0001580262false--03-31Q320240.0012549806425498064254980640.0011000000050000005000000500000014154P1Y0420000015802622023-04-012023-12-310001580262us-gaap:SubsequentEventMembersrt:BoardOfDirectorsChairmanMember2024-01-200001580262us-gaap:SubsequentEventMembersrt:BoardOfDirectorsChairmanMember2023-12-292024-01-010001580262us-gaap:SubsequentEventMembersrt:ChiefExecutiveOfficerMember2023-12-292024-01-0100015802622022-08-310001580262rton:AggregateMember2022-04-012023-03-310001580262us-gaap:ConvertibleDebtMember2022-04-012023-03-310001580262rton:PreferredsStocksMember2022-04-012023-03-310001580262rton:AggregateMember2023-04-012023-12-310001580262us-gaap:ConvertibleDebtMember2023-04-012023-12-310001580262rton:PreferredsStocksMember2023-04-012023-12-310001580262rton:AgreementTwentyTwoJuneTwoThousandTwentyThreeMember2023-04-012023-12-310001580262rton:NoteholderTenMember2023-04-012023-12-310001580262rton:AgreementTwentyTwoJuneTwoThousandTwentyThreeMember2023-06-012023-06-220001580262rton:AgreementElevenAugustTwoThousandTwentyTwoMember2022-08-012022-08-110001580262rton:AgreementTwentyOneJulyTwoThousandTwentyTwoMember2022-07-012022-07-210001580262rton:AgreementFourAugustTwoThousandTwentyTwoMember2022-08-012022-08-040001580262rton:NoteholderTenMember2023-05-152023-07-150001580262rton:NoteholderTenMember2022-11-152023-04-150001580262rton:NoteholderTenMember2022-05-152022-10-150001580262rton:NoteholderTenMember2022-04-180001580262rton:NoteholderTenMember2022-04-150001580262us-gaap:IndividualMemberrton:PromissoryNoteMember2019-11-220001580262us-gaap:IndividualMemberrton:PromissoryNoteMember2019-11-012019-11-220001580262rton:AmenmentAgreementConvertibleDebtMemberrton:NoteholderEightMember2023-04-012023-12-310001580262rton:TwoThousandTwentyFourMember2023-12-310001580262rton:NoteholderSeventeenMember2023-03-310001580262rton:NoteholderThirteenMember2023-03-310001580262rton:NoteholderNineMember2023-03-310001580262rton:NoteholderSeventeenMember2023-12-310001580262rton:NoteholderThirteenMember2023-12-310001580262rton:NoteholderNineMember2023-12-310001580262rton:NoteholderSixteenMember2023-12-310001580262rton:NoteholderEightMember2023-12-310001580262rton:NoteholderSeventeenMember2022-04-012023-03-310001580262rton:NoteholderThirteenMember2022-04-012023-03-310001580262rton:NoteholderNineMember2022-04-012023-03-310001580262rton:NoteholderSeventeenMember2023-04-012023-12-310001580262rton:NoteholderThirteenMember2023-04-012023-12-310001580262rton:NoteholderNineMember2023-04-012023-12-3100015802622022-04-012023-03-310001580262rton:NoteholderSixteenMember2023-04-012023-12-310001580262rton:NoteholderEightMember2023-04-012023-12-310001580262rton:IntangibleAssetsMember2023-03-310001580262rton:IntangibleAssetsMember2023-12-310001580262rton:TenantImprovementsMember2023-03-310001580262rton:TenantImprovementsMember2023-12-310001580262rton:StudioAndOfficeEquipmentMember2023-03-310001580262rton:StudioAndOfficeEquipmentMember2023-12-310001580262rton:AutomobileMember2023-03-310001580262rton:AutomobileMember2023-12-310001580262rton:WebsiteDevelopmentMember2023-03-310001580262rton:WebsiteDevelopmentMember2023-12-310001580262rton:DerivativeLiabilityConvertibleNoteMember2023-12-310001580262srt:MaximumMemberrton:DerivativeLiabilityConvertibleNoteMember2023-04-012023-12-310001580262srt:MinimumMemberrton:DerivativeLiabilityConvertibleNoteMember2023-04-012023-12-310001580262srt:MaximumMemberrton:DerivativeLiabilityConvertibleNoteMember2023-12-310001580262srt:MinimumMemberrton:DerivativeLiabilityConvertibleNoteMember2023-12-310001580262rton:DerivativeLiabilityConvertibleNoteMember2023-04-012023-12-310001580262rton:RetailRevenueNetMember2023-04-012023-12-310001580262rton:WholesaleRevenueNetMember2023-04-012023-12-310001580262us-gaap:FairValueInputsLevel3Member2022-04-012022-12-310001580262us-gaap:FairValueInputsLevel3Member2022-03-310001580262us-gaap:FairValueInputsLevel3Member2022-12-310001580262us-gaap:FairValueInputsLevel3Member2023-12-310001580262us-gaap:FairValueInputsLevel3Member2023-04-012023-12-310001580262us-gaap:FairValueInputsLevel3Member2023-03-310001580262rton:EndoAndCentreVentureLLCMember2023-03-310001580262rton:CentreLLCMember2023-12-310001580262rton:EndoAndCentreVentureLLCMember2023-12-310001580262us-gaap:RetainedEarningsMember2023-12-310001580262rton:CommonStockPayableMember2023-12-310001580262us-gaap:AdditionalPaidInCapitalMember2023-12-310001580262us-gaap:CommonStockMember2023-12-310001580262us-gaap:PreferredStockMember2023-12-310001580262us-gaap:RetainedEarningsMember2023-04-012023-12-310001580262rton:CommonStockPayableMember2023-04-012023-12-310001580262us-gaap:AdditionalPaidInCapitalMember2023-04-012023-12-310001580262us-gaap:CommonStockMember2023-04-012023-12-310001580262us-gaap:PreferredStockMember2023-04-012023-12-310001580262us-gaap:RetainedEarningsMember2023-03-310001580262rton:CommonStockPayableMember2023-03-310001580262us-gaap:AdditionalPaidInCapitalMember2023-03-310001580262us-gaap:CommonStockMember2023-03-310001580262us-gaap:PreferredStockMember2023-03-3100015802622022-12-310001580262us-gaap:RetainedEarningsMember2022-12-310001580262rton:CommonStockPayableMember2022-12-310001580262us-gaap:AdditionalPaidInCapitalMember2022-12-310001580262us-gaap:CommonStockMember2022-12-310001580262us-gaap:PreferredStockMember2022-12-310001580262us-gaap:RetainedEarningsMember2022-04-012022-12-310001580262rton:CommonStockPayableMember2022-04-012022-12-310001580262us-gaap:AdditionalPaidInCapitalMember2022-04-012022-12-310001580262us-gaap:CommonStockMember2022-04-012022-12-310001580262us-gaap:PreferredStockMember2022-04-012022-12-3100015802622022-03-310001580262us-gaap:RetainedEarningsMember2022-03-310001580262rton:CommonStockPayableMember2022-03-310001580262us-gaap:AdditionalPaidInCapitalMember2022-03-310001580262us-gaap:CommonStockMember2022-03-310001580262us-gaap:PreferredStockMember2022-03-3100015802622022-04-012022-12-3100015802622022-10-012022-12-3100015802622023-10-012023-12-3100015802622023-03-3100015802622023-12-3100015802622024-04-12iso4217:USDxbrli:sharesiso4217:USDxbrli:sharesxbrli:pure

