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
March 31, 2009 or
 
 oTransition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 For
the transition period from _____________ to _____________
 
 Commission
file number 333-123176
 
 Marani Brands,
Inc.
 
 (Exact
Name of Registrant as Specified in its Charter)
 
 Nevada
                    
                    20-2008579(State
      or Other Jurisdiction of
                    
                    (I.R.S.
      EmployerIncorporation
      or Organization)
                    
                    Identification
      No.)
 
 13152
Raymer Street, Suite 1A
 North
Hollywood, CA  91605
 (Address
of Principal Executive Offices)
 
 91605
 (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 174,506,796shares of
common stock outstanding as of May 15, 2009.
  
  TABLE OF
CONTENTS
  PagePART
      I - FINANCIAL INFORMATIONItem
      1. Financial Statements (Unaudited)
                1Consolidated
      Balance Sheets as of March 31, 2009 and June 30, 2008
                2Consolidated
      Statements of Operations for the Three and Six Months Ended March 31,
      2009
                  and
      2008
                3Consolidated
      Statements of Cash Flows for the nine Months Ended March 31,
      2009
                  and
      2008
                4Notes
      to Consolidated Financial Statements
                5Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
                16Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                21Item
      4T. Controls and Procedures
                21PART
      II - OTHER INFORMATIONItem
      1. Legal Proceedings
                23Item
      1A.  Risk Factors
                23Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                29Item
      3.  Defaults Upon Senior Securities
                29Item
      4.  Submission of Matters to a Vote of Security
      Holders
                29Item
      5.  Other Information
                29Item
      6. Exhibits
                29
  
  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-KSB for the year
ended June 20, 2008.
 
 In the
opinion of management, all adjustments necessary in order to make the financial
position, results of operations and changes in financial position at March 31,
2009, and for all periods presented, not misleading, have been
made.  The results of operations for the period ended March 31,
2009are
not necessarily indicative of the Company’s actual operating results for the
full year ending June 30, 2009.
  1
  Marani
Brands, Inc. and Subsidiaries
 Consolidated
Balance Sheets
 
 UNAUDITEDMarch
      31,
                                
                                
                                June
      30,2009
                                
                                
                                2008AssetsCurrent
      AssetsCash
      & Equivalents
                                
                                $
                                1,150,660
                                
                                
                                $
                                2,460,663Accounts
      Receivable
                                
                                
                                83,638
                                
                                
                                
                                29,661Inventory
                                
                                
                                374,576
                                
                                
                                
                                77,307Total
      Current Assets
                                
                                
                                1,608,874
                                
                                
                                
                                2,567,631Property
      & Equipment, Net
                                
                                
                                4,505
                                
                                
                                
                                5,510Deposits
                                
                                
                                10,255
                                
                                
                                
                                35,255Goodwill
      and Intangibles
                                
                                
                                3,861,280
                                
                                
                                
                                3,861,280Total
      Assets
                                
                                $
                                5,484,914
                                
                                
                                $
                                6,469,676Liabilities & Stockholders' Equity
      (Deficit)Current
      LiabilitiesAccounts
      Payable
                                
                                $
                                516,370
                                
                                
                                $
                                260,894Accrued
      Expenses
                                
                                
                                106,867
                                
                                
                                
                                94,063Notes
      Payable
                                
                                
                                1,280,495
                                
                                
                                
                                80,495Total
      Current Liabilities
                                
                                
                                1,903,732
                                
                                
                                
                                435,452Non-Current
      LiabilitiesNotes
      Payable
                                
                                
                                123,565
                                
                                
                                
                                249,816Total
      Non-Current Liabilities
                                
                                
                                123,565
                                
                                
                                
                                249,816Total
      Liabilities
                                
                                $
                                2,027,297
                                
                                
                                $
                                685,268Commitments
      & Contingencies
                                
                                
                                -
                                
                                
                                
                                -Stockholders'
      Equity (Deficit)Preferred
      Stock, $0.001 par value, 10,000,000 sharesauthorized;
      0 shares issued and outstanding
                                
                                
                                -
                                
                                
                                
                                -Common
      Stock, $0.001 par value, 300,000,000 sharesauthorized;
      174,506,796 and 169,743,752 shares issued and outstanding,
      respectively
                                
                                
                                174,607
                                
                                
                                
                                169,744Additional
      Paid-in Capital
                                
                                
                                25,118,368
                                
                                
                                
                                22,629,079Direct
      Offering Costs
                                
                                
                                (11,779,577
                                )
                                
                                
                                (11,779,577
                                )Accumulated
      Deficit
                                
                                
                                (10,055,781
                                )
                                
                                
                                (5,234,838
                                )Total
      Stockholders' Equity (Deficit)
                                
                                
                                3,457,617
                                
                                
                                
                                5,784,408Total
      Liabilities & Stockholders' Equity (Deficit)
                                
                                $
                                5,484,914
                                
                                
                                $
                                6,469,676
 
 The
accompanying notes are an integral part of these financial
statements
  2
 
 Marani
Brands, Inc. and Subsidiaries
 Consolidated
Statements of Operations
 UNAUDITED
  For
      the Three Months Ended
                                        March
      31,
                                      
                                      
                                      For
      the Nine Months Ended
                                        March
      31,2009
                                      
                                      
                                      2008
                                      
                                      
                                      2009
                                      
                                      
                                      2008Sales
                                      
                                      $
                                      81,443
                                      
                                      
                                      $
                                      36,872
                                      
                                      
                                      $
                                      192,205
                                      
                                      
                                      $
                                      122,086Cost
      of Sales
                                      
                                      
                                      55,341
                                      
                                      
                                      
