UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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: ~~September~~March 3031, ~~2016~~2017

Commission File Number: 333-205398

Vodka Brands, Corp

(Exact name of registrant as specified in its charter)




Pennsylvania		46-5551820
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Vodka Brands, Corp

554 33^rd Street

Pittsburgh, PA 15201

(Address of principal executive offices)(Zip Code)

Tel: (412) 681-7777

(Registrant’s telephone number, including area code)

Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods 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 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 ☒ 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 filer. See definition 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	☒

(Do not check if a 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 ☒

As of March 31, 2017, we had 12,508,833 shares of common stock, $0.00 par value, issued and outstanding.

As of September 30, 2016, we had 12,271,300 shares of common stock, $0.00 par value, issued and outstanding respectively.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION	PAGE
Item 1. Condensed Financial Statements	F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3. Quantitative and Qualitative Disclosures About Market Risk	6
Item 4. Controls and Procedures	67
PART II-- OTHER INFORMATION
Item 1. Legal Proceedings	78
Item 1A. Risk Factors	78
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3. Defaults Upon Senior Securities	78
Item 4. Mine Safety Disclosures	8
Item 5. Other Information	8
Item 6. Exhibits	8
SIGNATURES	9

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Financial Statements

INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Unaudited Condensed Balance Sheets as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016……………………………………………………...……………………………………..F-2

Unaudited Condensed Statements of Operations for the three months ended March 31, 2017 and 2016………………………………………………......................................................................F-23

Unaudited Condensed ~~Statements~~Statement of ~~Operations~~Changes in Stockholders' Equity for the three ~~and nine~~ months ~~ended~~

~~September~~ended 30March 31, ~~2016 and 2015~~ 2017………………………………………………………………………......F-4

Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2017 and 2016……………………………………………………………………………………………..F-35

Unaudited ~~Condensed~~Notes ~~Statement~~to ofCondensed ~~Changes~~Financial inStatement…………………………………...............F-6 ~~Stockholders' Equity for the nine months~~

ended September 30, 2016

F-4

Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2016 and 2015

F-5

Unaudited Notes to Condensed Financial Statements

F-6

F-1

VODKA BRANDS CORP
CONDENSED BALANCE SHEETS
(unaudited)
	September 30, 2016	December 31, 2015
	March 31, 2017	December 31, 2016
	(unaudited)
Assets
Current assets:
Cash	$ 2212,~~816~~879	$ 3510,~~445~~574
Accounts receivable	11,925	7,607
Accounts receivable, net	33,390	24,566
Accounts receivable - related party	6,462	23,850
Accounts receivable, net - related party	7,582	6,092
Prepaid insurance and consulting fees	1,242	6,267
Prepaid rent and consulting fees	146	208
Inventory	5173,~~620~~565	6678,~~445~~771
Short-term advance - related party	23,810	3,350
Total current assets	127,562	120,211
Total current assets	117,875	142,964
Property, plant and equipment
Office equipment	931	931
Less: accumulated depreciation	(~~282~~376)	(~~141~~329)
Total property, plant and equipment, net	~~649~~555	~~790~~602
Other assets
Other assets, net
Trademarks	1,125	1,125
Accumulated amortization	(1,~~040~~097)	(~~956~~1,069)
Total other assets, net	8528	~~169~~56
Total assets	$ ~~118~~128,~~609~~145	$ ~~143~~120,~~923~~869
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 4028,~~131~~877	$ 3443,~~383~~539
Accounts payable - related party	810,~~843~~473	511,~~701~~481
Loan payable – related party	5,547	-
Loan payable - related party	58,703	55,053
Accrued expenses	12,~~682~~710	-9,718
Total current liabilities	56100,~~203~~763	40119,~~084~~791
Commitments and contingencies
Stockholders' equity
Common stock, no par value, 100,000,000 shares authorized;
12,271,300 and 11,796,333 shares issued and outstanding
12,508,833 issued and 12,498,833 shares outstanding as of March 31, 2017 and 12,352,333 issued and 12,342,333 shares outstanding as of December 31, 2016, respectively	649,155	590,955
at September 30, 2016 and December 31, 2015, respectively	566,756	424,265
Subscription receivable	(11,000)	(11,000)
Accumulated deficit	(493,350)	(309,426)
Treasury stock, at cost 10,000 shares at March 31, 2017 and December 31, 2016	(3,000)	(3,000)
Total stockholders' equity	62,406	103,839
Accumulated deficit	(607,773)	(575,877)
Total liabilities and stockholders' equity	$ 118,609	$ 143,923
Total stockholders' equity	27,382	1,078
Total liabilities and stockholders' equity	$ 128,145	$ 120,869
See accompanying notes to condensed financial statements.

F-2

VODKA BRANDS CORP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
		Three months ended			Nine months ended
		September 30,			September 30,
		2016		2015	2016	2015
Sales	$ 12,065		$ 10,946		$ 33,597	$ 30,026
Cost of sales		9,361		7,222	26,941	19,472
Gross profit		2,704		3,724	6,656	10,554
Operating expenses
Selling expenses		9,918		7,308	18,719	18,782
General and administrative expenses		44,318		45,391	171,861	112,183
Total operating expenses		54,236		52,699	190,580	130,965
Loss from operations before provision for income taxes		(51,532)		(48,975)	(183,924)	(120,411)
Provision for income taxes		-		-	-	-
Net loss		$ (51,532)		$ (48,975)	$ (183,924)	$ (120,411)
Basic and diluted loss per common share		$ (0.00)		$ (0.00)	$ (0.02)	$ (0.01)
Basic and diluted weighted average common shares outstanding		12,219,130		11,432,970	11,999,744	11,394,271
See accompanying notes to condensed financial statements.

VODKA BRANDS CORP

STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended
	March 31,
	2017	2016
Sales	$ 11,052	$ 10,481
Cost of sales	6,961	8,399
Gross profit	4,091	2,082
Operating expenses
Selling expenses	15,038	3,652
General and administrative expenses	20,949	67,765
Total operating expenses	35,987	71,417
Loss from operations before provision for income taxes	$ (31,896)	$ (69,335)
Provision for income taxes	-	-
Net loss	(31,896)	(69,335)
Basic and diluted loss per common shares	$ (0.00)	$ (0.01)
Basic and diluted weighted average common shares outstanding	12,392,653	11,817,099

See accompanying notes to condensed financial statements.