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2023

☐	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 000-55704

Right On Brands, Inc.

(Exact name of registrant as specified in its charter)

Nevada		45-1994478
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

6501 Dalrock Road, Suite 100, Rowlett, TX 75089

(Address of principal executive offices)

(214) 736-7252

(Registrant’s telephone number)

N/A

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). ☒ Yes ☐ No

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

☐	Large accelerated filer	☐	Accelerated filer
☒	Non-accelerated filer	☒	Smaller reporting company
		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 12, 2024, there were 31,498,064 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4:	Controls and Procedures	8

PART II - OTHER INFORMATION

Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3:	Defaults Upon Senior Securities	9
Item 4:	Mine Safety Disclosures	9
Item 5:	Other Information	9
Item 6:	Exhibits	10

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 (unaudited);		F-1
Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2023 and 2022 (unaudited);		F-2
Condensed Consolidated Statements of Stockholders’ Deficit for the nine months ended December 31, 2023 and 2022 (unaudited);		F-3
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2023 and 2022 (unaudited);		F-4
Notes to Condensed Consolidated Financial Statements (unaudited).		F-5

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2023, are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

RIGHT ON BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31,			March 31,
	2023			2023

Assets
Current assets
Cash	$	59,369		$	33,322
Accounts receivable		12,554			1,798
Inventory		101,182			116,115
Other current assets		3,221			3,221
Total current assets		176,326			154,456

Non-current assets
Property and equipment, net of depreciation		5,685			9,885
Right of use asset		29,762			42,488
Total non-current assets		35,447			52,373

Total assets	$	211,773		$	206,829

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable	$	73,600		$	63,234
Accounts payable, related party		14,154			14,154
Accrued interest payable		47,829			28,236
Accrued expenses		107,404			104,148
Unearned revenue		12,500			12,500
Lease liability, current portion		26,349			23,388
Notes payable, net of discount		230,554			257,077
Convertible debt, net of discount		258,900			182,051
Derivative liability		242,165			-
Total current liabilities		1,013,455			684,788

Lease liability, non-current		4,540			19,100

Total liabilities		1,017,995			703,888

Commitments and contingencies

Stockholders' deficit
Series A Preferred stock; 10,000,000 shares authorized of $0.001 par value; 5,000,000 shares issued and outstanding		5,000			5,000
Common stock; par value $0.001; 100,000,000 and 12,000,000,000 shares authorized at December 31, 2023 and March 31, 2023, respectively, 25,498,064 shares issued and outstanding		25,498			25,498
Additional paid-in capital		15,301,443			15,218,684
Common stock payable		15,000			15,000
Accumulated deficit		(16,153,163	)		(15,761,241	)
Total stockholders' deficit		(806,222	)		(497,059	)

Total liabilities and stockholders' deficit	$	211,773		$	206,829

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

F-1

Table of Contents

RIGHT ON BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended						For the nine months ended
	December 31,						December 31,
	2023			2022			2023			2022

Revenues	$	342,197		$	259,918		$	1,076,956		$	809,383
Cost of goods sold		158,947			150,231			486,977			416,347
Gross profit		183,250			109,687			589,979			393,036

