Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[Amendment No. 2]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File No. 000-54247
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VITAMIN BLUE, INC.
(Exact name of the Registrant as specified in Charter)
Delaware
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33-0858127
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(State of Incorporation)
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(I.R.S. Employer ID Number)
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1005 West 18th Street, Costa Mesa, CA 92627
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92627
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s Telephone No. including Area Code: (949) 645-4592
Securities registered under 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common stock, $0.0001 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes o No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)
Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: 526,525,000 shares of Common stock, $0.0001 par value per share, as of August 10, 2011.
VITAMIN BLUE, INC.
TABLE OF CONTENTS
Page
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Part I – Financial Information
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Item 1.
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Financial Statements (Unaudited):
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2
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Balance Sheets – June 30, 2011 and December 31, 2010
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Statements of Operation - Three and Six Months Ended June 30, 2011 and 2010
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4
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Statement of Shareholders’ Equity – Six Months Ended June 30, 2011
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5
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Statements of Cash Flows - Three and Six Months Ended June 30, 2011 and 2010
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6
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Notes to Financial Statements
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Result of Operation
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10
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II – Other Information
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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13
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3.
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Defaults Upon Senior Securities
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Item 4.
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Removed and Reserved.
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Item 5.
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Other Information
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Item 6.
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Exhibits
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13
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Signatures
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13
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1
EXPLANATORY NOTE
This Amendment No. 2 to the Quarterly Report on Form 10-Q/A for Vitamin Blue, Inc. amends the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 and Amendment No. 1 to that report filed with the SEC on August 15, 2011. This Amendment No. 2 is being filed solely to revise certain portions of the report in response to comments issued by the SEC.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that can be expected for the year ending December 31, 2011.
VITAMIN BLUE, INC.
Financial Statements
June 30, 2011
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VITAMIN BLUE, INC
BALANCE SHEETS
June 30, 2011
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December 31, 2010
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(Unaudited)
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ASSETS
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CURRENT ASSETS
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Cash
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$ | 1,813 | $ | 1,830 | ||||
Accounts receivable, net
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10,969 | 5,535 | ||||||
Inventory
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13,030 | 15,772 | ||||||
TOTAL CURRENT ASSETS
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25,812 | 23,137 | ||||||
PROPERTY & EQUIPMENT, at cost
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Vehicles
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21,811 | 21,811 | ||||||
Machinery & equipment
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1,020 | 1,020 | ||||||
Office equipment
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1,839 | 1,839 | ||||||
24,670 | 24,670 | |||||||
Less accumulated depreciation
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(24,606 | ) | (24,548 | ) | ||||
NET PROPERTY AND EQUIPMENT
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64 | 122 | ||||||
TOTAL ASSETS
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$ | 25,876 | $ | 23,259 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Accounts payable
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$ | 65,699 | $ | 56,688 | ||||
Accrued expenses
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29,056 | 23,769 | ||||||
Accrued interest, related party
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1,494 | 1,134 | ||||||
Accrued interest, other
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52,305 | 45,440 | ||||||
Subscriptions payable
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- | 33,050 | ||||||
Derivative liability
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80,526 | 46,133 | ||||||
Convertible promissory notes
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80,000 | 40,000 | ||||||
Loans payable
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110,000 | 110,000 | ||||||
Loan payable, related party
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8,000 | 8,000 | ||||||
TOTAL CURRENT LIABILITIES
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427,080 | 364,214 | ||||||
SHAREHOLDERS' DEFICIT
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Preferred Stock, $0.0001 par value
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100,000,000 authorized preferred shares; none issued or outstanding
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- | - | ||||||
Common Stock, $0.0001 par value; 900,000,000 shares authorized 526,525,000 and 510,000,000 shares issued and outstanding, respectively
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52,653 | 51,000 | ||||||
Additional paid in capital
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82,594 | 39,487 | ||||||
Accumulated deficit
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(536,451 | ) | (431,442 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT
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(401,204 | ) | (340,955 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
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$ | 25,876 | $ | 23,259 |
The accompanying notes are an integral part of these financial statements
3
