VITAMIN BLUE, INC. - FORM 10-K

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EX-32.1 - CERTIFICATION REQUIRED UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - VITAMIN BLUE, INC.	vitaminblueexh321.htm
EX-31.1 - CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - VITAMIN BLUE, INC.	vitaminblueexh311.htm
EXCEL - IDEA: XBRL DOCUMENT - VITAMIN BLUE, INC.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[ X ]

Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2012

[ ]

Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File Number: 000-54247

Vitamin Blue, Inc.

(Exact name of registrant as specified in its charter)

Delaware	33-0858127
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1005 West 18th Street, Costa Mesa, California 92627

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (949) 645-4592

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

None

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

Common Stock, $0.0001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]

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 1934during 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]
(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 [ X ]

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sales price, or the average bid and asked price on such stock, as of June 30, 2012, the last business day of the registrant’s most recently completed fiscal year, was $-0-. Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the registrant’s knowledge, owned 10% or more of registrant’s outstanding common stock as June 30, 2012 have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the registrant’s common stock outstanding as of April 12, 2013 was 575,445,000.

DOCUMENTS INCORPORATED BY REFERENCE

A description of "Documents Incorporated by Reference" is contained in Part IV, Item 15.

VITAMIN BLUE, INC.

TABLE OF CONTENTS

PART I		Page

Item 1.	Business	3

Item 1A.	Risk Factors	8

Item 1B.	Unresolved Staff Comments	13

Item 2.	Properties	13

Item 3.	Legal Proceedings	13

Item 4.	Mine Safety Disclosures	13

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14

Item 6.	Selected Financial Data	15

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 8.	Financial Statements and Supplementary Data	18

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	18

Item 9A.	Controls and Procedures	19

Item 9B	Other Information	19

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	19

Item 11.	Executive Compensation	20

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	21

Item 13.	Certain Relationships and Related Transactions and Director Independence	22

Item 14.	Principal Accounting Fees and Services	23

PART IV

Item 15.	Exhibits, Financial Statement Schedules.	24

	Signatures	36

PART I

Item 1. Business.

Our Company

Vitamin Blue, Inc. (“Vitamin Blue” or the “Company”), was incorporated in Delaware on May 25, 1999, under the name Under The Influence, Inc., our name was changed to Vitamin Blue, Inc., by amendment to the Certificate of Incorporation effective on May 3, 2007. Our principal executive offices are located at 1005 West 18th Street, Costa Mesa, CA 92627 and our telephone number is (949) 645-4592. We are an innovative water boardsports company based in Costa Mesa, California. We design, manufacture and distribute water boardsports wear (boardshorts, t-shirts and fleece jackets) and water boardsports accessories (board bags, paddle bags and rack pads). Our Company is focused on becoming a water boardsports brand of long-term excellence by our commitment to exceeding our customers' expectations in producing products of the highest quality and athletic performance and continuing to develop a good reputation with our retail partners to deliver on time. We are an authentic source for unique, functional and diverse water boardsports products.

In pursuing a strategy of building and maintaining a strong foundation at the core water boardsports market level, we distribute products to surfboard and standup paddleboard manufacturers and surf and standup paddle shops, which they in turn resell to retail customers. Terms of such sales are payment in full for the products within thirty (30) from date of delivery. We intend to leverage this foundation by expanding product offerings and increasing brand penetration into the mainstream. We plan on expanding distribution into specialty stores and department stores. In order to maintain long-term brand awareness we intend to stay true to our water boardsports roots as an authentic source for water boardsports products. We also plan to support competitions through sponsoring athletes in order to create a visible foundation in the water boardsports industry..

Our primary focus is on water boardsports wear and water boardsports accessories. We manufacture most of our water boardsports accessories and nearly all of our water boardsports wear in-house. Only the manufacturing of some board bags and the sewing of board shorts (trunks) are outsourced.

Overview of Our Businesses

We are an innovative water boardsports company based in Costa Mesa, California. We design, manufacture and distribute water boardsports wear and water boardsports accessories. We are focused on becoming a water boardsports brand of long-term excellence by our commitment to exceeding our customers' expectations in producing products of the highest quality and athletic performance and continuing to develop a good reputation with our retail partners to deliver on time. Vitamin Blue is an authentic source for unique, functional and diverse water boardsports products.

In pursuing a strategy of building and maintaining a strong foundation at the core water boardsport market level, we have began the important first step in this strategy by distributing product to surfboard and standup paddleboard manufacturers and surf and standup paddle shops. We intend to leverage this foundation by expanding product offerings and increasing brand penetration into the mainstream. Our product distribution will extend into specialty stores and department stores. In order to maintain long-term brand awareness, Vitamin Blue intends to stay true to its water boardsports roots as an authentic source for water boardsports products by supporting the core of the sport through sponsorship of athletes, competitions and other grassroots activities, thereby maintaining a strong foundation in the water boardsports industry.

We manufacturer most of our water boardsports accessories and nearly all of our water boardsports wear in-house. Only the manufacturing of some board bags and the sewing of board shorts (trunks) are outsourced.

The primary focus of Vitamin Blue is water boardsports wear and water boardsports accessories. The Company began operations in 1999 and is located in Costa Mesa, Orange County, California, the epicenter of boardsports culture.

Vitamin Blue has launched product lines annually beginning in the summer of 2000. The Company has concentrated its sales and marketing efforts throughout California, into northern Baja California (Mexico), Hawaii and Eastern states. Initial distribution has centered on surfboard and standup paddleboard manufacturers and surf and standup paddle shops (the core water boardsports market).

Our strategy is to build brand recognition in the core water boardsports market with the aim of enhancing long-term growth potential. We intend to leverage the brand by expanding product offerings that appeal to boardsport participants and increasing brand penetration into the mainstream to attract those who affiliate themselves with the action sports lifestyle. We plan to extend our distribution to include specialty stores and department stores. Vitamin Blue will maintain its image by staying true to its water boardsports roots through the sponsorship of athletes, competitions, and other grassroots activities.

Industry Overview

Management is of the opinion that the surf industry has shown growth for the previous five years, according to the most recent 2010 Surf Industry Manufacturers Association (SIMA) Distribution Study (available at http://www.sima.com). Sales are expected to grow steadily over the next several years. Anticipated market growth can be attributed to a number of factors. Outdoor, individual extreme action sports among the general population have become increasingly popular. We believe that much of the increase in popularity is from shifting demographics, as the teenage population grows faster than the rest of the population. Additionally, with the overall population pursuing a more physically active lifestyle, it is not uncommon for an entire family living in or near water communities to engage in water boardsports together. Water boardsports has attracted new comers, from young sons and daughters to middle aged fathers and mothers.

Historically, the most frequent buyers of water boardsports wear and water boardsports accessories were teenage and young adult males. However, in recent years, the market has expanded to include water boardsports wear for teenage girls, women, children and toddlers.

The first evidence of surfing was in 1500 in Hawaii, when Polynesians arrived. Surfing became a well-known sport in 1912, when surf Olympian Duke Kahanamoku introduced the activity around the world. After World War II, surfboards were created from styrofoam, polyester resin and fiberglass. The new materials contributed to the growth of the sport.

In the late 1950’s and early 1960’s, surfing grew more popular with television shows like ABC’s Wide World of Sports and movies such as Endless Summer, Gidget and Beach Blanket Bingo. In recent years, surfing has become one of the fastest growing sports in the United States.

In the beginning, the only surfing accessory available was a surfboard. Surfing apparel was extremely bulky and made from inflexible material such as canvas. Early surf manufacturers include, among others, Hang Ten, Birdwell Beach Britches, and Kanvas by Katin. Today’s competitors in the surf industry include Quicksilver, Billabong International, Volcom Inc., and Hurley, a division of Nike. Today, surf companies typically offer a complete line of casual apparel for every season of the year. A line of surfing accessory products is also offered.

We believe that opportunities for growth exist in the water boardsport industry over the next several years due to shifting demographics. For example, the teenage population, or the “Generation Y” group, is growing faster than the rest of the population. We further believe that this group is an important demographic to target because it is a major participant in the action sports, such as surfing, and it has influence on fashion trends for older consumers such as Generation X-ers (persons born between 1965 and 1976) and Baby Boomers (1946 through 1964).

