UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
     

For the quarterly period ended September 30, 2015

or

¨ Transition report under Section 13 or 15(d) of the Exchange Act of 1934
     

For the transition period from _____________ to _____________

 

Commission File Number 000-55448

 

Long Island Iced Tea Corp.

(Exact Name of Issuer as Specified in Its Charter)

 

Delaware 47-2624098

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

116 Charlotte Avenue, Hicksville, NY 11801
(Address of Principal Executive Office)

 

(855) 542-2832
(Issuer’s Telephone Number, Including Area Code)

 

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

 

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

 

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

 

  Large accelerated filer ¨ Accelerated filer ¨
  Non-accelerated filer ¨ Smaller reporting company x
  (Do not check if smaller reporting company)  

 

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

 

As of November 13, 2015, 4,617,533 shares of common stock, par value $.0001 per share, were issued and outstanding.

 

 

 

 

 

LONG ISLAND ICED TEA CORP.

 

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2015

 

TABLE OF CONTENTS

 

  Page
Part I. Financial Information 1
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014 1
Condensed Consolidated Statement of Operations (Unaudited) for the three and nine months ended September 30, 2015 and 2014 2
Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2015 3
Condensed Consolidated Statement of Cash Flows (Unaudited) for the nine months ended September 30, 2015 and 2014 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 4. Controls and Procedures 30
Part II. Other Information 31
Item 1. Legal Proceedings 31
Item 1A. Risk Factors 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
Item 6. Exhibits 32
Signatures 33

 

 

 

 

 

 

PART I.
FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

       

    September 30, 2015     December 31, 2014  
    (unaudited)        
             
ASSETS                
Current Assets:                
Cash   $ 268,688     $ 398,164  
Accounts receivable, net (including amounts due                
from related parties of $72,423 and $27,155, respectively)     348,472       174,637  
Inventories, net     1,013,684       561,107  
Prepaid expenses and other current assets     52,856       9,573  
Total current assets     1,683,700       1,143,481  
                 
Property and equipment, net     240,081       242,123  
Intangible assets     28,745       32,498  
Other assets     70,601       11,706  
Total assets   $ 2,023,127     $ 1,429,808  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
Current Liabilities:                
Accounts payable   $ 1,085,476     $ 825,044  
Accrued expenses     363,924       112,819  
Current portion of automobile loans     18,891       17,915  
Total current liabilities     1,468,291       955,778  
                 
Loans payable     -       1,500,000  
Other liabilities     -       92,466  
Deferred rent     5,165       5,966  
Long term portion of automobile loans     41,802       56,096  
Total liabilities     1,515,258       2,610,306  
                 
Commitments and contingencies, Note 4                
                 
Stockholders' Equity (Deficit)                
Preferred stock, par value $0.0001; authorized 1,000,000 shares;                
no shares issued and outstanding     -       -  
Common stock, par value $0.0001; authorized 35,000,000 shares;                
4,600,033 and 2,633,334 shares issued and outstanding,                
as of September 30, 2015 and December 31, 2014, respectively     460       263  
Additional paid-in capital     1,873,959       3,184,574  
Accumulated deficit     (1,366,550 )     (4,365,335 )
Total stockholders' equity (deficit)     507,869       (1,180,498 )
                 
Total liabilities and stockholders' equity (deficit)   $ 2,023,127     $ 1,429,808  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

  1  

 

  

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

                 

    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2015     2014     2015     2014  
                         
Net sales (including sales to related parties of   $ 456,787     $ 582,956     $ 1,397,244     $ 1,510,201  
$6,199 and $22,106 for the three months ended                                
September 30, 2015 and 2014, respectively, and                                
$51,229 and $80,241 for the nine months ended                                
September 30, 2015 and 2014, respectively)                                
                                 
Cost of goods sold     392,606       513,226       1,104,723       1,284,933  
Gross profit     64,181       69,730       292,521       225,268  
                                 
Operating expenses:                                
General and administrative expenses     646,788       306,608       1,264,436       764,638  
Selling and marketing expenses     371,211       596,699       994,544       1,976,351  
Total operating expenses     1,017,999       903,307       2,258,980       2,740,989  
                                 
Operating Loss     (953,818 )     (833,577 )     (1,966,459 )     (2,515,721 )
                                 
Other expenses:                                
Other expense     -       -       (3,327 )     -  
Interest expense     (872 )     (23,845 )     (47,056 )     (86,190 )
Total other expenses     (872 )     (23,845 )     (50,383 )     (86,190 )
                                 
Net loss   $ (954,690 )   $ (857,422 )   $ (2,016,842 )   $ (2,601,911 )
                                 
Weighted average number of common shares                                
outstanding – basic and diluted     4,470,639       2,633,334       3,450,625       2,633,334  
                                 
Basic and diluted net loss per share   $ (0.21 )   $ (0.33 )   $ (0.58 )   $ (0.99 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

  2  

 

  

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

                     

    Common Stock                    
    Shares     Amount     Additional paid-in capital     Accumulated Deficit     Total Stockholders' Equity  
                               
Balance at January 1, 2015     2,633,334     $ 263     $ 3,184,574     $ (4,365,335 )   $ (1,180,498 )
                                         
Reverse Merger with Cullen Agricultural Holding Corp.     1,518,749       152       1,872,344       -       1,872,496  
Common stock issued as payments to vendors     28,085       3       134,267       -       134,270  
Conversion of loans payable and accrued interest to stockholders' equity     138,979       14       555,896       -       555,910  
Issuance of common stock, net of costs     142,636       14       568,454       -       568,468  
Issuance of common stock and warrants, net of costs     138,250       14       366,102       -       366,116  
Stock based compensation     -       -       207,949       -       207,949  
Reclassification of the historical losses of Long Island Brand Beverages LLC to additional paid in capital upon the date of the reverse merger with Cullen Agricultural Holding Corp.     -       -       (5,015,627 )     5,015,627       -  
Net loss     -       -       -       (2,016,842 )     (2,016,842 )
                                         
Balance at September 30, 2015     4,600,033     $ 460     $ 1,873,959     $ (1,366,550 )   $ 507,869  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

  3  

 

 

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

           

    For the Nine Months Ended September 30,  
    2015     2014  
Cash Flows From Operating Activities                
Net loss   $ (2,016,842 )   $ (2,601,911 )
Adjustments to reconcile net loss to net cash used in operating activities:                
   Bad debt expense     20,040       5,811  
Depreciation and amortization expense     80,331       49,512  
Deferred rent     (801 )     6,108  
Stock based compensation     207,949       -  
Loss on disposal of property and equipment     3,327       -  
Changes in assets and liabilities:                
Accounts receivable     (203,375 )     (156,386 )
Inventory     (452,577 )     (531,296 )
Prepaid expenses and other current assets     (22,782 )     65,686  
Other assets     (58,895 )     3,006  
Accounts payable     243,707       882,838  
Accrued expenses     276,068       209,968  
Other liabilities     (92,466 )     -  
Total adjustments     526       535,247  
                 
Net cash used in operating activities     (2,016,316 )     (2,066,664 )
                 
Cash Flows From Investing Activities                
Purchases of property and equipment     (65,036 )     (200,834 )
                 
Net cash used in investing activities     (65,036 )     (200,834 )
                 
Cash Flows From Financing Activities                
  Repayment of automobile loans     (13,318 )     (6,503 )
  Contributions from members, net of costs     -       194,504  
  Proceeds from loan payable member     -       30,000  
  Proceeds from the reverse merger with Cullen Agricultural Holding Corporation     120,841       -  
  Proceeds from the sale of common stock, net of costs     568,468       -  
  Proceeds from the sale of common stock and warrants, net of costs     475,885       -  
  Proceeds from Bass Properties LLC loan     150,000       -  
  Proceeds from Cullen Agricultural Holding Corporation loan     250,000       300,000  
  Proceeds from Ivory Castle Limited loan     400,000       1,300,000  
                 
Net cash provided by financing activities     1,951,876       1,818,001  
                 
Net decrease in cash     (129,476 )     (449,497 )
                 
Cash, beginning of period     398,164       604,841  
                 
Cash, end of period   $ 268,688     $ 155,344  
                 
Cash paid for interest   $ 2,954     $ 1,929  
                 
Non-cash investing and financing activities:                
Conversion of loans payable and accrued interest to stockholders' equity   $ 555,910     $ -  
Conversion of loans payable and accrued interest to members' equity   $ -     $ 1,527,058  
Purchase of automobiles with loans payable   $ -     $ 84,795  
Costs due to related to issuance of common stock and warrants included in accrued expenses   $ 109,769     $ -  
Purchase of a truck in exchange for accounts receivable   $ 9,500     $ -  
Net assets acquired in reverse merger   $ 1,751,655     $ -  
Payment of accounts payable through the issuance of common stock   $ 134,270     $ -  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

  4  

 

 

LONG ISLAND ICED TEA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – BUSINESS ORGANIZATION, LIQUIDITY AND MANAGEMENT’S PLANS

 

Business Organization

 

Long Island Iced Tea Corp, a Delaware C-Corporation, was formed on December 23, 2014. Long Island Iced Tea Corp. was formed in order to allow for the completion of mergers between Cullen Agricultural Holding Corp. (“Cullen”) and Long Island Brand Beverages LLC (“LIBB”). As a result of the merger which was consummated on May 27, 2015, Long Island Iced Tea Corp. consisted of its wholly owned subsidiaries, Long Island Brand Beverages LLC (its operating subsidiary) and Cullen Agricultural Corp. and its wholly owned subsidiaries, Cullen Agricultural Technologies, Inc. and Natural Dairy, Inc. (collectively the “Company”).

 

On December 31, 2014, LIBB entered into a merger agreement, as amended as of April 23, 2015, with Cullen, a public company, Long Island Iced Tea Corp., Cullen Merger Sub, Inc. (“Cullen Merger Sub”), LIBB Acquisition Sub, LLC (“LIBB Merger Sub”), and the founders of LIBB (“Founders”). Pursuant to the merger agreement, (a) Cullen Merger Sub was to be merged with and into Cullen, with Cullen surviving and becoming a wholly-owned subsidiary of Long Island Iced Tea Corp. and (b) LIBB Merger Sub was to be merged with and into LIBB, with LIBB surviving and becoming a wholly-owned subsidiary of Long Island Iced Tea Corp. (the “Mergers”).

 

Under the merger agreement, upon consummation of the company merger, the holders of the LIBB membership interests (the “LIBB members”) would receive 2,633,334 shares of common stock of Holdco (or approximately 63%), subject to adjustment based on LIBB’s and Cullen’s net working capital at closing.

 

If LIBB’s estimated net working capital at the closing was less than its net working capital target, the number of shares of Long Island Iced Tea Corp.’s common stock to be received by the LIBB members at the closing was to be reduced by a number of shares, allocated among the LIBB members pro rata, equal to such deficiency divided by $3.00. If LIBB’s estimated net working capital at the closing was more than its net working capital target, the number of shares of Long Island Iced Tea Corp.’s common stock to be received by the LIBB members at the closing was to be increased by a number of shares, allocated among the LIBB members pro rata, equal to such excess divided by $3.00. LIBB’s net working capital target was $70,069, except that for each day after February 15, 2015, the target was reduced by $3,333 for each day after such date through and including the closing date.

 

If Cullen’s estimated net working capital at the closing was more than its net working capital target, the number of shares of Long Island Iced Tea Corp.’s common stock to be received by the LIBB members at the closing was to be reduced by a number of shares, allocated among the LIBB members pro rata, equal to such excess divided by $3.00. If Cullen’s estimated net working capital at the closing was less than its net working capital target, the number of shares of Long Island Iced Tea Corp.’s common stock to be received by the LIBB members at the closing was to be increased by a number of shares, allocated among the LIBB members pro rata, equal to such deficiency divided by $3.00. Cullen’s net working capital target was $786,985, except that for each day after February 15, 2015, the target was reduced by $667 for each day after such date through and including the closing date.

 

On May 27, 2015, the Mergers were consummated.

 

On July 16, 2015, the parties to the Mergers agreed to waive the provisions of the working capital adjustment.

 

To provide a fund for satisfaction of Cullen, Long Island Iced Tea Corp.’s and LIBB’s post-Closing rights to indemnification under the Merger Agreement, an aggregate of 500,000 of the Merger Shares (“ Indemnity Shares ”) were placed in escrow, in accordance with an escrow agreement (the “ Escrow Agreement ”) executed by Long Island Iced Tea Corp., Philip Thomas, as the representative of the Members under the Merger Agreement (the “ LIBB Representative ”), and Continental Stock Transfer & Trust Company, as escrow agent (the “ Escrow Agent ”). The escrow is the sole remedy for Cullen, Long Island Iced Tea Corp. and LIBB for their rights to indemnification under the Merger Agreement. The Members’ right to indemnification will be satisfied through the issuance by Long Island Iced Tea Corp. of up to 500,000 additional shares of Long Island Iced Tea Corp.’s Common Stock.

 

  5  

 

 

On the date on which Long Island Iced Tea Corp.’s independent registered public accounting firm has issued its report relating to its financial statement for its fiscal year ending December 31, 2015, the Indemnity Shares remaining in escrow will be released to the former LIBB Members except for any shares subject to pending indemnification claims.

 

For accounting purposes, the Mergers were treated as an acquisition of Cullen by LIBB and as a recapitalization of LIBB, as the former LIBB members hold a large percent of the Long Island Iced Tea Corp.’s shares and will exercise significant influence over the operating and financial policies of the consolidated entity and the Company was a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination. As a result, the condensed consolidated balance sheets, statements of operations, and statements of cash flows of LIBB have been retroactively updated to reflect the recapitalization. Additionally, the historical condensed consolidated financial statements of LIBB are now reflected as those of the Company.

 

Overview

 

The Company produces and distributes premium ready-to-drink iced tea, with a proprietary recipe and quality components. The Company produces a 100% brewed tea, using black tea leaves, purified water and natural cane sugar or sucralose. The Company’s product, Long Island Iced Tea, is targeted for sale to health conscious consumers on the go. Flavors change from time to time, and have included lemon, peach, raspberry, guava, mango, diet lemon, diet peach, sweet tea, green tea and honey and half tea and half lemonade. The Company also offers lower calorie iced tea in twelve (12) ounce bottles. The lower calorie flavor options include mango, raspberry, and peach. The Company has also introduced four of its flavors in gallon bottles. The flavors packaged in gallon bottles include lemon, preach, green tea and honey, and mango.

 

The Company sells its products to a mix of independent mid-to-large range distributors who in turn sell to retail outlets, such as big chain supermarkets, mass merchants, convenience stores, restaurants and hotels principally in the Northeastern portion of the United States.

 

Liquidity and Management’s Plan

 

As of September 30, 2015, the Company’s cash on hand was $268,688. The Company incurred net losses of $2,016,842 and $2,601,911 for the nine months ended September 30, 2015 and 2014, respectively. At September 30, 2015, the Company’s stockholders’ equity was $507,869. As of September 30, 2015, the Company had working capital of $215,409.

 

On July 8, 2015, the Company received proceeds of $100,000 through the issuance of 25,000 shares of common stock.

 

On September 17, 2015 and September 30, 2015, the Company raised total net proceeds of $366,116 through the issuance of 138,250 shares of common stock and warrants to purchase 138,250 shares of common stock.

 

On October 23, 2015 and October 30, 2015, the Company received total gross proceeds of $70,000 through the issuance of 17,500 shares of common stock and warrants to purchase 17,500 shares of common stock.