VITAMIN BLUE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
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Six Months Ended
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June 30, 2011
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June 30, 2010
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June 30, 2011
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June 30, 2010
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REVENUE
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$ | 30,089 | $ | 29,856 | $ | 47,952 | $ | 49,240 | ||||||||
COST OF SALES
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20,806 | 11,775 | 34,481 | 23,127 | ||||||||||||
GROSS PROFIT
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9,283 | 18,081 | 13,471 | 26,113 | ||||||||||||
OPERATING EXPENSES
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49,649 | 30,317 | 74,718 | 55,603 | ||||||||||||
DEPRECIATION EXPENSE
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29 | 29 | 58 | 58 | ||||||||||||
TOTAL OPERATING EXPENSES
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49,678 | 30,346 | 74,776 | 55,661 | ||||||||||||
LOSS FROM OPERATIONS BEFORE OTHER EXPENSES
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(40,395 | ) | (12,265 | ) | (61,305 | ) | (29,548 | ) | ||||||||
OTHER EXPENSES
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Penalties
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(174 | ) | (137 | ) | (314 | ) | (272 | ) | ||||||||
Derivative valuation gain
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1,871 | - | 4,449 | - | ||||||||||||
Interest expense
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(23,429 | ) | (4,535 | ) | (47,839 | ) | (7,974 | ) | ||||||||
TOTAL OTHER EXPENSES
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(21,732 | ) | (4,672 | ) | (43,704 | ) | (8,246 | ) | ||||||||
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES
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(62,127 | ) | (16,937 | ) | (105,009 | ) | (37,794 | ) | ||||||||
Provision for income taxes
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- | - | - | - | ||||||||||||
NET LOSS
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$ | (62,127 | ) | $ | (16,937 | ) | $ | (105,009 | ) | $ | (37,794 | ) | ||||
BASIC AND DILUTED LOSS PER SHARE
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
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BASIC AND DILUTED
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526,525,000 | 510,000,000 | 521,229,696 | 510,000,000 |
The accompanying notes are an integral part of these financial statements
4
VITAMIN BLUE, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2011
Additional
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Preferred Stock
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Common stock
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Paid-in
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Accumulated
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Shares
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Amount
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Shares
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Amount
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Capital
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Defitcit
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Total
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Balance at December 31, 2010
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- | $ | - | 510,000,000 | $ | 51,000 | $ | 39,487 | $ | (431,442 | ) | $ | (340,955 | ) | ||||||||||||||
Issuance of shares of common stock for subscriptions payable (unaudited)
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- | - | 16,525,000 | 1,653 | 31,397 | - | 33,050 | |||||||||||||||||||||
Contributed services (unaudited)
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- | - | - | - | 11,710 | - | 11,710 | |||||||||||||||||||||
Net Loss for the six months ended June 30, 2011 (unaudited)
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- | - | - | - | - | (105,009 | ) | (105,009 | ) | |||||||||||||||||||
Balance at June 30, 2011 (unaudited)
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- | $ | - | 526,525,000 | $ | 52,653 | $ | 82,594 | $ | (536,451 | ) | $ | (401,204 | ) |
The accompanying notes are an integral part of these financial statements
5
VITAMIN BLUE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
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June 30, 2011
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June 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ | (105,009 | ) | $ | (37,794 | ) | ||
Adjustment to reconcile net loss to net cash used in operating activities
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Depreciation
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58 | 58 | ||||||
Bad debt expense
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(382 | ) | - | |||||
Contributed services
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11,710 | 14,807 | ||||||
Changes in Assets and Liabilities
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(Increase) Decrease in:
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Accounts receivable
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(5,052 | ) | (1,065 | ) | ||||
Inventory
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2,742 | (12,876 | ) | |||||
Increase (Decrease) in:
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Accounts payable
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9,011 | 4,509 | ||||||
Accrued expenses
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12,512 | 7,524 | ||||||
Derivative liability
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34,393 | - | ||||||
NET CASH USED IN OPERATING ACTIVITIES
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(40,017 | ) | (24,837 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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- | - | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from related party loans payable
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- | 5,000 | ||||||
Proceeds from investor loans payable
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- | 20,000 | ||||||
Proceeds from convertible promissory notes
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40,000 | - | ||||||
NET CASH PROVIDED IN FINANCING ACTIVITIES
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40,000 | 25,000 | ||||||
NET INCREASE/(DECREASE) IN CASH
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(17 | ) | 163 | |||||
CASH, BEGINNING OF PERIOD
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1,830 | 1,077 | ||||||
CASH, END OF PERIOD
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$ | 1,813 | $ | 1,240 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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Interest paid
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$ | - | $ | - | ||||
Taxes paid
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$ | - | $ | - | ||||
NON-CASH FINANCING AND INVESTING ACTIVITIES:
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During the six months ended June 30, 2011, the Company issued 16,525,000 shares of common stock in settlement of $33,050 in subscriptions payable.