                                      59,465
                                      
                                      
                                      
                                      116,874
                                      
                                      
                                      
                                      85,460Gross
      Profit
                                      
                                      
                                      26,102
                                      
                                      
                                      
                                      (22,593
                                      )
                                      
                                      
                                      75,331
                                      
                                      
                                      
                                      36,626Operating
      ExpensesMarketing
      and Sales Promotion
                                      
                                      
                                      156,378
                                      
                                      
                                      
                                      168,392
                                      
                                      
                                      
                                      969,709
                                      
                                      
                                      
                                      814,545General
      & Administrative
                                      
                                      
                                      407,776
                                      
                                      
                                      
                                      573,418
                                      
                                      
                                      
                                      1,436,795
                                      
                                      
                                      
                                      1,519,059Stock
      Based Compensation
                                      
                                      
                                      130,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,494,152
                                      
                                      
                                      
                                      76,120Total
      Operating Expenses
                                      
                                      
                                      694,154
                                      
                                      
                                      
                                      741,810
                                      
                                      
                                      
                                      4,900,656
                                      
                                      
                                      
                                      2,409,724Operating
      Income (Loss)
                                      
                                      $
                                      (668,052
                                      )
                                      
                                      $
                                      (764,403
                                      )
                                      
                                      $
                                      (4,825,325
                                      )
                                      
                                      $
                                      (2,373,098
                                      )Other
      Income (Expense)Interest
      Income
                                      
                                      
                                      7,390
                                      
                                      
                                      
                                      608
                                      
                                      
                                      
                                      22,473
                                      
                                      
                                      
                                      4,268Interest
      Expense
                                      
                                      
                                      (12,009
                                      )
                                      
                                      
                                      (10,135
                                      )
                                      
                                      
                                      (18,091
                                      )
                                      
                                      
                                      (61,500
                                      )Total
      Other  Income (Expense)
                                      
                                      
                                      (4,619
                                      )
                                      
                                      
                                      (9,527
                                      )
                                      
                                      
                                      4,382
                                      
                                      
                                      
                                      (57,232
                                      )Net
      Income (Loss) Before Income Taxes
                                      
                                      $
                                      (672,671
                                      )
                                      
                                      $
                                      (773,930
                                      )
                                      
                                      $
                                      (4,820,943
                                      )
                                      
                                      $
                                      (2,430,330
                                      )Provision
      for Income Taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      Income (Loss)
                                      
                                      $
                                      (672,671
                                      )
                                      
                                      $
                                      (773,930
                                      )
                                      
                                      $
                                      (4,820,943
                                      )
                                      
                                      $
                                      (2,430,330
                                      )Net
      Income per ShareBasic
                                      
                                      $
                                      (0.00
                                      )
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      (0.03
                                      )Diluted
                                      
                                      $
                                      (0.00
                                      )
                                      
                                      $
                                      (0.01
                                      )
                                      
                                      $
                                      (0.04
                                      )
                                      
                                      $
                                      (0.03
                                      )Number
      of Shares Used in Per Share CalculationsBasic
                                      
                                      
                                      174,556,796
                                      
                                      
                                      
                                      96,828,335
                                      
                                      
                                      
                                      137,303,398
                                      
                                      
                                      
                                      91,544,995Diluted
                                      
                                      
                                      174,556,796
                                      
                                      
                                      
                                      96,828,335
                                      
                                      
                                      
                                      137,303,398
                                      
                                      
                                      
                                      91,544,995
 
 The
accompanying notes are an integral part of these financial
statements
  3
  Marani
Brands, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 UNAUDITED
 
 For
      the Nine Months Ended
                                      March
      31,2009
                                    
                                    
                                    2008Cash Flows from Operating
      ActivitiesNet
      Income (Loss)
                                    
                                    $
                                    (4,820,943
                                    )
                                    
                                    $
                                    (2,430,330
                                    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      Based Compensation
                                    
                                    
                                    2,494,152
                                    
                                    
                                    
                                    76,120Depreciation
      & Amortization
                                    
                                    
                                    1,005
                                    
                                    
                                    
                                    730Changes
      in operating assets and liabilities:Accounts
      Receivable
                                    
                                    
                                    (53,977
                                    )
                                    
                                    
                                    (10,997
                                    )Inventory
                                    
                                    
                                    (297,269
                                    )
                                    
                                    
                                    (42,389
                                    )Deposits
                                    
                                    
                                    25,000
                                    
                                    
                                    
                                    (1,175,000
                                    )Accounts
      Payable
                                    
                                    
                                    255,476
                                    
                                    
                                    
                                    81,293Accrued
      Expenses
                                    
                                    
                                    12,804
                                    
                                    
                                    
                                    5,662Net
      Cash Used in Operating Activities
                                    
                                    
                                    (2,383,752
                                    )
                                    
                                    
                                    (3,494,911
                                    )Cash Flows from Investing
      ActivitiesPurchase
      of Property and Equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (990
                                    )Net
      Cash Used in Investing Activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (990
                                    )Cash Flows from Financing
      ActivitiesNotes
      Payable
                                    
                                    
                                    1,073,749
                                    
                                    
                                    
                                    (123,860
                                    )Convertible
      Debenture
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,500,000Notes
      Payable Related Parties
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (87,887
                                    )Common
      Stock Issued for Cash
                                    