 

The Company has been focused on the development of its brand and its infrastructure, as well as in the establishment of a network of distributors and qualified direct accounts. From inception, the Company has financed its operations through the issuance of debt, equity, and through utilizing trade credit with its vendors.

 

The Company believes that as a result of a commitment for financing from a stockholder and its working capital as of September 30, 2015 that its cash resources will be sufficient to fund the Company’s net cash requirements through September 30, 2016. However, in order to execute the Company’s long-term growth strategy, the Company may need to raise additional funds through private equity offerings, debt financings, or other means. There are no assurances that the Company will be able to raise such funds on terms that would be acceptable to the Company.

 

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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the result that may be expected for the year ending December 31, 2015. These condensed consolidated financial statements should be read in conjunction with the financial statements for the year ended December 31, 2014 and related notes thereto included the registration statement on Form S-4 as amended which was filed by Long Island Iced Tea Corp. on April 24, 2015 and declared effective on May 1, 2015.

 

Principles of Consolidation

 

The unaudited interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in the accompanying unaudited interim consolidated financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various other estimates, including but not limited to, assessing the collectability of accounts receivable, accrual of rebates to customers, the valuation of inventory, determining the estimated lives of long-lived assets, determining the potential impairment of intangibles, other legal claims and contingencies. The results of any changes in accounting estimates, are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.

 

Revenue Recognition

 

Revenue is stated net of sales discounts and rebates paid to customers (See Customer Marketing Programs and Sales Incentives, below). Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determinable; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms. These conditions typically occur when the products are delivered to or picked up by the Company’s customers.

 

Customer Marketing Programs and Sales Incentives

 

The Company participates in various programs and arrangements with customers designed to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for various discounts to the end retailers or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. The costs of all these various programs that were included as a reduction in net sales, totaled $26,221 and $40,934 for the three months September 30, 2015 and 2014, respectively. The costs of all these various programs, included as a reduction in net sales, totaled $54,919 and $86,712 for the nine months ended September 30, 2015 and 2014, respectively.

 

  7  

 

 

Shipping and Handling Costs

 

Shipping and handling costs incurred to move finished goods from the Company’s sales distribution centers to customer locations are included in selling and marketing expenses on the condensed consolidated statements of operations and totaled $27,563, and $11,639, for the three months ended September 30, 2015 and 2014, respectively. These costs totaled $71,813 and $33,179 for the nine months ended September 30, 2015 and 2014, respectively.

 

Advertising

 

The Company expenses advertising costs as incurred. For the three months ended September 30, 2015 and 2014, advertising expense was $29,130 and $226,555, respectively. For the nine months ended September 30, 2015 and 2014, advertising expense was $155,623 and $674,746, respectively.

 

Cash and cash equivalents

 

The Company considers all highly liquid instruments with an original maturity of three months or less when acquired to be cash equivalents.

 

Accounts Receivable

 

The Company sells products to distributors and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. While the Company has a concentration of credit risk in the retail sector, it believes this risk is mitigated due to the diverse nature of the customers it serves, including, but not limited to, its type, geographic location, size, and beverage channel. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Typically, accounts receivable have terms of net 30 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect.

 

Accounts receivable, net, is as follows:

 

    September 30,
2015
    December 31,
2014
 
Accounts receivable, gross   $ 388,472     $ 198,637  
Allowance for doubtful accounts     (40,000 )     (24,000 )
Accounts receivable, net   $ 348,472     $ 174,637  

 

Concentrations of Credit Risk

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of these deposits. These cash balances are maintained with one bank. As of September 30, 2015, one customer accounted for 15% of the Company’s trade receivables. As of December 31, 2014, two customers accounted for 36% and 13%, of the Company’s trade receivables. The Company does not generally require collateral or other security to support customer receivables. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

 

  8  

 

 

Inventories

 

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled and packaged iced tea.

 

The Company values its inventories at the lower of cost or market, net of reserves. Cost is determined using the first-in, first-out (FIFO) method. During the three and nine months ended September 30, 2015, the Company recorded an adjustment of $38,673 to reduce the cost of certain products to its estimated net realizable value which is included in cost of goods sold in the accompanying condensed consolidated statements of operations. The following table summarizes inventories as of the dates presented:

 

    As of  
    September 30,
2015
    December 31, 2014  
Finished goods   $ 908,230     $ 433,478  
Raw materials and supplies     105,454       127,629  
Total inventories   $ 1,013,684     $ 561,107  

 

Property and Equipment

 

Property and equipment is recorded at cost. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or add new functionality are expensed as incurred. Depreciation is recorded using the straight-line method over the respective estimated useful lives of the Company’s assets. The estimated useful lives typically are 3 years for cold-drink containers, such as reusable fridges, wood racks, vending machines, barrels, and coolers, and are depreciated using the straight-line method over the estimated useful life of each group of equipment, as determined using the group-life method. Under this method, the Company does not recognize gains or losses on the disposal of individual units of equipment when the disposal occurs in the normal course of business. The Company capitalizes the costs of refurbishing its cold-drink containers and depreciates those costs over the estimated period until the next scheduled refurbishment or until the equipment is retired. The estimated useful lives are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful lives for trucks and automobiles are typically 3 to 5 years and are depreciated on a straight line basis. For the three months ended September 30, 2015 and 2014, depreciation expense was $27,043 and $23,399, respectively. For the nine months ended September 30, 2015 and 2014, depreciation expense was $76,578 and $48,261, respectively.

 

Intangible Assets

 

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually or when circumstances indicate that there could be an impairment. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

 

Intangibles assets with indefinite useful lives consist of the cost to purchase an internet domain name for $20,000. The domain name is considered to have a perpetual life and as such, is not amortized. Insignificant costs incurred associated with renewing this asset are expensed as incurred.

 

Intangible assets with finite useful lives are amortized over their expected useful life. Intangible assets with useful lives are tested for impairment when circumstances indicate that there could be an impairment. Intangible assets with finite useful lives include website development costs of $8,745 and $12,498 as of September 30, 2015 and December 31, 2014, respectively. The estimated useful life of the capitalized costs of the Company’s website is 3 years and is depreciated on a straight line basis. As of September 30, 2015, the cost of the website development was $15,000 and the accumulated amortization was $6,255. As of December 31, 2014, the cost of the website development was $15,000 and the accumulated amortization was $2,502. For the three months ended September 30, 2015 and 2014, amortization expense was $1,251 and $1,251, respectively. For the nine months ended September 30, 2015 and 2014, amortization expense was $3,753 and $1,251, respectively.

 

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Income Taxes

 

Effective May 27, 2015, the Company completed its reverse merger, whereby Long Island Brand Beverages LLC was deemed to be the accounting acquirer of Cullen Agricultural Holding Corp. From the date of the reverse merger, the Company’s results of operations began to be taxed as a C corporation. Prior to the reverse merger, the Company’s operations were taxed as a limited liability company, whereby the Company elected to be taxed as a partnership and the income or loss was required to be reported by each respective member on their separate tax returns. The Company’s change in status was not deemed to have a significant impact on the Company’s deferred tax assets primarily due to the fact that the Company recorded a full valuation allowance as a result of the Company’s historical operating losses. In addition, Cullen’s historical net operating losses may be subject to limitations as stipulated under Internal Revenue Code 382.

 

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.

 

In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of valuation allowance related to the Company’s net operating loss carryforward as a result of the historical losses of the Company.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company accounts for uncertain tax positions in accordance with ASC 740—“Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations. Our primary tax jurisdictions are our federal, various state, and local taxes. Generally, Federal, State and Local authorities may examine the Company's tax returns for three years from the date of filing.

 

In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results.

 

Stock Based Compensation

 

The Company accounts for stock based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718, stock based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility or comparable companies over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method. The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. The Company expenses stock-based compensation by using the straight-line method.

 

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The Company accounts for stock options granted to consultants using the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). In accordance with ASC 505-50, the Company estimates the fair value of unvested stock options each reporting period using the fair value of the Company’s common stock or the fair value of the services, based on which amount represents a more reliable measure of the cost incurred.

 

Earnings per share

 

Basic net earnings per common share is computed by dividing income/loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options. The computation of diluted earnings per share excludes those with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings per share excludes outstanding options in periods where the exercise of such options would be antidilutive. For the three and nine months ended September 30, 2015 there were 194,667 options and 138,250 warrants excluded from the computation of earnings per share because they were anti-dilutive.

 

Fair Value of Financial Instruments

 

The carrying amounts of cash, accounts receivable, accrued expenses and notes payable approximate fair value due to the short-term nature of these instruments.

 

Reclassification

 

Certain reclassifications have been made to the accompanying 2014 condensed financial statements to conform them to the 2015 presentation. These reclassifications had no impact on the Company’s net loss for the periods presented.

 

Seasonality

 

The Company’s business is seasonal with the summer months in the second and third quarter of the fiscal year typically generating the largest net sales.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09 - Revenue from Contracts with Customers ("ASU 2014-09"). It outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that "an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." ASU 2014-09   is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods, for public companies, and for annual periods beginning after December 15, 2018 and interim periods within those annual periods, for private companies. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's financial statements.

 

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In June 2014, the FASB issued Accounting Standards Update 2014-12, “Accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period,” (“ASU 2014-12”) which requires performance-based awards with a performance target that affects vesting and that could be achieved after an employee completes the requisite service period to be accounted for as a performance condition. If performance targets are clearly defined and it is probable that the performance condition will be achieved, stock-based expense should be recognized over the remaining requisite service period. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the provisions of the ASU and assessing the potential effect on the Company’s financial position or results of operations.

 

In August 2014, the FASB issued Accounting Standard Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” related to disclosure of uncertainties about an entity's ability to continue as a going concern. The new standard provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. Additionally, an entity must provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. The new standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is in the process of evaluating the impact of adoption on the Company's financial statements.

 

In July 2015, the FASB issued Accounting Standards Update ("ASU") 2015-11, “Simplifying the Measurement of Inventory”, which changed the subsequent measurement guidance from the lower of cost or market to the lower of cost or net realizable value, with net realizable value defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. The Company is currently evaluating the impact of this standard on its financial statements.

 

Management’s Evaluation of Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, other than described in Note 1 –Business Organization, Liquidity, and Management’s Plans, Note 4 – Commitments and Contingencies, and Note 10 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated interim financial statements.

 

NOTE 3 – LOANS PAYABLE

 

Cullen Loans

 

On November 19, 2013, the Company and Cullen entered into a loan agreement (the “Cullen Loan Agreement”). Pursuant to the Cullen Loan Agreement, Cullen loaned the Company $600,000, bearing interest at 6% per annum with principal and accrued interest due on August 31, 2014. The Cullen Loan Agreement provided Cullen with the option to loan the Company an additional $600,000. The Cullen Loan Agreement also required that the Company utilize $450,000 of the loan to repay the Line of Credit – Member. On December 5, 2013, Cullen exercised its option and extended to the Company an additional loan in the amount of $600,000 also bearing interest at 6% per annum with principal and accrued interest due on August 31, 2014. On April 1, 2014, the Company received $300,000 as proceeds from an additional loan from Cullen with interest at 6% per annum and a maturity of August 31, 2014. The maturity date of the Cullen Loans have been extended until March 15, 2016. These Cullen loans are secured by the accounts receivable and inventory of the Company. On March 26, 2015, the Company received $250,000 as proceeds from an additional loan from Cullen, bearing interest at 6% per annum with principal and interest due and payable on March 15, 2016. On May 27, 2015, the Company consummated the Mergers. In connection with the Mergers, $1,500,000 principal amount of the loans were forgiven and the remaining $250,000 principal amount of the loans eliminate upon consolidation.

 

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Nortle Loan

 

On August 26, 2013, the Company and Nortle Holdings Limited (“Nortle”) entered into a loan (“Nortle Loan”) and option agreement (“Nortle Option Agreement”). The Nortle Loan was secured by the inventory and accounts receivable of the Company. The Nortle Loan provided for Nortle to lend the Company an aggregate of $200,000, bearing interest at 6% per annum. The Nortle Loan and all accrued interest thereon, was due and payable on August 31, 2014. The Nortle Option Agreement provided that through October 18, 2013, Nortle had the option to loan the Company an additional $300,000, on the same terms as the Nortle Loan (“Nortle Option”). In the event that Nortle did not exercise the Nortle Option by October 18, 2013, then on such date, the interest rate on the existing loan with Nortle would increase to 12% per annum for the remaining term. Due to the fact that the Nortle Option to advance additional funds was not exercised, the interest rate was increased to 12% per annum. On June 25, 2014, Nortle converted its loan and accrued interest of $217,951 into 9,103 voting units in LIBB prior to the reverse merger.

 

Ivory Castle Loan

 

On April 22, 2014, the Company and Ivory Castle Limited (“Ivory Castle”) entered into a loan (“Ivory Castle Loan”). The Ivory Castle Loan provided for Ivory Castle to lend the Company an aggregate of $1,300,000 bearing interest at 6%. The Ivory Castle Loan, together with accrued interest, was due and payable on August 31, 2014. On June 25, 2014, Ivory Castle’s loan and accrued interest of $1,309,107 was converted into 54,675 voting units in LIBB prior to the reverse merger.

 

In addition, as a condition of the conversion, the Company was required to obtain Ivory Castle’s approval in the event of a proposed business combination or in the event that the Company seeks equity financing in excess of $1,000,000 prior to June 25, 2015. On May 4, 2015, the Company received $400,000 as proceeds from a loan with Ivory Castle Limited, a stockholder of the Company. This note bears interest at 6% per annum and matures on July 31, 2016. On June 30, 2015 the note and accrued interest of $403,485 were converted into 100,872 shares of common stock.

 

Bass Properties LLC

 

On April 28, 2015, the Company received $150,000 as proceeds from a loan from Bass Properties, LLC, a stockholder of the Company. This note bears interest at 10% per annum and matures on July 31, 2016. On June 30, 2015, the note and accrued interest of $152,425 were converted into 38,107 shares of common stock.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

The Company is involved in various claims and legal actions arising from time to time in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters in ordinary course of business will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Legal costs related to these matters are expensed as they are incurred.

 

On August 1, 2014, an action was filed by LIBB in the Supreme Court in the State of New York entitled Long Island Brand Beverages LLC v. Revolution Marketing, LLC and Ascent Talent, Model Promotion Ltd., for several claims including breach of contract and fraud occurring during 2014. The Company is seeking damages of $10,000,000. Revolution Marketing has filed a counterclaim for breach of contract and related causes of action, claiming damages in the sum of $310,880, and seeking punitive damages of $5,000,000.  Ascent has filed a pre-answer motion to dismiss LIBB’s complaint. LIBB filed papers in opposition and the parties are awaiting the court’s decision. In addition, Revolution has filed a motion to amend its answer to include cross-claims against Ascent which were not asserted in its original answer of record. LIBB management and legal counsel believes it is too early to determine the probable outcome of this matter.

 

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On October 3, 2014, an action was filed by Madwell LLC (“Madwell”) in the Supreme Court of New York entitled Madwell LLC v. Long Island Brand Beverages LLC, Philip Thomas, its Chief Executive Officer, and Paul Vassilakos, Cullen’s former Chief Executive Officer and a director of the Company. Madwell is seeking $940,000, which includes $440,000 for breach of contract and payment of services as well as punitive damages of $500,000. In addition, the Company agreed to indemnify Mr. Vassilakos for any expenses he incurred in connection with this litigation. The Company currently does not believe that Mr. Vassilakos’ expenses in connection with such litigation will be material.