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The accompanying notes are an integral part of these financial statements
6
VITAMIN BLUE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information refer to the financial statements and footnotes for the year ended December 31, 2010.
Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholder through the period ended June 30, 2011. Management believes this funding will continue, and has also obtained funding from new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Vitamin Blue, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Accounts receivable
The Company extends credit to its customers, who are located primarily in California. Accounts receivable are customer obligations due under normal trade terms. The Company performs continuing credit evaluations of its customers’ financial condition. Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been received to determine if any such amounts will potentially be uncollected. The Company includes any balances that are determined to be uncollectible in its allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off. The balances of the allowance account at June 30, 2011 and 2010 is $3,475 and $1,572, respectively.
Revenue Recognition
The Company recognizes revenue upon delivery, provided that evidence of an arrangement exits, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future product returns, which is based upon our return policy, sales agreements, management estimates of potential future products returns related to current period revenue, current economic trends, changes in customer composition and historical experience. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluation of our customers and historic credit losses have been within our expectations. This is a critical policy, because we want our accounting to show only sales which is “final” with a payment arrangement.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2010 and 2009, the balances reported for cash, inventory, prepaid expenses, accounts payable, accrued expenses, loans payable, and convertible promissory notes payable approximate the fair value because of their short maturities.
We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.
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VITAMIN BLUE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments (Continued)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at June 30, 2011:
Total
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(Level 1)
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(Level 2)
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(Level 3)
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Assets
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$ | - | $ | - | $ | - | $ | - | ||||||||
Total assets measured at fair value
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$ | - | $ | - | $ | - | $ | - | ||||||||
Derivative Liability
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$ | 80,526 | $ | - | $ | - | $ | 80,526 | ||||||||
Total liabilities measured at fair value
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$ | 80,526 | $ | - | $ | - | $ | 80,526 |
Recently Issued Accounting Pronouncements
Management reviewed accounting pronouncements issued during the six months ended June 30, 2011, and no new pronouncements were adopted during the period.
3. CAPITAL STOCK
During the six months ended June 30, 2011, the Company issued 16,525,000 shares of common stock at a price of $0.002 per share for subscription payables.
4. LOANS PAYABLE
The Company received $0 in new loan proceeds for the period ended June 30, 2011. As of June 30, 2011, the principal balance of the Company’s outstanding loans payable were $110,000, which bears interest at the rate of 8% per annum, and are due upon demand. The balance due for the period ended June 30, 2011 including all accrued and unpaid interest was $162,305. The loans do not contain any type of conversion feature. The Company intends to retire these loans at a future date through the issuance of shares of common stock at a rate to be agreed upon by both the lenders and the Company at the time the retirement is to be completed. There was no interest paid during the period ended June 30, 2011.