Our Strategy

Our goal is to develop the Vitamin Blue brand into a leader in the water boardsport industry by offering innovative quality products and service, timely delivery, aggressive grassroots marketing and word-of-mouth and digital and print advertising.

The key points of our strategy are the following:

Continue to build a water boardsport brand of long-term excellence for the Vitamin Blue name.

Vitamin Blue management intends to present the water boardsport industry with an excellent image by offering superior quality products and customer service. Branding the Vitamin Blue name and image will involve traditional marketing methods, such as core consumer magazines, trade magazines, trade shows, promotional goods, and sponsorship of top-performing athletes. Also, management will strive to create a positive consumer experience by offering water boardsport products known for their functionality, athletic performance, longevity and value.

Concentrate on Five Main Value Chain Elements: Product, Quality, Image, Distribution, and Delivery.

Product. The main thrust of Vitamin Blue’s strategy will revolve around the fashion, function and performance of our products. Putting a product on the market that does not perform its function properly can lead to a rapid demise of a company. In order to ensure that all product designs from Vitamin Blue meet the demands for which they are intended, we will use water boardsport enthusiasts to assist in the design of our water boardsport wear and water boardsport accessory products.

Quality. From the very beginning, Vitamin Blue has made quality a priority. The Company does not intend to be a low-cost producer, but rather a leader in quality. These attributes stem directly from the quality that is built into every pair of board shorts, t-shirt, fleece, board bag, paddle bag, roof rack pads and other items marketed by the Company.

Image. Vitamin Blue is based on water boardsports, yet none of its revenue comes from boards. Rather, the Company intends to serve both the boardsport participant and those who affiliate themselves with the action sports lifestyle by cultivating the water boardsport image with its uniquely designed and colorful water boardsport wear.

Distribution. Vitamin Blue is in the process of cultivating a variety of future distribution channels. This includes specialty shops and department stores, which we believe will make our products more available to as many consumers as possible. Currently, we distribute our product through the core distribution channels consisting of surfboard and standup paddleboard manufacturers and surf and standup paddle shops. We do not have any distribution agreements and all sales are final. Typically, all sales to a new customers are “cash on delivery.” Terms of sales for established customers are payment in full for the products within thirty (30) from date of delivery. The recipient owners of the business are responsible for all payments.

Delivery. We intend to cultivate a variety of distribution channels in order to make our products available to a large group of consumers. However, we do not plan of developing low-end channels such as mass merchandisers and membership club stores, which we believe might diminish the quality and image of our products and brand name. We believe that is difficult to sell product at full price when consumers can purchase it in discount outlets.

The primary distribution efforts will focus on retail outlets in North America (U.S., Canada, and Mexico). As the Company continues to successfully grow, future plans are to penetrate Europe with an emphasis on France, United Kingdom, Spain, Italy, and Germany. Finally, Vitamin Blue will continue to build on the success of its expansion by penetrating parts of other markets such as Japan and Australia.

There are three types of retail outlets that Vitamin Blue intends to market to: surfboard and standup paddleboard manufacturers, surf and standup paddle shops, and e-commerce partners.

Surfboard and Standup Paddleboard Manufacturers

This retail outlet generally consists of single shops, where boards are designed, manufactured and marketed. These shops are located in or near water communities. This distribution channel is focused on the central water boardsport market and represents a genuine source for water boardsport accessories. Gaining and maintaining a presence within water boardsport manufacturers is one of the cornerstones to building long-term brand recognition in the core water boardsport market. Among Vitamin Blue’s business relationships are water boardsport manufacturers such as Bing & Jacobs Surfboards, Bark Paddleboards, Infinity Surfboards, Dewey Weber and King’s Paddle Sports. Vitamin Blue distributes water boardsports accessories through direct sales to these stores.

Surf and standup Paddle Shops

This distribution channel typically consists of single to multiple retail outlets, located in or near water communities, focused on the central boardsport market. Surf and Standup Paddle shops are an authentic retail source for complete lines of water boardsport wear and water boardsport accessory products. Gaining and maintaining a presence within this segment is also a cornerstones to building long-term brand recognition in the core water boardsport market. We have established distribution relationships with the following retail outlets:

●	Freeline Design (Santa Cruz, California)

●	The Frog House (Newport Beach, California)

●	Infinity Surfboards (Dana Point, California)

●	Legends SUP (Carlsbad, California)

●	Hi-Tech Surf Sports (Maui, Hawaii)

●	Second Wind Sail and Surf (Maui, Hawaii)

●	Hawaiian Island Surf and Sport (Maui, Hawaii)

●	Kennedy Surfboards (Woodland Hills, California)

●	Malibu Surf Shack, (Malibu, California)

●	E.T. Surf (Hermosa Beach, California)

●	Spyder (Hermosa Beach, California)

●	Icons of Surf (San Clemente, California)

●	Encinitas Surfboards (Encinitas, California)

●	Nor Easter Surf Shop (Scituate, Massachusetts)

●	Air & Speed Surf Shop (Montauk, New York)

●	Marsh’s Surf Shop (Atlantic Beach, North Carolina).

We distribute our complete line of products, from water boardsports wear to water boardsports accessories, through this distribution channel with direct sales to these stores. .

There are two types of retail outlets that Vitamin Blue intends to market to in the future: specialty stores and department stores:

Specialty Stores

Specialty stores are typically single, regional and national outlets generally located throughout North America in shopping centers and shopping malls. This distribution channel emphasizes the mainstream market, those who affiliate themselves with the action sports lifestyle. Specialty store retail outlets are primarily tourist/vacation shops, sporting good stores such as the Sports Chalet, or regional and national retail stores such as Pacific Sunwear of California and Zumiez. We intend to use this type of retail outlet to distribute water boardsports wear with direct sales to these stores.

Department Stores

This type of retail outlet generally has stores located within shopping malls nationwide. Such stores may include Bloomingdale’s, Macy’s, Saks Fifth Avenue, and Nordstrom. This distribution channel also concentrates on the mainstream market, those who affiliate themselves with the action sports lifestyle. Vitamin Blue intends to sell its water boardsports wear through this type of retail outlet.

Delivery

Vitamin Blue has a primary objective to ensure timely delivery of products to retailers. We believe that we have developed a reputation for on-time delivery that allows us to continue developing existing relationships and to cultivate new business relationships with new distributors.

Vitamin Blue believes that continuous focus on these five specific competencies will enable it to gain and maintain a leadership position in the water boardsports industry, as well as make significant inroads into the mainstream clothing industry.

●	Continue to Establish and Maintain Longstanding Relationships with Surfboard and Standup Paddleboard Manufacturers and Surf and Standup Paddle Shops and Expand Product Distribution into Specialty Stores and Department Stores.

Vitamin Blue is currently executing on its strategy to establish business relationships with surfboard and standup paddleboard manufacturers and surf and standup paddle shops thereby enabling the company to raise and maintain awareness of the brand. Our objectives are to secure a market presence at this core level and leverage this strong foundation into the mainstream clothing industry through specialty stores and department stores.

●	Continue the Aggressive Grassroots Marketing Strategy.

To initiate presence in the industry, Vitamin Blue has relied on aggressive grassroots marketing. In addition, the Company sponsors a team of up-and-coming professional water boarsports participants and numerous water boardsports competitions.

●	Build the Business Infrastructure Necessary to Support the Company’s Planned Growth.

Vitamin Blue has developed a business model that can accommodate the exceptional growth and serve its expanding customer base. The Company will continue to invest in its infrastructure by securing intelligent and tenacious management, sales and staff personnel. It is believed that the development of this infrastructure will allow Vitamin Blue to continue to effectively manage its rapidly growing business operations.

Water Boardsports Wear for Men and Women

Product designs are developed to appeal to preferences of active water boardsport enthusiast. Innovative designs, active fabrics, and quality are combined with fashion, functionality and athletic performance. The Company has distinguished its water boardsports wear line with the use of high-quality quick drying fabrics, triple stitching along the seams, Velcro® and Lycra® closing board shorts (trunks).

Vitamin Blue offers T-Shirts made of quality 100% heavy cotton. The shirts are made loose fitting and offered in a variety of colors with various water boardsports graphics depicted. We also offer pullover hooded fleece made of 80% cotton and 20% polyester.

Pullover hooded fleece made of 80% cotton and 20% polyester is also offered.