                                    
                                    -
                                    
                                    
                                    
                                    361,500Net
      Cash Provided by Financing Activities
                                    
                                    
                                    1,073,749
                                    
                                    
                                    
                                    3,649,753Net
      Increase (Decrease) in Cash
                                    
                                    
                                    (1,310,003
                                    )
                                    
                                    
                                    153,852Cash
      Beginning of Period
                                    
                                    
                                    2,460,663
                                    
                                    
                                    
                                    35,611Cash
      End of Year
                                    
                                    $
                                    1,150,660
                                    
                                    
                                    $
                                    189,463Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid during the period for interest
                                    
                                    $
                                    18,091
                                    
                                    
                                    $
                                    -Cash
      Paid during the period for income taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
 
 The
accompanying notes are an integral part of these financial
statements
  4
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 Note
1 – Organization, Business & Operations
 
 History
 
 Marani
Brands, Inc, formerly Fit For Business International, Inc. ("FFBI" or the
“Company”), a Nevada corporation, prior to the merger described in Note 4, was
in the business of providing products and services for the following: (i)
corporate wellness programs which addressed business productivity, stress and
absenteeism issues; (ii) living well programs directed primarily, but not
exclusively, to individuals over 45 years of age; and, (iii) nutritional
supplements manufactured and supplied by Herbalife Ltd.
 
 On
December 21, 2007, Mark Poulsen (“Poulsen”), then FFBI’s President and principal
shareholder entered into a stock purchase agreement with Route 32, LLC (“Route
32”), whereby Poulsen agreed to sell all of his shares of common stock in the
Company for $500,000. Pursuant to the closing of this transaction in February
2008, Poulsen paid off certain liabilities of the Company totaling
$234,362.
 
 Upon the
closing, under the stock purchase agreement with Route 32, Poulsen resigned as
the President and sole Director of the Company, and Adele Ruger was appointed as
the Company’s sole officer director. Upon the closing of the merger described in
Note 4, Ms. Ruger resigned as the Company’s President and Margrit Eyraud was
appointed as the Company’s Chairman, President and Chief Executive Officer. Ms.
Eyraud was Chairman and Chief Executive Officer of Margrit Enterprises
International, Inc. (“MEI”).
 
 Effective
April 7, 2008, the Company changed its name to Marani Brands, Inc. and its
common stock commenced trading under the new symbol "MRIB". Also on March 31,
2008, the Company amended its Articles of Incorporation to increase its
authorized common stock to 300,000,000 shares and provide for 10,000,000
authorized preferred shares.
 
 Effective
upon the closing of the merger transactions described in Note 4, the Company’s
sole business became the distribution of wine and spirit products. The Company
does business under the name Marani Spirits and is an importer of fine vodka and
other distilled beverage products. The Company is also beginning to import and
distribute a variety of other spirits and is located in Hollywood,
California.
  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 March 31, 2009,
the Company has an accumulated deficit of $10,055,781 and incurred a net loss
for the nine months ended March 31, 2009, of $4,820,943. 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.
 5
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 Note
3 - Summary of Significant Accounting Policies
 
 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.
  6
  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 March 31, 2009 and June 30, 2008 the Company has reserved $10,000 and $0
for doubtful accounts, respectively.
 
 Advertising
 
 The
Company expenses advertising costs as incurred. Advertising costs for the nine
months ended March 31, 2009 and 2008 was $144,326 and $139,408,
respectively.
  7
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 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 March 31, 2009
and June 30, 2008, as a result of net operating losses incurred during the
periods. As of March 31, 2009, the Company has available approximately
$10,100,000 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 March 31, 2009 and June
30, 2008, the Company has a deferred tax asset of approximately $4,000,000 and
$2,100,000 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.
 
 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:
 
 March
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2008Statutory
      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 March 31, 2009 and June 30,
2008, are as follows:
 
 March
      31 31,
                      
                      
                      June
      30,2009
                      
                      
                      2008Net
      Operating Loss Carryforward
                      
                      $
                      4,005,218
                      
                      
                      $
                      2,085,036Valuation
      Allowance
                      
                      
                      (4,005,218
                      )
                      
                      
                      (2,085,036
                      )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 March 31, 2009 and 2008.
 