Operating expenses
General and administrative		143,525			139,736			539,622			410,324
Advertising and promotion		11,900			4,499			36,685			11,778
Legal and professional		40,980			27,150			83,462			104,491
Depreciation and amortization		1,400			1,400			4,200			4,200
Total operating expenses		197,805			172,785			663,969			530,793

Gain (loss) from operations		(14,555	)		(63,098	)		(73,990	)		(137,757	)

Other income and (expense)
Interest expense		(5,441	)		(2,845	)		(26,883	)		(8,720	)
Amortization of debt discount		(77,661	)		(3,375	)		(127,096	)		(13,129	)
Change in fair value of derivative liability		34,298			-			34,459			51,994
Financing costs		(157,627	)		-			(198,412	)		(4,250	)
Gain on settlement of liabilities		-			-			-			140,297
Total other income (expense)		(206,431	)		(6,220	)		(317,932	)		166,192

Net income (loss)	$	(220,986	)	$	(69,318	)	$	(391,922	)	$	28,435

Income (loss) per share - basic	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	0.00
Income (loss) per share - diluted										$	0.00

Weighted average shares outstanding - basic		25,498,064			23,092,350			25,498,064			23,411,364
Weighted average shares outstanding - diluted											23,549,698

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

F-2

Table of Contents

RIGHT ON BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(UNAUDITED)

	Preferred Stock				Common Stock						Additional Paid in		Common Stock			Accumulated
	Shares		Amount		Shares			Amount			Capital		Payable			Deficit			Total

Balances, March 31, 2022		5,000,000	$	5,000		23,699,207		$	23,699		$	15,123,520	$	51,820		$	(15,769,967	)	$	(565,928	)

Issuance of common stock issuable		-		-		5,600			6			36,814		(36,820	)		-			-

Recission of shares		-		-		(612,456	)		(612	)		612		-			-			-

Net income		-		-		-			-			-		-			28,435			28,435

Balances, December 31, 2022		5,000,000	$	5,000		23,092,351		$	23,093		$	15,160,946	$	15,000		$	(15,741,532	)	$	(537,493	)

Balances, March 31, 2023		5,000,000	$	5,000		25,498,064		$	25,498		$	15,218,684	$	15,000		$	(15,761,241	)	$	(497,059	)

Settlement of derivative liability		-		-		-			-			82,759		-			-			82,759

Net loss		-		-		-			-			-		-			(391,922	)		(391,922	)

Balances, December 31, 2023		5,000,000	$	5,000		25,498,064		$	25,498		$	15,301,443	$	15,000		$	(16,153,163	)	$	(806,222	)

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

F-3

Table of Contents

RIGHT ON BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the nine months ended
	December 31,
	2023			2022
OPERATING ACTIVITIES
Net income (loss)	$	(391,922	)	$	28,435
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		4,200			4,200
Amortization of debt discount		127,096			13,129
Financing costs		198,412			4,250
Change in fair value of derivative liability		(34,459	)		(51,994	)
Gain on settlement of liabilities		-			(140,297	)
Changes in operating assets and liabilities:
Accounts receivable		(10,756	)		-
Prepaid expenses		-			(6,000	)
Inventory		14,933			19,579
Right of use assets and liabilities		1,127			-
Accounts payable		10,366			17,483
Accrued interest payable		26,398			8,720
Accrued expenses		3,256			29,658
NET CASH USED IN OPERATING ACTIVITIES		(51,349	)		(72,837	)

INVESTING ACTIVITIES
NET CASH USED IN INVESTING ACTIVITIES		-			-

FINANCING ACTIVITIES
Proceeds from notes payable		63,195			202,101
Proceeds from convertible notes payable		105,000			-
Repayment of notes payable		(90,799	)		(142,360	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		77,396			59,741

NET INCREASE (DECREASE) IN CASH	$	26,047		$	(13,096	)
CASH, BEGINNING OF PERIOD		33,322			28,056
CASH, END OF PERIOD	$	59,369		$	14,960

CASH PAID FOR INCOME TAXES	$	-		$	-
CASH PAID FOR INTEREST	$	485		$	-

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Discount on note payable	$	14,000		$	-
Discount on note payable from derivative liability	$	70,000		$	-
Discount on convertible note payable from derivative liability	$	90,971		$	-
Settlement of derivative liability	$	82,759		$	-
Accrued interest settled with note payable	$	6,805		$	-
Discount on convertible note payable	$	5,000		$	-
Common stock issued for common stock payable	$	-		$	36,820
Principal and interest settled	$	-		$	33,185
Original issuance discount on notes payable	$	-		$	16,991
Recission of shares	$	-		$	153,114

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

F-4

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Formation and Business Activity

Right on Brands, Inc. (“we” or “the Company” or “Right on Brands”) was incorporated under the laws of the State of Nevada on April 1, 2011, as HealthTalk Live, Inc. On August 10, 2017, the Company amended is articles of incorporation and changed its name to Right On Brands, Inc. On August 31, 2017 the Company's common shares commenced trading under the new stock symbol RTON. The Company’s primary business is the sale of health and wellness products.

The Company has the following wholly owned subsidiaries:

	·	Endo Brands, Inc.
	·	Humble Water Company

The Company has the following majority owned subsidiaries:

Endo & Centre Venture LLC (51% owner)

The Company, through its subsidiaries Humble Water Company and Endo & Centre Venture LLC, had joint ventures with no activity. The Company has discontinued these joint ventures and Humble Water Company and Endo & Centre Venture LLC contain no assets, liabilities, or operations.

