Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - VITAMIN BLUE, INC.Financial_Report.xls
EX-32.1 - CERTIFICATION REQUIRED UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - VITAMIN BLUE, INC.ex321.htm
EX-31.1 - CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - VITAMIN BLUE, INC.ex311.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[Amendment No. 2]

 
 

 
 
  X   
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the quarterly period ended June 30, 2011
     
   ___ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
Commission File No. 000-54247

 
VITAMIN BLUE, INC.
(Exact name of the Registrant as specified in Charter)


Delaware
33-0858127
(State of Incorporation)
(I.R.S. Employer ID Number)

1005 West 18th Street, Costa Mesa, CA  92627
92627
(Address of Principal Executive Offices)
(Zip Code)

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
     
 
Part I – Financial Information
 
     
Item 1.
Financial Statements (Unaudited):
2
     
 
Balance Sheets – June 30, 2011 and December 31, 2010
3
     
 
Statements of Operation - Three and Six Months Ended June 30, 2011 and 2010
4
     
 
Statement of Shareholders’ Equity – Six Months Ended June 30, 2011
5
     
 
Statements of Cash Flows - Three and Six Months Ended June 30, 2011 and 2010
6
     
 
Notes to Financial Statements
7
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Result of Operation
10
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
12
     
Item 4.
Controls and Procedures
12
     
 
Part II – Other Information
 
     
Item 1.
Legal Proceedings
13
     
Item 1A.
Risk Factors
13
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
13
     
Item 3.
Defaults Upon Senior Securities
13
     
Item 4.
Removed and Reserved.
13
     
Item 5.
Other Information
13
     
Item 6.
Exhibits
13
     
 
Signatures
13
 
 
 
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
 
 
2

 
 
VITAMIN BLUE, INC
BALANCE SHEETS
 
   
June 30, 2011
   
December 31, 2010
 
   
(Unaudited)
       
ASSETS
           
CURRENT ASSETS
           
   Cash
  $ 1,813     $ 1,830  
   Accounts receivable, net
    10,969       5,535  
   Inventory
    13,030       15,772  
                 
                        TOTAL CURRENT ASSETS
    25,812       23,137  
                 
PROPERTY & EQUIPMENT, at cost
               
   Vehicles
    21,811       21,811  
   Machinery & equipment
    1,020       1,020  
   Office equipment
    1,839       1,839  
      24,670       24,670  
Less accumulated depreciation
    (24,606 )     (24,548 )
                 
NET PROPERTY AND EQUIPMENT
    64       122  
                 
                       TOTAL ASSETS
  $ 25,876     $ 23,259  
                 
                 
LIABILITIES AND SHAREHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
   Accounts payable
  $ 65,699     $ 56,688  
   Accrued expenses
    29,056       23,769  
   Accrued interest, related party
    1,494       1,134  
   Accrued interest, other
    52,305       45,440  
   Subscriptions payable
    -       33,050  
   Derivative liability
    80,526       46,133  
   Convertible promissory notes
    80,000       40,000  
   Loans payable
    110,000       110,000  
   Loan payable, related party
    8,000       8,000  
                 
                       TOTAL CURRENT LIABILITIES
    427,080       364,214  
                 
                 
SHAREHOLDERS' DEFICIT
               
   Preferred Stock, $0.0001 par value
               
   100,000,000 authorized preferred shares; none issued or outstanding
    -       -  
   Common Stock, $0.0001 par value; 900,000,000 shares authorized 526,525,000 and 510,000,000 shares issued and outstanding, respectively
    52,653       51,000  
   Additional paid in capital
    82,594       39,487  
   Accumulated deficit
    (536,451 )     (431,442 )
                 
                      TOTAL SHAREHOLDERS' DEFICIT
    (401,204 )     (340,955 )
                 
                      TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
  $ 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
   
Six Months Ended
 
   
June 30, 2011
   
June 30, 2010
   
June 30, 2011
   
June 30, 2010
 
                         
REVENUE
  $ 30,089     $ 29,856     $ 47,952     $ 49,240  
                                 
COST OF SALES
    20,806       11,775       34,481       23,127  
                                 
GROSS PROFIT
    9,283       18,081       13,471       26,113  
                                 
OPERATING EXPENSES
    49,649       30,317       74,718       55,603  
DEPRECIATION EXPENSE
    29       29       58       58  
                                 