 Reclassifications
 
 Certain
items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period’s
presentation. These reclassifications have no effect on the previously reported
income (loss).
  8
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 Recently
Issued Accounting Pronouncements
  In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally
Accepted Accounting Principles. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS No. 162 is effective 60 days following the Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. The Company does not believe SFAS No.
162 will have a material impact on its financial statements.
  In March
2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133 . SFAS No. 161
changes the disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under Statement No. 133 and its
related interpretations and (c) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance and cash
flows. SFAS No. 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged. The Company is currently evaluating the impact SFAS No.
161 may have on its financial statements.
  In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No.
141(R) retains the fundamental requirements in SFAS No. 141, Business
Combinations, that the acquisition method of accounting be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS No. 141(R) requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions specified in SFAS No. 141(R). In addition, SFAS No. 141(R) requires
acquisition costs and restructuring costs that the acquirer expected but was not
obligated to incur to be recognized separately from the business combination,
therefore, expensed instead of part of the purchase price allocation. SFAS No.
141(R) will be applied prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Early adoption is prohibited.
The Company expects to adopt SFAS No. 141(R) to any business combinations with
an acquisition date on or after January 1, 2009.
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment to ARB No. 51. SFAS No. 160
changes the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS No. 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. Early adoption is
prohibited. The Company is currently evaluating the impact SFAS No. 160 may have
on its financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS No. 159 permits an entity to irrevocably
elect fair value on a contract-by-contract basis as the initial and subsequent
measurement attribute for many financial assets and liabilities and certain
other items including insurance contracts. Entities electing the fair value
option would be required to recognize changes in fair value in earnings and to
expense upfront cost and fees associated with the item for which the fair value
option is elected. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company
does not expect the adoption of SFAS No. 159 to have a material impact on its
financial condition or results of operations.
  9
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 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 10,0000,000
      shares of MEI then held by the Company as a result of the exchange
      transaction were cancelled.
  ·
              The
      Company thereby holds 100% of the shares of MEI by virtue of the Company’s
      ownership of the MEI shares that it obtained as part of the merger of FFBI
      Merger Sub Corp. and MEI, which shares now represent all of the issued and
      outstanding shares of MEI.
  ·
              On
      April 7, 2008, the Company sold its entire interest in its subsidiary, Fit
      For Business (Australia) Pty Limited ("FFB Australia"), to its former
      Chief Executive Officer.
  ·
              Since
      MEI operated an ongoing business and since the Company had pre merger
      business operations that were not pursued by the Company post merger, this
      merger transaction constituted a “reverse
  merger”.
  ·
              By
      virtue of this “reverse merger,” both MEI and the Company continue to have
      a separate existence, with MEI becoming a wholly owned subsidiary of the
      Company.
 
 Under the
Merger Agreement, as additional consideration for the merger transactions, the
Company issued, at Closing, the following: (i) 42,594,616 shares of the
Company’s common stock to Purrell Partners, LLC, or its assigns (the "Purrell
Group") and (ii) a Warrant to purchase 10,000,000 shares of the Company’s common
stock at an exercise price of $0.10 per share to the Purrell
Group.
  10
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 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.
 
 Note
5 – Inventories
 
 At March
31, 2009 and June 30, 2008, inventories are comprised of finished bottles/cases
of Marani Vodka available for resale. At March 31, 2009 and June 30, 2008
inventory totaled $374,576 and $77,307, respectively.
 
 Note
6 - Property and Equipment
 
 At March
31, 2009and June 30, 2008, property and equipment is comprised of the
following:
 
 March
      31,
                          
                          
                          June
      30,2009
                          
                          
                          2008Property
      & Equipment
                          
                          $
                          6,969
                          
                          
                          $
                          6,969Less:
      Accumulated Depreciation
                          
                          
                          (2,464
                          )
                          
                          
                          (1,459
                          )Net
      Property & Equipment
                          
                          $
                          4,505
                          
                          
                          $
                          5,510
 
 During
the nine months ended March 31, 2009 and 2008, the Company recorded depreciation
and amortization expense of $1,005 and $730, respectively.
 
 Note
7 – Intangibles
 
 As part
of the Merger, the shareholders holding 100% of MEI's issued and outstanding
shares of common stock  at the time of the merger received for their
shares of MEI common stock 100,000,000 founder shares of the Company’s common
stock which, at the closing date of the Merger, was valued at $.001 par value
totaling $100,000.  The following table summarizes the
acquisition:
 
 Current
      Assets
                    
                    $
                    337,130Property
      and Equipment
                    
                    
                    8,428Other
      Assets
                    
                    
                    10,255Goodwill
      and Intangibles
                    
                    
                    3,861,280Current
      Liabilities
                    
                    
                    (109,642
                    )Notes
      Payable
                    
                    
                    (4,007,451
                    )Total
      Purchase Price
                    
                    $
                    100,000
  11
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 Note
8 – Accrued Expenses
 
 At March
31, 2009 and June 30, 2008, accrued expenses consist of the
following:
 
 March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Accrued
      Payroll and Taxes
                    
                    $
                    85,000
                    
                    
                    $
                    31,266Credit
      Cards Payable
                    
                    
                    6,867
                    
                    
                    
                    22,797Accrued
      Professional Fees
                    
                    
                    15,000
                    
                    
                    
                    40,000Total
      Accounts Payable and Accrued Expenses
                    
                    $
                    106,867
                    
                    
                    $
                    94,063
 
 Note
9 – Notes Payable
 
 The
Company is obligated to a bank for an SBA loan. Terms indicate that the balance
of $123,565is due and payable in full in September of 2010. Interest is accrued and
paid monthly at 8.25%. This note is classified as long term.
 
 The
Company is also obligated to Searchlight Financial for a short term note
totaling $80,495. This obligation is in dispute, but is being recorded with
interest at 15%.
 
 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
March 31, 2009, the balance due on this credit line was $900,000.
 
 In March
of 2009, the Company borrowed $200,000 from a shareholder.  This note
carries no interest and is payable on June 1, 2009.
 
 Note
10 – Convertible Debentures
 
 On
December 18, 2007, MEI issued a one year Convertible Debentures to investors in
a private placement, in the aggregate amount of $3,500,000. Upon the completion
of the merger the entire principal balance of the Convertible Debenture, by
their terms, automatically converted into 14,000,000 shares of the Company’s
common stock.
 