The Company previously entered into an operating agreement with Centre Manufacturing, Inc. (“Centre”) and formed Endo & Centre Venture LLC. Endo & Centre Venture LLC is owned 51% by the Company and 49% owned by Centre, but all income and losses were to be split evenly. The owner of Centre is the former CEO of the Company. The Company discontinued operations of Endo & Centre Venture LLC prior to any significant activity occurring. At December 31, 2023 and March 31, 2023, the Company owed Centre $14,154, respectively.

NOTE 2 – GOING CONCERN

The accompanying condensed consolidated financial statements (the “financial statements" or “consolidated financial statements”) have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the period ended December 31, 2023, the Company had an accumulated deficit of approximately $16,153,000, had a net loss of approximately $392,000, and net cash used in operating activities of approximately $51,000, with approximately $1,077,000 revenue earned, and a lack of profitable operational history. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to generate greater revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of additional public and/or private offerings of its stock. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

F-5

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

The condensed consolidated financial statements of the Company include the accounts of Right On Brands, Inc. and its wholly owned subsidiaries and majority owned business (Endo Brands, Inc., Humble Water Company, Springhill Water Co, and Endo & Centre Venture LLC). Intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

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

Cash

For purposes of reporting cash flows, the Company has defined cash and cash equivalents as all cash in banks and highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2023 or March 31, 2023.

The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC provides coverage of up to $250,000 per depositor, per financial institution, for the aggregate total of depositors’ interest and non-interest-bearing accounts. The Company has not experienced any losses on these accounts and management does not believe that the Company is exposed to any significant risks.

Accounts Receivable

The Company performs periodic credit evaluations of its customers’ financial condition and extends credit to virtually all of its customers on an uncollateralized basis. Credit losses to date have been insignificant and within management’s expectations. The Company provides an allowance for doubtful accounts that is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Accounts receivable are typically due 30 to 45 days after the issuance of the invoice. Receivables past due more than 60 days are considered delinquent. Delinquent receivables are evaluated for collectability based on individual credit evaluation and specific circumstances of the customer. As of December 31, 2023, and March 31, 2023, the Company’s allowance for doubtful accounts was $0, respectively. The Company did not write off any accounts receivable against the allowance for doubtful accounts during the periods ended December 31, 2023 and March 31, 2023, respectively.

Inventory

Inventories are stated at the lower of cost (average cost) or net realizable value. Cost includes materials related to the purchase of finished goods to be sold to retail customers. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue.

F-6

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Property and Equipment

Property and equipment are stated at historical cost net of accumulated depreciation. Useful lives range from three to five years. Repairs and maintenance are expensed as incurred.

Recoverability of Long-Lived Assets

The Company evaluates long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future cash flows the asset is expected to generate. If the cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when management assesses that it is probable that a liability has been incurred and the amount can be reasonably estimated.

Income Taxes

In accordance with FASB ASC 740, "Income Taxes," the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

In addition, the Company’s management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. If the Company has interest or penalties associated with insufficient taxes paid, such expenses are reported in income tax expense.

Segments

The Company operates as a single segment.

F-7

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue Recognition

Revenue is recognized in accordance with ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and the related subsequent pronouncements (collectively “Topic 606”), which the Company early adopted at formation as of May 15, 2018. Under Topic 606, revenue recognition depicts the transfer of promised goods or services to a customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue recognition is aligned with the delivery of goods and services and is recognized at a point in time or over time, the assessment of which requires judgment.

In accordance with Topic 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. The Company applies the following five-step analysis to determine whether, how much, and when revenue is recognized: (1) identify the contract with the customer; (2) identify the performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.

Under Topic 606, revenue from the sale of the Company’s products has a single performance obligation and revenue is recognized at the point in time when control of the product transfers and the Company’s obligations have been fulfilled. This generally occurs upon delivery and acceptance by the customer. Amounts disclosed as revenue are net of allowances, discounts, and rebates. Freight and sales taxes collected from customers are excluded from revenue.

During the nine months ended December 31, 2023, our revenues consisted of approximately $282,000 in wholesale revenues and $795,000 in retail revenues. During the nine months ended December 31, 2022, all of our revenues were retail revenues.

Advertising Expenses

The Company accounts for its advertising and marketing expenses in accordance with ASC 720-35-50 and expenses all costs as they are incurred.

Leases

The Company uses the right-of-use (“ROU”) model to account for leases where the Company is the lessee, which requires an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental borrowing rate, as the rate implicit in the Company's leases is not readily determinable. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date and any residual value guarantees, if applicable. When determining the lease term, the Company includes option periods that it is reasonably certain to exercise as failure to renew the lease would impose a significant economic detriment.

For operating leases, minimum lease payments or receipts, including minimum scheduled rent increases, are recognized as rent expense where the Company is a lessee on a straight-line basis over the applicable lease terms. The excess of the straight-line rent over the minimum rents paid is included in the ROU asset where the Company is a lessee. Short-term lease cost for operating leases includes rental expense for leases with a term of less than 12 months.

Fair Value Measurement

ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”

F-8

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company did not have any Level 1 or Level 2 assets and liabilities at December 31, 2023 and 2022. The Derivative liabilities are Level 3 fair value measurements.