F-3

VODKA BRANDS CORP
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
	Common stock		Treasury stock					Total
	(no Par Value)		~~Subscription~~(no Par Value)		Subscription	~~Accumulated~~	Accumulated	~~Total~~ stockholders'
	Shares	Amount	~~receivable~~Shares	Amount	receivable	~~deficit~~	deficit	equity
Balance at December 31, 2015	11,796,333	$ 424,265	$ (11,000)			$ (309,426)		$ 103,839
Balance at December 31, 2016	12,342,333	$ 590,955	10,000	$ (3,000)	$ (11,000)		$ (575,877)	$ 1,078
Issuance of 437,967 shares of
Issuance of 147,500 shares of
common stock	437,967	131,391	-			-		131,391
common stock for cash	147,500	55,500	-	-	-		-	55,500
Issuance of 10,000 shares of
Issuance of 9,000 shares of
common stock for consulting and
common stock for compensation	9,000	2,700	-	-	-		-	2,700
professional services	10,000	3,000	-			-		3,000
Net Loss	-	-	-	-	-		(31,896)	(31,896)
Issuance of 27,000 shares of
Balance at March 31, 2017 (unaudited)	12,498,833	$ 649,155	10,000	$ (3,000)	$ (11,000)		$ (607,773)	$ 27,382
common stock for compensation	27,000	8,100	-			-		8,100
See accompanying notes to condensed financial statements.
Net Loss	-	-	-			(183,924)		(183,924)
Balance at September 30, 2016 (unaudited)	12,271,300	$ 566,756	$ (11,000)			$ (493,350)		$ 62,406
See accompanying notes to condensed financial statements.

F-4

VODKA BRANDS CORP
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
	Nine months ended	Nine months ended
	Three months ended March 31,
	September 30,	September 30,
	2017	2016
	2016	2015
Cash flows from operating activities:
Net loss	$ (~~183~~31,~~924~~896)	$ (~~120~~69,~~411~~335)
Adjustments to reconcile net loss to
net cash used by operating activities:
net cash used in operating activities:
Prepaid rent and consulting expense paid with common stock	~~8,275~~-	185,~~875~~175
Stock-based compensation	82,~~100~~700	52,~~400~~700
Depreciation and amortization expense	~~225~~75	~~178~~75
Changes in operating assets and liabilities: Increase in accounts receivable	(4,318)	(30,026)
Inventory used in promotion activities	1,616	-
Decrease in accounts receivable - related party	17,388	-
Changes in operating assets and liabilities:
Increase in prepaid expenses	(250)	(3,350)
Increase in accounts receivable, net	(8,824)	(1,933)
Decrease (increase) in inventory	14,825	(63,464)
(Decrease) increase in accounts receivable, net - related party	(1,490)	23,850
Increase in short-term advance - related party	(20,460)	-
Increase in prepaid expenses	62	-
Increase in accounts payable	5,748	4,706
Decrease in inventory	3,590	3,209
Increase (decrease) in accounts payable - related party	3,142	(4,999)
Increase in short-term advance	-	(1,350)
Increase (decrease) in accrued expenses	1,682	(1,279)
(Decrease) increase in accounts payable	(14,662)	15,554
Net cash used in operating activities	(149,567)	(194,370)
(Decrease) increase in accounts payable - related party	(1,008)	1,674
Cash flows from investing activities:
(Decrease) increase in accrued expenses	(7,008)	320
Purchase of fixed assets	-	(931)
Net cash used in operating activities	(56,845)	(20,061)
Net cash used in investing activities	-	(931)
Cash flows from financing activities:
Proceeds from related party loan	5,547	-
Increase in loan payable - related party	3,650	1,100
Payments received on subscription receivable	-	15,000
Proceeds from issuance of common stock	55,500	8,100
Proceeds from issuance of common stock	131,391	114,500
Net cash provided by financing activities	59,150	9,200
Purchase of treasury stock	-	(35,000)
Net increase (decrease) in cash	2,305	(10,861)
Net cash provided by financing activities	136,938	94,500
Cash, at beginning of period	10,574	35,445
Net decrease in cash	(12,629)	(100,801)
Cash, at end of period	$ 12,879	$ 24,584
Cash, at beginning of period	35,445	129,008
Cash, at end of period	$ 22,816	$ 28,207
Supplemental disclosures of cash flow information:
Non-cash financing activities:
Common stock issued for consulting and rent	$ ~~3,000~~-	$ 63,000
Common stock issued for subscriptions receivable	-	2,500
Common stock issued for compensation	2,700	2,700
Common stock issued for compensation	8,100	5,400
See accompanying notes to condensed financial statements.

F-5

VODKA BRANDS CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

Note 1 – Interim Condensed Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three -months ~~and nine months~~ ended ~~September~~March 3031, ~~2016~~2017 are not necessarily indicative of the results for the year ending December 31, ~~2016~~2017 or any period thereafter. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and related notes included in our annual report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2015,~~2016 filed with the ~~SEC~~Securities onand ~~April~~Exchange ~~14, 2016~~Commission.

Note 2 - Organization and Business

Vodka Brands Corp (the “Company”) was incorporated on April 17, 2014 (Inception) as a Pennsylvania corporation with a year-end of December 31. The Company is primarily engaged in the import and distribution of alcoholic beverages. From Inception tothrough ~~date~~March of 2015, the Company imported its alcoholic beverages through a related party. The Company obtained its own import license in April 2015. The Company distributes in the United States. Its products are primarily sold to wholesale distributors as well as state alcohol beverage control agencies.

Note 3 - Going Concern

These accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, the Company had a net loss of $~~183~~31,~~924~~896. As of ~~September~~March ~~30, 2016 and December~~ 31, ~~2015~~2017, the Company has an accumulated deficit of $~~493~~607,~~350~~773. Due to the start-up nature of the Company, the Company expects to incur additional operating losses in the immediate future. Given the operating loss and ~~309~~expected future operating losses,~~426,~~ ~~respectively~~the Company’s ability to realize its assets and discharge its liabilities depends on its ability to generate cash from capital financing and generate future profitable operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Due to the start-up nature of the Company, the Company expects to incur additional operating losses in the immediate future. Given the operating loss and expected future operating losses, the Company’s ability to realize its assets and discharge its liabilities depends on its ability to generate cash from capital financing and generate future profitable operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company is planning on obtaining additional financing through the issuance of equity or debt. To the extent that the funds generated from any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital through other channels.

Note 4 - Summary of Significant Accounting Policies

Basis of Presentation

These financial statements are presented in U.S. dollars and are prepared in accordance with U.S. GAAP.

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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's significant accounting policies are those that are both most important to the Company's financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates. Significant estimates include the allowance for doubtful accounts and ~~inventory~~valuation ~~reserves~~of trademarks.

F-6

Revenue Recognition

The Company recognizes revenue when the customer takes ownership of the applicable goods and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of a sale exists and the sales price is fixed or determinable. For the Company, title passes when delivery has occurred. Provisions for discounts and rebates to customers are provided for in the same period the related sales are recorded. We account for rebates as a reduction of revenue and accrue for the estimated ~~potential~~amounts ~~rebates~~to be paid. We recognized a reduction to revenue of $~~450~~369 and $~~1,140~~415 during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016,~~2017 ~~respectively~~and 2016. At ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, $~~325~~350 ~~and $0~~ were accrued for customer programs.

Shipping and Handling

Shipping and handling costs relating to the delivery of the applicable goods are recorded in costs of sales.

Concentrations of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, accounts receivable, accounts payable, and accrued expenses and approximate their fair value due to the short maturities of those instruments.