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VITAMIN BLUE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
5. RELATED PARTY
As of June 30, 2011, the Company has loans outstanding from Veronica Ornelas the sister of the corporate president in the amount of $8,000. The Company has imputed interest on these loans at the rate of 9% per annum. As of June 30, 2011, the balance of accrued interest payable to this related party was $1,494.
Frank Ornelas, the Company’s Chief Executive Officer, receives an annual salary of $50,000. During the six month periods ended June 30, 2011 and 2010, the Company paid for various personal expenses on behalf of the CEO totaling $13,290 and $10,039, respectively, which have been recognized as payments against this annual salary. The unpaid portions of the CEO’s salary of $11,710 and $14,961, respectively, for the six month periods ended June 30, 2011 and 2010, have been reflected as contributed capital in accordance with SAB Topic 5T. The CEO has agreed to waive the unpaid portions of his salary and no shares have been or will be issued to the CEO in exchange for this unpaid salary.
6. CONVERTIBLE PROMISSORY NOTES
As of June 30, 2011, the Company received eight loans in the form of convertible debentures from three individuals in the amounts of $10,000 each for a total of $80,000. The loans bear interest at 8% per annum on the unpaid balance until paid or until default. The convertible promissory note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.
The Holders of the debentures have the right to convert at any time amounts outstanding under the debentures into shares of common stock at a conversion price per share equal to sixty (60%) of the average bid and ask price of the common stock for the previous five (5) trading days or if the common stock has not traded in the last thirty (30) business days, then sixty percent (60%) of the price that the Maker’s common stock was last issued to a non-affiliated investor. The holders may elect payment of the principal of this note, before any repayment of interest.
ASC Topic 815 provides applicable guidance to the convertible promissory notes issued by the Company in instances where the number into which a note can be converted is not fixed. For example, when a note converts at a discount to market based on the stock price on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible promissory notes be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the embedded derivative. The discount is amortized over the life of the convertible promissory notes, which resulted in the recognition of $40,000 in interest expense for the year ended December 31, 2010, and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital. For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:
Stock price on the valuation date
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$ | 0.0020 | ||
Conversion price for the loans
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$ | 0.0012 | ||
Dividend yield
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0.00 | % | ||
Years to Maturity
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1 | |||
Risk free rate
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0.29 | % | ||
Expected volatility
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128.42 | % |
The value of the derivative liability at June 30, 2011 was $80,526.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 15, 2011, the date the financial statement were issued, according to the requirements of ASC TOPIC 855 and has reported the following:
On July 22, 2011, the Company received an additional loan in the amount of $10,000 from an investor for operating expenses. The loan bears interest at 8% per annum, and the principal and interest is convertible into shares of common stock within one year from the date the funds were received. The shares of common stock are convertible at a rate of 60% of the average bid and asking price of the common stock for the previous five (5) trading days or if in the common stock has not traded in the last thirty (30) business days, then sixty percent (60%) of the price that the Company’s common stock was last issued to a non-affiliated investor.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three and Six Months Ended June 30, 2011 compared to the Three and Six Months Ended June 30, 2010.
Total revenues increased by $233 to $30,089 for the three months ended June 30, 2011 compared to $29,856 for the prior period ended June 30, 2010. Total revenues decreased by $(1,288) to $47,952 for the six months ended June 30, 2011 compared to $49,240 for the prior period ended June 30, 2010. We attributed the decrease to the lack of funds to increase adverting expenditures in order to take advantage of market opportunities.
Cost of sales increased by $9,031 to $20,806 for the three months ended June 30, 2011 compared to $11,775 for the prior period ended June 30, 2010. Cost of sales increased by $11,354 to $34,481 for the six months ended June 30, 2011 compared to $23,127 for the prior period ended June 30, 2010. The gross profit decreased $(8,798) to $9,283 for the three months ended June 30, 2011 compared to $18,081 for the prior period ended June 30, 2010. Gross profits for the six month period ended decreased by $(12,642) to $13,471 compared to $26,113 for the prior period ended June 30, 2010. The decrease in gross profits is attributed to the increased cost of sales and general economic conditions.