Water Boardsports Accessories

Included among these products are:

●	Board Travel Bags, which offer board protection and can be used daily or for long distance surf trips.

●	Water boardsport Gear Travel Bags, which are duffle bags used to carry water boardsports essentials on trips.

●	Paddle Bags, which are used to protect paddles.

●	Roof-Rack Pads, used on existing car roof racks for board protection and security on daily surf outings.

Operations and Manufacturing

Vitamin Blue conducts design, marketing, distribution and nearly all manufacturing in-house for all of its products. Our President, Frank D. Ornelas, designs all products distributed and manufactured by Vitamin Blue. Vitamin Blue manufacturing activities and capabilities include cutting, sewing and silk-screening. The sewing of board shorts (trunks) and the manufacturing of some board bags are the only functions outsourced. By outsourcing these two product categories, Vitamin Blue only engages in its core products. We strive to continuously improve the design quality and timely delivery of our products.

Sales and Marketing

The Company’s marketing programs share a coherent vision in promoting its image and products to consumers and wholesale accounts. Key elements of Vitamin Blue’s public relations and advertising efforts include:

●	Digital and Print advertising (i.e., Eastern Surf Magazine, Bliss Magazine, Standupzone.com)

●	Trade Shows (Surf Expo)
·	Industry – Specific events sponsorship (Water Boardsport Contests)

●	Promotional goods

Competition

We are subject to significant competition that could impact our ability to gain market share, win business and increase the price of our products. We face strong competition from a wide variety of firms, including large, retail box or discount as well as small businesses.

Quicksilver, Inc., (ZQK) a publicly traded company based in Huntington Beach, California, is a manufacturer of surf wear and surfing accessories. The company’s products are carried in surf shops, specialty stores, department stores and its own Boardriders Club stores throughout the world. This company is managed and operated by surfers, and generates approximately $2 billion in sales annually.

Billabong Intl, (AU:BGG) publicly trades on the Australian Stock Exchange, however, it is based in Irvine, California. The company manufactures surf wear and surfing accessories for boys, men, and girls. In 1983, Bob Hurley purchased the licensing rights to market Billabong in North America. He was instrumental in bringing the company to its current level of success. In 1999, Mr. Hurley relinquished the license and began his own company, Hurley. Billabong is run by surfers and generates over $1 billion annually in revenue.

Hurley, based in Costa Mesa, California, manufactures surf wear and surfing accessories for boys, men and girls. The Company is managed and operated by a surfer, Bob Hurley. In February 2002, Hurley was purchased by Nike, Inc. (NKE). Terms of the transaction were not disclosed.

Volcom Inc., (VLMC) a publicly traded company located in Costa Mesa, California, manufactures young men’s and young women’s clothing and accessories. The company’s products are carried in board sports retailers, specialty stores and department stores. Volcom produces over $300 million in sales annually. The company was founded by surfers and is managed by surfers.

Vitamin Blue has taken a very assertive stance and has earned an entry position in the water boardsports industry. By currently distributing its products to surfboard and standup paddleboard manufacturers and surf and standup paddle shops, Vitamin Blue has initiated the steps necessary in building long-term brand awareness. Since 1999 the company has experienced positive sales growth each year.

Government Regulation

We are subject to certain federal, state and local laws and regulations affecting our business and products, particularly those promulgated by the Federal Trade Commission and the Consumer Products Safety Commission. These regulations relate principally to product labeling, licensing requirements, product safety and labor and workplace rules. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations. We believe that we are in substantial compliance with those currently existing regulations, as well as applicable federal, state and local laws.

Employees

As of December 31, 2012, we had two part-time employees and one full-time employee, Frank D. Ornelas, our President and Chief Executive Officer.

Item 1A. Risk Factors

Our business, industry and common stock are subject to numerous risks and uncertainties. Any of the following risks, if realized, could materially and adversely affect our revenues, operating results, profitability, financial condition, prospects for future development, growth and overall business, as well as the value of our common stock.

INVESTMENT IN THE COMPANY IS HIGHLY SPECULATIVE, SUBJECT TO NUMEROUS AND SUBSTANTIAL RISKS, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY AND MANY OF WHICH CANNOT BE REASONABLE ASCERTAINED OR QUANTIFIED AT THIS TIME. THE SHARES ARE SUITABLE ONLY AS AN INVESTMENT FOR THOSE WHO ARE ABLE TO AFFORD A COMPLETE LOSS OF THEIR INVESTMENT. THEREFORE, PROSPECTIVE SUBSCRIBERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS TOGETHER WITH ALL OTHER INFORMATION CONTAINED IN THIS REPORT BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.

Any investment in our common stock involves a high degree of risk. Prospective investors should carefully consider the following information about these risks, together with the other information contained in this Report, before they decide whether to buy any shares. If any of the following risks occur, the business, and the results of operations and financial condition, would likely suffer.

We have limited operating history and results; prior losses and no independent operations.

We have a limited operating history that has resulted in operating losses. The accumulated net losses since inception on May 25, 1999 to December 31, 2012 have amounted to $762,146. There can be no assurance as to when or whether we will be able to achieve sustained and growing operating revenues. Or if operating revenues are achieved, there can be no assurance they can be sustained. For additional information please refer to our financial statements with notes that appear elsewhere in this Report.

Risks Related to Our Business

If our operations are not sufficient to sustain our business and possible future expansion, we may have to seek additional funding.

We can give no assurance that a sufficient level of sales will be attained by us in our operations within the foreseeable future, which will enable us to fund our business and undertake our expansion plans. We may face unbudgeted costs, delays and difficulties’ executing our business plan, as is frequently encountered by similarly situated companies. We are aware that there may be changes in economic, regulatory or competitive conditions that may lead to increased costs. All of these factors may culminate in circumstances that could make funds generated by our operations insufficient to fund our cash requirements for the next twelve months and beyond. We may determine that it is in our best interests to expand more rapidly than currently intended, in which case we will need additional financing.

The Company may in the future be required to pursue additional securities offerings publicly or privately to finance unanticipated capital costs and working capital needs and potential expansion. These offerings may be made from time-to-time over an indefinite period and will result in a dilution of the shareholders’ interest prior to the offering. Operations thereafter may depend upon the level of business revenues and the continued availability of investment capital. If operating revenues are insufficient to continue the Company’s operations, additional funds will have to be raised through loans or other financing, and there can be no assurance that any such financing will be obtained on favorable terms, if at all.

The Company shall have the right to issue, in the aggregate, a number of shares equal to the difference between the number of issued and outstanding shares and the number of shares authorized by its Certificate of Incorporation.

Any new issuance of equity stock of the Company will have the effect of diluting the percentage interest of a shareholder for purposes of allocations of equity and distributions.

Additional financing may not be available when needed or may not be available on terms acceptable to us. If additional funds are raised by issuing equity securities, stockholders may incur dilution. If adequate financing is not available, we may be required to delay, scale back or eliminate one or more of our product development programs or otherwise limit the development and marketing of our products, which could materially and adversely affect our business, results of operation and financial condition.

Our Independent Registered Accountants’ Report states that there is a substantial doubt that we will be able to continue as a going concern.

Our independent registered public accountants, state in their audit report, that 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.

Our future operating results are likely to fluctuate.

Our quarterly and annual operating revenues, expenses and operating results may fluctuate due to a variety of factors, many of which are beyond our control, including:

●	The timing of orders from, and shipments to, significant customers

●	The timing of new product introductions by us or our competitors

●		Variations in the mix of products sold by us or our competitors

●		The timely payment of our invoices

●		Possible decreases in average selling prices of our products in response to competitive pressures

●		Market acceptance for new lines of our products

●	Fluctuations in general economic conditions

Due to all of the foregoing factors, we do not believe that period-to-period comparisons of our historical results of operations are indications of future performance. Furthermore, it is possible that in some future quarters our results of operations may fall below the expectations of securities analysis and investors. In such event, the price of our stock, when trading and listed, will likely be materially and adversely affected.

We are and will continue to be dependent upon key personnel.

We depend to a significant extent upon our President, Frank D. Ornelas and we will depend upon new and additional senior management, sales and marketing personnel. The competition for such personnel is intense. Our growth and future success will depend to a large extent on our ability to attract and retain highly qualified personnel. We do not have employment agreements with our President. The loss of our President or the inability to hire or retain qualified personnel could have a material adverse effect upon our business and operating results. In addition, if we are unable to hire additional personnel as needed, we may not be able to adequately manage our operations or implement our plans for expansion growth. We may not be able to attract and retain the qualified personnel necessary for the development of our business which would have a material adverse effect on our business, products and services and our business operating results, and financial condition.