The following is a summary of activity of Level 3 liabilities during the period ended December 31, 2023:

Balance - March 31, 2023	$	-
Additions		359,383
Settlements		(82,759	)
Change in fair value		(34,459	)
Balance - December 31, 2023	$	242,165

The following is a summary of activity of Level 3 liabilities during the period ended December 31, 2022:

Balance at March 31, 2022	$	159,106
Settlement		(107,112	)
Change in fair value		(51,994	)
Balance at December 31, 2022	$	-

F-9

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Under the Company’s contract ordering policy, the Company first considers common shares issued and outstanding as well as reserved but unissued equity awards, such as under an equity award program. All remaining equity linked instruments such as, but not limited to, options, warrants, and debt and equity with conversion features are evaluated based on the date of issuance. If the number of shares which may be issued under the Company’s agreements exceed the authorized number of shares or are unable to be determined, equity linked instruments from that date forward are considered to be derivative liabilities until such time as the number of shares which may be issued under the Company’s agreements no longer exceed the authorized number of shares and are able to be determined.

On June 22, 2023, the Company issued a note payable agreement which contained default provisions that included a conversion feature meeting the definition of a derivative liability which therefore required bifurcation.

On October 16, 2023, the Company issued a convertible note payable agreement that included a conversion feature meeting the definition of a derivative liability which therefore required bifurcation.

At December 31, 2023, the Company estimated the fair value of the conversion feature derivatives embedded in note payable agreements based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.0118; risk-free interest rates ranging from 5.26% to 5.40%, and expected volatility of the Company’s common stock ranging from 337% to 411%, estimated exercise prices ranging from $0.003 to $0.025, and terms under one year.

Financial Instruments

The Company’s financial instruments include cash and cash equivalents, receivables, payables, and debt and are accounted for under the provisions of ASC Topic 825, “Financial Instruments”. The carrying amount of these financial instruments, with the exception of discounted debt, as reflected in the accompanying consolidated balance sheets approximates fair value.

Basic and Diluted Loss Per Share

FASB ASC Topic 260, “Earnings Per Share”, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (“EPS”) computations.

Basic earnings (loss) per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Recently Issued Accounting Standards

During the period ended December 31, 2023, and subsequently, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

Subsequent Events

The Company has evaluated all transactions through the date of this report for subsequent event disclosure consideration (Note 11).

F-10

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 4 – INVENTORY

The Company’s inventory consisted of the following at the respective balance sheet dates:

	December 31, 2023		March 31, 2023

Finished goods	$	101,182	$	116,115
	$	101,182	$	116,115

NOTE 5 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

The Company’s property and equipment consisted of the following at the respective balance sheet dates:

	December 31, 2023			March 31, 2023

Website development	$	88,965		$	88,965
Automobile		31,596			31,596
Studio and office equipment		11,910			11,910
Tenant improvements		11,135			11,135
Intangible assets		1,024			1,024
		144,630			144,630
Accumulated depreciation and amortization		(138,945	)		(134,745	)
	$	5,685		$	9,885

Depreciation expense of property and equipment for the periods ended December 31, 2023 and 2022 was $4,200, respectively.

NOTE 6 – DEBT

Notes Payable

On November 22, 2019, the Company issued a $50,000 promissory note to a third-party lender for a $25,000 cash borrowing. Accordingly, a $25,000 discount was recorded at issuance, all of which was amortized by March 31, 2020. The non-interest-bearing note is secured by inventory, matured February 20, 2020, and remains in default at December 31, 2023.

During December 2021, the Company was listed as defendant on a complaint from a noteholder seeking repayment of amounts due under a February 2020 convertible note payable. The Company had recorded all unpaid principal and interest due to the noteholder through March 31, 2022. On April 15, 2022, the Company and the noteholder entered into a settlement agreement whereby the Company will repay the noteholder a total of $115,000 consisting of $25,000 paid on April 18, 2022, $5,000 to be paid monthly from May 15, 2022 to October 15, 2022, $6,250 to be paid monthly from November 15, 2022 to April 15, 2023, and $7,500 to be paid monthly from May 15, 2023 to July 15, 2023. As a result of the settlement, the Company reclassified the note from convertible debt to notes payable. On December 31, 2023, the balance of the note totaled $60,000 and payments are past due.

F-11

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On July 21, 2022, the Company entered into a note payable agreement totaling $89,581, consisting of cash proceeds totaling $72,101, repayment of a prior loan balance totaling $6,999, and loan fees totaling $10,481 in lieu of interest. The note is to be repaid on an ongoing basis by deducting 19.75% of daily sales and applying against the loan balance. The note matures on January 21, 2024. On December 31, 2023, the balance of the note totaled $46,725. Subsequent to December 31, 2023, the Company defaulted on the note at maturity.

On August 4, 2022, the Company entered into a 0% note payable agreement for $80,000. The note is to be repaid in $3,000 monthly installments beginning on September 10, 2022, with the remaining balance due at maturity on December 31, 2022. On December 31, 2023, the balance of the note totaled $69,786 and was in default.

On August 11, 2022, the Company entered into a 12% note payable agreement totaling $60,760, consisting of cash proceeds totaling $50,000, financing costs of $4,250, and an original discount totaling $6,510. The note requires monthly payments of $6,805 beginning on September 30, 2022 until maturity on August 11, 2023. The note was repaid during June 2023.