 Note
11 – Warrants
 
 The
following is a summary of share purchase warrants for period ended December31,
2008:
 
 Number of
                      Warrants
                    
                    
                    Weighted
                      Average Exercise
                      PriceOutstanding
      June 30, 2008
                    
                    
                    29,620,000
                    
                    
                    $
                    0.32Granted
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      March 31, 2009
                    
                    
                    29,620,000
                    
                    
                    $
                    0.32
  12
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 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
 
 Note
12 - Stockholders’ Equity
 
 Preferred
Stock
 
 The
Company has created and authorized the issuance of up to 10,000,000 shares of
Preferred Stock, at $0.001 par value. As of March 31, 2009, the Company had no
shares of Preferred Stock issued and outstanding.
 
 During
the year ended June 30, 2008, 200,000 common shares were issued to an officer to
restore voting rights on 1,000,000 undesignated preferred shares totaling
($1,000).
 
 There was
no activity for the nine months ended March 31, 2009.
 
 Common
Stock
 
 Effective
March 31, 2008, the Company’s common stock underwent a 1-for-250 reverse stock
split. All references in the financial statements to the number of shares
outstanding, per share amounts, and stock options data of the Company’s common
stock have been restated to reflect the effect of the stock split for all
periods presented.
 
 Following
the reverse stock split, the Company has authorized the issuance of up to
300,000,000 shares of Common Stock, at $0.001 par value. As of March 31, 2009,
the Company had 174,606,796 shares of Common Stock issued and
outstanding.
 
 During
the year ended June 30, 2008, the Company issued a total of 169,646,358 of which
5,736 shares were issued for the exercise of stock options for partial
settlement of note payable to a principle stockholder totaling $28,680; 90,000
shares in settlement of debt totaling $393,536; 200,000 shares to an officer to
restore voting rights on undesignated preferred shares totaling $0; 25,930,000
shares to investors for cash totaling $7,502,500; 100,000,000 founder shares to
MEI shareholders for the merger totaling $100,000; 281,797 shares to
non-affiliated parties for services totaling $70,449; and 43,138,825 shares for
direct offering costs totaling $10,648,654.
 
 During
the nine months ended March 31, 2009, the Company issued 3,913,044 to Margit
Eyraud pursuant to her severance package totaling $1,995,652 and 950,000 shares
were issued for services totaling $468,500.
 
 Direct
Offering Costs
 
 The
Company defers the direct incremental costs of raising capital until such time
as the offering is completed. At the time of the completion of the offering, the
costs are charged against the capital raised. Should the offering be terminated,
deferred offering costs are charged to operations during the period in which the
offering is terminated. As of June 30, 2008, the Company had incurred
($1,130,923) in cash direct offering costs and issued 43,138,825 shares for
direct offering costs totaling ($10,648,654).
  13
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 
 Note
13– Commitments & Contingencies
 
 Leases
 
 The
Company leases 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
nine months ended March 31, 2009, the Company paid $100,000 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 nine months ended March 31, the Company paid $0 to
Continental Advisors, SA under this agreement.
 
 Severance
Agreement
 
 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;
  14
  Marani
Brands, Inc. and Subsidiaries
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
  ·
              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.
  Note
14 - Subsequent Events
  There
were no subsequent events
  15
  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, 2008 included in our Annual Report on Form 10-KSB for the
year ended June 30, 2008.
 
 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 Company pays a ten percent (10%)
royalty to Erashk for all sales. 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.
  16
  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.
 
 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 the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
 
 Results of Operations for the Three
and Nine Months Ending March 31, 2009Compared to March 31,
2008
 
 Revenues
 
 Period
      Ending March 31
                  
                  2009
                  
                  
                  2008
                  
                  
                  $ Change
                  
                  
                  % ChangeRevenues
      (3 months)
                  
                  $
                  81,443
                  
                  
                  $
                  36,872
                  
                  
                  $
                  44,571
                  
                  
                  
                  121
                  %Revenues
      (9 months)
                  
                  $
                  192,205
                  
                  
                  $
                  122,086
                  
                  
                  $
                  70,119
                  
                  
                  
                  57.4
                  %
  17
  On April
4, 2008, we entered into an Agreement and Plan of Merger by and among FFBI
Merger Sub Corp., a California corporation and wholly-owned subsidiary which we
formed for purposes of the Merger and MEI, by which FFBI would be merged with
and into MEI.  On April 7, 2008, the Merger closed, with MEI, now
known as Marani Spirits, Inc., being the surviving corporation and becoming our
wholly-owned subsidiary.  Prior to the merger, our only business was
that of our wholly-owned subsidiary, Fit for Business (Australia) Pty Limited,
which is engaged in the development of overall wellness programs for the
workplace in Australia.  Subsequent to the merger, we exercised our
option to sell this subsidiary to our former Chief Executive Officer, Mark
Paulsen, who acquired all our interest in, Fit for Business (Australia) Pty
Limited on or about May 15, 2008.
 
 The
revenues for the period ending March 31, 2008 were based upon the wellness
programs developed by Fit for Business (Australia) Pty
Limited.  Subsequent to the merger, our sole business is the
distribution of wine and spirit products manufactured in Armenia.  The
increase in our revenues reflects the change of core 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 new advertising
campaign.
 
 Cost of
Sales
 
 Period Ending
                      March 31
                    
                    2009
                    
                    % of
                      Revenues
                    
                    2008
                    
                    
                    % of
                      Revenues
                    
                    
                    $ Change
                    
                    
                    % ChangeCosts
      (3 month)
                    
                    $
                    55,341
                    
                    68
                    %
                    
                    59,465
                    
                    
                    
                    161
                    %
                    
                    
                    4,124
                    
                    
                    
                    6.9
                    %Costs
      (9 months)
                    
                    $
                    116,874
                    
                    61
                    %
                    
                    85,460
                    
                    
                    
                    70
                    %
                    
                    
                    31,414
                    
                    
                    
                    36.75
                    %
 
 The
increase in cost of sales and cost of sales as a percentage of revenues are the
result of the change in our core business from the development and sale of
wellness programs by Fit for Business (Australia) Pty Limited to our post merger
current business of the branding, marketing and distribution of wine and spirit
products manufactured in Armenia.
 