Cash

The Company maintains its cash in non-interest bearing accounts at various banking institutions that are insured by the Federal Deposit Insurance Company up to $250,000. The Company’s deposits may, from time to time, exceed the $250,000 limit; however, management believes that there is no unusual risk present, as the Company places its cash with financial institutions which management considers being of high quality.

Accounts Receivable

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on management’s experience. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is remote. The allowance for doubtful accounts was $0 as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016. The Company does not have any off-balance-sheet credit exposure related to its customers. Collections on accounts receivable previously written -off are included in income as received.

Inventory

Inventories are stated at the lower of cost, as determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management writes down the inventories to market value if ~~they~~it ~~are~~is below cost. Management regularly evaluates the composition of the Company’s inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required. The ~~valuation~~ allowance for slow-moving and obsolete ~~inventory~~inventories was $0 as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016.

Short-term advance – related party

The Company has advanced cash payments to a contractor for future service obligations. The Company recognizes the advance as an expense upon the completion of the service obligations. The Company expects the services to be rendered within one year.

Property, plant and equipment

Property, plant and equipment, are stated at cost less depreciation ~~and amortization~~. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

Depreciation of property, plant and equipment is calculated based on cost, less their estimated residual value, if any, using the straight-line method over their estimated useful lives.

F-7

Trademarks

Trademarks represent the trade names contributed by the founder through his wholly owned company Trademark Holdings, LLC. The four trademarks are Blue Diamond, Diamond Girl, Blue Crystal and White Crystal. Trademarks ~~are~~were initially measured at the carryover basis of the founder. Amortization of the trademarks is calculated based upon cost using a straight-line method over their estimated useful lives from registration and are stated at a historical cost.

F-7

Impairment of Long-Lived Assets

In accordance with Financial Accounting Standards Board (“FASB”) ASC 360, Long-Lived Assets, such as property, plant and equipment and intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company determined that there was no impairment at ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016.

Advertising and Promotional Costs

The Company expenses advertising and promotional costs as incurred or the first time the advertising or promotion takes place, whichever is earlier, in accordance with the FASB ASC 720, Other Expenses.

Research and Development Costs

The Company charges research and development costs to expense when incurred in accordance with the FASB ASC 730, Research and Development. Research and development costs ~~were~~for the ~~following:~~three months ended March 31, 2017 and 2016 was $0.

	Three months ended		Nine months ended
	September 30,		September 30,
	2016	2015	2016	2015
Research and development	$ -	$ -	$ -	$ -

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes, (ASC 740) which requires that deferred tax assets and liabilities be recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, ASC 740 requires recognition of future tax benefits, such as carry forwards, to the extent that realization of such benefits is more likely than not and that a valuation allowance be provided when it is more likely than not that some portion of the deferred tax asset will not be realized.

The Company has an accumulated deficit and a loss from operations. Realization of the net deferred tax asset is dependent upon taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred asset has been offset by a full valuation allowance.

The Company accounts for income taxes in interim periods in accordance with FASB ASC 740-270, Income Taxes - Interim Reporting. The Company has determined an estimated annual effective tax rate which will be revised, if necessary, as of the end of each successive interim period during the Company’s fiscal year to its best current estimate. The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

F-8

Basic and Diluted Loss per Share

The Company reports loss per share in accordance with FASB ASC 260, Earnings per share. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the three and nine months ended September 30, 2016 and 2015.

Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock options are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the three months ended March 31, 2017 and 2016.

Comprehensive Income

Net loss is the Company’s only component of comprehensive income or loss for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016.

F-8

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value provisions of ASC 718, Compensation — Stock Compensation that requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options and restricted stock. This topic requires companies to estimate the fair value of the stock-based awards on the date of grant for options are issued to employees and directors. The Company uses a Black-Scholes valuation model as the most appropriate valuation method for pricing these options. Awards for consultants are accounted for under ASC 505-50, Equity Based Payments to Non-Employees. Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest. There are customary limitations on the sale or transfer of the stock.

The fair value of the common stock for compensation was the following:

	~~Three months ended~~	Three months ended			~~Nine months ended~~
	September 30,				September 30,
		March 31,
	2016		2015		2016	2015
		2017		2016
Shares issued for compensation	~~9,000~~	9,000	~~9,000~~	9,000	~~27,000~~	~~18,000~~
Fair value per share	~~$ 0.30~~	$ 0.30	~~$ 0.30~~	$ 0.30	~~$ 0.30~~	~~$ 0.30~~
Compensation expense	$ 2,700		$ 2,700		$ 8,100	$ 5,400
Stock–based compensation expense		$ 2,700		$ 2,700

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions.

All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related party.

F-9

Recent Accounting Pronouncements

InDuring ~~May~~March 2016, the FASB issued ASU No. 2016-1209, Improvements ~~Narrow~~to Employee Share-~~Scope~~Based ~~Improvements~~Payment ~~and~~Accounting, ~~Practical~~which ~~Expedients~~amends ASC Topic 718, Compensation ~~makes~~- ~~certain~~Stock ~~targeted~~Compensation. ~~amendments~~The toobjective ~~Topic~~of ~~606,~~this ~~Revenue~~update ~~from~~is ~~Contracts~~part ~~with~~of ~~Customers,~~the ~~which~~FASB’s ~~includes:~~Simplification ~~assessing~~Initiative ~~collectability,~~as ~~presenting~~it ~~sales~~applies ~~taxes~~to ~~and~~several ~~other~~aspects ~~similar~~of ~~taxes~~the ~~collected~~accounting ~~from~~for ~~customers,~~share-based ~~noncash~~payment ~~consideration~~transactions, ~~contract~~including ~~modifications~~the atincome ~~transition~~tax consequences, ~~completed~~classification ~~contracts~~of atawards ~~transition,~~as ~~and~~either ~~disclosing~~equity ~~the~~or ~~accounting~~liabilities, ~~change~~and inclassification on the ~~period~~statement of ~~adoption~~cash flows. The effective date ~~and~~of ~~transition~~the ~~requirements~~update is for ~~ASU~~fiscal years beginning after December 15, 2016~~-12~~ ~~are~~and ~~the~~interim ~~same~~periods aswithin ~~the~~that ~~effective~~reporting ~~date~~period ~~and~~Early ~~transition~~adoption ~~requirements~~was ofpermitted. ~~ASU~~We ~~2014-09~~adopted ~~(Topic~~this ~~606)~~standard effective January 1, 2017. The ~~Company~~adoption isdid ~~currently~~not inhave ~~the~~a ~~process~~material ofimpact ~~evaluating~~on the ~~impact~~presentation of ~~adoption~~our financial statements, financial position, results of ~~the~~operations, ~~ASU~~cash onflows ~~its~~or ~~financial~~related ~~statements~~disclosures.