 

On July 31, 2015, we entered into a settlement agreement with Madwell. Pursuant to the settlement agreement, we agreed to pay Madwell $440,000 in six installments with the last installment due no later than December 31, 2015. In addition, Madwell agreed to discontinue its lawsuit and the parties agreed to mutual releases of liability related to fees for advertising, marketing and design services or any matter relating to the lawsuit. As of September 30, 2015, $290,000 was included in accounts payable in the condensed consolidated balance sheets related to this matter. During October 2015, the Company paid Madwell $50,000 towards the balance. The remaining payments are due in three equal monthly installments of $80,000 through December 31, 2015.

 

Brokerage Arrangements

 

The Company maintains arrangements with sales brokers who help with bringing new distributors and retail outlets to the Company. These sales brokers receive a commission for these services. Commissions to these brokers currently range from 2-5% of sales.

 

Employment Agreements

 

On May 27, 2015, the Company entered into employment agreements with Messrs. Thomas, Dydensborg and Meehan to serve as Chief Executive Officer, Chief Operating Officer and Chief Accounting Officer, respectively. Each has a term of two years except the agreements with Messrs. Dydensborg and Meehan provide that either the Company’s or the executive can terminate the agreement with six months’ advance notice (or three months’ advance notice, in the case of Mr. Meehan). The employment agreements will provide for Messrs. Thomas, Dydensborg and Meehan to receive base salaries of $150,000, $130,000 and $120,000. Additionally, each is entitled to an incentive bonus at the discretion of the Board of Directors of up to 50%, 40% and 25% of such individual’s base salary, respectively.

 

On May 27, 2015, the Company entered into an employment agreement with Thomas Panza, a stockholder of the Company to serve as LIBB’s Purchasing Manager. The agreement has a term of two years except that either LILBB or Mr. Panza can terminate the agreement with six months’ advance notice. Mr. Panza will receive a base salary of $80,000 and an incentive bonus of up to 50% of his base salary at the discretion of the Board of Directors.

 

Consulting Agreements

 

On June 17, 2015, the Company announced that it had determined to explore potential opportunities in expanding the business into alcoholic beverages. In connection with the proposed expansion, the Company engaged Julian Davidson as a consultant to spearhead this new initiative. The Company will reimburse Julian Davidson for reasonable business expenses. In the event the Company raises $10,000,000, Julian Davidson would become an employee of the Company.

 

During the three months ended September 30, 2015, the Company entered into agreements with three members of its Advisory Board. Upon signing the agreement, each Advisory Board Member was entitled to receive 7,500 shares of common stock, at $4.00 per share, which will be issued on December 31, 2015. During the three and nine months ended September 30, 2015, the Company incurred $90,000 in costs, which are included in general and administrative expenses in the condensed consolidated statements of operations. For each year of service after December 31, 2015, the Advisory Board members will be entitled to receive $30,000 worth of common stock and $12,000 in cash on an annual basis. In addition, the members will be entitled to reimbursement of expenses and $1,000 for each meeting attended. The agreements can be terminated by either party with 30 days notice.

 

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NOTE 5 – STOCKHOLDERS’ EQUITY

 

In connection with the Mergers, on May 27, 2015, 2,633,334 shares of common stock were issued to the former members of LIBB and 1,518,749 shares of common stock were issued to the former stockholders of Cullen.

 

On May 27, 2015, the Company issued 19,047 shares of common stock to a vendor in payment of its accounts payable balance of $98,120.

 

On June 30, 2015, loans from Ivory Castle Limited and Bass Properties LLC, together with accrued interest, of $555,910 were converted into 138,979 shares of common stock.

 

On June 30, 2015, the Company received gross proceeds of $50,000 through the issuance of 12,500 shares of common stock to a family member of a director of the Company.

 

On June 30, 2015, the Company received gross proceeds of $50,000 through the issuance of 12,500 shares of common stock to a family member of a director of the Company.

 

On June 30, 2015, the Company received gross proceeds of $370,544 through the issuance of 92,636 shares of common stock Bass Properties LLC.

 

On June 30, 2015, the Company issued 9,038 shares of common stock to vendors in payment of accounts payable balances of $36,150.

 

On July 8, 2015, the Company received proceeds of $100,000 through the issuance of 25,000 shares of common stock.

 

On September 30, 2015, the Company sold an aggregate of 72,750 units at a price of $4.00 per unit. The sale was part of a private placement of up to $3,000,000 of units (the “Offering ”) being conducted by the Company on a “best efforts” basis through a placement agent (the “ Placement Agent ”). The Offering will terminate on the earlier of the sale of the full $3,000,000 and October 30, 2015. The Company sold an aggregate of 65,500 units in the Offering on September 17, 2015. Accordingly, the Company has received gross proceeds of $553,000. In addition, the Company incurred $186,884 in costs related this capital raise for total net proceeds of $366,116. Included in the raise were 6,250 units issued to a member of the Board of Directors, 6,250 units issued to the CEO and member of the Board of Directors, 22,500 units issued to Ivory Castle Limited, and 15,000 units issued to Bass Properties LLC.

 

The units consist of one share of the Company’s common stock and one warrant. The units are separable immediately upon issuance and are issued separately as shares of common stock and warrants.

 

Each warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $6.00 per share, commencing immediately and expiring on September 17, 2018. The exercise price and number of shares of common stock issuable on exercise of the warrants are subject to standard anti-dilution provisions. The shares will be issued pursuant to an exemption from registration. The Company, at its option, may call the warrants for redemption, in whole and not in part, at a price of $0.01 per warrant, if (i) the closing price per share of the common stock is at least $10.00 for 30 consecutive trading days ending on the third business day prior to the notice of redemption or (ii) the common stock is listed for trading on a national securities exchange and the closing price per share of common stock on the first day of trading on such exchange is at least $7.50. The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.

 

 

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The Placement Agent is entitled to a commission equal to (a) 10% of the aggregate purchase price from the units sold to investors introduced to the Company by the Placement Agent, and (b) 5% of the aggregate purchase price from the units sold to investors that were not introduced to the Company by the Placement Agent. In addition, the Company will pay the Placement Agent a non-accountable expense allowance equal to 3% of the aggregate purchase price from the units sold to investors introduced to the Company by the Placement Agent. At the final closing, the Placement Agent also will receive warrants to purchase a number of shares of the Company’s common stock equal to 10% of the total shares included in the units sold in the Placement, with an exercise price of $4.50 per share. Furthermore, if the Company sells the full $3,000,000 of units in the Placement, for the 12 month period commencing on the final closing of the Placement, the Placement Agent will have a right of first refusal to act as passive bookrunner with respect to any proposed underwritten public distribution or private placement of the Company’s securities. The Company also previously paid the Placement Agent a $15,000 commitment fee. The Company has accrued or paid to the Placement Agent an aggregate of $70,090 in commissions. In addition, the Company accrued the value of the 13,825 warrants based upon 10% of the securities issued through September 30, 2015. The value of the accrual of $97,969 was determined using the Black-Scholes method utilizing the $9.75 stock price, a dividend yield of 0%, expected volatility of 68%, a risk free interest rate of 1.37%, and a life of five years.

 

NOTE 6 – STOCK OPTIONS

 

On May 27, 2015, the Company’s board of directors adopted the 2015 Long-Term Incentive Equity Plan (“2015 Stock Option Plan”). The 2015 Stock Option Plan provides for the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to, among others, the officers, directors, employees and consultants of the Company. The total number of shares of common stock reserved under the Plan are 466,667.

 

On May 27, 2015, as part of their employment agreements, the Company granted the officers of the Company and Mr. Panza, options to purchase 194,667 shares at an exercise price of $3.75 which are exercisable until May 26, 2020. These options vest on a quarterly basis over the two year period from the date of issuance.

 

The following table summarizes the stock option activity of the Company:

 

    Shares     Weighted Average Exercise Price     Weighted Average Grant Date Fair Value     Average Remaining Contractual Term (Years)     Aggregate Intrinsic Value  
Outstanding at January 1, 2015     -     $ -     $ -                  
                                         
Granted     194,667     $ 3.75     $ 6.22                  
Exercised     -     $ -     $ -                  
Expired, forfeited or cancelled     -     $ -     $ -                  
                                         
Outstanding at September 30, 2015     194,667     $ 3.75     $ 6.22       4.7     $ 1,168,002  
Exerciseable at September 30, 2015     24,333     $ 3.75     $ 6.22       4.7     $ 146,000  

 

As of September 30, 2015, there was a total of $1,002,514 of unrecognized compensation arrangements granted related to unvested options. The cost is expected to be recognized through 2017 over a weighted average period of 1.65 years.

 

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The Company accounts for all stock based compensation as an expense in the financial statements and associated costs are measured at the fair value of the award. For the three months and nine months ended September 30, 2015, the Company recorded stock based compensation expense of $151,354 and $207,949 respectively.

 

The Black Scholes method option pricing model was used to estimate fair value as of the date of grants during 2015 using the assumptions: a stock price of $8.70, a dividend yield of 0%, expected volatility of 79%, a risk free interest rate of 0.99%, and an expected life of 3.25 years. The simplified method was used to determine the expected life as the granted options as the options were considered to be plain-vanilla options.

 

NOTE 7 – STOCK WARRANTS

 

On September 17, 2015 and September 30, 2015, the Company issued warrants to purchase 65,500 and 72,750 shares of common stock (See Note 5 – Stockholders’ Equity) which are all exerciseable.

 

The following table summarizes the stock warrant activity of the Company:

 

    Number of shares     Weighted average exercise price     Weighted average contractual life (years)  
Outstanding - January 1, 2015     -     $ -       -  
                         
Issued     138,250     $ 6.00       3.0  
Expired     -     $ -       -  
Forfeited     -     $ -       -  
                         
Outstanding September 30, 2015     138,250     $ 6.00       3.0  

 

NOTE 8 – MAJOR CUSTOMERS AND VENDORS

 

For the three months ended September 30, 2015, one customer accounted for 10% of net sales, respectively. For the three months ended September 30, 2014, three customers accounted for 32%, 16%, and 13% of the Company’s net sales.

 

For the nine months ended September 30, 2015, no customers accounted for greater than 10% of the Company’s net sales. For the nine months ended September 30, 2014, three customers accounted for 37%, 14%, and 15% of the Company’s net sales.

 

For the three months ended September 30, 2015 and 2014, the largest vendors represented approximately 80% (three vendors) and 71% (three vendors) of purchases, respectively. For the nine months ended September 30, 2015 and 2014, the largest vendors represented approximately 82% (four vendors) and 69% (three vendors) of purchases, respectively. As of September 30, 2015, 15% of our accounts payables were with one vendor from whom the Company purchases inventory.

 

NOTE 9 - RELATED PARTIES

 

The Company recorded revenue related to shipments of inventory to two entities whose owners became employees of the Company during 2014. For the three months ended September 30, 2015 and 2014, sales to these related parties were $3,945 and $20,182, respectively. For the nine months ended September 30, 2015 and 2014, sales to these related parties were $35,140 and $75,188, respectively. As of September 30, 2015, accounts receivable from these customers were $18,854. As of December 31, 2014, accounts receivable from these customers were $25,829.

 

The Company recorded revenue related to shipments of inventory to an entity whose owner became an employee of the Company during 2015. For the three months ended September 30, 2015, sales to this related party were $742. For the nine months ended September 30, 2015, sales to this related party were $11,716. As of September 30, 2015, accounts receivable from this customer was $51,915.

 

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In addition, the Company recorded revenue related to shipments of inventory to an entity owned by an immediate family member of Philip Thomas, CEO, stockholder, and member of the Board of Directors. Mr. Thomas is also an employee of this entity. For the three months ended September 30, 2015 and 2014, sales to this related party were $1,512 and $1,924, respectively. For the nine months ended September 30, 2015 and 2014, sales to this related party were $4,373 and $5,053, respectively. As of September 30, 2015 and December 31, 2014, there was $1,653 and $1,326, respectively, due from this related party which was included in accounts receivable in the condensed consolidated balance sheets.

 

During the three and nine months ended September 30, 2015, the Company accrued $60,000 in expenses related to fees payable to the Company’s Board of Directors, which is included in general and administrative expenses in the condensed consolidated statements of operations. The non-employee members of the Board of Directors will receive $30,000 worth of stock for their services on December 31, 2015.

 

A stockholder and a company owned by member of the Board of Directors of the Company has paid certain expenses on behalf of the Company. As of September 30, 2015 accounts payable to these parties were $47,414.

 

On August 21, 2014, the Company entered into a loan agreement with Philip Thomas for $30,000. The loan bears interest at 6% and had an original maturity date of August 31, 2014. On August 30, 2014, the loan was extended to October 15, 2014. On October 15, 2014, the Company repaid the full amount of the loan together with accrued interest.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On October 23, 2015 and October 30, 2015, the Company received total gross proceeds of $70,000 through the issuance of 17,500 shares of common stock and warrants to purchase 17,500 shares of common stock.

  

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

References in this quarterly report to “we,” “us”, or “our” or to “our company” or “the Company” refer to Long Island Iced Tea Corp., a holding company, and its wholly owned subsidiaries, including Long Island Brand Beverages LLC (“LIBB”) and Cullen Agricultural Holding Corp. (“Cullen”).

 

The information disclosed in this quarterly report, and the information incorporated by reference herein, include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

 

The forward-looking statements contained or incorporated by reference in this quarterly report are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in this Item 2 of Part I of this quarterly report, in Item 1A of Part II of our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015 and in the “Risk Factors” section of the final proxy statement/prospectus dated May 1, 2015 (the “Proxy Statement/Prospectus”) that forms a part of our registration statement on Form S-4 (File No. 333-201527). Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

The following discussion should be read in conjunction with our condensed consolidated interim financial statements and footnotes thereto contained in this quarterly report.

 

Overview

 

We are a holding company operating through our wholly-owned subsidiary, LIBB. We are engaged in the production and distribution of premium ready-to-drink (“RTD”) iced tea in the beverage industry. We are currently organized around our flagship brand Long Island Iced Tea, a premium RTD tea made from a proprietary recipe and with quality components sold primarily on the East Coast of the United States through a network of national and regional retail chains and distributors. Our mission is to provide consumers with premium iced tea offered at an affordable price.

 

We aspire to be a market leader in the development of iced tea beverages that are convenient and appealing to consumers. There are two major target markets for Long Island Iced Tea, consumers on the go and health conscious consumers. Consumers on the go are families, employees, students and other consumers who lead a busy lifestyle. With increasingly hectic and demanding schedules, there is a need for products that are accessible and readily available. Health conscious consumers are individuals who are becoming more interested and better educated on what is included in their diets, causing them to shift away from the less healthy options towards alternative beverages such as iced tea.

 

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In addition, we have begun exploring entry into the $215 billion U.S. alcohol industry, with the hope to establish ourselves as multi-beverage alcohol and non-alcohol company. 

 

We were incorporated on December 23, 2014 in the State of Delaware. Our corporate offices are located at 116 Charlotte Avenue, Hicksville, NY 11801 and our telephone number at that location is (855) 542-2832.

 

Recent Developments

 

Business Combination

 

On May 27, 2015, we completed the business combination (the “Business Combination”) contemplated by the Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of December 31, 2014 and amended as of April 23, 2015, by and among Cullen, the Company, Cullen Merger Sub, Inc. (“Cullen Merger Sub”), LIBB Acquisition Sub, LLC (“LIBB Merger Sub”), LIBB, Philip Thomas and Thomas Panza (the “Founders”), who formerly owned a majority of the outstanding membership units of LIBB, and the other former members of LIBB executing a joinder thereto.

