Additional
      Paid-in Capital
              
              
              22,465,072
              
              
              
              22,825,893Stock
      Subscriptions Payable
              
              
              110,000
              
              
              
              60,000Accumulated
      Deficit
              
              
              (24,179,722
              )
              
              
              (24,389,258
              )Total
      Stockholders' Equity (Deficit)
              
              
              (1,423,758
              )
              
              
              (1,321,963
              )Total
      Liabilities & Stockholders' Equity (Deficit)
              
              $
              1,420,067
              
              
              $
              1,465,904The
      accompanying notes are an integral part of these financial
      statements


F-2
 Table of Contents




Marani
      Brands, Inc. and SubsidiariesConsolidated Statements of OperationsUNAUDITEDFor
      the Three Months EndedSeptember
      30,2009
                
                
                2008Sales
                
                $
                106,737
                
                
                $
                21,574Cost
      of Sales
                
                
                50,370
                
                
                
                5,617Gross
      Profit
                
                
                56,367
                
                
                
                15,957Operating
      ExpensesMarketing
      and Sales Promotion
                
                
                74,225
                
                
                
                433,816General
      & Administrative
                
                
                (243,722
                )
                
                
                362,015Total
      Operating Expenses
                
                
                (169,497
                )
                
                
                795,831Operating
      Income (Loss)
                
                $
                225,864
                
                
                $
                (779,874
                )Other
      Income (Expense)Interest
      Income
                
                
                7,173
                
                
                
                7,546Interest
      Expense
                
                
                (17,700
                )
                
                
                (1,077
                )Derivative
      Expense
                
                
                (5,801
                )
                
                
                -Total
      Other  Income (Expense)
                
                
                (16,328
                )
                
                
                6,469Net
      Income (Loss) Before Income Taxes
                
                $
                209,536
                
                
                $
                (773,405
                )Provision
      for Income Taxes
                
                
                -
                
                
                
                -Net
      Income (Loss)
                
                $
                209,536
                
                
                $
                (773,405
                )Net
      Income per ShareBasic
                
                $
                0.00
                
                
                $
                (0.00
                )Diluted
                
                $
                0.00
                
                
                $
                (0.00
                )Number
      of Shares Used in Per Share CalculationsBasic
                
                
                181,146,796
                
                
                
                169,868,752Diluted
                
                
                181,146,796
                
                
                
                169,868,752The
      accompanying notes are an integral part of these financial
      statements


F-3
 Table of Contents






Marani
      Brands, Inc.
      and SubsidiariesConsolidated
      Statements of Cash FlowsUNAUDITEDFor
      the Three Months Ended
                September
      30,2009
              
              
              2008Cash
      Flows from Operating ActivitiesNet
      Income (Loss)
              
              $
              209,536
              
              
              $
              (773,405
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      Based Compensation
              
              
              (616,331
              )
              
              
              62,500Derivative
      Expense
              
              
              5,801
              
              
              
              -Depreciation
      & Amortization
              
              
              -
              
              
              
              350Changes
      in operating assets and liabilities:Accounts
      Receivable
              
              
              12,349
              
              
              
              4,321Inventory
              
              
              11,993
              
              
              
              (321,209
              )Accounts
      Payable
              
              
              9,303
              
              
              
              (136,277
              )Accrued
      Expenses
              
              
              101,443
              
              
              
              (10,191
              )Net
      Cash Used in Operating Activities
              
              
              (265,906
              )
              
              
              (1,173,911
              )Cash
      Flows from Financing ActivitiesProceeds
      from Notes Payable
              
              
              200,000
              
              
              
              -Payments
      on Notes Payable
              
              
              (5,589
              )
              
              
              (125,000
              )Stock
      Subscriptions Received
              
              
              50,000
              
              
              
              -Net
      Cash Provided by Financing Activities
              
              
              244,411
              
              
              
              (125,000
              )Net
      Increase (Decrease) in Cash
              
              
              (21,495
              )
              
              
              (1,298,911
              )Cash
      Beginning of Period
              
              
              1,116,460
              
              
              
              2,460,663Cash
      End of Period
              
              $
              1,094,965
              
              
              $
              1,161,752Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid during the period for interest
              
              $
              17,700
              
              
              $
              1,077Cash
      Paid during the period for income taxes
              
              
              -
              
              
              
              -Supplemental
      Disclosure of Non-Cash Items:Common
      Stock issued for Conversion of Debt
              
              $
              255,000
              
              
              $
              -The
      accompanying notes are an integral part of these financial
      statements




F-4
 Table of Contents




Marani
Brands 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 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, the Company's 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 September 30,
2009, the Company has an accumulated deficit of $24,179,722. 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.