In ~~March~~ February 2016, the FASB issued ~~ASU~~Accounting Standards Update No. 2016-0902, ~~Compensation~~Leases ~~- Stock Compensation~~ (Topic ~~718~~842)~~: Improvements to Employee Share-Based Payment Accounting~~. The ~~amendments~~new ~~are~~standard ~~intended~~establishes toa ~~improve the accounting for employee share~~right-~~based~~of-use ~~payments~~(ROU) ~~and~~model ~~affect~~that ~~all~~requires ~~organizations~~a ~~that~~lessee ~~issue~~to ~~share-based~~record ~~payment~~a ~~awards~~ROU toasset ~~their~~and ~~employees.~~a ~~Several~~lease ~~aspects~~liability ofon the ~~accounting~~balance sheet for ~~share-based~~all ~~payment~~leases ~~award~~with ~~transactions~~terms ~~are~~longer ~~simplified,~~than ~~including:~~12 ~~(a) income~~months. ~~tax~~Leases ~~consequences;~~will ~~(b) classification~~be ofclassified ~~awards~~ as either ~~equity~~finance or ~~liabilities;~~operating, ~~and~~with ~~(c)~~ classification onaffecting the ~~statement~~pattern of ~~cash~~expense ~~flows.~~recognition ~~For~~in ~~public~~the ~~companies,~~income ~~the~~statement. ~~amendments~~The ~~are~~new standard is effective for ~~annual~~fiscal ~~periods~~years beginning after December 15, ~~2016~~2018, ~~and~~including interim periods within those ~~annual~~fiscal ~~periods~~years. ~~For~~A ~~private~~modified ~~companies,~~retrospective ~~the~~transition ~~amendments~~approach ~~are~~is ~~effective~~required for ~~annual~~lessees ~~periods~~for ~~beginning~~capital ~~after December 15, 2017,~~ and ~~interim~~operating ~~periods~~leases ~~within~~existing ~~annual~~at, ~~periods~~or ~~beginning~~entered ~~after~~into ~~December 15~~after, ~~2018.~~the ~~Early~~beginning ~~adoption~~of isthe ~~permitted~~earliest ~~for~~comparative ~~any~~period ~~organization~~presented in ~~any~~the ~~interim~~financial orstatements, ~~annual~~with ~~period~~certain practical expedients available. We are currently ~~assessing~~evaluating ~~the~~what impact, ~~that~~if ~~this~~any, ~~standard~~the adoption will have onto the presentation of our financial ~~position~~statements and related disclosures, but do not expect it to have a material impact on our financial position, results of operations, or cash flows.

~~In August 2014, FASB issued ASU No. 2014~~F-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40). This standard is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments contained in this ASU apply to all companies and not-for-profit organizations. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. We are currently evaluating what impact, if any, the adoption will have to the presentation of our financial statements and related disclosures, but do not expect it to have a material impact on our financial position, results of operations, or cash flows.9

In ~~May~~January ~~2014~~2016, the ~~Financial Accounting Standards Board (the "~~FASB") issued ~~Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers (~~ASU ~~2014~~2016-~~09)~~01, which ~~supersedes~~revises ~~nearly~~the ~~all existing revenue recognition~~ guidance ~~under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers~~ in anASC ~~amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014~~825-0910, Recognition ~~defines~~and aMeasurement ~~five~~of ~~step~~Financial ~~process~~Assets ~~to achieve this core principle~~ and, inFinancial ~~doing so~~Liabilities, ~~more judgment~~ and provides ~~estimates~~guidance ~~may~~for ~~be required within~~ the ~~revenue~~ recognition, ~~process~~measurement, ~~than are required under existing U.S. GAAP. In July 2015~~presentation, ~~the~~and ~~FASB~~disclosure ~~finalized a one year delay in the effective date~~ of ~~this~~financial ~~standard,~~assets ~~which~~and ~~will~~liabilities. ~~now~~The beguidance is effective for ~~the~~reporting ~~Company~~periods on(interim ~~January 1,~~and ~~2018,~~annual) ~~however~~beginning ~~early adoption is permitted any time~~ after ~~the~~December ~~original~~15, ~~effective date~~2017, ~~which~~ for uspublic ~~is January 1, 2017~~companies. We are ~~evaluating~~currently assessing the ~~effect~~potential ~~that ASU~~impact ~~2014-09 will~~of ~~have~~this onASU ~~our financial statements and related disclosures, but do not expect it to have a material impact~~ on our financial position, and results of operations~~, or cash flows~~.

In July 2015, the FASB issued ASU No. 2015-11, Inventory, Simplifying the Measurement of Inventory. The ~~Company~~amended ~~believes~~guidance requires that ~~there~~inventory ~~were~~be nomeasured ~~other~~at ~~accounting~~the ~~standards~~lower ~~recently~~of ~~issued~~cost ~~that~~and ~~had~~net orrealizable ~~are~~value. ~~expected~~The amended guidance is limited to inventory measured using the first-in, first-out (“FIFO”) or average cost methods and excludes inventory measured using last-in, first-out (“LIFO”) or retail inventory methods. ASU 2015-11 is effective for fiscal years, and interim periods, beginning after December 15, 2016, or January 1, 2017 for the Company. Early adoption is permitted. The adoption of ASU 2015-11 did not have a material impact on ~~our~~the Company’s financial position or results of operations.

In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40). This standard is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments contained in this ASU apply to all companies and not-for-profit organizations. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. The Company adopted this guidance on December 31, 2016 and management assessed the entity’s ability to continue as a going concern. After considering the Company’s historical negative cash flow from operating activities, recurring losses and accumulated deficit management concluded that there is substantial doubt about the entities ability to continue as a going concern. Certain disclosures were added to comply with the disclosure requirements of the ASU.

In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In July 2015, the FASB finalized a one-year delay in the effective date of this standard, which will now be effective for the Company on January 1, 2018, however early adoption is permitted any time after the original effective date, which for us is January 1, 2017. We are evaluating the effect that ASU 2014-09 will have on our financial statements and related disclosures, but do not expect it to have a material impact on our financial position, results of operations, or cash flows.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations

Reclassification

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Note 5 - Common Stock

The Articles of Incorporation authorized Vodka Brands Corp to issue 100,000,000 shares of common stock with no par value.

Each share of our common stock entitles the holder to one (1) vote, either in person or by proxy, at meetings of shareholders. The shareholders are not permitted to vote their shares cumulatively. Accordingly, the holders of more than fifty percent (50%) of the total voting rights on matters presented to our common stockholders can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any such directors. The vote of the holders of a majority of the holders entitled to vote on matters submitted to our common stockholders including of our preferred stock described below is sufficient to authorize, affirm, ratify, or consent to such act or action, except as otherwise provided by law.

From January ~~2016~~2017 through ~~September~~March ~~2016~~31, ~~437~~2017,~~967~~ 35,000 shares of the Company’s common stock were issued for cash of $~~131~~10,~~391~~500 at $0.30 per share.

From January 2017 through March 31, 2017, 112,500 shares of the Company’s common stock were issued for cash of $45,000 at $0.40 per share.