Our sole officer and director is not covered by an employment contract and he can terminate his relationship with us at any time. He is not subject to non-competition agreements which would survive termination of employment. We do not have “key person” insurance coverage for the loss of any of Mr. Ornelas.

Our operations have been and will continue to be dependent on the efforts of Frank D. Ornelas, our President, Chief Executive Officer, Secretary and Treasurer and the sole member of our Board of Directors; The development of our products and services, as well as the development of improvements to our products and services is dependent on retaining the services of qualified personnel who were involved in the development of our products and services. The loss of key management, the inability to secure or retain such key personnel with unique knowledge of our products and services and the technology and programming employed as part of our products and services, or an inability to attract and retain sufficient numbers of other qualified personnel would adversely affect our business, products, and services and could have a material adverse effect on our business, operating results, and financial condition.

Our Sole Officer has no experience in managing a public company.

Our sole officer has no previous experience in managing a public company, and we do not have any employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.

We are subject to substantial competition.

We are subject to significant competition that could harm our ability to win business and increase the price pressure on our products. We face strong competition from a wide variety of firms, including large, firms. Most of our competitors have considerably greater financial, marketing and technological resources than we do, which may make it difficult to win new mandates and we may not be able to compete successfully. Certain competitors operate larger facilities and have longer operating histories and presence in key markets, greater name recognition and larger customer bases. As a result, these competitors may be able to adapt more quickly changes in customer requirements. They may also be able to devote greater resources to the promotion and sale of their products. Moreover, we may not have sufficient resources to undertake the continuing research and development necessary to remain competitive.

We expect to make, strategic acquisitions and investments, and these activities involve risks and uncertainties.

In pursuing our business strategies, we continually review, evaluate and consider potential investments and acquisitions. In evaluating such transactions, we are required to make difficult judgments regarding the value of business opportunities, technologies and other assets, and the risks and cost of potential liabilities. Furthermore, acquisitions and investments involve certain other risks and uncertainties, including the difficulty in integrating newly-acquired businesses, the challenges in achieving strategic objectives and other benefits expected from acquisitions or investments, the diversion of our attention and resources from our operations and other initiatives, the potential impairment of acquired assets and the potential loss of key employees of the acquired businesses.

Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability.

We are subject to income taxes in the United States. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in domestic or foreign income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income tax provisions and accruals. Additionally, changes in the geographic mix of our sales could also impact our tax liabilities and affect our income tax expense and profitability.

Risks Related to our Common Stock

Currently, there is a limited public market for our Common Stock, and there can be no assurance that an active public market will develop or that our common stock will continue to be quoted for trading and, even if quoted, it will probably be subject to significant price fluctuations.

Our common stock is currently traded in the over-the-counter market and included on the OTCBB under the trading symbol “VTMB”. Inclusion on the OTCBB permits price quotations for our shares to be published by that service. However, we do not anticipate a substantial public trading market in our shares in the immediate future. There are no plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities.

Only companies that report their current financial information to the SEC may have their securities included on the OTCBB. Therefore, we must keep current in our filing obligations with the SEC, including periodic and annual reports and the financial statements required thereby. In the event that we become delinquent in our filings or otherwise lose our status as a "reporting issuer," any future quotation of our shares would be jeopardized.

A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state. Whether stockholders may trade their shares in a particular state is subject to various rules and regulations of that state.

Because we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and may experience further dilution.

We are authorized to issue up to 900,000,000 shares of common stock. At present, there are 575,445,000 shares of our common stock issued and outstanding. Our Board of Directors has the authority to cause us to issue additional shares of common stock without consent of any of our stockholders. Consequently, our stockholders may experience more dilution in their ownership of our common stocks in the future. As our officers and directors own a significant percentage of our issued and outstanding common stock, any future sales of their shares may result in a decrease in the price of our common stock and the value of our stockholders’ investments. Our sole officer and director, currently owns 510,050,000 shares of the total issued and outstanding shares of our common stock. Collectively, our sole officer and director owns 88.6% of our total outstanding shares of our common stock.

The possibility of future sales of significant amounts of shares held of our common stock by our officers and directors could decrease the market price of our common stock, if the market does not orderly adjust to the increase in shares of our common stock in the market. In such event, the value of your investment in us will decrease.

Sales of our common stock in reliance on Rule 144 may reduce prices in that market by a material amount.

Most of our outstanding shares of our common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted securities, those shares may be resold only pursuant to an effective registration statement or pursuant to the requirements of Rule 144 or other applicable exemptions from registration under that Act and as required under applicable state securities laws. Rule 144 provides in essence that an affiliate (i.e., an officer, director, or control person) who has held restricted securities for a prescribed period under certain conditions, may sell every three months, in brokerage transactions, a number of shares that does not exceed 1.0% of the issuer’s outstanding common stock. The alternative average weekly trading volume during the four calendar weeks prior to the sale is not available to our shareholders, as the OTCBB (if and when our common stock is listed thereon) is not an “automated quotation system” and, accordingly, market based volume limitations are not available for securities quoted only on the OTCBB.

Trading in our shares may be restricted because of state securities “Blue Sky” laws which prohibit trading absent compliance with individual state laws.

These restrictions may make it difficult or impossible to sell our common stock in those states. Transfers of our common stock may, also, be restricted under the securities laws promulgated by various states and foreign jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such laws, our common stock may not be traded in such jurisdictions. Because the shares of our common stock registered hereunder have not been registered for resale under the “Blue Sky” laws of any state, the holders of such shares and persons who desire to purchase such shares in any trading market that might develop in the future, should be aware that there may be significant state “Blue Sky” law restrictions upon the ability of investors to sell and purchasers to purchase such shares. These restrictions prohibit the secondary trading our common stock. Investors should consider the secondary market for our securities to be limited.

We may acquire other companies or product lines.

We may pursue acquisitions that could provide new products or businesses. Future acquisitions may involve the use of significant amounts of cash, potentially dilutive issuances of equity securities, incurrence of debt or amortization of expenses related to good will and other intangible assets.

In addition, acquisitions involve numerous risks, including:

●	Difficulties in the assimilation of the operations, products and personnel of the acquired company.

●	The diversion of management’s attention from other business concerns

●		Risks of entering markets in which we have no or limited prior experience

●	The potential loss of key employees of ours or of the acquired company

We currently have no commitments with respect to any acquisition. In the event that such an acquisition does occur and we are unable to successfully integrate businesses, products, or personnel that we acquire, our business, results of operations and financial condition could be materially adversely affected.

Because our sole officer and director, Frank Ornelas owns 88.6% of our outstanding common stock, investors may find that corporate decisions controlled by Mr. Ornelas are inconsistent with the interests of other stockholders.

Frank Ornelas, our sole officer and director, controls 88.6% of our issued and outstanding shares of common stock. Accordingly, in accordance with our Certificate of Incorporation and Bylaws, Mr. Ornelas Is able to control who is elected to our Board of Directors and thus could act, or could have the power to act, as our management. Since Mr. Ornelas is not simply a passive investor, but is also our sole officer, his interests as an executive officer may, at times, be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon Mr. Ornelas exercising, in a manner fair to all of our shareholders his fiduciary duties as an officer or as a member of our Board of Directors. Also, due to his stock ownership position, Mr. Ornelas will have: (i) the ability to control the outcome of most corporate actions requiring stockholder approval, including amendments to our Certificate of Incorporation; (ii) the ability to control corporate combinations or similar transactions that might benefit minority stockholders which may be rejected by Mr. Ornelas to their detriment, and (iii) control over transactions between him and Mr. Ornelas.

Volatility of our stock price could adversely affect stockholders.

The market price of our common stock could fluctuate significantly as a result of:

●	quarterly variations in our operating results;

●	cyclical nature of consumer spending;

●		interest rate changes;

●		changes in the market’s expectations about our operating results;

●		our operating results failing to meet the expectation of securities analysts or investors in a particular period;

●		changes in financial estimates and recommendations by securities analysts concerning our company or the defense industry in general;

●		operating and stock price performance of other companies that investors deem comparable to us;

●		news reports relating to trends in our markets;

●		changes in laws and regulations affecting our business;

●		material announcements by us or our competitors;

●		sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur;

●		general economic and political conditions such as recessions and acts of war or terrorism; and

●	other matters discussed in the risk factors.