 Operating
Expenses
  Period
      Ending March 31
                        
                        2009
                        
                        
                        % of Revenues
                        
                        
                        2008
                        
                        
                        % of Revenues
                        
                        
                        $ Change
                        
                        
                        % ChangeMarketing
      and Advertising (3 months)
                        
                        $
                        156,378
                        
                        
                        
                        192
                        %
                        
                        
                        168,392
                        
                        
                        
                        456
                        %
                        
                        
                        12,014
                        
                        
                        
                        7.1
                        %Marketing
      and Advertising (9 months)
                        
                        $
                        969,709
                        
                        
                        
                        504
                        %
                        
                        
                        814,545
                        
                        
                        
                        667
                        %
                        
                        
                        155,164
                        
                        
                        
                        19
                        %General
      & administrative (3months)
                        
                        $
                        407,776
                        
                        
                        
                        500
                        %
                        
                        
                        573,418
                        
                        
                        
                        1,555
                        %
                        
                        
                        165,642
                        
                        
                        
                        28.8
                        %General
      & administrative (9 months)
                        
                        $
                        1,436,795
                        
                        
                        
                        74.7
                        %
                        
                        
                        1,519,059
                        
                        
                        
                        1,244
                        %
                        
                        
                        82,264
                        
                        
                        
                        5.4
                        %Stock
      Based Comp(3
      months)
                        
                        $
                        130,000
                        
                        
                        
                        159.6
                        %
                        
                        
                        -
                        
                        
                        
                        0
                        %
                        
                        
                        130,000
                        
                        
                        
                        100
                        %Stock
      Based Comp(9
      months)
                        
                        $
                        2,494,152
                        
                        
                        
                        1,297
                        %
                        
                        
                        76,120
                        
                        
                        
                        62.3
                        %
                        
                        
                        2,418,032
                        
                        
                        
                        3,176
                        %Total
      (3months)
                        
                        $
                        694,154
                        
                        
                        
                        852
                        %
                        
                        
                        741,810
                        
                        
                        
                        2,011
                        %
                        
                        
                        47,656
                        
                        
                        
                        6.4
                        %Total
      (9months)
                        
                        $
                        4,900,656
                        
                        
                        
                        2,596
                        %
                        
                        
                        2,409,724
                        
                        
                        
                        1,973
                        %
                        
                        
                        2,490,932
                        
                        
                        
                        1,033
                        %
  Marketing
and Advertising
 
 The
increase in marketing and advertising expenses is the result of the change in
our core business after the April 2008 merger transaction, including a major
marketing program designed to create consumer awareness and increase market
share for our products.  As a percentage of revenues, the high cost of
marketing and expenses reflects our aggressive efforts to increase market share
for our products in the United States from a small sales base to increase future
sales.  We expect marketing and advertising expenses to increase as we
continue to build the company infrastructure. We anticipate, however, that the
expense as a percentage of revenue will be reduced due to revenue
growth.
  18
 
 General
and Administrative
 
 Included
in our general and administrative expenses are the addition of five employees,
increased travel for market development and financing activities, increased
compensation for our new executive management, increased accounts payable,
accrued expenses and legal fees associated with the April 2008 merger
transaction. Total general and administrative expenses are expected to increase
as we continue to build the company infrastructure.  Subsequent to the
changes caused by the 2008 merger transaction, however, we do not anticipate
increased costs associated with management and expect a reduction in legal fees
associated with routine business and compliance matters.  As such,
management expects that our general and administrative expenses as a percentage
of revenue will be reduced due to revenue growth, cost cutting efforts and the
refinement of business operations.
 
 Stock
Based Compensation
 
 The
increase in stock based compensation is the result of our necessity to pay for
services rendered to us with equity owing to cash flow
constraints.  As revenues increase, we expect that the necessity for
stock based compensation will decrease.
 
 Other Income
(Expense)
 
 Period
      Ending March 31
                          
                          2009
                          
                          
                          2008
                          
                          
                          $ Change
                          
                          
                          % ChangeInterest
      income (3 months)
                          
                          $
                          7,390
                          
                          
                          
                          608
                          
                          
                          
                          6,700
                          
                          
                          
                          1,102
                          %Interest
      income (9 months)
                          
                          $
                          22,473
                          
                          
                          
                          4,268
                          
                          
                          
                          18,205
                          
                          
                          
                          426.5
                          %Interest
      expense (3 months)
                          
                          $
                          (12,009
                          )
                          
                          
                          (10,135
                          )
                          
                          
                          1,874
                          
                          
                          
                          18.5
                          %Interest
      expense(9 months)
                          
                          $
                          (18,091
                          )
                          
                          
                          (61,500
                          )
                          
                          
                          43,409
                          
                          
                          
                          70.5
                          %Total
      Other Income (Expense) (3months)
                          
                          $
                          (4,619
                          )
                          
                          
                          (9,527
                          )
                          
                          
                          4,908
                          
                          
                          
                          51.5
                          %Total
      Other Income (Expense)(9
      months)
                          
                          $
                          4,382
                          
                          
                          
                          (57,232
                          )
                          
                          
                          61,614
                          
                          
                          
                          1,076
                          %
 
 The
decrease in interest expense over the nine months ending March 31, 2009 is
primarily the result of our pay down of our debt obligations under a long term
SBA loan having a balance due at March 31, 2009 of $124,816,
having an interest rate of 8.25%, and our accrual of interest on a short term
note in the amount $80,495 having an interest rate of 15%.
 