F-10

From January ~~2016~~2017 through ~~September~~March ~~2016~~31, 102017, 9,000 shares of the Company’s common stock were issued ~~for~~as ~~consultant~~stock-based ~~services pertaining to a contract cancellation agreement~~compensation. These ~~10,000~~ shares were valued at $2,700 of compensation at $0.30 per share. in connection with the employment agreement with the Company’s CEO.

~~The~~Note ~~common~~6 ~~shares~~- ~~issued~~Income ~~for services and rents during the periods were immediately vested upon issuance.~~Tax

OnThe ~~March~~Company 7,has ~~2015~~operating ~~the~~losses ~~Company~~that ~~entered~~may ~~into~~be anapplied ~~employment~~against ~~agreement~~future ~~with~~taxable ~~its~~income. The ~~Chief~~potential ~~Executive~~tax ~~Officer~~benefits ~~(“CEO”).~~arising ~~Under~~from ~~the~~these ~~terms~~loss ofcarry ~~the agreement~~forwards, ~~the~~which ~~CEO~~expire ~~will~~beginning ~~earn~~in ~~36,000~~the ~~shares~~year of2034, ~~common~~are ~~stock~~offset ~~for~~by ~~his~~a ~~services~~valuation ~~annually.~~allowance ~~The~~due ~~agreement~~to isthe ~~effective~~uncertainty ~~April~~of 1,profitable ~~2015.~~operations ~~From~~in ~~January~~the ~~2016~~future. The ~~through~~U.S. ~~September~~federal ~~2016,~~statutory ~~27,000~~tax ~~shares~~rate ofis ~~common~~35.00%. ~~stock~~The ~~were~~Company’s ~~issued~~effective astax ~~compensation.~~rate ~~These~~for ~~27,000~~the ~~shares~~three ~~were~~months ~~valued~~ended atMarch $831,~~100~~ of2017 ~~compensation~~and at2016 $was 0%.~~30 per share.~~

~~Note~~The 6Company’s -tax ~~Related~~years ~~Party~~open ~~Transactions~~to examination will begin with the 2014 federal and state income tax returns. The Company’s policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision. The Company has not recognized any interest or penalties for the underpayment of income taxes or unrecognized tax benefits. The change in the valuation allowance is a result of loss carry forwards which will begin to expire in 2034.

OnNote ~~April~~7 ~~20,~~- ~~2014~~Related ~~the~~Party ~~Company purchased its entire inventory from Beverage Brands, Inc. (“BBI”) which is wholly owned by the CEO, in the amount of $25,502. This amount represents the cost of the inventory to BBI.~~Transactions

~~In addition,~~ BBI paid third parties for storage and administrative services on behalf of the Company. These amounts were charged to cost of sales. ~~During~~The ~~the~~total ~~three~~amount ~~and nine month period ended September 30, 2016, fees~~ paid onwas ~~behalf of the Company were~~ $~~750~~1,225 and $~~2,250. During~~750 for the three ~~and~~months ~~nine month period~~ ended ~~September~~March ~~30, 2015, fees paid on behalf of the Company were $750 and $2,482. At September 30, 2016 and December~~ 31, ~~2015,~~2017 ~~the Company owed BBI $8,843~~ and ~~$5,201, respectively, and is included in accounts payable – related party~~2016.

~~Effective~~The ~~March 9, 2016, the~~ Company ~~entered~~owes ~~into a promissory note with its CEO. The original principal balance was~~ $110,~~100~~473 and ~~reflected~~$11,481 into ~~the~~this ~~loan payable~~ related party. ~~The~~and ~~promissory~~these ~~note~~amounts isare ~~due~~included onin ~~demand~~accounts ~~and~~payable ~~bears~~- ~~interest~~related party at 3%March ~~annually.~~31, ~~During~~2017 ~~the~~and ~~three~~December ~~months ended September 30~~31, 2016 ~~an additional $5~~,~~347~~ ~~was advanced from the CEO and $900 was repaid by the Company~~respectively.

~~During~~Effective April 28, 2015 the ~~three~~Company ~~months~~executed ~~ended~~a ~~September~~consulting ~~30,~~agreement ~~2016,~~with ~~the~~a consultant who is an affiliate with BBI. The Company ~~paid~~compensates $31,~~300~~000 ofper ~~operating~~month ~~expenses~~to onthe ~~behalf~~consultant and requires a minimum of ~~BBI~~fifty hours of services per month. ~~This~~The ~~amount~~agreement ~~was~~may ~~excluded~~terminate, ~~from~~at ~~the~~any ~~statements~~time, ofby ~~operations~~written ~~and~~notice isof ~~included~~the inCompany. ~~accounts~~The ~~receivable~~total –fees incurred related ~~party~~to atthis ~~September~~consultant 30were $4,000 and $3,000 for the three months ended March 31, 2017 and 2016. The fees are included in consulting fees.

~~Effective~~During ~~April 28~~2016, ~~2015~~ the Company ~~executed~~entered ainto ~~consulting agreement with a consultant who is~~ an ~~affiliate~~informal, ~~with~~interest ~~BBI. The Company compensates $1~~free,~~000~~ ~~per~~unsecured ~~month~~advance tofrom ~~the~~its ~~consultant and requires a minimum of fifty hours of services per month~~CEO. As ~~The agreement may terminate, at any time, by written notice~~ of ~~the~~March ~~Company. At September 30~~31, ~~2016~~2017 and December 31, ~~2015,~~2016 ~~the Company advanced this consultant~~ $2358,~~810~~703 and $355,~~350,~~053 ~~respectively,~~is ~~for~~reflected ~~future~~in ~~services~~advance ~~which~~– ~~are expected to be performed within one year. The total fees incurred~~ related toparty ~~this~~in ~~consultant were $3,000 and $9,000 for~~ the ~~three~~accompanying ~~and~~balance ~~nine months ended September 30~~sheets, ~~2016~~respectively. ~~The total fees incurred related to this consultant were $4,000 and $10,300 for the three and nine months ended September 30, 2015. The fees are included in consulting fees. See Note 9.~~

See additional transactions with related parties in Note 5 and Note 89.

Note 78 - Concentrations

The Company’s revenues include ~~three~~two major customers, the Commonwealth of Pennsylvania, and the Mississippi Department of Revenue, ~~and a distributor in Tennessee,~~ which account for 100% of revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016. Outstanding accounts receivable from these customers amounted to the following:

	September 30, 2016	December 31, 2015
	March 31, 2017	December 31, 2016
	(unaudited)
Accounts receivable	$ 1133,~~925~~390	$ 724,~~607~~071

The Company imports and distributes alcoholic beverages from one supplier which accounted for 100% of the Company’s purchases for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015.~~2017 ~~The Company had no purchases for the three~~ and ~~nine months ended September 30,~~ 2016. All purchases require prepayment terms. Accounts payable to this vendor amounted to $0394 as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016.

FNote 9 -11 Commitments and Contingencies

~~Note~~Control 8by -principal ~~Commitments~~stockholder and ~~Contingencies~~CEO

Control by principal stockholder/officer

The CEO owns beneficially and in the aggregate, the majority of the common shares of the Company. Accordingly, the CEO has the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.