 

Prior to the closing of the Business Combination, we were a wholly-owned subsidiary of Cullen formed solely for the purpose of consummating the Business Combination, LIBB was a private operating company and Cullen was a public company seeking alternative strategic opportunities in all industries and regions in an effort to maximize stockholder value. Upon the closing of the Business Combination, we became the new public company and Cullen and LIBB became wholly-owned subsidiaries of ours. In addition, the historical financial statements of LIBB became our financial statements. As a result of the Business Combination, the business of LIBB became our business.

 

Proposed Expansion of Business

 

On June 17, 2015, we announced that we had determined to explore potential opportunities in expanding our business into alcoholic beverages. In connection with the proposed expansion, we engaged Julian Davidson as a consultant to spearhead this new initiative. Mr. Davidson has nearly 25 years of experience in the alcoholic beverage industry, including most recently serving as Chief Executive Officer of Independent Liquor NZ’s businesses in New Zealand, the United States and Canada.

 

Private Placements

 

On June 30, 2015, we sold an aggregate of 256,615 shares of our common stock to certain accredited investors at a purchase price of $4.00 per share, for an aggregate purchase price of approximately $1,027,000, including through the cancellation of an aggregate of approximately $556,000 in outstanding debt, including accrued interest, owed by the Company to certain of the investors. The shares were sold in a private placement pursuant to the terms of subscription agreements executed by each of the investors. Family members of Philip Thomas, the Company’s Chief Executive Officer and a member of its board of directors, and family members of Paul N. Vassilakos, a member of the Company’s board of directors, each purchased $50,000 worth of shares in the private placement.

 

On July 8, 2015, we sold an aggregate of 25,000 shares of our common stock to certain accredited investors at a purchase price of $4.00 per share, for an aggregate purchase price of approximately $100,000. The shares were sold in a private placement pursuant to the terms of subscription agreements executed by each of the investors.

 

Commencing on August 10, 2015 and ending on October 30, 2015, we conducted a “best efforts” private placement of up to $3,000,000 of units (the “Offering”), at a price of $4.00 per unit, through a placement agent (the “Placement Agent”). During the Offering, we sold an aggregate of 155,750 units for total gross proceeds of $623,000. The units consisted of one share of our common stock (or an aggregate of 155,750 shares) and one warrant (or an aggregate of 155,750 warrants). The units were separable immediately upon issuance and were issued separately as shares of common stock and warrants.

 

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Each warrant entitles the holder to purchase one share of our common stock at an exercise price of $6.00 per share, commencing immediately and expiring on September 17, 2018. The exercise price and number of shares of common stock issuable on exercise of the warrants are subject to standard anti-dilution provisions. We may call the warrants for redemption, at our option, in whole and not in part, at a price of $0.01 per warrant, if (i) the closing price per share of the common stock is at least $10.00 for 30 consecutive trading days ending on the third business day prior to the notice of redemption or (ii) the common stock is listed for trading on a national securities exchange and the closing price per share of common stock on the first day of trading on such exchange is at least $7.50. The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.

 

Pursuant to the subscription agreement entered into with each of the investors in the Offering, the investors have certain “piggyback” registration rights covering the resale of the shares of common stock included in the units and the shares of common stock underlying the warrants.

 

We incurred fees paid or to be paid in cash to the Placement Agent in connection with the Offering of $15,000 as a commitment fee, $51,800 in commissions and $16,890 as a non-accountable expense allowance. In addition, at the final closing, we will issue the Placement Agent a warrant to purchase 15,575 shares of our common stock at an exercise price of $4.50 per share. As we did not sell the full $3,000,000 of units in the Offering, the Placement Agent will not have a right of first refusal in connection with future offerings by us.

 

Strategic Advisory Board

 

The Company has established a Strategic Advisory Board of business and industry professionals to help guide the Company’s business and market development. The advisory board is initially comprised of Tom Cardella, John Carson and Dan Holland.

 

OTCQB Trading

 

On October 1, 2015, our common stock was verified for trading on the OTCQB Venture Market.

 

Highlights

 

We generate income through the sale of our iced teas. The following are highlights of our operating results for the three and nine months ended September 30, 2015:

 

· Net sales . During the nine months ended September 30, 2015, we had net sales of $1,397,244, a decrease of $112,957 over the nine months ended September 30, 2014. During the three months ended September 30, 2015, we had net sales of $456,787, a decrease of $126,169 over the three months ended September 30, 2014. The primary drivers of these changes were decline in our sales to Costco from the prior year as our product was not carried in Costco’s product line, and we performed fewer road shows in the current year.

 

· Margin . Our margin increased by 6% for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. Our margin also increased by 2% for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014. The primary reason for the increase was the fact that the Company received a credit of $120,000 from one of the Company’s vendors related to production issues during the first quarter of 2015, which resulted in a reduction of the cost of the inventory affected by the production issues. Our ability to sell this inventory has resulted in improved margins. These positive impacts were partially offset by the addition of smaller margin gallon containers to the product line. In addition, during the three and nine months ended September 30, 2015, we recorded an adjustment of $38,673 to reduce the cost of our gallons to the estimated net realizable value.

 

· Operating expenses . During the nine months ended September 30, 2015, our operating expenses were $2,258,980, a decrease of $482,009 as compared to the nine months ended September 30, 2014. During the three months ended September 30, 2015, our operating expenses were $1,017,999, an increase of $114,692 as compared to the three months ended September 30, 2014. Our decrease in operating expenses for the nine month period related primarily to decreased advertising and other marketing expenses as a result of the cost of our marketing campaigns for 2015 as well as decreased costs related to the performance of our roadshows at Costco as compared to the prior year. These decreases for the three month ended September 30, 2015, were primarily offset by costs for stock based compensation and other fees related to the Board of Directors and the Advisory Board.

 

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Historically, our cash generated from operations has not been sufficient to meet our expenses. Accordingly, we have historically financed our business through the sale of equity interests or through the issuance of promissory notes. During the nine months ended September 30, 2015, our cash flows used in operations were $2,016,316 and our net cash provided by financing activities was $1,951,876. We had working capital of $215,409 as of September 30, 2015.

 

In order to execute our long-term growth strategy, we may need to continue to raise additional funds through private equity offerings, debt financings, or other means. There are no assurances that we will be able to raise such funds on acceptable terms or at all.

 

Uncertainties and Trends in Our Business

 

We believe that the key uncertainties and trends in our business are as follows:

 

· We believe that using various marketing tools, which may include significant advertising expenses, will be necessary in order to increase product awareness in order to compete with our competitors, including large and well established brands with access to significant capital resources.

 

· Customer trends and tastes can change for a variety of reasons including health consciousness, government regulations and variation in demographics. We will need to be able to adapt to changing preferences in the future.

 

· Our sales growth is dependent upon maintaining our relationships with existing and future customers who may generate substantial portions of our revenue, which includes sales to retailers where there may be concentrations. During the year ended December 31 2014, from April through September, we sold to Costco both at road shows as well as in Costco’s product line, which represented 32% of the Company’s sales. While the Company performed road shows at Costco through September 2015, sales to Costco decreased from approximately $562,000 for the nine months ended September 30, 2015 to $118,000 for the nine months ended September 30, 2014. This was due to the fact that for the nine months ended September 30, 2014, we performed more road shows and product demonstrations than during the nine months ended September 30, 2014. In addition, during the nine months ended September 30, 2014 we were sold in Costco’s product line, while our product was not sold in Costco’s regular product line during the nine months ended September 30, 2015. We are currently not performing road shows at Costco, and our product is not currently part of Costco’s regular product line.

 

· Our sales are subject to seasonality. Our sales are typically the strongest in the summer months in the northeastern United States.

 

· We are currently involved in litigation. Please refer to Item 1 of Part II of this quarterly report. There are no assurances that there will be successful outcomes to these matters.

 

· We developed a gallon product line featuring four of our existing flavors in May 2015. The Company’s gross margins are minimal on this product. As a result of the minimal gross margins and the expenses related to delivery of the product to the end customers, during the nine months ended September 30, 2015, we recorded an adjustment of $38,673 to reduce the cost of our gallons to the estimated net realizable value.

 

· We are exploring potential opportunities to expand our business to include alcoholic beverages. This expansion may require a substantial investment of resources and management time, and there can be no assurances that our efforts will be successful.

 

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Please refer to the “ Risk Factors ” section of the Proxy Statement/Prospectus and Item 1A of Part II of our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015 for additional information about risks and uncertainties facing the Company.

 

Critical Accounting Policies

 

The preparation of the financial statements in conformity with United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in these consolidated financial statements. We believe that, of our significant accounting policies (see Note 2 of the financial statement included in this quarterly report), the following policies are the most critical.

 

Revenue Recognition

 

Revenue is stated net of sales discounts and rebates paid to customers. Net sales are recognized when all of the following conditions are met: (1) the price is fixed and determined; (2) evidence of a binding arrangement exists (generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are collectible under normal payment terms. These conditions typically occur when the products are delivered to or picked up by the Company’s customers.

 

Customer Marketing Programs and Sales Incentives

 

The Company participates in various programs and arrangements with customers designed to increase the sale of its products. Among these programs are arrangements under which allowances can be earned by customers for attaining agreed upon sales levels or for participating in specific marketing programs. The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive marketplace. The costs of all these various programs are recorded as a reduction of sales in the financial statements.

 

Accounts Receivable

 

The Company sells products to distributors and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation of the customer’s financial condition. Potential losses on the Company’s receivables are dependent on each individual customer’s financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable at net realizable value. Typically, accounts receivable have terms of net 30 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its high-risk customers. Past due receivable balances are written off when the Company’s efforts have been unsuccessful in collecting the amount due. Accounts receivable are stated at the amounts management expects to collect.

 

Inventories

 

The Company’s inventory includes raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists of bottled and packaged iced tea. The Company values its inventories at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

 

Business Combination

 

For accounting purposes, the Business Combination was treated as an acquisition of Cullen by LIBB and as a recapitalization of LIBB, as the former LIBB members hold a large percent of the Company shares and exercise significant influence over the operating and financial policies of the consolidated entity and the Company was a public shell company at the time of the transaction. Pursuant to Accounting Standards Codification (“ASC”) 805-10-55-11 through 55-15, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination. As a result, the condensed consolidated balance sheet, statement of operations, and statement of cash flows of LIBB have been retroactively updated to reflect the recapitalization. Additionally, the historical condensed consolidated financial statements of LIBB are now reflected as those of the Company.

 

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Results of Operations

 

Comparison of the nine months ended September 30, 2015 and September 30, 2014

 

    For the Nine Months Ended September 30,  
    2015     2014  
             
Net sales   $ 1,397,244     $ 1,510,201  
Cost of goods sold     1,104,723       1,284,933  
Gross profit     292,521       225,268  
                 
Operating expenses:                
General and administrative expenses     1,264,436       764,638  
Selling and marketing expenses     994,544       1,976,351  
Total operating expenses     2,258,980       2,740,989  
                 
Operating Loss     (1,966,459 )     (2,515,721 )
                 
Other expenses:                
Other expense     (3,327 )     -  
Interest expense     (47,056 )     (86,190 )
Total other expenses     (50,383 )     (86,190 )
                 
Net loss   $ (2,016,842 )   $ (2,601,911 )

 

Net Sales and Gross Profit

 

Net sales for the nine months ended September 30, 2015 decreased by $112,957, or 7%, to $1,397,244 as compared to $1,510,201 for the nine months ended September 30, 2014. The sales decreased primarily as a result of decreased sales to Costco from approximately $562,000 for the nine months ended September 30, 2014 to $118,000 for the nine months ended September 30, 2015. This was due to the fact that for the nine months ended September 30, 2014, we performed more road shows and product demonstrations. In addition, during the nine months ended September 30, 2014 we were sold in Costco’s product line. During the nine months ended September 30, 2015, our product was not sold in Costco’s regular product line. These decreases were offset by increases in sales as a result of the Company’s focus on increasing brand recognition and expanding its customer base through the utilization of new distributors particularly in the New Jersey, Philadelphia, Florida, Virginia, and New England areas. We also began to sell gallons during May 2015, which contributed to the offset of our overall decline in sales during the nine month period. Sales of our gallons were approximately $156,000 during the nine months ended September 30, 2015.

 

Gross profit increased by $67,253, or 30%, from $225,268 for the nine months ended September 30, 2014 to $292,521 for the nine months ended September 30, 2015. Gross profit percentage increased by 6% from 15% for the nine months ended September 30, 2014 to 21% for the nine months ended September 30, 2015. The primary reason for the increase was due to the fact that the Company received a credit of $120,000 from one of the Company’s vendors related to production issues. The cost of the inventory affected by these production issues was reduced by $91,523 resulting in a positive impact of $28,477 on our gross profit. The Company maintained this inventory, and as a result, sales of this inventory over the remainder of this fiscal year resulted in a positive impact on our margins which may not be indicative of future results. Our margins were also positively impacted by the fact that in some regions we were selling directly to retailers which resulted in higher case prices. These increases in our margins were offset by the sales of our gallon product line, which have lower gross margins. In addition, during the nine months ended September 30, 2015, we recorded an adjustment of $38,673 to reduce the cost of our gallons to the estimated net realizable value, which further offset the increase in our margins.

 

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General and administrative expenses

 

General and administrative expenses for the nine months ended September 30, 2015 increased by $499,798, or 65%, to $1,264,436 as compared to $764,638 for the nine months ended September 30, 2014. During the nine months ended September 30, 2015, costs incurred related to our Board of Directors and Advisory Board were $150,000, which consisted of fees to be paid in common stock to the directors and Advisory Board members at December 31, 2015, as compared to $0 during the nine months ended September 30, 2014. During the nine months ended September 30, 2015, the Company’s general and administrative salaries increased by $175,299 as compared to the nine months ended September 30, 2014. This was primarily the result of officers’ salaries including the Chief Executive Officer and Chief Accounting Officer of the Company. In addition, the Company incurred $145,279 in stock based compensation expense that was allocated to general and administrative expenses during the nine months ended September 30, 2015. In addition, there were increases in insurance expense of $30,897 primarily related to our directors and officers insurance. Depreciation and amortization expense increased by $30,819 primarily as a result of increased capital expenditures in the prior year related to display items such as wood racks and refrigerators as well as automobiles and trucks. SEC filing expenses, stock transfer fees, and other filing fees also increased by $39,427, primarily as a result of the fact that the Company became a public entity on May 27, 2015. The remaining increase in general and administrative expenses was caused primarily by increases in rent, travel, and other administrative costs.

 

These increases were offset by decreases in accounting fees of $127,794 primarily related to the accounting and audit services needed in the prior year period to prepare for the Business Combination.

 

Selling and marketing expenses

 

Selling and marketing expenses for the nine months ended September 30, 2015 decreased by $981,807, or 50%, to $994,544 as compared to $1,976,351 for the nine months ended September 30, 2014. Selling and marketing expenses decreased largely due to decreased advertising expenses from $674,746 for the nine months ended September 30, 2014 to $155,623 for the nine months ended September 30, 2015. In addition, the costs to perform road shows and product demonstrations, including staff and sample expenses at these shows, decreased by approximately $244,391 for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. This was due to the fact that we performed fewer road shows and product demonstrations during the period along with the fact that they were mainly staffed in house during the current year. Selling salaries also declined by $228,666 during the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. In addition the Company’s selling and marketing expenses decreased due to the fact that the Company changed the style of its labels in 2014. As a result, design costs decreased by $46,956. These declines in selling expenses were offset primarily by increases in freight of $38,634 and stock based compensation allocated to selling expenses of $62,670.