Fluctuations in the price of our common stock could contribute to the loss of all or part of an investor’s investment in our company.

We currently do not intend to pay dividends on our common stock and consequently your only opportunity to achieve a return on your investment is if the price of common stock appreciates.

We currently do not plan to declare dividends on our common stock in the foreseeable future. Any payment of cash dividends will depend upon our financial condition, capital requirements, earnings and other factors deemed relevant by our board of directors. Agreements governing future indebtedness will likely contain restrictions on our ability to pay cash dividends. Consequently, your only opportunity to achieve a return on your investment in the common stock of our company will be if the market price of our common stock appreciates and you sell your common stock at a profit.

In addition, we intend to retain earnings, if any, to provide funds for the implementation of our business plan. We intend not to declare or pay any dividends in the foreseeable future. Therefore, there can be no assurance that holders of our common stock will receive any additional cash, stock or other dividends on their shares of our common stock until we have funds which our Board of Directors determines can be allocated to dividends. Investors that require liquidity should also not invest in our common stock. There is no established trading market and should one develop it will likely be volatile and subject to minimal trading volumes.

Provisions in our certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our stock.

Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

●	provide that only our board of directors shall determine the number of directors and can fill vacancies on the board of directors;

●	authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

●		limit the ability of our stockholders to call special meetings of stockholders;

●		Prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

●	provide that the board of directors is expressly authorized to adopt, amend, or repeal our bylaws; and

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company.

These and other provisions contained in our amended and restated certificate of incorporation and bylaws could delay or discourage transactions involving an actual or potential change in control of us or our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current prices, and may limit the ability of stockholders to remove our current management or approve transactions that our stockholders may deem to be in their best interests and, therefore, could adversely affect the price of our common stock.

Risk Factor Related to Controls and Procedures

If we are unable to develop and maintain an effective system of internal controls, stockholders and prospective investors may lose confidence in the reliability of our financial reporting.

The Company has limited segregation of duties amongst its officers and employees with respect to the Company's preparation and review of the Company's financial statements due to the limited number of employees, which is a material weakness in internal controls. If the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in the Company's financial reporting which could harm the trading price of stock.

The Company and its independent public accounting firm have identified this as a material weakness in the Company's internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist.

Item 1B. Unresolved Staff Comments.

This item is not required for a smaller reporting company.

Item 2. Description of Property.

We sublease our facility on a month-to-month basis. We believe that our current facilities are suitable and adequate to meet our current needs. We maintain insurance coverage against losses, including fire, casualty and theft, for each of our locations in amounts we believe to be adequate. Our headquarters are located at: 1005 West 18th Street, Costa Mesa, CA 92627.

Item 3. Legal Proceedings.

There are no material pending legal proceedings to which the company or any subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock was accepted for quotation on the OTCBB on September 5, 2012 under the symbol VTMB. The first reported trade was on December 4, 2012. The highest trade during the fourth quarter of 2012 was $0.75 and the lowest was $0.005. The last reported trade on April 11, 2013 was $0.0065. Because of the limited trading during 2012, we are not including a historical trading table.

As of the date hereof there are approximately 290 stockholders of record of our common stock.

Secondary trading of our shares may be subject to certain state imposed restrictions. Except for the OTCB, we have no immediate plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities. The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.

Penny Stock Rule

It is unlikely that our securities will be listed on any national or regional exchange or The Nasdaq Stock Market in the foreseeable future. Therefore our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for broker-dealer transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is:

●	registered and traded on a national securities exchange meeting specified criteria set by the SEC;

●	authorized for quotation on The Nasdaq Stock Market;

●	issued by a registered investment company;

●	excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or

●	exempted from the definition by the SEC.

A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000, excluding their principal residence, or annual income exceeding $200,000, or $300,000 together with their spouse.

For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, a monthly statement must be sent to the client disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.

Rule 144

All of our outstanding common shares were issued in private transactions and, except for those shares not included in our registration in August 2012, are deemed restricted securities. Rule 144 is the common means for stockholders to resell restricted securities and for affiliates, to sell their securities, either restricted on non restricted (control) shares. Rule 144 was amended, effective February 15, 2008.

Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:

●	the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or

●	1% of the shares then outstanding.

Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer.

A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144, provided only that the issuer has available current public information about itself. After a one-year holding period, a non-affiliate may make unlimited sales with no other requirements or limitations.

We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, if a market for our shares develops, but such sales may have a substantial depressing effect on such market price.

Dividends Policy

We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future.

Item 6. Selected Financial Data.

This item is not required for a smaller reporting company.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-K.

Forward Looking and Cautionary Statements

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Overview and Plan of Operation

Results of Operations 2012 Compared to 2011

Total revenues increased 23%, or $24,654, to $129,652 for the year ended December 31, 2012 compared to $104,498 for the prior year ended December 31, 2011. The revenues increase is primarily attributed to increased sales from our website that was operative for the full year, particularly the sale of board bags. Generally for 2012, the number of units sold increased and pricing remained stable.

Cost of sales increased 1%, or $850, to $74,153 for the year ended December 31, 2012 compared to $73,303 for the prior year ended December 31, 2011, primarily related to the increase in revenues and reduction in the purchase of inventory. The gross profit increased 75%, or $23,804, to $55,499 for the year ended December 31, 2012 compared to $31,695 for the same period in 2011, also due to the increase in sales.

Operating expenses, including marketing, selling and general and administrative expenses for fiscal 2012, increased 9% or $14,783, to $174,351 from $154,568 for fiscal 2011. The increase in operating expenses resulted primarily from increased business and selling expenses in the current period.

Interest expense for fiscal 2012 totaled $95,615, an increase of $6,940 over fiscal 2011. The increase in interest expense resulted from increased borrowing during 2012 and from amortization of a $69,907 debt discount on newly issued convertible promissory notes issued in 2012.

Net loss for fiscal 2012 was $107,026 as compared to a net loss of $223,678 for fiscal 2011.

Liquidity and Capital Resources

At December 31, 2012, we had an accumulated deficit of $762,146, 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 December 31, 2012, our available balance of cash and cash equivalents was approximately $3,940.

We expect to put our present and anticipated capital resources toward expanding our operations.

Liquidity and Capital Resources

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 year ended December 31, 2012, the Company had a net increase in cash of $2,524. The Company’s principal sources and uses of funds were as follows:

Cash used in operating activities. The Company used $65,476 in cash for operating activities for the year ended December 31, 2012 as compared to $71,014 in the prior year ended December 31, 2011. The 2012 result was primarily due to the $107,026 net loss and a derivative valuation gain of $92,383. Offsetting the cash used by operating activities was $25,329 in contributed services representing unpaid salaries to the Company’s President and the $25,906 increase in accrued expenses and $23,129 increase in accounts payable.

Cash provided by financing activities. Net cash provided in financing activities was $68,000 for the year ended December 31, 2012, compared to $72,000 in 2011. This represented $70,000 in proceeds from convertible promissory notes, partially offset by $2,000 in payments on related party loans payable.

There was no significant impact on the Company’s operations as a result of inflation for the year ended December 31, 2012.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

Revenue Recognition

We recognize revenue in accordance with the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). We recognize revenue upon delivery, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. Shipping terms are typically FOB shipping point and we bill our customers for shipping and handling and include such amounts in sales. We accrue for warranty costs, sales returns and other allowances based on our experience, which tells us we have less than $5,000 per year in warranty returns and allowances. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluations of our customers and historic credit losses have been within our expectations. We do not make consignment sales, nor inventory sales subject to a “buy back” or return arrangement from customers. Accordingly, our customers do not presently have a right to return unsold products to us outside of returns for defective product. Occasionally we offer our customers volume incentives on surfboard travel boards.

Our standard policies are set forth below.

●	Shipping terms in Southern California are that we deliver products directly to customers. Elsewhere, our products are shipped FOB shipping point. We recognize revenue when products are shipped.

●	We bill customers for shipping and handling and include such amounts in sales.

●	Our return policy consists of accepting product returns within 30 days of shipment.