On June 22, 2023, the Company entered into a 12% note payable agreement totaling $84,000, consisting of cash proceeds totaling $63,195, financing costs of $5,000, an original discount totaling $9,000, and accrued interest from the August 11, 2022 note totaling $6,805. The note requires monthly payments of $10,453 beginning on July 30, 2023 until maturity on March 30, 2023. Interest at 12% was accrued at issuance. On December 31, 2023, the balance of the note totaled $31,733.

During the period ended December 31, 2023, the Company incurred $15,609 in interest expenses related to notes payable.

Convertible Debt

At December 31, 2023, the Company's convertible debt related to the notes which can be converted at various conversion rates are summarized as follows:

Noteholder	Origination	Maturity	Interest rate			Conversion rate	Principal balance		Debt discount		Net amount of liabilities presented
Noteholder 8	9/5/2023	12/5/2023		8.00	%	$0.025/Share	$	65,000	$	-	$	65,000
Noteholder 9	7/7/2016	9/30/2019		6.00	%	$25.00/Share		25,000		-		25,000
Noteholder 13	2/16/2021	8/16/2021		6.00	%	$3.75/Share		140,000		-		140,000
Noteholder 17	2/17/2023	8/20/2023		6.00	%	$0.025/Share		17,051		-		17,051
Noteholder 16	10/16/2023	7/30/2024		10.00	%	$0.0035/Share		45,000		33,151		11,849
							$	292,051	$	33,151	$	258,900

At March 31, 2023, the Company's convertible debt related to the notes which can be converted at various conversion rates are summarized as follows:

Noteholder	Origination	Maturity	Interest rate			Fixed conversion rate	Principal balance		Debt discount		Net amount of liabilities presented
Noteholder 9	7/7/2016	9/30/2019		6.00	%	$25.00/Share	$	25,000	$	-	$	25,000
Noteholder 13	2/16/2021	8/16/2021		6.00	%	$3.75/Share		140,000		-		140,000
Noteholder 17	2/17/2023	8/20/2023		6.00	%	$0.025/Share		17,051		-		17,051
							$	182,051	$	-	$	182,051

During the period ended December 31, 2023, the Company incurred interest expenses related to convertible debt totaling $11,274.

The convertible debt held by noteholders 8, 9, 13 and 17 were in default at December 31, 2023.

F-12

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Future Maturities

The Company’s future maturities of notes payable and convertible debt are as follows:

Year ending
March 31,	Amount
2024	$	550,295

Amortization of Debt Discount

During the period ended December 31, 2023, the Company recorded amortization of debt discounts totaling $127,096.

NOTE 8 – EARNINGS PER SHARE

The Company had no potential additional dilutive securities outstanding at December 31, 2023 or March 31, 2023, except as follows:

	December 31, 2023		March 31, 2023
Preferred stock		100,000		100,000
Convertible debt		16,177,516		720,373
Total		16,277,516		820,373

NOTE 9 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

The Series A Preferred Stock is convertible to common stock at a rate of five shares for every share held and the holder(s) have the right to cast a total of fifty-percent (50%) plus one votes on all matters submitted to a vote of holder of the Company’s common stock. Our Series A Preferred Stock ranks equally, on an as-converted basis, to our common stock with respect to rights upon winding up, dissolution, or liquidation.

On June 6, 2019 the Board of Directors agreed to amend the certificate of designation for the Series A Preferred stock to have the right to cast a total of fifty-percent (50%) plus one votes on all matters submitted to a vote of holder of the Company’s common stock, including the election of directors, and all other matters as required by law. There is no right to cumulative voting in the election of directors. The holders of Series A Preferred Stock shall vote together with all other classes and series of common stock of the Company as a single class on all actions to be taken by the common stock holders of the Company except to the extent that voting as a separate class or series is required by law. Our Series A Preferred Stock does not have any special dividend rights.

Common Stock

During December 2022, the Company’s shareholders approved a reverse split of the Company’s common stock in the amount of 250 for 1. The reverse split was to be effective during January 2023. However, the reverse split was not approved by FINRA until September 2023. The effect of the reverse split has been retroactively presented in these consolidated financial statements.

During August 2022, the Company reduced its authorized common shares from 12,000,000,000 to 100,000,000.

F-13

Table of Contents

RIGHT ON BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 10 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be involved in litigation in the ordinary course of business. The company is not currently involved in any litigation that the Company believes could have a material adverse effect on its financial condition or results of operations.

On March 17, 2021, the Company entered into a storefront lease agreement in Rowlett, Texas. The Company records rent on straight-line basis over the terms of the underlying lease. Minimum lease payments under the lease are as follows:

Year Ending March 31,	Amount
2024	$	6,708
2025		25,025
Total remaining lease payments	$	31,733
Less: imputed interest		(844	)
Present Value of remaining lease payments	$	30,889

Current	$	26,349
Noncurrent	$	4,540

Remaining lease term (years)		1.17
Discount rate		5.00	%

NOTE 11 – SUBSEQUENT EVENTS

On January 1, 2024, the company Board of Directors approved and issued 5,000,000 shares of common stock in connection with employee compensation. Included in the issuance are 2,500,000 shares issued to the daughter of the Company’s CEO.

On January 20, 2024, the company Board of Directors approved and issued 1,000,000 shares of common stock for the purchase of inventory.