 

Other expense

 

Other expense, which consisted primarily of interest expense, for the nine months ended September 30, 2015 decreased by $35,807, or 42%, to $50,383 as compared to $86,190 for the nine months ended September 30, 2014. Interest expense decreases were the result of reduced borrowing during the nine months ended September 30, 2015 primarily related to the closing of the Business Combination and the related cancellation of debt with Cullen.

 

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Comparison of the three months ended September 30, 2015 and September 30, 2014

 

    For the Three Months Ended September 30,  
    2015     2014  
             
Net sales   $ 456,787     $ 582,956  
Cost of goods sold     392,606       513,226  
Gross profit     64,181       69,730  
                 
Operating expenses:                
General and administrative expenses     646,788       306,608  
Selling and marketing expenses     371,211       596,699  
Total operating expenses     1,017,999       903,307  
                 
Operating Loss     (953,818 )     (833,577 )
                 
Other expenses:                
Other expense     -       -  
Interest expense     (872 )     (23,845 )
Total other expenses     (872 )     (23,845 )
                 
Net loss   $ (954,690 )   $ (857,422 )

 

Net Sales and Gross Profit

 

Net sales for the three months ended September 30, 2015 decreased by $126,169, or 22%, to $456,787 as compared to $582,956 for the three months ended September 30, 2014. The primary reason for the decreased sales was the decrease in the Company’s sales to Costco. Sales decreased from approximately $188,000 for the three months ended September 30, 2014 to $42,000 for the three months ended September 30, 2015. This was due to the fact that during the three months ended September 30, 2014, we performed more road shows and product demonstrations. In addition, during the three months ended September 30, 2014, we were sold in Costco’s product line. During the three months ended September 30, 2015, our product was not sold in Costco’s regular product line. These sales were offset by the focus on increasing brand recognition and expanding our customer base through the utilization of new distributors particularly in the New Jersey, Philadelphia, Florida, and Virginia areas. However, during the third quarter of 2015 our sales were negatively impacted by one of our significant retailers filing for Chapter 11 bankruptcy. We also began to sell gallons in May 2015, which contributed to sales. Sales of our gallons were approximately $86,000 during the three months ended September 30, 2015.

 

Gross profit decreased by $5,549, or 8%, from $69,730 for the three months ended September 30, 2014 to $64,181 for the three months ended September 30, 2015. Gross profit percentage increased by 2% from 12% for the three months ended September 30, 2014 to 14% for the three months ended September 30, 2015. The primary reason for the increase was due to the fact that the Company received a credit of $120,000 from one of the Company’s vendors related to production issues during the first quarter of 2015. The cost of the inventory affected by these production issues was reduced by $91,523. The Company maintained this inventory, and as a result, our ability to sell this inventory improved our margins. Our ability to sell this inventory during the remainder of this fiscal year resulted in a positive impact on our margins which may not occur in future periods. Our margins were also positively impacted by the fact that in some regions we were selling directly to retailers which resulted in higher case prices. These increases in our margins were offset by the sales of our gallon product line which have lower margins. As a result, during the three months ended September 30, 2015, we recorded an adjustment of $38,673 to reduce the cost of our gallons to the estimated net realizable value.

 

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General and administrative expenses

 

General and administrative expenses for the three months ended September 30, 2015 increased by $340,180, or 111%, to $646,788 as compared to $306,608 for the three months ended September 30, 2014. During the three months ended September 30, 2015, the Company’s general and administrative salaries increased by $75,302 as compared to the three months ended September 30, 2014. In addition, the Company incurred $105,740 in stock based compensation expense that was allocated to general and administrative expenses during the three months ended September 30, 2015. This was primarily the result of officers’ salaries including the Chief Executive Officer and Chief Accounting Officer of the Company. In addition, the Company incurred $150,000 related to its Advisory Board and Board of Directors fees during the three months ended September 30, 2015. These increases were offset by decreases in accounting and legal fees of $47,011 primarily related to the accounting and audit services needed in the prior year period to prepare for the Business Combination. The remaining increase in general and administrative expenses was caused primarily by increases in SEC filing expenses, insurance, and other administrative costs.

 

Selling and marketing expenses

 

Selling and marketing expenses for the three months ended September 30, 2015 decreased by $225,488, or 38%, to $371,211 as compared to $596,699 for the three months ended September 30, 2014. Selling and marketing expenses decreased largely due to decreased advertising expenses from $226,555 for the three months ended September 30, 2014 to $29,130 for the three months ended September 30, 2015. In addition, the costs to perform road shows and product demonstrations, including staff and sample expenses at these shows, decreased by approximately $30,557 for the three months ended September 30, 2015 as compared to the three months ended September 30, 2014. This was due to the fact that we performed fewer road shows and product demonstrations during the period along with the fact that they were mainly staffed in house during the current year. There was also a decline in selling salaries of $74,316 during the three months ended September 30, 2015 as compared to the three month ended September 30, 2014. These decreases of $302,298 were offset by increases of $76,810 primarily relating to $45,614 related to stock based compensation which was allocated to selling and marketing expenses as well as other promotional fees.

 

Other expense

 

Other expense, which consisted primarily of interest expense, for the three months ended September 30, 2015 decreased by $22,973, or 96%, to $872 as compared to $23,845 for the three months ended September 30, 2014. Interest expense decreases were the result of reduced borrowing during the nine months ended September 30, 2015 primarily related to the closing of the Business Combination and the related cancellation of debt with Cullen.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

The Company has historically been financed by debt from its stockholders and unrelated third parties. In addition, the Company has also been financed by the sale of equity interests. We had working capital of $215,409 as of September 30, 2015. We believe that as a result of a commitment for financing from a stockholder and our working capital as of September 30, 2015 that our cash resources will be sufficient to fund our net cash requirements through September 30, 2016.

 

The following is an overview of our borrowings as of September 30, 2015:

 

Description of Debt   Holder     Interest Rate   Balance as of
September 30, 2015
 
Automobile loans     Various     3.59% to 10.74%   $ 60,693  
                     

On August 26, 2013, LIBB and Nortle entered into a loan (“Nortle Loan”) and option agreement (“Nortle Option Agreement”). The Nortle Loan was secured by the inventory and accounts receivable of LIBB. The Nortle Loan provided for Nortle to lend the Company an aggregate of $200,000, bearing interest at 6% per annum. The Nortle Loan and all accrued interest thereon, were due and payable on August 31, 2014. The Nortle Option Agreement provided that through October 18, 2013, Nortle had the option to loan LIBB an additional $300,000, on the same terms as the Nortle Loan (“Nortle Option”). In the event that Nortle did not exercise the Nortle Option by October 18, 2013, then on such date, the interest rate on the existing loan with Nortle would increase to 12% per annum for the remaining term. Due to the fact that the Nortle Option to advance additional funds was not exercised, the interest rate was increased to 12% per annum. On June 25, 2014, Nortle converted its loan and accrued interest of $217,951 into equity interests of LIBB. Such equity interests were converted into shares of our common stock in the Business Combination.

 

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On November 19, 2013, LIBB and Cullen entered into the Cullen Loan Agreement. Pursuant to the Cullen Loan Agreement, Cullen loaned LIBB $600,000, bearing interest at 6% per annum with principal and accrued interest due on August 31, 2014. The Cullen Loan Agreement provided Cullen with the option to loan LIBB an additional $600,000. The Cullen Loan Agreement also required that LIBB utilize $450,000 of the loan to repay certain outstanding indebtedness. On December 5, 2013, Cullen exercised its option and extended to LIBB an additional loan in the amount of $600,000 also bearing interest at 6% per annum with principal and accrued interest due on August 31, 2014. On April 1, 2014, LIBB received $300,000 as proceeds from an additional loan from Cullen, bearing interest at 6% per annum with principal and accrued interest due and payable on August 31, 2014. On August 15, 2014, the maturity date of the Cullen Loan Agreement and the additional loan was extended to November 15, 2014. On November 7, 2014, the maturity date was further extended to March 15, 2015. On March 4, 2015, the maturity date was further extended to March 15, 2016. Upon consummation of the Business Combination, these loans by Cullen were forgiven.

 

On March 26, 2015, LIBB received $250,000 as proceeds from an additional loan from Cullen, bearing interest at 6% per annum with principal and interest due and payable on March 15, 2016. This loan was eliminated when consolidating the financial statements.

 

On April 22, 2014, LIBB received $1,300,000 from the proceeds of a loan from Ivory Castle, bearing interest at 6% per annum and with a maturity of August 31, 2014. Interest was payable upon maturity of the loan. The agreement also included provisions whereby the Company agreed to enter into a good faith negotiation for the purchase of membership interests by Ivory Castle. On June 25, 2014, Ivory Castle converted its loan and accrued interest of $1,309,107 into equity interest in LIBB. Such equity interests were converted into shares of our common stock in the Business Combination.

 

On September 26, 2014, LIBB raised $194,504, net of costs of raising capital of $5,468, as a result of the sale of equity interests. Such equity interests were converted into shares of our common stock in the Business Combination.

 

From October 1, 2014 through December 5, 2014, LIBB raised an additional $702,007 as a result of the issuance of equity interests. Such equity interests were converted into shares of our common stock in the Business Combination.

 

During 2014, LIBB entered into various loan agreements for the purchase of trucks and automobiles. The total amount of borrowing for these loans was $84,795. The loans require monthly installments of principal ranging from $282 to $758 per month. Interest rates on these loans range from 3.59% to 10.74%. These loans mature at various dates through 2019.

 

On April 28, 2015, LIBB received $150,000 as proceeds from a loan from Bass Properties, LLC, which was at the time a stockholder of Cullen and member of LIBB. This note bore interest at 10% per annum and was to mature on July 31, 2016. On May 4, 2015, LIBB received $400,000 as proceeds from a loan with Ivory Castle Limited, which was at the time a member of LIBB. This note bore interest at 6% per annum and was to mature on July 31, 2016. On June 30, 2015, these loans, together with accrued interest, of $555,910 were converted into 138,979 shares of the Company’s common stock.

 

On May 27, 2015, we completed the Business Combination contemplated by the Merger Agreement. Prior to the closing of the Business Combination, we were a wholly-owned subsidiary of Cullen formed solely for the purpose of consummating the Business Combination, LIBB was a private operating company and Cullen was a public company seeking alternative strategic opportunities in all industries and regions in an effort to maximize stockholder value. Upon the closing of the Business Combination, we became the new public company and Cullen and LIBB became wholly-owned subsidiaries of ours. As a result of the consummation of the Business Combination, we gained access to the cash held by Cullen of $120,841. Under the Merger Agreement, upon consummation of the Business Combination, the holders of the LIBB membership interests received 2,633,334 shares of Company common stock, subject to adjustment based on LIBB’s and Cullen’s net working capital at the closing. On July 16, 2015, the payment of the net working capital adjustment under the Merger Agreement was waived by the parties.

 

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On June 30, 2015, we received net proceeds of $468,469 through the issuance of 117,636 shares of common stock.

 

On July 8, 2015, we received proceeds of $100,000 through the issuance of 25,000 shares of common stock.

 

On September 17, 2015 and September 30, 2015, we raised total net proceeds (including direct costs included in accrued expenses) of $366,115 through the issuance of 163,250 shares of common stock and warrants to purchase 163,250 shares of common stock as part of the Offering (as described above under “ Recent Developments—Private Placements ”). In addition, on October 23, 2015 and October 30, 2015, we received additional gross proceeds of $70,000 through the issuance of an additional 17,500 shares of common stock and warrants to purchase 17,500 shares of common stock in the Offering.

 

In order to execute our long-term growth strategy, including the expansion of the business to include alcoholic beverages, we may need to continue to raise additional funds through private equity offerings, debt financings, or other means. There are no assurances that we will be able to raise such funds on acceptable terms or at all.

 

Cash flows

 

Net cash used in operating activities

 

Net cash used in operating activities was $2,016,316 for the nine months ended September 30, 2015 as compared to net cash used in operating activities of $2,066,664 for the nine months ended September 30, 2014. Cash used in operating activities for the nine months ended September 30, 2015 was primarily the result of the net loss of $2,016,842. Cash used in operating activities for the nine months ended September 30, 2014 was primarily the result of the net loss of $2,601,911. The effect of our net losses on our cash flows were reduced by the increases in inventory and accounts receivable which were partially offset by increases in accounts payable and accrued expenses.

 

Net cash used in investing activities

 

Net cash used in investing activities was $65,036 for the nine months ended September 30, 2015 as compared to $200,834 for the nine months ended September 30, 2014. Cash used in investing activities pertained primarily to the purchase of display items, trucks, and automobiles during these periods.

 

Net cash provided by financing activities

 

Net cash provided by financing activities was $1,951,876 for the nine months ended September 30, 2015 as compared to net cash provided by financing activities of $1,818,001 for the nine months ended September 30, 2014. During the nine months ended September 30, 2015, and prior to the Business Combination, we received additional proceeds of $250,000 from a loan from Cullen. Upon the consummation of the Business Combination, we received $120,841 in cash from Cullen. In addition, LIBB received loans totaling $550,000 from two of our stockholders, Bass Properties LLC and Ivory Castle Limited. These loans, together with accrued interest, were converted into 138,979 shares of Company common stock. In addition, the Company received net proceeds of $568,468 through the issuance of 142,636 shares of common stock. In addition, the Company received net proceeds of $475,885 through the issuance of common stock and warrants during the nine months ended September 30, 2015. These proceeds were offset by repayments of the Company’s automobile loans of $13,318. During the nine months ended September 30, 2014, LIBB received $1,300,000 in loans from Ivory Castle and $300,000 in loans from Cullen which were converted into membership interests in LIBB. LIBB also raised net proceeds of $194,504 through the sale of membership interests. In addition, the Company raised $30,000 from a promissory note with its managing member which was repaid in October 2014. Lastly, cash flows from financing activities consisted of repayments of automobile loans of $6,503.

 

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Off-balance Sheet Arrangements

 

We do not have any off-balance sheet financing arrangements.

 

Contractual Obligations

 

During the nine months ended September 30, 2015, the following material changes occurred in the Company’s contractual obligations: As a result of the Business Combination, pursuant to which Cullen and LIBB became subsidiaries of the Company, LIBB’s contractual obligations related to $1,500,000 in debt from Cullen were cancelled.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosures. As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive) and Chief Accounting Officer (our principal financial officer and principal accounting officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015. Based on this evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were not effective as of September 30, 2015 due to a material weakness in our internal control over financial reporting as described below.

 

A material weakness is defined within the Public Company Accounting Oversight Board’s Auditing Standard No. 5, as 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We determined that our internal control of financial reporting had the following material weakness:

 

· Due to the small size of the Company, the Company does not maintain sufficient segregation of duties to ensure the processing, review and authorization of all transactions including non-routine transactions.

 

The Company is evaluating this weakness to determine the appropriate remedy. Because disclosure controls and procedures include those components of internal control over financial reporting that provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, management determined that its disclosure controls and procedures were not effective as a result of the foregoing material weakness in its internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II.
OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are involved in various claims and legal actions arising from time to time in the ordinary course of business. In the opinion of our management, the ultimate disposition of these matters in the ordinary course of business will not have a material adverse effect on our financial position, results of operations or cash flows.

 

In addition, we are involved in the following legal actions:

 

Revolution Marketing, LLC . On August 1, 2014, an action was filed by LIBB in the Supreme Court in the State of New York in an action entitled Long Island Brand Beverages LLC v. Revolution Marketing, LLC (“Revolution”) and Ascent Talent, Model Promotion Ltd.. LIBB is seeking damages of $10,000,000 for several claims including breach of contract and fraud occurring during 2014. Revolution has filed a counterclaim for breach of contract and related causes of action, claiming damages in the sum of $310,880, and seeking punitive damages of $5,000,000. Ascent has filed a pre-answer motion to dismiss LIBB’s complaint. LIBB filed papers in opposition and the motion was submitted by March 9, 2015. In addition, Revolution has filed a motion to amend its answer to include cross-claims against Ascent which were not asserted in its original answer of record. LIBB management and legal counsel believe it is too early to determine the probable outcome of this matter.