●	Occasionally, we offer volume incentives on surfboard travel bags. Customers who informally agree to purchase 100 surfboard travel bags over the course of a year receive a 7 1/2% discount.

Reserve for Obsolete/Excess Inventory

Inventories are stated at the lower of cost or market. We regularly review our inventories and, when required, will write down any excess or obsolete inventory based on factors that may impact the realizable value of our inventory including, but not limited to, market demand, regulatory requirements and significant changes in our cost structure. If ultimate usage varies significantly from expected usage, or other factors arise that are significantly different than those anticipated by management, inventory write-downs or increases in reserves may be required. During the years ended December 31, 2012 and 2011, there were no inventory write downs recorded.

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 December 31, 2012 and 2011 are $0 and $0, respectively.

Derivative Liability

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 $69,907 in interest expense for the year ended December 31, 2012, 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	$	0.1150
Conversion price for the loans	$	0.2935
Dividend yield		0.00	%
Years to Maturity		1
Risk free rate		0.16	%
Expected volatility		394.94	%

The value of the derivative liability at December 31, 2012 and 2011 was $58,562 and $119,991, respectively.

Cash and Cash Equivalents

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

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.

Going Concern

The audited financial statements included with this Annual Report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the financial statements.

Recent Accounting Pronouncements

The company has evaluated recent accounting pronouncements and their adoption has not had nor is not expected to have a material impact on the company’s financial position or statements..

Off-Balance Sheet Arrangements

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

Item 8. Financial Statements and Supplementary Data.

Financial statements for the fiscal years ended December 31, 2012 and 2011 have been examined to the extent indicated in their reports by HJ Associates & Consultants, LLP, independent certified public accountants and have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to regulations promulgated by the SEC. The aforementioned financial statements are included herein under Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosures and Procedures

As of the end of the period covered by this annual report, our chief executive officer, also acting as principal financial officer, carried out an evaluation of the effectiveness of “disclosure controls and procedures,” as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon that evaluation, it was concluded that as of December 31, 2012, our disclosure controls and procedures were ineffective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is:

(i)	recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms; and

(ii)	accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management has concluded that our disclosure controls and procedures are ineffective due to material weaknesses in maintaining sufficient segregation of duties. Due to our size and limited resources, we are unable at this time to implement and maintain proper segregation of duties.

Management’s Annual Report on Internal Control Over Financial Reporting

As the first annual report following the Company becoming a reporting issuer, this annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our Company’s registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies. In the future reports, we will be providing such disclosure.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal controls over financial reporting or in other factors that could materially affect, or would be likely to materially affect, our internal controls over financial reporting subsequent to the date we carried out our evaluation.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Our board of directors consists of one director. The following table sets forth certain information with respect to each executive officer and director of Vitamin Blue, Inc. following the distribution:

Name	Age	Position

Frank D. Ornelas	53	President, Treasurer and Director
Veronica C. Ornelas	51	Vice President and Secretary

Frank Ornelas has served as President and Chief Executive Officer of Vitamin Blue since he founded the Company in 1999. Previously from 1983 to 1999, he held different positions in the financial services industry including securities analyst, options and bond trader and stockbroker with various financial firms. Mr. Ornelas received his Bachelors of Science degree in Business Administration from California State University at Long Beach. We believe Mr. Ornelas’ experience in various capacities in the financial services industry and his thirteen years operating Vitamin Blue provides Mr. Ornelas with ample qualifications to serve as a director and to operate the company as its CEO.

Veronica C. Ornelas was elected Vice President and Secretary on December 27, 2010. Since 1989, she has owned and operated Ornelas Graphic Designs, a custom screen printing business located in Costa Mesa, California. Ms. Ornelas is the sister of Frank Ornelas, the company’s President and Chief Executive Officer.

Committees of the Board of Directors

The Board of Directors currently does not have any committees and any such functions are carried out by the Board of Directors.

Audit Committee

The functions of the Audit Committee are currently carried out by our Board of Directors.

Director Nominees

We do not have a nominating committee for the Board of Directors.

Nominating Committee

The Company does not have a standing nominating committee or a committee performing similar functions, as the Board of Directors consists of only one member. Due to the Company’s size, it finds it difficult to attract individuals who would be willing to accept membership on the Company’s Board of Directors. Therefore, with only one member of the Board of Directors, the full Board of Directors would participate in nominating candidates to the Board of Directors. The Company did not have an annual meeting of shareholders in the past fiscal year.

Code of Ethics

The Board of Directors adopted a Code of Ethics for its chief executive officer and chief financial officer and this Code of Ethics is filed as Exhibit 14 to this Company’s Report on Form-10-KSB. The Code of Ethics will be provided to any person without charge, upon request. Requests should be directed to the Investor Relations Department at the Company's corporate headquarters.

Compensation of Directors

Our sole director did not receive compensation for his service as a director since inception May 25, 1999.

Compliance With Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. We believe that that all applicable reports were filed during the fiscal year 2012.

Item 11. Executive Compensation.

The following table sets forth compensation information for services rendered by certain executive officers in all capacities during the last three completed fiscal years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted, and certain other compensation, if any, whether paid or deferred.

During the years ended December 31, 2012, 2011 and 2010, Frank Ornelas, the Company’s Chief Executive Officers’ annual salary was $50,000. The Company has also paid for various personal expenses on behalf of Mr. Ornelas in lieu of his salary totaling $24,671 for 2012, $23,687 for 2011 and $21,041 for 2010. The unpaid portion of the Mr. Ornelas’ salary of $25,329 for 2012, $26,313 for 2011 and $28,959 for 2010, has been reflected as capital contributed in accordance with SAB Topic 5T. Mr. Ornelas has agreed to waive the unpaid portions of his past salary.

Summary Compensation Table

	Year	Salary		Total
Name	($)	($)		Compensation

Frank D. Ornelas	2012		50,000		50,000	(1)
President,	2011		50,000		50,000	(2)
Treasurer and	2010		50,000		50,000	(3)
Chief Executive
Officer

Veronica C. Ornelas	2012		0		0
Vice President and	2011		0		0
Secretary	2010		0		0

(1) Paid $24,671 in personal expenses on behalf of Mr. Ornelas during 2012 in lieu of direct salary payments – balance of $25,329 was deemed contributed services to the company and has been waived by Mr. Ornelas.

(2) Paid $23,687 in personal expenses on behalf of Mr. Ornelas during 2011 in lieu of direct salary payments – balance of $26,313 was deemed contributed services to the company and has been waived by Mr. Ornelas.

(3) Paid $21,041 in personal expenses on behalf of Mr. Ornelas during 2010 in lieu of direct salary payments – balance of $28,959 was deemed contributed services to the company and has been waived by Mr. Ornelas.

Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Name	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options/SARs at FY-End (#) Exercisable/Unexercisable	Value of Unexercised In-the-Money Options/SARs at FY-End ($) Exercisable/ Unexercisable

None	0	0	0	0 / 0

Stock Option Grants

The Company did not issue any stock options for the years ended December 31, 2012 and 2011.

Employment Contracts

We have not entered into any employment agreement or consulting agreement with our sole officer/director.

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the vent of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

Plan for Compensating Officers and Directors During the Next 12 Months

We do not have a plan for compensating officers and directors during the next 12 months. It is our intention that if before the end of the next 12 months the Company will start to generate revenue, the Company will then consider whether to provide compensation based on the projection of total revenues to be generated in the following 12 months to the officers but not to the directors of the Company.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following tables set forth certain information regarding the beneficial ownership of our voting securities as of April 12, 2013 of (i) each person known to us to beneficially own more than 5% of the applicable class of voting securities, (ii) our directors, (iii) and each named executive officer and (iv) all directors and executive officers as a group. As of April 12, 2013 a total of 575,445,000 shares of common stock were outstanding. Each share of common stock common stock is entitled to one vote on matters on which holders of common stock are eligible to vote. The column entitled "Percentage of Total Voting Stock" shows the percentage of total voting stock beneficially owned by each listed party.

The number of shares beneficially owned is determined under rules promulgated by the Securities and Exchange Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of April 12, 2013 through the exercise or conversion of any stock option, convertible security, warrant or other right. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person's spouse) with respect to all shares of capital stock listed as owned by that person or entity.