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.




F-5
 Table of Contents




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




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 subsidiaries Marani Spirits, Inc. and Great Hawk,
Inc. (collectively the “Company”). 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.




Impairment
of long-lived assets




Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a Disposal of a Segment of a Business." The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 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 and
convertible notes.




F-6
 Table of Contents


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




Stock-based
compensation




In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123(R) 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
SFAS No. 123(R), 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 SFAS 123(R) and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services". 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




Statement
of Financial Accounting Standard No. 107, Disclosures about Fair Value of
Financial Instruments, 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.




Shipping
and Handling




In
accordance with Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting
for Shipping and Handling Fees and Costs, we include shipping fees billed to
customers in net revenues and do not bill customers for handling. Amounts
incurred by us for freight are included in cost of goods sold.




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 September 30, 2009 and June 30, 2009 the Company has reserved $35,431 for
doubtful accounts.




Advertising




The
Company expenses advertising costs as incurred. Advertising costs for the three
months ended September 30, 2009 and 2008, was $6,758 and $69,616,
respectively.




Income
Taxes




The
Company accounts for income taxes using the liability method as required by
Statement of Financial Accounting Standards ("FASB") No. 109, Accounting for
Income Taxes ("SFAS 109"). Under this method, 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 September 30,
2009 and June 30, 2009, as a result of net operating losses incurred during the
periods. As of September 30, 2009, the Company has available approximately
$24,200,000 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 September 30, 2009 and
June 30, 2009, the Company has a deferred tax assets of approximately $9,600,000
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. In
addition, other limitations may be imposed by the code by virtue of the
acquisition outlined in Note 4.




F-7
 Table of Contents




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





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:




September
      30,
                
                
                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
                %






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


September
      30,
                
                
                June
      30,2009
                
                
                2009Net
      Operating Loss Carryforward
                
                $
                9,630,783
                
                
                $
                9,714,241Valuation
      Allowance
                
                
                (9,630,783
                )
                
                
                (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 three months
ended September 30, 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).




F-8
 Table of Contents




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





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 Statement 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, (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 Corporation. 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,
      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.




·
            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.




·
            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.




F-9
 Table of Contents




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




·
            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.




·
            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”.




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.




F-10
 Table of Contents




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




·
            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, Fit For
Business (Australia) Pty Limited ("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.




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
September 30, 2009 and June 30, 2009, inventories are comprised of finished
bottles/cases of Marani Vodka available for resale and in-transit totaling
$158,525 and $170,518, respectively.




Note
6 – Accrued Expenses




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


September
      30,
                
                
                June
      30,2009
                
                
                2009Accrued
      Payroll and Taxes
                
                $
                170,612
                
                
                $
                116,854Deferred
      Officer Salaries
                
                
                35,602
                
                
                
                -Credit
      Cards
                
                
                37,090
                
                
                
                38,260Accrued
      Severance
                
                
                -
                
                
                
                255,000Accrued
      Interest & Other
                
                
                56,955
                
                
                
                43,702Total
      Accounts Payable and Accrued Expenses
                
                $
                300,259
                
                
                $
                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
September, 2009 the balance due on this credit line was $999,556.




F-11
 Table of Contents
 
 Marani
Brands Inc. and Subsidiaries
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  UNAUDITED


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 2006,
the Company received a $80,495 short term loan from Searchlight Financial
carrying a 10% interest rate. The parties are in negotiation to settle this
amount and accrued interest totaling $30,169 for the issuance of Marani S-8
shares.





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 $10,564 is included in Accrued Expenses at September
30, 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 $1,326 is included in Accrued Expenses at September 30,
2009.