 

Madwell LLC . On October 3, 2014, an action was filed by Madwell LLC (“Madwell”) in the Supreme Court of New York entitled Madwell LLC v. Long Island Brand Beverages LLC, Philip Thomas, its Chief Executive Officer, and Paul Vassilakos, Cullen’s former Chief Executive Officer and a director of the Company. Madwell is seeking $940,000, which includes $440,000 for breach of contract and payment of services as well as punitive damages of $500,000. In addition, we agreed to indemnify Mr. Vassilakos for any expenses he incurred in connection with this litigation. We currently do not believe that Mr. Vassilakos’ expenses in connection with such litigation will be material. On July 31, 2015, we entered into a settlement agreement with Madwell. Pursuant to the settlement agreement, we agreed to pay Madwell $440,000 in six installments with the last installment due no later than December 31, 2015. In addition, Madwell agreed to discontinue its lawsuit and the parties agreed to mutual releases of liability related to fees for advertising, marketing and design services or any matter relating to the lawsuit. As of September 30, 2015, $290,000 was included in accounts payable in the condensed consolidated balance sheets related to this matter. During October 2015, the Company paid Madwell $50,000 towards the balance. The remaining payments are due in three equal monthly installments of $80,000 through December 31, 2015.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes from the risk factors set forth in the “ Risk Factors ” section of the Proxy Statement/Prospectus and in Item 1A of Part II of our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015, which are incorporated herein by reference. In addition to the information in this quarterly report, the risk factors disclosed in the Proxy Statement/Prospectus and in our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015 should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On October 23, 2015 and October 30, 2015, we sold an aggregate of 17,500 units in the Offering to certain accredited investors, at a price of $4.00 per unit, for aggregate gross proceeds of $70,000. We previously sold an aggregate of 138,250 units in the Offering for aggregate gross proceeds of $553,000. Accordingly, the Company received total gross proceeds of $623,000 in Offering   . The units consisted of one share of our common stock and one warrant. The units were separable immediately upon issuance and were issued separately as shares of common stock and warrants. The material terms of the Offering, including the terms of the warrants and the commissions and other compensation of the Placement Agent, are described in Item 2 of Part I of this quarterly report, and such description is incorporated herein by reference. The Offering was conducted pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D thereunder. The Offering was made solely to accredited investors without the use of any general solicitation or general advertising.

 

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ITEM 6. EXHIBITS

 

(a) Exhibits:

 

Exhibit No. Description
   
2.1 Agreement and Plan of Reorganization, dated as of December 31, 2014, by and among, Cullen Agricultural Holding Corp., Long Island Iced Tea Corp., Cullen Merger Sub, Inc., LIIT Acquisition Sub, LLC, Long Island Brand Beverages LLC, Phil Thomas and Thomas Panza (incorporated by reference to Exhibit 2.1 of Cullen Agricultural Holding Corp.’s Current Report on Form 8-K filed on January 6, 2015).
   
2.2 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of April 23, 2015, by and among, Cullen Agricultural Holding Corp., Long Island Iced Tea Corp., Cullen Merger Sub, Inc., LIIT Acquisition Sub, LLC, Long Island Brand Beverages LLC, Philip Thomas and Thomas Panza, and Philip Thomas, in his capacity as the “LIBB Representative” under the Merger Agreement on behalf of the other members of LIBB party to the Merger Agreement (incorporated by reference to Exhibit 2.1 of Cullen Agricultural Holding Corp.’s Current Report on Form 8-K filed on April 24, 2015).
   
10.1 Settlement Agreement, dated as of July 31, 2015, by and among Madwell LLC, Long Island Brand Beverages LLC, Philip Thomas and Paul Vassilakos.
   
10.2 Form of Subscription Agreement.
   
10.3 Form of Warrant.
   
31.1 Section 302 Certification by Chief Executive Officer
   
31.2 Section 302 Certification by Chief Accounting Officer
   
32 Section 906 Certification by Chief Executive Officer and Chief Accounting Officer
   
101 Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2015, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity, (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Unaudited Condensed Consolidated Financial Statements, as blocks of text and in detail.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 13, 2015

 

LONG ISLAND ICED TEA CORP.

 

 

By:   /s/ James Meehan

Name: James Meehan

Title: Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)

 

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EXHIBIT INDEX

 

Exhibit No. Description
   
2.1 Agreement and Plan of Reorganization, dated as of December 31, 2014, by and among, Cullen Agricultural Holding Corp., Long Island Iced Tea Corp., Cullen Merger Sub, Inc., LIIT Acquisition Sub, LLC, Long Island Brand Beverages LLC, Phil Thomas and Thomas Panza (incorporated by reference to Exhibit 2.1 of Cullen Agricultural Holding Corp.’s Current Report on Form 8-K filed on January 6, 2015).
   
2.2 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of April 23, 2015, by and among, Cullen Agricultural Holding Corp., Long Island Iced Tea Corp., Cullen Merger Sub, Inc., LIIT Acquisition Sub, LLC, Long Island Brand Beverages LLC, Philip Thomas and Thomas Panza, and Philip Thomas, in his capacity as the “LIBB Representative” under the Merger Agreement on behalf of the other members of LIBB party to the Merger Agreement (incorporated by reference to Exhibit 2.1 of Cullen Agricultural Holding Corp.’s Current Report on Form 8-K filed on April 24, 2015).
   
10.1 Settlement Agreement, dated as of July 31, 2015, by and among Madwell LLC, Long Island Brand Beverages LLC, Philip Thomas and Paul Vassilakos.
   
10.2 Form of Subscription Agreement.
   
10.3 Form of Warrant.
   
31.1 Section 302 Certification by Chief Executive Officer
   
31.2 Section 302 Certification by Chief Accounting Officer
   
32 Section 906 Certification by Chief Executive Officer and Chief Accounting Officer
   
101 Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2015, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity, (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Unaudited Condensed Consolidated Financial Statements, as blocks of text and in detail.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

 

   

 

 

Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (“Settlement Agreement”) is executed by and between Plaintiff Madwell LLC of 243 Boerum Street, Brooklyn, NY 11206 (“Plaintiff”), on the one hand, and on the other hand Defendants Long Island Brand Beverages LLC (“LIBB”), Philip Thomas of 16 Ash Street, Garden City, New York (“Mr. Thomas”) and Paul Vassilakos of 180 Madison Avenue Suite 1702 New York, NY (“Mr. Vassilakos,” and collectively with LIBB and Mr. Thomas, “Defendants”). Plaintiff and Defendants are collectively hereinafter referred to as the “Parties.”

 

RECITALS

 

A. WHEREAS, in 2013 and 2014, Plaintiff provided advertising, marketing and design services to LIBB and incurred expenses on behalf of LIBB for the purchase of advertising space (the “Advertising Campaign”); and

 

B. WHEREAS, Plaintiff alleges that it invoiced LIBB for a total of $676,112.15 for services rendered and expenses incurred in the course of the Advertising Campaign (the “Campaign Fees”); and

 

C. WHEREAS, LIBB has paid Plaintiff $278,114.15 of the Campaign Fees; and

 

D. WHEREAS, certain disputes arose between Plaintiff and LIBB with respect to the Advertising Campaign and amounts owed to Plaintiff by LIBB in connection therewith; and

 

E. WHEREAS, Plaintiff initiated a lawsuit against Defendants in the New York Supreme Court for the County of Kings, bearing Index Number 509081/2015 (the “Lawsuit”), to, among other things, recover the alleged unpaid portion of the Campaign Fees, plus interest; and

 

F. WHEREAS, Plaintiff alleges that it is owed $397,998, together with at least $80,000 of contractual interest accrued on the aforesaid unpaid sum; and

 

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G. WHEREAS, the Parties wish to compromise and settle all of the outstanding controversies between and among them related to the Lawsuit and Advertising Campaign, with prejudice and without costs, and enter into a mutual release, all on the terms set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which is hereby admitted and acknowledged, the Parties hereto agree as follows:

 

AGREEMENT

 

1. Incorporation of Recitals. The above Recitals are incorporated herein by reference, and form a part of this Settlement Agreement.

 

2. Settlement Payment . LIBB will pay Plaintiff the total Settlement Amount of $440,000 (the “Settlement Amount”) in accordance with the following schedule:

 

a) Initial Payment : On the same day as the execution of this Agreement by Plaintiff and LIBB (the “Execution Date”), LIBB will pay Plaintiff a lump sum of $50,000 by executing a wire transfer of $50,000 to from LIBB's attorney's trust account to Plaintiffs bank account.

 

b) Second Payment : No later than one month after the Execution Date, LIBB will pay $100,000 to Plaintiff in one lump sum by sending a check for $100,000 to Plaintiff by overnight delivery via FedEx or UPS. By way of example, if the Execution Date is July 30, 2015, then this check must be sent no later than August 30, 2015.

 

c) Third Payment : No later than two months after the Execution Date, LIBB will pay $50,000 to Plaintiff in one lump sum by sending a check for $50,000 to Plaintiff by overnight delivery via FedEx or UPS. By way of example, if the Execution Date is July 30, 2015, then this check must be sent no later than September 30, 2015.

 

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d) Fourth Payment: No later than three months after the Execution Date, LIBB will pay $80,000 to Plaintiff in one lump sum by sending a check for $80,000 to Plaintiff by overnight delivery via FedEx or UPS. By way of example, if the Execution Date is July 30, 2015, then this check must be sent no later than October 30, 2015.

 

e) Fifth Payment: No later than four months after the Execution Date, LIBB will pay $80,000 to Plaintiff in one lump sum by sending a check for $80,000 to Plaintiff by overnight delivery via FedEx or UPS. By way of example, if the Execution Date is July 30, 2015, then this check must be sent no later than November 30, 2015.

 

f) Sixth Payment: No later than five months after the Execution Date, LIBB will pay $80,000 to Plaintiff in one lump sum by sending a check for $80,000 to Plaintiff by overnight delivery via FedEx or UPS. By way of example, if the Execution Date is July 30, 2015, then this check must be sent no later than December 30, 2015.

 

3. Effective Date: This Settlement Agreement shall become effective on the day that the funds clear from the check for the Initial Payment to Plaintiff’s bank account.

 

4. Affidavit of Confession of Judgment

 

a) Simultaneously with execution of this Settlement Agreement, Mr. Thomas shall execute on behalf of LIBB and have notarized the Affidavit for Confession of Judgment attached hereto as Exhibit A (the “Affidavit”). The original Affidavit shall immediately be delivered to Plaintiff’s counsel’s office: Law Office of Matthew C. Heerde, 222 Broadway 19th Floor, New York, NY 10038

 

b) The Affidavit shall be held by Plaintiff’s attorneys under the following conditions: (A) upon full payment of the Settlement Amount, the Affidavit shall be destroyed; or (B) upon Default as provided below, such original may be filed with the Court and enforced.

 

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5. Default.

  

a) If LIBB fails to timely make any payment required by Section 2 above, LIBB may cure such failure by remitting such payment in full within fifteen (15) calendar days from the sending of notice of nonpayment to LIBB as designated hereunder. In the event that LIBB fails to timely cure their failure to pay by 5 p.m. New York time on the fifteenth such calendar day following the sending of such notice, LIBB will at that time be deemed to be in “Default”.

 

b) In the event of Default, all unpaid portions of the Settlement Amount plus stipulated interest of $50,000 (the “Unpaid Balance”), shall become immediately due, owing, and payable to Plaintiff, and Plaintiff shall be entitled to file for entry of judgment for the Unpaid Balance against LIBB in the Supreme Court of the State of New York, County of Nassau, without further notice, and shall have execution therefor, pursuant to the Affidavit and in accordance with this Agreement.

 

c) The Parties agree that the $50,000 stipulated interest described in Section 5(b) above is a fair and reasonable assessment of Plaintiff’s damages in the event that LIBB breaches its obligations under Section 2.;

 

d) Upon LIBB’s Default, LIBB shall be liable for Plaintiff’s reasonable costs and attorney fees incurred in enforcing the judgment described in the Affidavit.

 

6. Dismissal of Action . Upon the clearing of funds from the check for the Initial Payment, Plaintiff and Defendants, through their attorneys, shall execute a Stipulation of Discontinuance with Prejudice (attached hereto as Exhibit B), which Plaintiff shall promptly then file with the Court.

 

 

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7. Other Covenants and Consideration

 

a) By Plaintiff. Plaintiff, on behalf of itself and on behalf of its successors and assigns, hereby covenants and agrees that it:

 

(i) shall not take any action, including without limitation the making of disparaging statements (oral or in writing) concerning any Defendant(s), that is reasonably likely to injure, impair or damage the relationships between any Defendant and any lessor, lessee, vendor, supplier, customer, distributor, franchisee, franchisor, employer, employee, consultant, state or municipal governing body or agency, or other business associate of or person or entity having any relationship with such Defendant, as such relationship relates to such Defendant’s employment or conduct of business, except that nothing in this subsection 7(a)(i) shall prohibit Plaintiff from testifying or providing information in response to a lawful subpoena or in the course of any court action.

 

b) By Defendants. Defendants, on behalf of themselves and on behalf of their successors and assigns, hereby covenant and agree that they:

 

(i) shall not take any action, including without limitation the making of disparaging statements (oral or in writing) concerning Plaintiff, that is reasonably likely to injure, impair or damage the relationships between Plaintiff and any lessor, lessee, vendor, supplier, customer, distributor, franchisee, franchisor, employer, employee, consultant, state or municipal governing body or agency, or other business associate of or person or entity having any relationship with Plaintiff, as such relationship relates to Plaintiff’s employment or conduct of business, , except that nothing in this subsection 7(b)(i) shall prohibit Defendants from testifying or providing information in response to a lawful subpoena or in the course of any court action.

 

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8. Mutual General Releases by Parties.

 

a) Defendants’ Release . Defendants, on their own behalf and on behalf of their agents, partners, shareholders, predecessors, attorneys, creditors, heirs, executors, trustees, administrators, assigns, successors-in-interest of any kind, and all of their respective past and present officers and directors (collectively, the “Defendant Releasing Parties”), do hereby release, remise, relieve and forever discharge and shall hold harmless and indemnify (if any other person or entity files a claim by, on behalf of, or through any Defendant Releasing Party), Plaintiff, and each and all of Plaintiff’s affiliates, partners, associates, employees, former employees, independent contractors, former independent contractors, attorneys, agents, successors, assigns, personal representatives, predecessors, related organizations, heirs, executors, trustees, and administrators (collectively, the “Plaintiff Released Parties”) of and from any and all costs (including costs of suit, attorney’s fees and expenses), expenses, monies due or owing, suits, debts, obligations, claims, damages, demands, liabilities, actions and causes of action of every kind and character, known by the Defendant Releasing Parties as of the effective date hereof, whether contingent or absolute, which any Defendant Releasing Party has had or now has against any of the Plaintiff Released Parties, accruing by reason of any cause, matter or thing whatsoever from the beginning of time to the effective date hereof, including but not limited to any matter, cause or thing arising out of or related to the Lawsuit..