Ownership of Common Stock

Name and Position(s)	Title of Class	Common Stock Beneficially Owned		Percentage Ownership (1)

Frank D. Ornelas President, Treasurer and Chief Executive Officer	Common Stock		510,050,000	88.6	%(2)

Veronica C. Ornelas Vice President and Secretary	Common Stock		75,000	.0001	%(2)

All directors and executive Officers as a group (1 persons)	Common Stock		510,125,000	88.601	%

(1)	Percentage ownership for the Company’s Common Stock is based on 575,445,000 shares of Common Stock outstanding as of April 12, 2013.

(2)	Total issued and outstanding equals 575,445,000 common stock shares as of April 12, 2013.

Equity Compensation Plan Information

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders	0	N/A	0

Equity compensation plans not approved by security holders	0	N/A	0

Total	0	N/A	0

Item 13. Certain Relationships and Related Transactions, and Director Independence.

During the year ended December 31, 2012, the Company paid $2,000 towards the outstanding debt owed to Veronica Ornelas the Company’s Vice President and Secretary. During the year ended December 31, 2011, Ms. Ornelas loaned the Company $2,0000 for operating expenses. As of December 31, 2012 and 2011, the balance of these related party loans payable was $8,000 and $10,000, respectively. The Company has imputed interest on these loans at the rate of 9% per annum. As of December 31, 2012 and 2011, the balance of accrued interest payable to this related party was $2,592 and $1,861, respectively.

During the past two fiscal years we have subleased from Ms. Ornelas our principal place of business and executive offices, located at 1005 West 18th Street, Costa Mesa, California 92627. The facilities are leased on a month-to-month basis and consist of approximately 650 square feet of warehouse space, for which we pay $565 per month, or $6,786 per year.

During the years ended December 31, 2012, 2011 and 2010, Frank Ornelas, the Company’s Chief Executive Officers’ annual salary was $50,000. The Company paid for various personal expenses on behalf of Mr. Ornelas in lieu of his salary totaling $24,671 for 2012, $23,687 for 2011 and $21,041 for 2010. The unpaid portion of the Mr. Ornelas’ salary of $25,329 for 2012, $26,313 for 2011 and $28,959 for 2010, has been waived by Mr. Ornelas and recorded as contributed capital.

None of our directors are deemed to be independent directors. We do not have a compensation, audit or nominating committee, rather those functions are carried out by the board as a whole.

Item 14. Principal Accounting Fees and Services.

We do not have an audit committee and as a result our entire board of directors performs the duties of an audit committee. Our board of directors will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

Audit Fees

Our current auditors, HJ Associates & Consultants, LLP, billed us $34,800 and $25,800 for the audit of our annual financial statements included in this annual report for the years ended December 31, 2012 and 2011, respectively.

Audit Related Fees

For the year ended December 31, 2012 and 2011, there were no fees billed for assurance and related services by HJ Associates & Consultants, LLP relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above.

Tax Fees

For the years ended December 31, 2012 and 2011, no fees were billed by our current auditors HJ Associates & Consultants, LLP for tax compliance, tax advice and tax planning.

We do not use HJ Associates & Consultants, LLP for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage HJ Associates & Consultants, LLP to provide compliance outsourcing services.

The board of directors has considered the nature and amount of fees billed by HJ Associates & Consultants, LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining HJ Associates & Consultants, LLP,s independence.

PART 1V

Item 15. Exhibits, Financial Statement Schedules

(a)

List the following documents filed as part of the report

	1.	All financial statements schedules required to be filed by Item 8 of this Report
	2.	Those exhibits required by Item 601 of Regulation S-K (17 CFR 229.601 of this chapter) and by paragraph (b) below.

(b)

Exhibits

No.	Description

3.1		Amended and Restated Certificate of Incorporation (filed with the Commission as Exhibit 3.1 on Form 8-A12G, File No. 000-54247, filed on January 18, 2011 and is incorporated herein by reference.

3.2		By-laws (filed with the Commission as Exhibit 3.2 on Form 8-A12G, File No. 000-54247, filed on January 18, 2011 and is incorporated herein by reference.

4.1		Vitamin Blue, Inc. 2010 Stock Incentive Plan (filed with the Commission as Exhibit 4.1 on Form 8-A12G, File No. 000-54247, filed on January 18, 2011 and is incorporated herein by reference.

10.1		Promissory Note dated February 16, 2005 payable to Chester Massey for the principal sum of $60,000 filed as Exhibit 10.1 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

10.2		Promissory Note dated February 16, 2007 payable to Chester Massey for the principal sum of $50,000 filed as Exhibit 10.2 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

10.3		Convertible Promissory Note dated March 17, 2011 payable to James Yeung for the principal sum of $30,000 filed as Exhibit 10.3 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

10.4		Convertible Promissory Note dated March 17, 2011 payable to Carlthon Corp. for the principal sum of $10,000 filed as Exhibit 10.4 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

10.5		Convertible Promissory Note dated March 17, 2011 payable to Casprey Capital Corp. for the principal sum of $20,000 filed as Exhibit 10.5 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

14		Code of Ethics filed as Exhibit 14 to the Form 10-K for the fiscal year ended 2009 and is incorporated herein by reference.

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 Document*

101 SCH		XBRL Schema Document*

101 CAL		XBRL Calculation Linkbase Document*

101 DEF		XBRL Definition Linkbase Document*

101 LAB		XBRL Labels Linkbase Document*

101 PRE		XBRL Presentation Linkbase Document*

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Vitamin Blue, Inc.

Costa Mesa, California

We have audited the accompanying balance sheets of Vitamin Blue, Inc. as of December 31, 2012 and 2011, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vitamin Blue, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HJ Associates & Consultants, LLP

Salt Lake City, Utah

April 15, 2013

VITAMIN BLUE, INC.

BALANCE SHEETS

	December 31, 2012			December 31, 2011

ASSETS

CURRENT ASSETS
Cash	$	3,940		$	1,416
Accounts receivable, net		10,614			5,776
Inventory		10,527			13,041
Prepaid expenses, current		5,400			-

TOTAL CURRENT ASSETS		30,481			20,233

PROPERTY & EQUIPMENT, at cost
Vehicles		21,811			21,811
Machinery & equipment		2,420			2,420
Office equipment		1,839			1,839
Website Development		4,900			-
		30,970			26,070
Less accumulated depreciation		(25,895	)		(24,792	)

NET PROPERTY AND EQUIPMENT		5,075			1,278

OTHER ASSETS
Prepaid expenses, long term		23,000			-


TOTAL ASSETS	$	58,556		$	21,511


LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable	$	107,972		$	84,842
Accrued expenses		34,908			29,458
Accrued interest, related party		2,592			1,861
Accrued interest, other		80,353			60,629
Derivative liability		58,562			119,991
Convertible promissory notes		145,296			110,000
Loans payable		110,000			110,000
Loan payable, related party		8,000			10,000

TOTAL CURRENT LIABILITIES		547,683			526,781


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 575,445,000 and 526,525,000 shares issued and outstanding, respectively		57,545			52,653
Additional paid in capital		215,474			97,197
Accumulated deficit		(762,146	)		(655,120	)

TOTAL SHAREHOLDERS' DEFICIT		(489,127	)		(505,270	)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	58,556		$	21,511

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

VITAMIN BLUE, INC.

STATEMENTS OF OPERATIONS

	Years Ended
	December 31, 2012			December 31, 2011


REVENUE	$	129,652		$	104,998

COST OF SALES		74,153			73,303

GROSS PROFIT		55,499			31,695

OPERATING EXPENSES		174,351			159,568
DEPRECIATION EXPENSE		286			244

TOTAL OPERATING EXPENSES		174,637			159,812

LOSS FROM OPERATIONS BEFORE OTHER EXPENSES		(119,138	)		(128,117	)

OTHER EXPENSES
Penalties		(473	)		(537	)
Derivative valuation gain/(loss)		92,383			(6,349	)
Gain on extinguishment of debt		15,817			-
Interest expense		(95,615	)		(88,675	)

TOTAL OTHER EXPENSES		12,112			(95,561	)

LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES		(107,026	)		(223,678	)
Provision for income taxes		-			-

NET LOSS	$	(107,026	)	$	(223,678	)


BASIC AND DILUTED LOSS PER SHARE	$	(0.00	)	$	(0.00	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED		540,494,563			523,014,194

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

VITAMIN BLUE, INC.