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 $1,096 is included in Accrued
Expenses at September 30, 2009.




Note
9 – Warrants




The
following is a summary of share purchase warrants for period ended September 30,
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
                
                
                -
                
                
                $
                -Forfeited
                
                
                -
                
                
                $
                -Exercised
                
                
                -
                
                
                $
                -Outstanding
      September 30, 2009
                
                
                29,620,000
                
                
                $
                0.32
   Expiry
                
                Number
      of Warrants
                
                
                Exercise
      PriceSeptember
      30, 2010
                
                
                10,000,000
                
                
                $
                0.10November
      11, 2010
                
                
                4,700,000
                
                
                $
                0.35November
      29, 2010
                
                
                160,000
                
                
                $
                0.35April
      2, 2011
                
                
                520,000
                
                
                $
                0.35April
      15, 2011
                
                
                250,000
                
                
                $
                1.00May
      1, 2011
                
                
                2,375,000
                
                
                $
                0.25June
      1, 2011
                
                
                10,000,000
                
                
                $
                0.50June
      4, 2011
                
                
                100,000
                
                
                $
                1.00June
      11, 2011
                
                
                1,515,000
                
                
                $
                0.35Total
                
                
                29,620,000
                
                
                $
                0.32


The fair
value of the share purchase warrants as of September 30, 2009 and June 30, 2009,
was $252,302 and $246,501, respectively, which was determined using the
Black-Scholes option value model with the following assumptions:


September
      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)
                
                
                1.45
                
                
                
                1.70


Note
10 - 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.




F-12
 Table of Contents
 
 Marani
Brands Inc. and Subsidiaries
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  UNAUDITED


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 September 30,
2009, the Company had 180,891,796 shares of Common Stock issued and
outstanding.





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.





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.





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 September 30,
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
      September 30, 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 $4,479 was recorded for the period ended September 30,
2009.




Note
11– Commitments & Contingencies




Leases




The
Company leases 2,100 square feet at its corporate office space in North
Hollywood, California. This lease is currently on a month-to-month basis at a
monthly rental 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
three months ended September 30, 2009 and 2008, the Company paid $0 and $60,000,
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 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 three months ended September 30, 2009 and 2008,
the Company paid $0 to Continental Advisors, SA under this
agreement.




F-13
 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.




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.




F-14
 Table of Contents




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




Note
12 - Subsequent Events Review




The
Company has evaluated all subsequent events through November 16, 2009, 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.




Equity
Issuance




Subsequent
to September 30, 2009, the Company issued a total of 2,961,539 common shares to
investors for outstanding stock subscription agreements totaling
$110,000.




Warrant
and Share Cancellation-Purrell




Purrell
and Margrit Enterprises International, Inc., which is now called Marani Spirits,
Inc., are parties to a Consulting Agreement dated November 1, 2007 (the
"Consulting Agreement"). Pursuant to the consulting Agreement, 10,000,000
Warrants were issued in consideration of services, purportedly performed by
Purrell under the Consulting Agreement and related to the Merger described in
Note 4. In addition, 43,138,825 shares of common stock (the “Shares”) were
issued to Purrell in consideration of services, purportedly performed by Purrell
under the Consulting Agreement, in anticipation of Purrell assisting the Company
with receiving approximately $10,000,000 of equity
financing.  However, no equity financing was arranged by Purrell for
the Company. Therefore the Shares were not validly issued since the Company did
not receive adequate consideration.





In
addition, it has come to the Company's attention that Purrell is not a
registered broker-dealer and therefore was not legally permitted to provide
certain of the services set forth in the Consulting Agreement. In particular,
since Purrell was not a registered broker-dealer, the various agreements between
Purrell and the Company (including the Consulting Agreement) relating to Purrell
raising financing for the Company are voidable. In light of foregoing the
Warrants were not properly issued.





The
Company has requested its transfer agent to cancel the 21,297,309 Shares of the
43,138,825 Shares issued May 30, 2009 valued at $.25, and 10,000,000 Warrants,
issued with an exercise price of $.10, to Purrell pursuant to the
Consulting Agreement.