On February 29, 2024, the Company created a new subsidiary named California Best Product, Inc., organized to facilitate partnerships with California-based hemp brands. The Company contemplates maintaining majority control of the new entity with minority stakes being granted to future partners. The Company has entered into negotiations with various major California hemp brands with the aim of creating partnerships whereby such brands will be offered to consumers via the Company’s growing distribution network. While the Company has entered these negotiations and it believes such partnerships are likely, no such partnerships have been signed as of yet. There can be no assurance that such relationships will be formed, or that any other agreement or transaction will occur.

F-14

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclose any obligation to update forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Right On Brands is at the intersection of health and wellness. We create lasting brands with emerging functional ingredients, and our focus right now is industrial hemp and hemp derived products. Our business has historically been conducted through our wholly owned subsidiaries, Endo Brands and Humble Water Company. Humble Water Company is in a partnership with Springhill Water Co. to develop a line of High Alkaline, Natural Mineral Water, and a bottling and packaging facility, but it is no longer active. Endo Brands creates and markets a line of cannabinoid-based consumer products. All of our current business is through Endo Brands.

Results of Operations

Three Months Ended December 31, 2023, Compared to the Three Months Ended December 31, 2022:

Revenues

Revenues for the three months ended December 31, 2023, were approximately $342,000, as compared to approximately $260,000 for the three months ended December 31, 2022, an increase of approximately $82,000, or 32%.

This increase in revenues can be attributed to an increase in wholesale revenues, which approximated $134,000 in the current year period compared to none in the prior year, combined with improved in store sales. We expect our revenues to improve in future periods as we plan to partner with new locations for wholesaling and expand our offerings.

Gross Profit and Margins

Gross profit for the three months ended December 31, 2023, was approximately $183,000, as compared to approximately $110,000 for the three months ended December 31, 2022. The $73,000 increase, or 67%, in gross profit is the result of the Company’s increased focus on wholesaling and our retail store front focusing on selling more profitable products as compared to sales during the comparative prior period. Gross profit margin for the three months ended December 31, 2023, was approximately 54%, as compared to approximately 42% for the three months ended December 31, 2022. This change in gross profit margin resulted from management identifying and focusing sales efforts on the most popular and highest margin products during 2023, as well as increasing wholesale revenues. We believe that, subject to factors outside of our control, gross margins of approximately 50% are likely to be the norm.

Operating Expenses

Operating expenses for the three months ended December 31, 2023, were approximately $198,000, as compared to approximately $173,000 for the three months ended December 31, 2022. The increase was primarily due to an increase in staffing. We expect that operating expenses will increase over the next 12-36 months as our long-term growth strategy will require increases in personnel and facility expansion.

Table of Contents

Profit/Loss from Operations and Total Net Loss

Loss from operations for the three months ended December 31, 2023, was approximately $15,000, as compared to a loss from operations of approximately $63,000 for the three months ended December 31, 2022, a decrease of approximately $49,000. The increase in revenues during the current period was only partially offset by an increase in staffing costs. Management believes the increase in staff will allow revenues to continue to increase.

Total net loss for the three months ended December 31, 2023, was approximately $221,000, as compared to a total net loss of approximately $69,000 for the three months ended December 31, 2022, a change of approximately $152,000. The change for the three months ended December 31, 2023, was as a result of (i) the change in operations discussed above, (ii) interest expenses of approximately $5,000 in the current period compared to approximately $3,000 in the prior period, (iii) amortization of debt discounts of approximately $78,000 in the current period compared to approximately $3,000 in the prior period, (iv) financing costs of approximately $158,000 in the current period compared to approximately $-0- in the prior period and (vi) non-cash gains of approximately $34,000 related to the derivative liability compared to non-cash gains of $-0- in the prior period. Derivative liabilities are associated with notes that are convertible and may have variable pricing on the equivalent shares of Common Stock. At the end of each period, these derivative liabilities are valued, and the net change is recorded as a gain or loss in other expense and income.

Nine Months Ended December 31, 2023, Compared to the Nine Months Ended December 31, 2022:

Revenues

Revenues for the nine months ended December 31, 2023, were approximately $1,077,000, as compared to approximately $809,000 for the nine months ended December 31, 2022, an increase of approximately $268,000, or 33%.

This increase in revenues can be attributed to an increase in wholesale revenues, which approximated $282,000 in the current year compared to none in the prior year, combined with improved in store sales. We expect our revenues to improve in future periods as we plan to partner with new locations for wholesaling and expand our offerings.

Gross Profit and Margins

Gross profit for the nine months ended December 31, 2023, was approximately $590,000, as compared to approximately $393,000 for the nine months ended December 31, 2022. The $197,000 increase, or 50%, in gross profit is the result of the Company’s increased focus on wholesaling and our retail store front focusing on selling more profitable products as compared to sales during the comparative prior period. Gross profit margin for the nine months ended December 31, 2023, was approximately 55%, as compared to approximately 49% for the nine months ended December 31, 2022. This change in gross profit margin resulted from management identifying and focusing sales efforts on the most popular and highest margin products during 2023. We believe that, subject to factors outside of our control, gross margins of approximately 50% are likely to be the norm.

Operating Expenses

Operating expenses for the nine months ended December 31, 2023, were approximately $664,000, as compared to approximately $531,000 for the nine months ended December 31, 2022. The increase was primarily due to an increase in staffing. We expect that operating expenses will increase over the next 12-36 months as our long-term growth strategy will require increases in personnel and facility expansion.