 

b) Plaintiff’s Release . Plaintiff, on its own behalf and on behalf of its agents, partners, shareholders, predecessors, attorneys, creditors, heirs, executors, trustees, administrators, assigns, successors-in-interest of any kind, and all of their respective past and present officers and directors (collectively, the “Plaintiff Releasing Parties”), hereby release, remise, relieve and forever discharge and shall hold harmless and indemnify (if any other person or entity files a claim by, on behalf of, or through any Plaintiff Releasing Party), Defendants, and each and all of Defendants’ affiliates, employees, former employees, independent contractors, former independent contractors, attorneys, agents, successors, assigns, personal representatives, predecessors, related organizations, heirs, executors, trustees, and administrators (collectively, the “Defendant Released Parties”) of and from any and all costs (including costs of suit, attorney’s fees and expenses), expenses, monies due or owing, suits, debts, obligations, claims, damages, demands, liabilities, actions and causes of action of every kind and character, known by the Plaintiff Releasing Parties as of the effective date hereof, whether contingent or absolute, which any Plaintiff Releasing Party has had or now has against any of the Defendant Released Parties, accruing by reason of any cause, matter or thing whatsoever from the beginning of time to the effective date hereof, including but not limited to any matter, cause or thing arising out of or related to the Lawsuit.

 

  Page 6 of 12  

 

 

c) Miscellaneous Provisions Related to the Releases.

 

(i) It is the specific intent and purpose of this instrument to be a full, final and complete, remise, release, discharge, compromise, settlement, accord and satisfaction of any and all claims or causes of action of every kind and character asserted or that could have been asserted by or among the Parties in connection with the Action.

 

(ii) Each of the Parties acknowledges that he/she/it may hereafter discover facts different from, or in addition to, those which he/she/it now believes to be true with respect to any and all of the liabilities, claims, causes of action, damages, costs or demands herein released. The Parties hereby waive any rights, claims, or causes of action that might arise as a result of such different or additional claims or facts as they exist as of the execution date of Agreement, under any theory, statute, or cause of action. The Parties acknowledge that they understand the significance and consequence of such release and such waiver of any claims.

 

  Page 7 of 12  

 

 

(iii) Each of the Parties acknowledges that he/she/it is fully informed and aware of his/her/its rights to receive independent legal advice regarding the advisability of entering into this release and has received independent legal advice from his/her/its attorney with regard to the advisability of executing this release. Each of the Parties further acknowledges that he/she/it has made an investigation of the facts pertaining to this release as he/she/it has deemed necessary, and, further, acknowledges that he/she/it has not relied upon any statement or representation of any of the other Parties.

 

(iv) Each of the Parties acknowledges and agrees that in executing this Agreement and the other documents delivered under this Agreement, he/she/it does not rely and has not relied upon any representation, warranty or statement made by any other Party or any of its agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement and any of the other documents delivered under this Agreement or otherwise.

 

(v) Notwithstanding anything in this Agreement to the contrary, no Party is released from such Party’s covenants, obligations, representations, warranties and agreements to the extent set forth in this Agreement.

 

9. Bankruptcy . LIBB represents that it has no intention of filing any form of Bankruptcy Petition with any court. In the unlikely event that any such petition is filed prior to the effective and complete payment of the entire Settlement Amount, LIBB agrees that Plaintiff may dispute any alleged dischargability of the remaining settlement payments due.

 

10. Waiver. No provision hereof may be waived unless in writing and signed by the Party whose rights are thereby waived. Waiver of any one provision herein shall not be deemed to be a waiver of any other provision herein (whether similar or not), nor shall such waiver constitute a continuing waiver unless otherwise expressly so provided

 

  Page 8 of 12  

 

 

11. Successors, Assigns, Transferees. This Settlement Agreement shall be binding upon and inure to the benefit of, all Parties and, as applicable, each Party’s officers, directors, shareholders, affiliates, parent companies, subsidiaries, related entities, employees, representatives, legal representatives, acquirers, partners, principals, attorneys, agents, predecessors, heirs, successors, assignees, and transferees of the Parties.

 

12. Review and Investigation. Defendants acknowledge and agree that they have carefully read and reviewed this Settlement Agreement and its Exhibits and understand them fully, and Defendants specifically do not rely upon any statement, representation, legal opinion, accounting opinion or promise of Plaintiff or any person representing such other Party, in executing this Settlement Agreement or in making the settlement provided for herein, except as expressly stated in this Settlement Agreement. Each party has made such an investigation of the law and facts pertaining to this Settlement Agreement and of all matters pertaining thereto as it deems necessary. This Settlement Agreement has been carefully read by, and the contents hereof are known and understood by the Parties, and it is signed freely by each party executing this Settlement Agreement.

 

13. Non-Admission of Liability.    Neither this Agreement nor anything contained herein shall constitute or is to be construed as an admission by any of the Parties as evidence of any liability, wrongdoing or unlawful conduct.

 

14. Availability of Counsel. The Parties each acknowledge and agree that they have had a reasonable opportunity to consult with legal counsel before executing this Agreement.

 

  Page 9 of 12  

 

 

15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdictions other than the State of New York.

 

16. Venue. Any dispute regarding the interpretation or obligations under this Settlement Agreement shall be adjudicated in the Supreme Court of New York, Kings County. All Parties hereby agree and consent that they are subject to the Jurisdiction of New York Courts for the purpose of any dispute regarding this Settlement Agreement.

 

17. Attorneys Fees. In the event of any court action to enforce this Settlement Agreement or regarding the interpretation of this Settlement Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys fees.

 

18. Entire Agreement. This Agreement constitutes a single integrated written agreement expressing the entire agreement and understanding between the Parties concerning the subject matter hereof and supersedes and replaces all prior negotiations or proposed agreements, whether written or oral. All prior and contemporaneous negotiations and agreements are deemed incorporated and merged into this Agreement and are deemed to have been abandoned if not so incorporated. No modification or amendment of this Agreement or any waiver of any right granted hereunder shall be of any force or effect unless reduced to writing and signed by the Party claimed to be bound thereby. This Agreement is intended to be, and is, final and binding upon the Parties hereto according to the terms hereof regardless of any claims of mistake of fact or law.

 

 

  Page 10 of 12  

 

 

 

19. Notices. All notices permitted under this Agreement shall be sent:

 

For LIBB: Long Island Brand Beverages
  Attn: Phil Thomas
  116 Charlotte Avenue
  Hicksville, NY 11801
   
   
With Copies to: Eric Sharp, Esq.
  Via email: esharp@galganolaw.com
   
   
For Plaintiff: Madwell LLC
  Attn: David Eisenman
  243 Boerum Street
  Brooklyn, New York 11206
   
With Copies to: Matthew C. Heerde, Esq.
  Via email: mheerde@heerdelaw.com

  

or such other addresses which the Parties may designate in writing from time to time.

 

20. Authority to Execute. Each party hereto hereby represents and warrants to the other party that (a) the person signing on its behalf below has the capacity and authority to execute and deliver this Settlement Agreement, and (b) no consent or approval of any other person or entity is required to authorize it to enter into this Settlement Agreement and to perform its obligations hereunder.

 

21. Counterparts. This Agreement may be signed in counterpart copies, each of which shall constitute an original, with the same force and effect as if each of the Parties hereto has signed a single instrument.

 

  Page 11 of 12  

 

 

 

22. Facsimile and Electronic Signatures. Facsimile or electronic copies of signatures of the Parties hereto shall have the same force and effect as original ink signatures.

 

23. Costs. Except for the payments referenced herein, each Party shall bear its own attorneys' fees and costs, and shall not seek to recover such fees and costs from any other Party.

 

IN WITNESS THEREOF, the undersigned Parties have executed this Agreement.

 

 

/s/ Philip Thomas   July 31, 2015  
Long Island Brand Beverages LLC   Date  
By: Philip Thomas, Managing Member      
       
       
/s/ David Eisenman   July 30, 2015  
Madwell LLC   Date  
By: David Eisenman, CEO      
       
/s/ Philip Thomas   July 31, 2015  
Philip Thomas, Individually   Date  
       
/s/ Paul Vassilakos   July 31, 2015  
Paul Vassilakos, Individually   Date  

 

 

  Page 12 of 12  

 

 

Exhibit 10.2

 

 

 

 

 

LONG ISLAND ICED TEA CORP.

 

 

 

Subscription Agreement

 

 

 

 

 

 

INSTRUCTIONS

 

 

IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING. SIGNIFICANT OBLIGATIONS AND REPRESENTATIONS ARE CONTAINED IN THIS DOCUMENT .

 

 

Steps For All Investors

 

1. Fill in your name and amount of investment on Page 3.

 

 

Additional Steps for Individual Investors

 

1. Complete the requested information on Page 8.
2. Sign Page 10.

 

 

Additional Steps for Entity Investors

 

1. Complete the requested information on Page 9.
2. Sign Page 10.
3. If applicable, complete the information on Pages 11 and please sign as indicated thereon.

 

 

PLEASE DELIVER TWO EXECUTED COPIES OF THE SUBSCRIPTION AGREEMENT TO:

 

Long Island Iced Tea Corp.

116 Charlotte Avenue

Hicksville, NY 11801

 

THE SUBSCRIPTION PAYMENT MUST BE WIRED AS FOLLOWS:

 

Wire your funds to the following account, maintained by Long Island Iced Tea Corp.:

 

Bank Info: _______________

Bank Address: _______________

Routing No.: _______________

Account Name: _______________

Account No.: _______________

 

When you wire your funds, please notify _______________ at _______________.

 

Any questions you may have concerning these documents or the payment of your subscription amount should be directed to _______________ at _______________.

 

 

 

 

Print Name of Investor: _________________________

 

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (“Subscription Agreement”) is being used by Long Island Iced Tea Corp., a Delaware corporation (the “Company”), for a private placement (the “Offering”) of units (each a “Unit,” and together the “Units”) at a price of $4.00 per Unit on the terms contained in this Subscription Agreement. Each Unit consists of one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and a three-year warrant to purchase one share of Common Stock at an exercise price of $6.00 per share, subject to adjustment as described therein (each a “Warrant,” and together the “Warrants”).

 

The above-named Investor hereby agrees as follows:

1. Subscription for Securities. Investor hereby subscribes for and agrees to purchase $_________ of Units of the Company at a purchase price of $4.00 per Unit, subject to the terms and conditions set forth in this Subscription Agreement. The Common Stock and Warrants comprising the Units will be issued separately. The Warrants issuable to Investor will be issued as a single warrant to purchase the applicable number of shares of Common Stock on substantially the terms and in substantially the form of Exhibit A.

 

2. Offering and Offering Period . The Units are being offered in a private placement in accordance with the terms set forth in this Subscription Agreement. The Company intends to offer up to 750,000 Units (or an aggregate of $3 million of Units). The Company’s officers, directors and affiliates shall be entitled to purchase Units in the Offering on the same terms as other Investors.

 

3. Investor Delivery of Documents and Payment . Investor has tendered to the Company two (2) completed and manually executed copies of this Subscription Agreement. Simultaneously with submitting this Subscription Agreement, the Investor is wiring the subscription amount in accordance with the directions on the cover sheet (or delivering evidence of any outstanding loans or advances being converted in this Offering).

 

4. Acceptance or Rejection of Subscription; Return of Unapplied Funds . The Company has the right to reject this subscription, in whole or in part, for any reason and at any time prior to a Closing (defined below). In the event of the rejection of this subscription, my subscription payment will be promptly returned to me without interest or deduction and this Subscription Agreement shall have no force or effect. The Units subscribed for herein will not be deemed issued to or owned by the Investor until one copy of this Subscription Agreement has been executed by the Investor and countersigned by the Company and the Closing (defined below) with respect to the Investor’s subscription has occurred.

 

5. Closing and Delivery of Securities . The Offering is being made on a “no minimum, no maximum, best efforts” basis. The closing (“Closing”) on an Investor’s investment may occur at any time, as determined by the Company, together with, or separate from, investments by other Investors. The Company may accept this Subscription Agreement and have a Closing for all or any portion of the Units subscribed for by executing a copy hereof as provided and notifying Investor of such acceptance.

 

6. Offering to Accredited Investors . The Offering is limited to “accredited investors” as defined in Section 2(15) of the Securities Act of 1933, as amended (“Securities Act”), and Rule 501(a) promulgated thereunder, and is being made without registration under the Securities Act in reliance upon the exemptions contained in Section 4(a)(2) of the Securities Act and applicable state securities laws; it being understood that for purposes of the qualifying under the $1,000,000 net worth test:

 

· The Investor’s primary residence shall not be included as an asset;
· Indebtedness that is secured by the Investor’s primary residence, up to the estimated fair market value of the primary residence as of the date of this Agreement, shall not be included as a liability (except that if the amount of such indebtedness outstanding as of such date exceeds the amount outstanding 60 days before such date, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and
· Indebtedness that is secured by the Investor’s primary residence in excess of the estimated fair market value of the primary residence shall be included as a liability.

 

  1  

 

 

7. Investor Representations and Warranties .

 

7.1. No Right to Terminate . Investor is aware that Investor is not entitled to cancel, terminate or revoke this subscription, and any agreements made in connection herewith will survive an individual Investor’s death or disability. In order to induce the Company to issue and sell Units to Investor, Investor represents and warrants that the information relating to Investor stated herein is true and complete as of the date hereof and will be true and complete as of the date or dates on which Investor’s purchase of Units becomes effective. If, prior to the final consummation of the offer and sale of the Units, there should be any change in such information or any of such information becomes incorrect or incomplete, Investor agrees to notify the Company and supply the Company promptly with corrective information.

 

7.2. Information About the Company and the Units .

 

(a) The Company has made available to Investor a copy of the Company’s Final Prospectus, dated May 1, 2015, the Company’s Current Report on Form 8-K dated May 27, 2015, the Company’s Current Report on Form 8-K dated June 17, 2015, the Company’s Current Report on Form 8-K dated July 2, 2015 and the Company’s Current Report on Form 8-K dated July 27, 2015, as well as the other filings made by the Company pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as of the execution date of this Subscription Agreement (together the “Disclosure Documents”). Investor has read the Disclosure Documents, including the “Risk Factors” set forth in the Final Prospectus, together with this Subscription Agreement, and fully understands the information set forth therein and herein.

 

(b) Investor has been given access to full and complete information regarding the Company as Investor has requested and has utilized such access to Investor’s satisfaction for the purpose of verifying the information included herein and therein, and Investor has either met with or been given reasonable opportunity to meet with the individuals who will become the officers of the Company for the purpose of asking reasonable questions of such officers concerning the terms and conditions of the Offering and the business of the Company and all such questions have been answered to Investor’s full satisfaction. Investor has also been given an opportunity to obtain any additional relevant information to the extent reasonably available to the Company. After reading of such information and materials, Investor understands that there is no assurance as to the future performance of the Units.

 

(c) Investor has received no representation or warranty from the Company or any of its officers, directors, equity holders, employees or agents in respect of Investor’s investment in the Units. Investor is not participating in the Offering as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the Internet or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

 

7.3. Speculative Investment . Investor is aware that the Units are a speculative investment that involve a high degree of risk and Investor may suffer the total loss of its investment. Investor has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Units and have obtained, in Investor’s judgment, sufficient information to evaluate the merits and risks of an investment in the Units. Investor has not utilized any person as its purchaser representative (as defined in Regulation D) in connection with evaluating such merits and risks and has relied solely upon its own investigation in making a decision to invest in the Units. Investor has been urged to seek independent advice from its professional advisors relating to the suitability of an investment in the Units in view of its overall financial needs and with respect to the legal and tax implications of such investment. Investor believes that the investment in the Units is suitable for it based upon its investment objectives and financial needs, and Investor has adequate means for providing for its current financial needs and contingencies and has no need for liquidity with respect to its investment in the Units. The investment in the Units does not constitute a significant portion of Investor’s investment portfolio.