F-11

Reliance on other parties and related parties

The Company currently is primarily engaged in the business of importing and distributing alcoholic beverages in the United States. However, from April 17, 2014 (Inception) through March 2015, the Company did not have a permit to import and distribute alcoholic beverages in the United States, nor did it have a permit to distribute alcoholic beverages within the United States.

The Company contracted with BBI, to import alcoholic beverages from Europe to the U.S. under BBI’s federal importing permit. Once imported, the inventory is stored in a bonded warehouse operated by a third party licensed by the federal government.

When the Company sells alcoholic beverages to its customer, the Pennsylvania Liquor Control Board, it uses a third party who has an alcoholic beverage sale permit in the U.S., to enter into purchase orders with the customer. The third party would not transact with the Company until the federal importing permit was obtained. Therefore, BBI acted as a conduit between the Company and the third party. There were no fees or expenses paid to or retained by BBI with regards to this arrangement. ~~The third party collects from the Pennsylvania Liquor Control Board in a BBI account.~~

In April 2015, the Company obtained its own federal importing permit.

When the Company sells alcoholic beverages to certain of its ~~customer~~customers, specifically the Mississippi Department of Revenue and the West Virginia Alcohol Beverage Control Administration, the alcoholic beverages are sent to a bailment warehouse, operated by the Mississippi Department of Revenue and the West Virginia Alcohol Beverage Control Administration. The Company maintains ownership of the alcoholic beverages while in the bailment warehouse, without fee, until final withdraw by the Mississippi Department of Revenue. Ator ~~September 30, 2016~~ and ~~December~~the ~~31,~~West ~~2015,~~Virginia ~~$2,784~~Alcohol ~~and~~Beverage ~~$1,470~~Control ~~of excise taxes are included in inventory~~Administration.

When the alcoholic beverage leaves the bonded warehouse, the Company retains a third party as a customer broker to process the paper work with United States Customs and advance the federal tax payment for the alcoholic ~~beverage~~beverages sold. Payment of the tax is due ~~before~~as the product leaves the bonded warehouse.

Note 9 – Operating Expenses

Selling expenses consisted of the following:

	Three months ended		Nine months ended
	September 30,		September 30,
	2016	2015	2016	2015
Commissions	$ -	$ -	$ 271	$ -
Promotional	5,684	-	8,912	6,724
Advertising	4,234	7,308	9,536	12,058
Total	$ 9,918	$ 7,308	$ 18,719	$ 18,782

F-12

General and administrative expenses consisted of the following:

	Three months ended		Nine months ended
	September 30,		September 30,
	2016	2015	2016	2015
Depreciation and amortization	$ 75	$ 75	$ 225	$ 178
Compensation	2,700	2,700	8,100	5,400
Professional fees	15,968	23,638	84,454	63,638
Consulting fees	18,405	13,005	50,775	31,338
Rents	2,250	2,250	6,750	5,750
Other general and administrative	4,920	3,723	21,557	5,879
Total	$ 44,318	$ 45,391	$ 171,861	$ 112,183

Note 10 – Property, plant and equipment

The net book value related to this property, plant and equipment was the following:

	September 30, 2016	December 31, 2015
	March 31, 2017	December 31, 2016
	(unaudited)
Cost	$ 931	$ 931
Accumulated depreciation	(~~282~~376)	(~~141~~329)
Total trademarks, net	$ 649	$ 790
Property, plant and equipment, net	$ 555	$ 602

Depreciation of ~~the~~these assets ~~are~~for asthe ~~follows:~~three months ended March 31, 2017 and 2016 was $47.

	Three months ended		Nine months ended
	September 30,		September 30,
	2016	2015	2016	2015
Depreciation	$ 47	$ 47	$ 141	$ 94

The estimated useful lives of the assets are as follows:

Office equipment and furniture 3-5 years

Note 11 – Trademarks

The net book value related to these trademarks was the following:

	September 30, 2016	December 31, 2015
	March 31, 2017	December 31, 2016
	(unaudited)
Cost	$ 1,125	$ 1,125
Accumulated amortization	(~~1040~~1,097)	(~~956~~1,069)
Total trademarks, net	$ 85	$ 169
Trademarks, net	$ 28	$ 56

~~F-13~~Amortization expense related to these trademarks for the three months ended March 31, 2017 and 2016 was $28.

~~Amortization expense related to these trademarks was the following:~~F-12

	Three months ended		Nine months ended
	September 30,		September 30,
	2016	2015	2016	2015
Amortization	$ 28	$ 28	$ 84	$ 84

The Company did not incur costs to renew or extend the term of the trademarks during the three months ended March 31, 2017 and 2016. The future cash flows of the Company are significantly affected by the Company’s ability to renew the trademarks with the United States Patent and Trademark Office.

The Company did not incur costs to renew or extend the term of the trademarks during the periods ending March 31, 2016 and December 31, 2015. The future cash flows of the Company are significantly affected by the Company’s ability to renew the trademarks with the United States Patent and Trademark Office.

The estimated useful lives of the assets are as follows:

Trademarks 10 years

The estimated amortization expense is as follows:

For the year ending December 31, 2016	$ 112
For the year ending December 31, 2017	$ 57

For the year ending December 31, 2017 $ 57

Note 12 – Operating ~~- Subsequent Events~~expenses

~~Subsequent~~Selling ~~events~~expenses ~~have~~consisted ~~been~~of ~~evaluated through November 25, 2016 which is~~ the ~~date the financial statements were available to be issued. Management did not identify any events requiring recording or disclosure in the accompanying financial statements.~~following:


	Three months ended
	March 31,
	2017	2016
Promotional	5,400	-
Advertising	9,638	3,652
Total	$ 15,038	$ 3,652

General and administrative expenses consisted of the following:




	Three months ended March 31,
	2017	2016
	(unaudited)	(unaudited)
Depreciation and amortization	$ 75	$ 75
Stock-based compensation	2,700	2,700
Professional fees	-	37,674
Consulting fees	10,809	20,225
Office rent	950	2,250
Other general and administrative	6,415	4,841
Total	$ 20,949	$ 67,765

F-13

Note 13 – Inventories

Inventories consist of the following:



	March 31, 2017	December 31, 2016
	(unaudited)

Finished goods	$ 70,653	$ 77,050
Excise taxes	2,912	1,721
Total	73,565	78,771
Allowance	-	-
Total	$ 73,565	$ 78,771

Capitalized excise taxes represents taxes paid for the removal of finished goods from the bonded warehouse and transported to the West Virginia Alcohol Beverage Control Administration and the Mississippi Department of Revenue’s bailment warehouses. These costs are recognized as cost of sales once the inventory is sold to the ultimate customer by the West Virginia Alcohol Beverage Control Administration and the Mississippi Department of Revenue.

Note 14 - Subsequent Events

Subsequent events have been evaluated through May 22, 2017 which is the date the financial statements were available to be issued. Management did not identify any events requiring recording or disclosure in the financial statements for the three-month period January 1, 2017 through March 31, 2017.