Table of Contents

Profit/Loss from Operations and Total Net Loss

Loss from operations for the nine months ended December 31, 2023, was approximately $74,000, as compared to a loss from operations of approximately $138,000 for the nine months ended December 31, 2022, a decrease of approximately $64,000. The increase in revenues during the current period was only partially offset by an increase in staffing costs. Management believes the increase in staff will allow revenues to continue to increase.

Total net loss for the nine months ended December 31, 2023, was approximately $392,000, as compared to a total net income of approximately $28,000 for the nine months ended December 31, 2022, a change of approximately $420,000. The change for the nine months ended December 31, 2023, was as a result of (i) the change in operations discussed above, (ii) a gain on settlement of liabilities in the prior period of approximately $140,000, (iii) interest expenses of approximately $27,000 in the current period compared to approximately $9,000 in the prior period, (iv) amortization of debt discounts of approximately $127,000 in the current period compared to approximately $13,000 in the prior period, (v) financing costs of approximately $198,000 in the current period compared to approximately $4,000 in the prior period and (vi) non-cash gains of approximately $34,000 related to the derivative liability compared to non-cash gains of approximately $52,000 in the prior period. Derivative liabilities are associated with that are convertible and have variable pricing on the equivalent shares of Common Stock. At the end of each period, these derivative liabilities are valued, and the net change is recorded as a gain or loss in other expense and income.

We do not expect to realize significant net income in the near term as anticipated operational expenses are expected to increase as our long-term growth strategy will require increases in personnel and facilities. Despite management’s focus on ensuring operating efficiencies, we expect to continue to operate at a loss through fiscal 2024.

Liquidity and Capital Resources

Going Concern

We have incurred significant operating losses since inception and have negative cash flow from operations. As of December 31, 2023, we had a stockholders’ deficit of approximately $16,153,000, a working capital deficit of approximately $837,000, and incurred net loss of approximately $392,000 for the nine months ended December 31, 2023. Additionally, our operations utilized approximately $51,000 in cash during the nine months ended December 31, 2023, while we received approximately $77,000 in net cash from financing activities. As a result, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations, but there can be no assurance that such financing will be available on terms acceptable to us, if at all.

Our condensed consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations and continue our operations for the next fiscal year. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow.

As of December 31, 2023 and March 31, 2023, we had cash of approximately $59,000 and $33,000, respectively. We estimate our operating expenses for the near- and mid-term may continue to exceed the revenues that we may generate, and we may need to raise capital through either debt or equity offerings to continue operations. We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financing. Due to market conditions and the early stage of our operations, there is a considerable risk that we will not be able to raise such financing at all, or on terms that are not overly dilutive to our existing stockholders. We can offer no assurance that we will be able to raise such funds. If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and we may be forced to reduce or discontinue operations.

There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Table of Contents

Cash Flows – Operating Activities

For the nine months ended December 31, 2023, our cash used in operating activities amounted to an outflow of approximately $51,000, compared to cash used during the nine months ended December 31, 2022, of approximately $73,000. The decrease in cash used in our operating activities is due to the Company increasing revenues, partially offset by increased personnel costs.

Cash Flows – Investing Activities

For the nine months ended December 31, 2023 and 2022, there was no cash used in investing activities.

Cash Flows – Financing Activities

For the nine months ended December 31, 2023, our cash provided by financing activities amounted to approximately $77,000, which includes approximately $63,000 in proceeds from notes payable, $105,000 in proceeds from convertible notes payable, and repayments of notes payable totaling approximately $91,000. Our cash provided by financing activities for the nine months ended December 31, 2022, amounted to approximately $60,000, which includes approximately $202,000 in proceeds from notes payable and repayments of notes payable totaling approximately $142,000. The Company anticipates additional financing through the issuance of notes payable and common stock to fund the expansion in operations.

Off Balance Sheet Arrangements

As of December 31, 2023 and March 31, 2023, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to stockholders.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K for the year ended March 31, 2023, filed with the Securities and Exchange Commission on August 16, 2023.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2023. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Jerry Grisaffi. Based upon that evaluation, our Chief Executive Officer concluded that, as of December 31, 2023, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the period ended December 31, 2023.

Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

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

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

A smaller reporting company is not required to include this information. For a description of the risk factors applicable to our business and operations, please refer to our Annual Report on Form 10-K for the year ended March 31, 2023, filed with SEC on August 16, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

Exhibit Number		Description of Exhibit

3.1		Articles of Incorporation (incorporated by reference to Registration Statement on Form S-1 filed July 1, 2013)
3.2		Certificate of Designation (incorporated by reference to Current Report on Form 8-K filed October 5, 2016)
3.3		Articles of Merger (changing name) (incorporated by reference to Current Report on Form 8-K filed August 31, 2017)
3.4		Bylaws (incorporated by reference to Registration Statement on Form S-1 filed July 1, 2013)
31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Materials from the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2023 formatted in Extensible Business Reporting Language (XBRL)

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Right On Brands, Inc.

Date: April 15, 2024	By:	/s/ Jerry Grisaffi
	Name:	Jerry Grisaffi
	Title:	Chief Executive Officer

Date: April 15, 2024	By:	/s/ Jerry Grisaffi
	Name:	Jerry Grisaffi
	Title:	Chief Financial Officer

Right On Brands, Inc. 10-Q