 Net Loss
 
 Period Ending March 31
                    
                    2009
                    
                    
                    2008
                    
                    
                    $ Change
                    
                    
                    % ChangeNet
      Income (Loss) (3 months)
                    
                    $
                    (672,671
                    )
                    
                    
                    (773,930
                    )
                    
                    
                    101,259
                    
                    
                    
                    13
                    %Net
      Income (Loss) (9 months)
                    
                    
                    (4,820,943
                    )
                    
                    
                    (2,430,330
                    )
                    
                    
                    2,390,330
                    
                    
                    
                    98.3
                    %
 
 Our
increased net loss over the nine months ending March 31, 2009 resulted from a
significant increase in stock based compensation during the three months ending
December 31 2008, increased operating expenses in developing our administrative
and operating infrastructure, developing new and existing sales channels and for
our for marketing programs.  Marketing expenses included a major
rebranding of our primary product, Marani Vodka, the costs of retention of an
advertising agency, Juggernaut, and preparation and primary shooting of a major
advertising campaign, a complete redesign of the Company’s web presence, hiring
of a surveying firm to generate marketing data regarding the placement of our
product, and other major expenses involved in the enhancement and positioning of
the Marani brand.  For the three months ending March 31, 2009, our
decreased net loss is the result of an increase in sales
revenues.  Our current revenue volume, however, has not been
sufficient to recover all of our operating expenses. We anticipate that our
operating expenses as a percentage of our sales will decrease in future periods
as our revenues increase and our costs stabilize.
  19
 
 Loss per Common Share
Applicable to Common Stockholders
 
 Our basic
income/loss per common share applicable to common stockholders for the three
months ending March 31, 2009 was $(0.00) compared with a basic loss per common
share applicable to common stockholders in 2008 of $(0.01).  Because
we experienced net losses in 2009 and 2008, all potential common share issuances
resulting from the exercise of options and warrants would have an antidilutive
impact on earnings per share; therefore, diluted loss per common share equals
basic loss per common share for both years.
 
 The
number of common shares used in our per share calculations increased from
137,303,389 for the nine month period ending March 31, 2008 to 174,556,796for
2009.  The increase is attributed primarily to the issuance of our
common stock in connection with (i) the MEI reverse merger, (ii) additional
equity financing activities contemporaneous with and subsequent to the merger,
(iii) the issuance of common stock for direct offering services, (iv) the
issuance of common stock for other services, and (v) common stock issued for
stock based compensation.
 
 Liquidity
and Capital Resources
 
 Working Capital Needs and
Major Cash Expenditures
 
 Our
footnotes contain an explanatory paragraph that indicates that we have
continuing losses from operations, and our working capital is insufficient to
meet our planned business objectives. This report also states that, because of
these losses, there is substantial doubt about our ability to continue as a
going concern. This report and the existence of these recurring losses from
operations may make it more difficult for us to raise additional debt or equity
financing needed to run our business, and are not viewed favorably by analysts
or investors. Furthermore, if we are unable to raise a significant amount of
proceeds from private placements, public offerings or other financings, this may
cause our cessation of business resulting in investors losing the value of their
investment in us.
 
 A major
factor in the Company’s net losses, as set forth above, was the recent
investments by the Company in expanded operations and a marketing campaign
relating to its primary product, Marani Vodka. Management believes that these
expenses are necessary to expand the business of the Company.
 
 We
currently have monthly working capital needs of approximately
$225,000.  This amount is expected to increase in 2009, primarily due
to the following factors:
 
 • continued
      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 year ended June 30, 2008, we received proceeds of $7,502,500 from the sale
of common stock. In addition, we issued shares of our common stock in payment
of
  • $70,449
for services rendered by third parties,
  •
$422,216 for certain debt obligations, and
  •
$10,648,654 for direct offering services.
 
 During
the nine months ended March 31, 2009, the Company issued 3,913,044 to Margit
Eyraud pursuant to her severance package totaling $1,995,652 and 850,000 shares
were issued for services totaling $368,500.
 
 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
March 31, 2009, the balance due on this credit line was
$900,000.
  20
 
 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 Nine Month Period Ending March 31, 2009
 
 Cash
      provided by (used in):
                  
                  2009
                  
                  
                  2008
                  
                  
                  $ Change
                  
                  
                  % ChangeOperating
      activities
                  
                  $
                  (2,383,752
                  )
                  
                  
                  (3,494,911
                  )
                  
                  
                  1,111,159
                  
                  
                  
                  31.8
                  %Financing
      activities
                  
                  $
                  1,073,749
                  
                  
                  
                  3,649,753
                  
                  
                  
                  2,576,004
                  
                  
                  
                  70.5
                  %
 
 Cash
provided by or used in our operating, investing and financing activities is the
result of the change in our core business after the April 2008 merger
transaction.  The net decrease in cash used in operating activities of
is due primarily to the increase in our net loss in the period ending March 31,
2009 of $773,405 compared to a net loss of $1,418,828 for the same period in
2007.  Such net loss was primarily attributable to a change in core
business, and increased spending for marketing and operations by the Company, as
set forth above.  The increase in our net loss was offset by increased
changes in stock based compensation during 2008 by $2,364,452, compared to
$76,120 for the same period in 2007.  Changes in accounts payable
contributed to a decrease in cash used by operating activities of $44,012 in
2008, as compared to $59,258 for 2007.  Changes in inventory
contributed to an increase in cash used by operating activities of $228,872 for
2008, compared to contributing to an increase of $46,057 for
2007.  Cash flows generated by our operating activities were
inadequate to cover our cash disbursement needs for the period ending March 31,
2009, and we had to rely on private placement financing to cover operating
expenses.
 