F-14

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

The following is management’s discussion and analysis of the financial condition and results of operations of Vodka Brands Corp (“Vodka Brands”, the “Company”, “we”, and “our”) for three ~~and nine~~ months ended ~~September~~March 3031, ~~2016,~~2017 ~~compared to the three~~ and ~~nine months ended September 30, 2015~~2016. The following information should be read in conjunction with the financial statements for the ~~year~~years ended December 31, 2016 and 2015 and notes thereto appearing elsewhere in this Annual Report on Form 10-K ~~filed~~(this ~~with the SEC on April 14, 2016~~“Report”). Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Our Business

We began operations on April 17, 2014 (Inception) and operate within the alcoholic spirit industry. ~~Through~~We ~~our operations we~~ oversee the manufacturing of our trademarked Blue Diamond and Diamond Girl Vodkas. We introduced our Diamond Girl Vodka ~~and~~in ~~sell~~the fourth quarter of 2016 as our second vodka product. We sell our products in the United States with hopes of expanding internationally. We have a federal permit to import alcoholic beverages. Currently, our customers include the Pennsylvania Liquor Control Board the Alcoholic Beverage Control of Mississippi and a distributor in Tennessee. We are also licensed in West Virginia. We had our first purchase order for the State of Tennessee ~~during~~in ~~the period ended June 30,~~ mid-2016.. We plan to continue to develop our trademarked ~~name~~products ~~“Blue Diamond” brand~~ as well as our other trademarked brands.

Our cash on hand as of ~~September~~ 30March 31, ~~2016~~2017, was $2212,~~816~~879.

RESULTS OF OPERATIONS

Sales

We generated sales of $1211,~~065 and~~052 ~~$33,597~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and $10,~~946~~481 ~~and~~in ~~$30,026~~same ~~for~~prior ~~the~~year ~~three and nine months ended September 30, 2015~~period. The increase iswas ~~due~~ primarily due to ~~the~~ higher order volumes. During the ~~three~~quarter ~~months ended September 30, 2016,~~ we ~~sold~~shipped ~~947~~924 bottles ~~versus~~compared ~~852~~to ~~bottles~~828 ~~sold~~in ~~during~~ the ~~three~~prior ~~months~~year ~~ended September 30, 2015~~quarter.

The most significant variable in product cost in the future is expected to be currency exchange rates between the Euro and the US Dollar. Our European suppliers invoice in Euros. We do not believe that inflation had any material impact on us during the ~~three~~quarters ~~months~~ ended ~~September~~March 3031, ~~2016~~2017 and ~~2015.~~2016, respectively.

We recognize revenue when four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) shipment has occurred; (3) the fee is fixed or determinable; and (4) collection is reasonably assured.

With the introduction of Blue Diamond Vodka as a shelf item in the State of Pennsylvania, ~~two~~and ~~years~~with ~~ago~~the addition of our Diamond Girl in late 2016, our sales are ~~primarily~~comprised largely to the Pennsylvania Liquor Control Board and can be found in roughly forty -five of their stores. If we were to lose this customer, our operations would be materially impacted. However, we have the possibility to increase the number of stores in Pennsylvania, and much greater potential nationally, and internationally. To this end, we continued to generate sales to the Mississippi Department of Revenue during the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2016~~2017. Our product is sold in approximately forty stores in Mississippi.

In January 2016, we began issuing customer incentives on our ~~Blue~~ Diamond Vodka through the use of mail-in rebate coupons. Revenues for the ~~three~~quarter ~~months~~ ended March 31, ~~2016~~2017 were reduced by estimated rebate costs of $~~415 and revenues for the three months ended June 30, 2016 were reduced by estimated rebate costs of $275~~369. ~~Revenues for the three months ended September 30, 3016 were reduced by estimated rebate costs of $450.~~

Cost of Goods Sold

Our cost of sales ~~were~~was $96,~~361~~961 ~~and~~in ~~$26,941 for~~ the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 compared to $78,~~222~~399 ~~and~~in ~~$19,472 for~~ the ~~three~~same ~~and~~prior ~~nine~~year ~~months ended September 30, 2015~~period. ~~The increase in our cost of sales was primarily due to higher order volumes, freight costs and distribution outlets.~~

Gross profit

We expect to be able to maintain a gross profit margin over 25% on our product. For the ~~three~~quarter ~~and nine months~~ ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016 our gross profit margin was 2237%, ~~20%, 34%~~ and 3520%, respectively. We expect that our ~~2016~~2017 profit margin will remain in line with our aforementioned expectations, however we have flexibility to adjust prices if necessary to gain market share. We implemented a $5.00 mail-in rebate in ~~the first quarter of~~ 2016 to increase sales. The mail-in rebate and higher purchase and freight costs decreased our gross profit percentage for the three and nine months ended September 30, 2016. Further, we offered our Blue Diamond Vodka at a reduced price to gain market access in Tennessee contributing to the reduction in our gross profit margin.

Selling, general administrative and other expenses (SG&A)

Our most significant selling costs are promotional and advertising expenses as we continue to develop brand recognition. The most significant general and administrative costs were legal and accounting expenses.

The market for spirits and vodka is large. We have the potential to expand sales dramatically. This will be determined in large part by our success in attracting distributors. Although, we believe the market is large, we are uncertain if our product will obtain significant demand. Additionally, we are uncertain with regards to industry trends or events that will materially impact our operational condition whether beneficial or detrimental.

To this objective, we are in the early stages of identifying an individual with industry experience and relationships with national and international distributors to become part of our management team.

Net loss

We incurred a net loss of $5131,~~532~~896 ~~and $183,924~~ for the ~~three~~quarter ~~and~~ended ~~nine~~March ~~months~~31, ~~ended~~2017 ~~September~~compared ~~30,~~to ~~2016,~~a ~~and~~net ~~$48,975~~loss ~~and~~of $~~120~~69,~~411,~~335 ~~for~~in the ~~three~~first ~~and~~quarter ~~nine~~of ~~months ended September 30, 2015~~2016.

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through the sale of equity or ~~possibly~~ debt ~~financing~~securities.

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

Deferred Tax Asset and Valuation Allowance

We recorded a deferred tax asset, but recorded a full valuation allowance against this asset as it is uncertain if we will be able to realize any of this benefit.

Related Parties

During the period April 17, 2014 (Inception) through ~~December~~March 31, 2014, we purchased all of our inventory from Beverage Brands, Inc. (“BBI”), a wholly owned company of our CEO. The purchase price was recorded at the price BBI paid for the product from a third party manufacturer. Additionally, BBI acted as a conduit with a third party to facilitate sales to the Pennsylvania Liquor Control Board as we did not have our federal import license. We obtained our federal import license in April of 2015. There were no fees or expenses paid to or retained by BBI with regards to this arrangement.