Warrant
Cancellation-Continental Advisors




Continental
Advisors (CA) acted as the placement agent for a private placement (the
“Placement”) of Convertible Debentures issued by Margrit Enterprises
International, Inc. pursuant to a Letter Agreement effective as of October 12,
2007.  Pursuant to CA’s placement agent services, 3,890,000 warrants
were issued.  CA has not exercised any of the warrants.





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. The Company has requested its transfer agent to cancel the 3,890,000
warrants issued (2,375,000 issued on May 1, 2008 with an
exercise price of $.25 and 1,515,000 warrants  issued on June 4, 2008
with an exercise price of $.35) pursuant to the Letter
Agreement.




Arbitration




In
October, 2009, Juggernaut Advertising, Inc. commenced arbitration proceedings
against the Company seeking damages, including legal expenses and interest, of
$273,776 based upon an alleged breach of contract by the
Company.  Juggernaut Advertising, Inc. entered into a contract with
the Company on May 1, 2008 to provide advertising and marketing services for
which the Company has filed a counterclaim.   The Company is
awaiting the decision in the arbitration.  The Company believes it has
no liability for any costs above those amounts already included in accounts
payable and will be successful in this arbitration process.





F-15
 Table of Contents





Item 2. 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.





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 in retailers such as Ralphs,
Safeway, Vons, Pavilions, and Dominicks, and in Southern California locations
such as Ritz-Carlton Hotels, Marriott Hotels, Spago Restaurants and Lawry's
Restaurants.





The
Company intends to, and is currently in negotiations with, other distributors to
reach arrangements to maximize distribution of its products in the United
States. The Company also is in the process of identifying appropriate
distributors of Marani Vodka in Italy, Switzerland, Monaco, Germany, Mexico, and
parts of Asia.





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.





3
 Table of Contents





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
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123(R) 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
SFAS No. 123(R), 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 SFAS 123(R) and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services". 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





Statement
of Financial Accounting Standard No. 107, Disclosures about Fair Value of
Financial Instruments, requires that we 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 Three Months Ending September 30, 2009 Compared to
September 30, 2008





Revenues





Period
      Ending September 30
            
            2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeRevenues
            
            $
            106,737
            
            
            $
            21,574
            
            
            $
            85,163
            
            
            
            394.7
            %





The
revenues for the period ending September 30, 2008 were based upon the
development stage of our new core business of the distribution of wine and
spirit products manufactured in Armenia.  The increase in our revenues
for the three months ending September 30, 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 September 30
            
            2009
            
            
            %
      of Revenues
            
            
            2008
            
            
            %
      of Revenues
            
            
            $
      Change
            
            
            %
      ChangeCosts
            
            $
            50,370
            
            
            
            47
            %
            
            
            5,617
            
            
            
            26
            %
            
            
            44,753
            
            
            
            796.7
            %





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 September 30
            
            2009
            
            
            %
      of Revenues
            
            
            2008
            
            
            %
      of Revenues
            
            
            $
      Change
            
            
            %
      ChangeMarketing
      and Advertising
            
            $
            74,225
            
            
            
            69.5
            %
            
            
            433,816
            
            
            
            2,010
            %
            
            
            359,591
            
            
            
            82.8
            %General
      & administrative
            
            $
            (243,722
            )
            
            
            (228)
            %
            
            
            362,015
            
            
            
            1,670
            %
            
            
            605,737
            
            
            
            167.3
            %Total
      Operating Expenses
            
            $
            (169,497
            )
            
            
            (159.7)
            %
            
            
            795,831
            
            
            
            3,684
            %
            
            
            965,328
            
            
            
            121.3
            %





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.