 Net cash
provided by our financing activities for the period ending March 31, 2009was $775,000,
while net cash provided by financing activities for the same period in 2007 was
$3,720,430.  The decrease in 2008 is attributed to the reduced
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.
 
 Item
4T. Controls and Procedures.
 
 Disclosure Controls and
Procedures
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and our Chief Financial
Officer are responsible for maintaining our disclosure controls and procedures.
The controls and procedures established by us are designed to provide reasonable
assurance that information required to be disclosed by the issuer in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms.
  21
  As
required by Rule 13a-15 under the Exchange Act, our management, including, our
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of our disclosure controls and procedures as of
March 31, 2009. Based on that evaluation, management concluded that as of March
31, 2009, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and
procedures were effective to satisfy the objectives for which they are
intended.
 
 Internal Controls over
Financial Reporting
  Section
404 of the Sarbanes-Oxley Act of 2002 requires that our management document and
test our internal control over financial reporting and include in this Quarterly
Report on Form 10-Q a report on management’s assessment of the effectiveness of
our internal control over financial reporting, and to delineate any material
weakness in our internal control.  A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. Under the supervision and with the participation of our
management, including our Chief Executive Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based upon
the framework in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that our internal control over financial
reporting is effective, as of March 31, 2009.
 
 Changes in Internal
Controls
 
 There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during period ending March 31, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
  22
 
 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.
 
 Other
than this claim, neither our parent company nor our subsidiary, or any of their
properties, is 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.
  23
 
 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.
 
 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.
  24
 
 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.
  25
 
 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.
  26
 
 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.
 
 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.
  27
 
 Our common stock is governed under
The Securities Enforcement and Penny Stock Reform Act of
1990.
 
 The
Securities Enforcement and Penny Stock Reform Act of 1990 require additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock.  The Securities and Exchange
Commission has adopted regulations that generally define a penny stock to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions.  Such exceptions include any equity security
listed on NASDAQ and any equity security issued by an issuer that has
(i) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average annual revenue of at least $6,000,000, if such
issuer has been in continuous operation for less than three
years.  Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith.
 
 The forward looking statements
contained in this Report may prove incorrect.
  This
report contains certain forward-looking statements, including among
others:  (i) anticipated trends in our financial condition and results
of operations; (ii) our business strategy for expanding distribution, directly
manufacturing products based upon the possible acquisition of Eraskh; and (iii)
our ability to distinguish our products and services from our current and future
competitors.  These forward-looking statements are based largely on
our management’s current expectations and are subject to a number of risks and
uncertainties.  Forward-looking statements include the information
concerning our possible or assumed future results of operations, business
strategies, financing plans, competitive position, industry environment,
potential growth opportunities, and the effects of future regulation and the
effects of competition.  Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words “believe,” “expect,” “anticipate,”
“intend,” “plan,” “estimate” or similar expressions.  These statements
are only predictions and involve known and unknown risks and uncertainties,
including the risks outlined under “Risk Factors” and elsewhere in this
prospectus.
 
 Actual
results could differ materially from these forward-looking
statements.  In addition to the other risks described elsewhere in
this “Risk Factors” discussion, important factors to consider in evaluating such
forward-looking statements include: (i) changes to external competitive
market factors or in our internal budgeting process which might impact trends in
our results of operations; (ii) anticipated working capital or other cash
requirements; (iii) changes in our business strategy or an inability to execute
its strategy due to unanticipated changes in the web development and web hosting
industry; and (iv) various competitive factors that may prevent us from
competing successfully in the marketplace.  In light of these risks
and uncertainties, many of which are described in greater detail elsewhere in
this “Risk Factors” discussion, there can be no assurance that the events
predicted in forward-looking statements contained in this prospectus will, in
fact, transpire.
 
 Although
we believe that the expectations reflected in our forward-looking statements are
reasonable, we cannot guarantee future results, events, levels of activity,
performance or achievement. We are not under any duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results, unless required by law
 
 IN
ADDITION TO THE FOREGOING RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS THAT ARE
NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT.  POTENTIAL INVESTORS
SHOULD KEEP IN MIND THAT OTHER IMPORTANT RISKS COULD ARISE.
  28
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 During
the nine months ended March 31, 2009, the Company issued 3,913,044 to Margit
Eyraud pursuant to her severance package totaling $1,995,652 and 950,000 shares
were issued for services totaling $468,500, in transactions not involving a
public offering, pursuant to Section 4(2) of the Securities Act of
1933.
 
 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.
 
 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
 
 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:
      May 15, 2009
                    
                    /s/
      Ara ZartarianBy:Ara
      ZartarianChief
      Executive Officer, PresidentDirectorDate:
      May 15, 2009
                    
                    /s/
      Ani KevorkianBy:Ani
      KevorkianChief
      Financial OfficerPrincipal
      Accounting OfficerDirector
  29