 

  2  

 

 

7.4. Restrictions on Transfer . Investor understands that (i) the Units have not been registered under the Securities Act or the securities laws of certain states in reliance on specific exemptions from registration and (ii) the Units cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states, or an exemption from such registration is available. Each certificate representing the Units will bear a restrictive legend relating to such restrictions. In addition, Investor understands that (x) no securities administrator of any state or the federal government has recommended or endorsed the Offering or made any finding or determination relating to the fairness of an investment in the Units and (y) the Company is relying on Investor’s representations and agreements for the purpose of determining whether this transaction meets the requirements of the exemptions afforded by the Securities Act and certain state securities laws. Investor understands that the Company is under no obligation to register the Units or to assist Investor in complying with any exemption from such registration under the Securities Act or any state securities laws

 

7.5. Investment Representation . Investor is purchasing the Units for its own account for investment and not with a view to, or for sale in connection with, any subsequent distribution of the securities, nor with any present intention of selling or otherwise disposing of all or any part of the Units in violation of the Federal securities laws.

 

7.6. Entity Authority . If Investor is a corporation, partnership, company, trust, employee benefit plan, individual retirement account, Keogh plan or other tax-exempt entity, it is authorized and qualified to become an investor in the Units and the person signing this Subscription Agreement on behalf of such entity has been duly authorized by such entity to do so.

 

7.7. No Offer Until Determination of Suitability . Investor acknowledges that any delivery to Investor of the documents relating to the Offering prior to the determination by the Company of Investor’s suitability will not constitute an offer of the Units until such determination of suitability is made.

 

7.8. For Florida Residents . The Units have not been registered under the Securities Act of 1933, as amended (“1933 Act”), or the Florida Securities and Investor Protection Act (“Florida Securities Act”), by reason of specific exemptions thereunder relating to the limited availability of the Offering. The Units cannot be sold, transferred or otherwise disposed of to any person or entity unless subsequently registered under the 1933 Act or the Florida Securities Act, if such registration is required. Pursuant to Section 517.061(11) of the Florida Securities Act, when sales are made to five (5) or more persons in Florida, any sale made pursuant to Subsection 517.061(11) of the Florida Securities Act will be voidable by such Florida purchaser either within three (3) days after the first tender of consideration is made by the purchaser to the issuer, an agent of the issuer, or an escrow agent, or within three (3) days after the availability of the privilege is communicated to such purchaser, whichever occurs later. In addition, as required by Section 517.061(11)(a)(3) of the Florida Securities Act and by Rule 69W-500.005(5)(a) thereunder, if Investor is a Florida resident Investor may have, at the offices of the Company, at any reasonable hour, after reasonable notice, access to the materials set forth in such Rule that the Company can obtain without unreasonable effort or expense.

 

 

  3  

 

 

8. Registration Rights . If the Company proposes to register any of its Common Stock, including the Registrable Securities (as defined below) (other than in connection with registrations on Form S-4 or S-8 (or similar forms) promulgated by the SEC and any successor or similar forms), and the registration form to be used may be used for the registration of the Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice to the Holders of the Registrable Securities and the holders of the Warrants exercisable for Registrable Securities (in any event within three Business Days after the filing of the registration statement relating to the Piggyback Registration), and, shall include in such Piggyback Registration (and in all related registrations or qualifications under blue sky laws and in any related underwritten offering) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 10 days after delivery of the Company’s notice, subject to the applicable rules and regulations of the U.S. Securities and Exchange Commission and to the Investor becoming party to any underwriting agreement, and agreeing to the terms of any lock-up restrictions imposed by the underwriters, in connection with any related underwritten offering. “Registrable Securities” means the shares of Common Stock issued as part of the Units and the shares of Common Stock issuable upon exercise of the Warrants.

 

9. Indemnification . Investor hereby agrees to indemnify and hold harmless the Company, its officers, directors, shareholders, employees, agents and attorneys against any and all losses, claims, demands, liabilities, and expenses (including reasonable legal or other expenses incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person or whether incurred by the indemnified party in any action or proceeding between the indemnitor and indemnified party or between the indemnified party and any third party) to which any such indemnified party may become subject, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by Investor and contained herein or (b) arise out of or are based upon any breach by Investor of any representation, warranty or agreement made by Investor contained herein

 

10. Severability; Remedies . In the event any part or parts of this Subscription Agreement are found to be void, the remaining provisions of this Subscription Agreement are nevertheless binding with the same effect as though the void part or parts were deleted.

 

11. Governing Law . This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.

 

12. Counterparts . This Subscription Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. The execution of this Subscription Agreement may be by actual or facsimile signature.

 

13. Benefit . Except as otherwise set forth herein, this Subscription Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, executors, personal representatives, successors and assigns.

 

14. Notices . All notices, offers, acceptance and any other acts under this Subscription Agreement (except payment) must be in writing, and is sufficiently given if delivered to the addressees in person, by overnight courier service, facsimile, electronic transmission (including via email) or, if mailed, postage prepaid, by certified mail (return receipt requested), and will be effective three days after being placed in the mail if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier or confirmed telecopy or other electronic transmission (including via email), in each case addressed to a party. All communications to Investor should be sent to Investor’s address on the signature page hereto. All communications to the Company should be sent to:

 

 

LONG ISLAND ICED TEA CORP.
116 Charlotte Avenue
Hicksville, NY 11801
Attention: Philip Thomas
Telephone: (917) 686-1298
Facsimile:
Email: pthomas@longislandteas.com

  4  

 

 

 

15. Oral Evidence . This Subscription Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. This Subscription Agreement may not be changed, waived, discharged, or terminated orally, but rather, only by a statement in writing signed by the party or parties against which enforcement or the change, waiver, discharge or termination is sought.

 

16. Paragraph Headings . Paragraph headings herein have been inserted for reference only and will not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Subscription Agreement.

 

17. Survival of Representations, Warranties and Agreements . The representations, warranties and agreements contained herein will survive the delivery of, and the payment for, the Units.

 

 

[QUESTIONNAIRES AND SIGNATURE PAGES FOLLOW]

 

  5  

 

 

INDIVIDUAL and JOINT INVESTORS – Complete All Information

Additional information may be requested

 

 

Investor’s Name:    

 

Date of Birth:     SSN/Tax ID:    

 

Co-Investor Name:    

 

Date of Birth:     SSN/Tax ID:    

 

Home Street Address:    

 

City:       State:     Zip Code:

 

Mailing Street Address:    

 

City:       State:     Zip Code:

 

Work Phone:       Home Phone:    

 

E-Mail Address:    

 

Do you believe you have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the Units?

 

¨ Yes ¨ No

 

  6  

 

 

ENTITY INFORMATION – Complete All Information

 

Entity Name:    

 

Tax ID:     State of Formation:    

 

Company Street Address:    

 

City:       State:     Zip Code:  

 

Primary Contact:       Title:    
             
Telephone Number:       Fax Number:    

 

Email Address:    

 

Do you believe you have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the Units?

 

¨ Yes ¨ No

 

Have you participated in other private placements? ¨ Yes ¨ No

 

Are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe? ¨ Yes ¨ No

 

Investment Objectives (Please select one): ¨ Speculation ¨ Growth ¨ Income ¨ Capital Preservation

 

Investor’s Information: Employer:    

 

Title:     Type of Business:    

 

Employer’s Address:    

 

Income: Expected 2015:       Actual 2014:       Actual 2013:  

 

Net Worth:     Total Value of Investments:    

  

Co-Investor’s Information: Employer:    

 

Title:     Type of Business:    

 

Employer’s Address:    

 

Income: Expected 2015:       Actual 2014:       Actual 2013:  

 

Net Worth:     Total Value of Investments:    

  

  7  

 

 

ALL MUST COMPLETE

 

 

Accredited Investor Status * :

 

Please check one or more of the following definitions of “accredited investor,” if any, which applies to you. If none of the following applies to you, you may not qualify to take parting this offering.

 

¨ A Bank as defined in Section 3(a)(2) of the Act, or any savings association or institution as defined in Section 3(a)(5)(A) of the Securities Act of 1933, as amended (the “Act”).
   
¨ Any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
   
¨ An insurance company as defined in Section 2(13) of the Act.
   
¨ Investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”) or a business development company as defined in Section 2(a)(48) of the Investment Company Act.
   
¨ Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended.
   
¨ Plan established and maintained by a state, or its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000.
   
¨ Any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, if the investment decision is made by a plan fiduciary, as defined in the Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the plan has assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are Accredited Investors.
   
¨ A Private Business Development Company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.
   
¨ An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation or Partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
   
¨ A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of purchase exceeds $1,000,000.  For purposes hereof net worth shall be deemed to include ALL of your assets, liquid or illiquid (including such items as home, furnishings, automobile and restricted securities) MINUS any liabilities (including such items as home mortgages and other debts and liabilities).

 

___________________________

* As defined in Rule 501(a) of Regulation D of the Securities Act.

 

 

 

 

 

¨

A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

 

For purposes hereof the term “income” is not limited to “adjusted gross income” as that term is defined for federal income tax purposes, but rather includes certain items of income which are deducted in computing “adjusted gross income.” For investors who are salaried employees, the gross salary of such investor, minus any significant expenses personally incurred by such investor in connection with earning the salary, plus any income from any other source including unearned income, is a fair measure of “income” for purposes hereof. For investors who are self-employed, “income” is generally construed to mean total revenues received during the calendar year minus significant expenses incurred in connection with earning such revenues.

 

¨ A trust, with assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2) (ii) of Regulation D of the Act.
   
¨ Any entity in which all of the equity owners are Accredited Investors.
   
¨ A director or officer of the Company.

 

 

 

 

  SIGNATURE PAGE

 

 

I/We am(are) affirming that all the information contained herein is true and correct to the best of my/our knowledge and belief, including the attached schedule. If I am signing on behalf of an entity or trust I represent I have the authority to make investment decisions for the entity. I also understand that a background/credit check maybe conducted for the purposes of detecting and deterring money laundering.

 

 

 

     
Signature   Date
     
     
     
Print Name    
     
     
     
Title (if applicable)    
     
     
     
Signature   Date
     
     
     
Print Name    
     
     
     
Title (if applicable)    

 

 

The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms.

 

LONG ISLAND ICED TEA CORP.

 

 

     
Name   Title:
     
     
Date    

 

 

 

 

 

Additional Information

 

 

Trusts (Complete for all Trustees and Person who have Contributed Assets):

 

 

_________________________

Name

 

Please check the appropriate box:

 

¨ Trustee ¨ Contributed Assets

 

_________________________

Name

 

Please check the appropriate box:

 

¨ Trustee ¨ Contributed Assets

 

 

 

 

 

_________________________

Name

 

Please check the appropriate box:

 

¨ Trustee ¨ Contributed Assets

 

 

 

 

Exhibit 10.3 

 

EXHIBIT A

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

Long Island Iced Tea Corp.

 

Warrant Shares: _______ Initial Exercise Date: _______, 2015

Issue Date: _______, 2015

 

THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, _____________ or its assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after September 17, 2015 (the “ Initial Exercise Date ”) and on or prior to the close of business on the three year anniversary of the Initial Exercise Date (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from Long Island Iced Tea Corp., a Delaware corporation (the “ Company ”), up to ______ shares (as subject to adjustment hereunder, the “ Warrant Shares ”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1 . Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Subscription Agreement (the “ Subscription Agreement ”), between the Company and the original Holder of this Warrant, pursuant to which the original Holder acquired this Warrant.

 

Section 2 . Exercise .

 

  1  

 

 

a) Exercise of Warrant . Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. If payment of the aggregate Exercise Price is not received within such three (3) Trading Day period, such exercise shall be deemed void and of no effect. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price . The exercise price per share of the Common Stock under this Warrant shall be $6.00, subject to adjustment hereunder (the “ Exercise Price ”).

 

 

c) Mechanics of Exercise .

 

i. Delivery of Warrant Shares Upon Exercise . Warrant Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised and payment to the Company of the aggregate Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance of such shares, has been made.

 

  2  

 

 

ii. Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights . If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.

 

No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

v. Charges, Taxes and Expenses . Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

  3  

 

 

vi. Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

Section 3 . Certain Adjustments .

 

a) Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Fundamental Transaction . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, or (iii) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(b) pursuant to written agreements and shall deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.

 

 

  4  

 

 

c) Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

d) Notice to Holder .

 

i. Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

  5  

 

 

Section 4. Redemption.

 

a) Redemption . Subject to Section 4 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Company, upon the notice referred to in Section 4(b), at the price of $0.01 per Warrant (“ Redemption Price ”), provided that, (i) the Common Stock is listed on The NASDAQ Stock Market or another national exchange, and the last sale price of the Common Stock on the first day of trading on such exchange is at least $7.50; or (ii) the last sales price of the Common Stock has been at least $10.00 per share (subject to adjustment in accordance with Section 3 hereof), on each of thirty consecutive (30) trading days (“ 30-Day Trading Period ”) ending on the third business day prior to the date on which notice of redemption is given.

 

b) Date Fixed for, and Notice of, Redemption . In the event the Company shall elect to redeem all of the Warrants, the Company shall fix a date for the redemption (the “ Redemption Date ”). Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the Redemption Date to the registered holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

 

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c) Exercise After Notice of Redemption . The Warrants may be exercised, for cash at any time after notice of redemption shall have been given by the Company pursuant to Section 4(b) hereof and prior to the Redemption Date. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

 

Section 5 . Transfer of Warrant .

 

a) Transferability . Subject to compliance with any applicable securities laws and the conditions set forth in Section 5(d) hereof and to the provisions of Section 7.4 of the Subscription Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

  7  

 

 

c) Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Transfer Restrictions . If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 7.4 of the Subscription Agreement.

 

e) Representation by the Holder . The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 6 . Miscellaneous .

 

a) No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2, except as expressly set forth in Section 3.

 

b) Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

 

  8  

 

 

c) Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares .

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

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e) Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Subscription Agreement.

 

f) Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

 

i) Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

  10  

 

 

l) Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

********************

 

 

(Signature Page Follows)

 

  11  

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

  Long Island Iced Tea Corp.
   
  By:
    Name:
    Title:  

 

 

  12  

 

 

 

NOTICE OF EXERCISE

 

To: Long Island Iced Tea Corp.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall be in lawful money of the United States.

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor . The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:    

 

Signature of Authorized Signatory of Investing Entity:    

 

Name of Authorized Signatory:    

 

Title of Authorized Signatory:    

 

Date:    

  

 

 

 

ASSIGNMENT FORM

 

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:
  (Please Print)
   
Address:
  (Please Print)
Dated: _______________ __, ______  
   
Holder’s Signature: ________________  
   
Holder’s Address: ________________  

 

 

 

 

 

Exhibit 31.1

CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Philip Thomas, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Long Island Iced Tea Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of unaudited condensed consolidated interim financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2015

  /s/ Philip Thomas
  Name: Philip Thomas
  Title: Chief Executive Officer (Principal Executive Officer)

 

 

 

 

 

Exhibit 31.2

CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, James Meehan, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Long Island Iced Tea Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of unaudited condensed consolidated interim financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2015

  /s/ James Meehan
  Name: James Meehan
  Title: Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

Exhibit 32

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Long Island Iced Tea Corp. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Dated: November 13, 2015

  /s/ Philip Thomas
  Name: Philip Thomas
  Title: Chief Executive Officer (Principal Executive Officer)

 

Dated: November 13, 2015

  /s/ James Meehan
  Name: James Meehan
  Title: Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)