4
 Table of Contents





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 September 30
            
            2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeInterest
      income
            
            $
            7,173
            
            
            
            7,546
            
            
            
            373
            
            
            
            4.9
            %Interest
      expense
            
            $
            (17,700
            )
            
            
            (1,077
            )
            
            
            16,623
            
            
            
            1,543
            %Derivative
      Expense
            
            $
            (5,801
            )
            
            
            -
            
            
            
            5,801
            
            
            
            100
            %Total
      Other Income (Expense)
            
            $
            (16,328
            )
            
            
            6,469
            
            
            
            9,859
            
            
            
            152.4
            %





The
increase in interest expense over the three months ending September 30, 2009 is
primarily the result of our pay down of our debt obligations under a long term
SBA loan having a balance due at September 30, 2009 of $124,091, having 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
$5,810 for the three months ending September 30, 2009, based upon the relative
fair values of our share purchase warrants outstanding as of September 30, 2009
and June 30, 2009 respectively, as set forth in Note 9.





Net Income
(Loss)





Period
      Ending September 31
            
            2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeNet
      Income (Loss)
            
            $
            209,536
            
            
            
            (773,405
            )
            
            
            982,941
            
            
            
            127
            %





Our net
income over the three months ending September 30, 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 three
months ending September 30, 2009 and the same period in 2008 was $0.00 and
$(0.00), respectively  Accordingly, 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 increased from
169,868,752 for the three month period ending September 30, 2008 to
181,146,796 for 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 September 30, 2009 reporting period, 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.




5
 Table of Contents




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.





External Sources of
Liquidity:





During
the three months ended September 30, 2009, we received proceeds of $50,000 from
the sale of common stock and $200,000 from loans. In addition, we issued shares
of our common stock in payment of





•
$255,000 for debt to equity conversion, and





•
$616,331 for stock based compensation.





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
September 30, 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
            
            
            $
      Change
            
            
            %
      ChangeOperating
      activities
            
            $
            (265,906
            )
            
            
            (1,173,911
            )
            
            
            908,005
            
            
            
            77.3
            %Financing
      activities
            
            $
            244,411
            
            
            
            (125,000
            )
            
            
            369,411
            
            
            
            295.5
            %





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 September
30, 2009 of $209,536 compared to a net loss of $773,405 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.  Our net income was offset by increased changes in
stock based compensation during the three month ending September 30, 2009 by
$616,331.  Changes in accounts payable contributed to a decrease in
cash used by operating activities of $9,303 in 2009, as compared to an increase
of $136,277 for 2008.  Changes in inventory contributed to a decrease
in cash used by operating activities of $11,993 for 2009, compared to
contributing to an increase of $321,209 for 2007.  Cash flows
generated by our operating activities were inadequate to cover our cash
disbursement needs for the period ending September 30, 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 September 30,
2009 was $244,441, while net cash provided by financing activities for the
same period in 2008 was $(125,000).  The increase in 2009 is
attributed to the increased proceeds provided by financing activities during the
period.





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.





Item 3. Quantitative and Qualitative Disclosures About Market
Risk





Not
applicable.




6
 Table of Contents





Item 4T. 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 September 30, 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 September 30, 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
September 30, 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 September 30, 2009, based on criteria inInternal Control – Integrated
Framework issued by the COSO.





For the
period ended September 30, 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:





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.





7
 Table of Contents




PART
II - OTHER INFORMATION





Item 1. 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, of
$273,776 based upon an alleged breach of contract by the
Company.  Juggernaut Advertising, Inc. entered into a contract with
the Company on May 1, 2008 to provide advertising and marketing services for
which the Company has filed a counterclaim.   The Company is
awaiting the decision in the arbitration.  The Company believes it has
no liability for any costs above those amounts already included in accounts
payable and will be successful in this arbitration process.





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.





Item 1A.  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.





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.





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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.





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.





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.





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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.





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.





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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.





Item 2.  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.





Item 3.  Defaults Upon Senior Securities





None





Item 4.  Submission of Matters to a Vote of Security
Holders





None





Item 5.  Other Information





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 set forth in Note 14 to
our Consolidated Financial Statements. .  Subsequently, Ms. Eyraud
resumed her position as Chief Executive Officer, effective August 1,
2009.





Item 6.  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:
November 16,
2009


By: /s/ Margrit
Eyraud


Margrit
Eyraud


Chief
Executive Officer, President


Director





Date:
November 16,
2009


By: 
/s/ Ani
Kevorkian


Ani
Kevorkian


Chief
Financial Officer


Principal
Accounting Officer


Director









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