Operating expenses, including marketing, selling and general and administrative expenses for the three months ended June 30, 2011 increased by $19,332 to $49,649 compared to $30,317 for the prior period ended June 30, 2010. Operating expenses for the six months ended June 30, 2011 increased by $19,115 to $74,718 compared to $55,603 for the prior period ended June 30, 2010. The increase in operating expenses resulted primarily from an increase in accounting and legal fees incurred in the current period.
Interest expense for the three months ended June 30, 2011 totaled $23,429, an increase of $18,894 over $4,535 for the three months ended June 30, 2010. Interest expense for the six months ended June 30, 2011 totaled $47,839, an increase of $39,865 over $7,974 for the six months ended June 30, 2010. The increase in interest expense resulted from increased borrowing during the current period plus $38,842 of interest expense resulting from the amortization of debt discounts during the six months ended June 30, 2011.
Net loss for the six months ended June 30, 2011 was $(105,009) as compared to a net loss of $(37,794) for the six months ended June 30, 2010.
Liquidity and Capital Resources
At June 30, 2011, we had an accumulated deficit of $(536,451), and we expect to incur additional losses in the foreseeable future. While we have funded our operations since inception through investor and related party loans and through collection of our accounts receivable, there can be no assurance that adequate financing will continue to be available to us and, if available, on terms that are favorable to us.
As of June 30, 2011, our available balance of cash was $1,813.
10
We expect to put our present and anticipated capital resources to expanding our operations.
To date, the Company has incurred substantial losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.
If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.
The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that the Company will raise sufficient funds from such financing arrangements, or that Company will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of the Company’s financing is dependent upon.
During the six months ended June 30, 2011, the Company had a net decrease in cash of $(17). The Company’s principal sources and uses of funds were as follows:
Cash used in operating activities. The Company used $(40,017) in cash for operating activities for the six months ended June 30, 2011 as compared to $(24,837) in the prior six months ended June 30, 2010. This result is primarily attributed to the increased net loss for the period, partially offset by a derivative liability of $34,393.
Cash provided by financing activities. The Company received proceeds from convertible promissory notes payable of $40,000 during the six months ended June 30, 2011.
There was no significant impact on the Company’s operations as a result of inflation for the six months ended June 30, 2011.
During the six months ended June 30, 2011, we did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.
Forward Looking Statements - Cautionary Factors
Certain statements in this report contain "forward-looking statements" that may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance and similar matters. When used in this report, the words "may," "will," expect," anticipate," "continue," "estimate," "project," "intend," and similar expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. We caution readers that a variety of factors could cause our actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements.
Additional risks and uncertainties not currently known or deemed to be immaterial also may materially adversely affect the business, financial condition and/or operating results.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not required for a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our chief executive officer, also acting as principal financial officer, has carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, it was concluded that our disclosure controls and procedures were ineffective in ensuring that information required to be disclosed by us in our ;periodic reports that we file or submit under the Exchange Act for the following reasons:
a) The Company has limited segregation of duties amongst its employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
b) The Company's has a limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.
Changes in internal control over financial reporting.
Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.
Item 1A. Risk Factors
This item is not required for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
This Item is not applicable.
Item 3. Defaults Upon Senior Securities
This Item is not applicable.
Item 4. Removed and Reserved
Item 5. Other Information
This Item is not applicable.
Item 6.
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Exhibits
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31.1
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Certification required under Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification required under Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS | XBRL Instance |
101.SCH | XBRL Schema |
101.CAL | XBRL Calculation |
101.DEF | XBRL Definition |
101.LAB | XBRL Label |
101.PRE | XBRL Presentation |
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
VITAMIN BLUE, INC. | |
June 8, 2012
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By: /s/ Frank D. Ornelas
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Frank D. Ornelas
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President, Principal Executive Officer,
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Principal Financial Officer
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