TOTAL OPERATING EXPENSES
    49,678       30,346       74,776       55,661  
                                 
LOSS FROM OPERATIONS BEFORE  OTHER EXPENSES
    (40,395 )     (12,265 )     (61,305 )     (29,548 )
                                 
OTHER EXPENSES
                               
    Penalties
    (174 )     (137 )     (314 )     (272 )
    Derivative valuation gain
    1,871       -       4,449       -  
    Interest expense
    (23,429 )     (4,535 )     (47,839 )     (7,974 )
                                 
TOTAL OTHER EXPENSES
    (21,732 )     (4,672 )     (43,704 )     (8,246 )
                                 
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES
    (62,127 )     (16,937 )     (105,009 )     (37,794 )
    Provision for income taxes
    -       -       -       -  
                                 
NET LOSS
  $ (62,127 )   $ (16,937 )   $ (105,009 )   $ (37,794 )
                                 
                                 
BASIC AND DILUTED LOSS PER SHARE
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
                               
      BASIC AND DILUTED
    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
             
   
Preferred Stock
   
Common stock
   
Paid-in
   
Accumulated
       
   
Shares
   
Amount
 
Shares
   
Amount
   
Capital
   
Defitcit
   
Total
 
Balance at December 31, 2010
    -     $ -       510,000,000     $ 51,000     $ 39,487     $ (431,442 )   $ (340,955 )
                                                         
Issuance of shares of common stock for subscriptions payable (unaudited)
    -       -       16,525,000       1,653       31,397       -       33,050  
                                                         
Contributed services (unaudited)
    -       -       -       -       11,710       -       11,710  
                                                         
Net Loss for the six months ended June 30, 2011 (unaudited)
    -       -       -       -       -       (105,009 )     (105,009 )
                                                         
Balance at June 30, 2011 (unaudited)
    -     $ -       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
 
   
June 30, 2011
   
June 30, 2010
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
      Net loss
  $ (105,009 )   $ (37,794 )
      Adjustment to reconcile net loss to net cash  used in operating activities
               
      Depreciation
    58       58  
      Bad debt expense
    (382 )     -  
      Contributed services
    11,710       14,807  
    Changes in Assets and Liabilities
               
     (Increase) Decrease in:
               
     Accounts receivable
    (5,052 )     (1,065 )
     Inventory
    2,742       (12,876 )
     Increase (Decrease) in:
               
     Accounts payable
    9,011       4,509  
     Accrued expenses
    12,512       7,524  
     Derivative liability
    34,393       -  
                 
NET CASH USED IN OPERATING ACTIVITIES
    (40,017 )     (24,837 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
     Proceeds from related party loans payable
    -       5,000  
     Proceeds from investor loans payable
    -       20,000  
     Proceeds from convertible promissory notes
    40,000       -  
                 
NET CASH PROVIDED IN FINANCING ACTIVITIES
    40,000       25,000  
                 
NET INCREASE/(DECREASE) IN CASH
    (17 )     163  
                 
CASH, BEGINNING OF PERIOD
    1,830       1,077  
                 
CASH, END OF PERIOD
  $ 1,813     $ 1,240  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
    Interest paid
  $ -     $ -  
    Taxes paid
  $ -     $ -  
                 
NON-CASH FINANCING AND INVESTING ACTIVITIES:
               
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.
 
 
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.
 
 
7

 
 
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:

 
·
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
 
·
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
 
·
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.

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
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
                         
Assets
  $ -     $ -     $ -     $ -  
                                 
Total assets measured at fair value
  $ -     $ -     $ -     $ -  
                                 
Derivative Liability
  $ 80,526     $ -     $ -     $ 80,526  
                                 
Total liabilities measured at fair value
  $ 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.
 

 
8

 
 
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
  $ 0.0020  
Conversion price for the loans
  $ 0.0012  
Dividend yield
    0.00 %
Years to Maturity
    1  
Risk free rate
    0.29 %
Expected volatility
    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.
 
 
9

 

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.
 
Off Balance Sheet Arrangements

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.

 
11

 
 
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.
 
 
12

 

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.
Exhibits
   
31.1
Certification required under Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1
Certification required under Section 906 of the Sarbanes-Oxley Act of 2002.
   
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
By: /s/ Frank D. Ornelas
 
Frank D. Ornelas
 
President, Principal Executive Officer,
 
Principal Financial Officer
 
 
 
 
13