During April 2014, Trademark Holdings, LLC, a wholly owned company of our CEO, contributed the trademarks Blue Diamond, Diamond Girl, Blue Crystal and White Crystal. We recorded the trademarks at carryover basis and will continue to amortize these trademarks in accordance with their useful life from the date of registration.

~~LIQUIDITY~~Effective ~~AND~~April ~~CAPITAL~~28, ~~RESOURCES~~2015 we executed a consulting agreement with a consultant who is an affiliate with BBI. The Company compensates $1,000 per month to the consultant and requires a minimum of fifty hours of services per month. The agreement may terminate, at any time, by written notice of the Company.

As of September 30, 2016, our current assets were $117,875 and our current liabilities were $56,203 and as of December 31, 2015 our current assets were $142,964 and our current liabilities were $40,084.

As of September 30, 2016 our stockholders’ equity was $62,406 and as of December 31, 2015 our stockholders’ equity was $103,839.

At September 30, 2016 and December 31, 2015, we had 12,271,300 and 11,796,333 common shares outstanding, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2017, our total assets were $128,145 and our liabilities were $100,763 and as of December 31, 2016, our total assets were $120,869 and our liabilities were $119,791.

Our stockholders’ equity totaled $27,382 at March 31, 2017 compared to total stockholders’ equity of $1,078 at December 31, 2016.

As of March 31, 2017, and December 31, 2016, we had 12,498,833 and 12,342,333 common shares outstanding, respectively.

Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities. For the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2016~~2017, net cash used in operating activities was $~~149~~56,~~567~~845 ~~and~~compared ~~for~~to ~~the nine months ended September 30, 2015 net cash used in operating activities was~~ $~~194~~20,~~370. The~~061 ~~change was primarily a result~~ in the ~~purchase~~same ofprior ~~our~~year ~~second production of Blue Diamond Vodka in February 2015~~period.

Cash Flows from Financing Activities

We have financed our operations primarily from the issuance of shares of our common stock. For the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, net cash provided by financing activity was $~~136~~59,~~938~~150 and for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, net cash provided by financing activities was $949,~~500~~200. Proceeds received from ~~proceeds from~~ issuance of our common stock to investors was $55,500 in 2017 compared to $8,100 received in 2016. In addition to the common stock proceeds received in 2017, we also received $3,650 in proceeds from related party loans in 2017 and $1,100 in 2016.

In April 2015, we entered into an arrangement to repurchase 363,167 shares of common stock issued for legal services. We paid $20,000 for these shares. In August 2015, we entered into an arrangement to repurchase the remaining 100,000 shares of common stock issued for legal services. We paid $10,000 for these shares. In September 2015, we executed a cancellation resolution of the 463,167 of the repurchased shares. The cancelation is reflected as a reduction common stock at the price paid of $35,000.

PLAN OF OPERATION AND FUNDING

Operations

Our overriding objective is to produce high quality vodka products with recognizable brand names and to expand distribution nationally and internationally. We plan to increase sales of our Blue Diamond Vodka brand and to develop our other brand names. Increase in sales of our existing brand can be achieved through the improvement in product packaging which has been ongoing, promotional activities, and forming relationships with distributors. We can develop one or more of our other brand names in the next six to twelve months. An important component of success will be to add an individual to our management team who has industry experience and relationships with national and international distributors.

Product ~~development~~Development

Our Blue Diamond Vodka bottle is produced in France and shipped to Northern Europe to the country of Estonia to complete production. Current production of Blue Diamond Vodka includes some noticeable improvements in product packaging. For example, the bottle closure ~~utilizes~~will utilize an up-scale synthetic cork with logo embossed on the top. A PVC capsule with logo ~~complements~~will complement the long neck bottle. There iswill be a clear portion surrounding the diamond in martini glass design on the frosted bottle and other slight modifications. These modest but noticeable changes should give our product a cleaner, more professional and appealing appearance. We anticipate further development of other brands within six to twelve months.

~~In the fourth quarter 2016, we began production of vodka under our Diamond Girl trademark.~~ 5

Funding

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

We have paid for the second production run of 1,229 cases of Blue Diamond Vodka ~~in February 2015~~ and we received the product in September 2015. Existing working capital and anticipated cash flow are expected to be adequate to fund our operations over the next three months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the sale of our common stock to investors. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of equity or debt securities. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Material Commitments

As of the date of this ~~Quarterly~~Annual Report, we do not have any material commitments.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment during the next twelve months.

Off-Balance Sheet Arrangements

As of the date of this ~~Quarterly~~Annual Report, we do not have any 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 are material to investors.

Going Concern

The report of the independent registered public accounting firm accompanying our ~~annual report for the year ended~~ December 31, ~~2015~~2016 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Smaller reporting companies are not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The design of the internal controls over the segregation of duties and financial reporting close process constitute a material weakness. Specifically, we do not have a formal written process to perform monthly close procedures nor a detailed review of such information. Further, our transactions are initiated and processed by a single individual. Accordingly, the lack of these controls results in the possibility that a material misstatement could occur and would not be prevented or detected on a timely basis.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during the three month period ending ~~September~~March 3031, ~~2016~~2017, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

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

During the three (3) month period ending ~~September~~March 3031, ~~2016,~~2017 and through the filing of this Form 10-Q report, we offered and sold securities below. None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, and Rule 506 of the Securities Act of 1933, as amended for the offer and sale of the securities. We believed these exemptions from registration were available because:

·We are not a blank check company;

·Sales were not made by general solicitation or advertising;

·All certificates had restrictive legends; and

·Sales were made to persons with a pre-existing relationship to Mark T. Lucero, our President, Chief Executive Officer and Director.

On July 11, 2016, we sold 10,000 shares of our common stock to Ghridhar Raghavan at a price of $0.30 per share or an aggregate of $3,000.

On August 8, 2016, we sold 16,667 shares of our common stock to Derrick Hemby at a price of $0.30 per share or an aggregate of $5,000.

On August 15, 2016, we sold 6,700 shares of our common stock to Erica Jean Lewis at a price of $0.30 per share or an aggregate of $2,010.

On August 15, 2016, we sold 16,600 shares of our common stock to Chelsy Elaine Hogue at a price of $0.30 per share or an aggregate of $4,980.

On September 16, 2016, we sold 3,333 shares of our common stock to Elijah Thompson at a price of $0.30 per share or an aggregate of $1,000.

On September 20, 2016, we sold 30,000 shares of our common stock to Leonard Oddo at a price of $0.30 per share or an aggregate of $9,000.

On October 6, 2016, we sold 17,000 shares of our common stock to Chad Edward Gobersk and Amy Lynn Warzinski at a price of $0.30 per share or an aggregate of $5,100.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

Exhibit No.

Description

31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes Oxley Act of 2002*

32.1Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002*

* Filed herewith.

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, there unto duly authorized.

Vodka Brands, Corp

/s/ Mark T. Lucero

Name: Mark T. Lucero

Position: President, Chief Executive Officer,

Director, Acting Chief Financial Officer

~~November~~May 2522, ~~2016~~2017

Filing Compare · Vodka Brands Corp