STATEMENT OF SHAREHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2012


									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		-		-		16,525,000		1,653		31,397		-			33,050

Contributed seervices		-		-		-		-		26,313		-			26,313

Net Loss for the year ended December 31, 2011		-		-		-		-		-		(223,678	)		(223,678	)
Balance at December 31, 2011		-		-		526,525,000		52,653		97,197		(655,120	)		(505,270	)

Issuance of common stock for conversion of promissory notes		-		-		28,920,000		2,892		54,948		-			57,840

Issuance of common stock for services at fair value		-		-		20,000,000		2,000		38,000		-			40,000

Contributed seervices		-		-		-		-		25,329		-			25,329

Net Loss for the year ended December 31, 2012		-		-		-		-		-		(107,026	)		(107,026	)

Balance at December 31, 2012		-	$	-		575,445,000	$	57,545	$	215,474	$	(762,146	)	$	(489,127	)

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

VITAMIN BLUE, INC.

STATEMENTS OF CASH FLOWS

	Years Ended
	December 31, 2012			December 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(107,026	)	$	(223,678	)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation		1,103			244
Bad debt expense		(1,679	)		(426	)
Contributed services		25,329			26,313
Common stock issued for services		(15,817	)		-
Amortization of debt discounts recognized as interest expense		69,907			67,509
Derivative valuation (gain)/loss		(92,383	)		6,349
Changes in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable		(3,159	)		185
Prepaid expenses		6,700			-
Inventory		2,514			2,731
Increase (Decrease) in:
Accounts payable		23,129			28,154
Accrued expenses		25,906			21,605

NET CASH USED IN OPERATING ACTIVITIES		(65,476	)		(71,014	)


CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of warehouse fixed assets		-			(1,400	)

NET CASH USED IN INVESTING ACTIVITIES		-			(1,400	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loans payable		-			5,000
Payments on related party loans payable		(2,000	)		(3,000	)
Proceeds from convertible promissory notes		70,000			70,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		68,000			72,000

NET INCREASE/(DECREASE) IN CASH		2,524			(414	)

CASH, BEGINNING OF PERIOD		1,416			1,830
					-
CASH, END OF PERIOD	$	3,940		$	1,416

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	-		$	-
Taxes paid	$	-		$	-

NON-CASH FINANCING AND INVESTING ACTIVITIES:
During the year ended December 31, 2012, the Company issued 28,920,000 shares of common stock valued at $57,840 in conversion of convertible promissory notes payable. In addition, the Company issued 20,000,000 shares of common stock valued at $40,000 for website development and consulting. During the year ended September 30, 2011, the Company issued 16,525,000 shares of common in settlement of $33,050 in subscriptions payable.

The accompanying notes are an integral part of these financial statements

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

1. ORGANIZATION AND LINE OF BUSINESS

Organization

Vitamin Blue, Inc. (the "Company") was incorporated in the state of Delaware on May 25, 1999. The Company, based in Costa Mesa, California, began operations on June 1, 1999 in designing and selling surfing clothing and accessories.

Line of Business

The Company designs, manufactures and distributes surf-wear and accessories.

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 December 31, 2012. 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

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.

Use of Estimates

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred. Total advertising costs were $0 and $250 for the years ended December 31, 2012 and 2011, respectively.

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment are stated at cost, and are depreciated using the straight line and modified accelerated cost recovery system (macrs) method over 3-10 years.

Office equipment	SL	5 Years
Warehouse equipment	SL	5 Years
Vehicle	Macrs	5 Years
Website	SL	3 Years

Depreciation expense for the years ended December 31, 2012 and 2011 was $1,103 and $244, respectively, of which $817 and $0, respectively was included in Cost of Sales.

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, 2012 and 2011, 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.

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 December 31, 2011:

	Total		(Level 1)		(Level 2)		(Level 3)

Assets	$	-	$	-	$	-	$	-

Total assets measured at fair value	$	-	$	-	$	-	$	-

Derivative Liability	$	58,562	$	-	$	-	$	58,562

Total liabilities measured at fair value	$	58,562	$	-	$	-	$	58,562

Inventory

Inventories are stated at the lower of cost (first-in, first-out basis) or market. As of December 31, 2012 and 2011, inventory consisted of the following items:

	December31,
	2012		2011
Raw materials	$	9,156	$	9,707
Work in process		-		-
Finished goods		1,196		3,159
Promotional items		175		175
Total	$	10,527		13,041

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss per Share Calculations

ASC TOPIC 260, Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The issuance of common shares for the convertible promissory notes could potentially dilute basic earnings per share. However, the 550,834 and 98,468,450 shares of common stock into which the convertible as of December 31, 2012 and 2011, respectively have not been included in the computation since they would have also been anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2012 and 2011, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. A reconciliation of the numerators and denominators used in the computation of loss per share is as follows:

	For the year ended
	December 31,
	2012			2011

(Loss) to common shareholders (Numerator)	$	(107,026	)	$	(223,678	)

Basic and diluted weighted average number of common shares outstanding (Denominator)		540,494,563			523,014,194
Basic and diluted loss per share	$	(0.00	)	$	(0.00	)

Income Taxes

The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.

Concentrations of Business and Credit Risk

The Company operates in a single industry segment. The Company markets its services to companies and individuals in many industries and geographic locations. The Company’s operations are subject to intense competition in designing and selling surfing clothing and accessories.

Accounts receivable represent financial instruments with potential credit risk. The Company typically offers its customers credit terms. The Company makes periodic evaluations of the credit worthiness of its enterprise customers and other than obtaining deposits pursuant to its policies, it generally does not require collateral. In the event of nonpayment, the Company has the ability to terminate services.

At December 31, 2012, accounts receivable from three customers represented approximately 54%, of total accounts receivable. At December 31, 2011, accounts receivable from these same customers represented approximately 43%, of total accounts receivable. There were no other customers who represented 10% of total accounts receivable at December 31, 2012 and 2011.

For the year ended December 31, 2012, the Company had two customers who represented approximately 22%, of total revenues. For the year ended December 31, 2011, the Company had two customers who represented approximately 30%, of total revenues. There were no other customers who represented greater than 10% of total revenues for the years ended December 31, 2012 and 2011.

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the year ended December 31, 2012, and adopted the following pronouncements:

The Company adopted ASC 825 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. The adoption of this pronouncement did not have a material effect on the financial statements of the Company.

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

The Company adopted ASC 815 "Accounting for Certain Hybrid Financial Instruments". This statement narrows the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principal cash flows. It also allows qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is a derivative financial instrument. The adoption of this pronouncement did not have a material effect on the financial statements of the Company.

3.	CAPITAL STOCK

During the year ended December 31, 2012, the Company issued 28,920,000 shares of common stock at a price of $0.0012 per share for the conversion of $34,704 in convertible promissory notes. The Company also issued 20,000,000 share of common stock at a price of $0.002 for current year and on-going future services through December 31, 2014.

During the year ended December 31, 2011, the Company issued 16,525,000 shares of common stock at a price of $0.002 per share for subscription payables in the amount of $33,050.

4.	RENTAL LEASE

The Company subleases office space on a month-to-month basis. The rent paid for the years ended December 31, 2012 and 2011 was $6,786 and $6,786, respectively.

5.	INCOME TAXES

The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2006.

Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain.

Included in the balance at December 31, 2012, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses. During the years ended December 31, 2012 and 2011, the Company recognized $473 and $537 in penalties related to unpaid payroll taxes, and $1,554 and $1,280, respectively, in interest related to these unpaid taxes. These are not considered to be uncertain tax positions because these amounts have not been deducted for tax purposes.

6.	LOANS PAYABLE

The Company received $0 in new loan proceeds for the year ended December 31, 2012. As of December 31, 2012, 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 years ended December 31, 2012and 2011, including all accrued and unpaid interest was $171,267 and $162,467, respectively. 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 years ended December 31, 2012and 2011, respectively.

7.	RELATED PARTY TRANSACTIONS

During the year ended December 31, 2012, the Company paid $2,000 towards the outstanding debt owed to Veronica Ornelas, the Companies Vice President and Secretary. During the year ended December 31, 2011, Ms. Ornelas loaned the Company $2,000 for operating expenses. As of December 31, 2012 and 2011, the balance of these related party loans payable was $8,000 and $10,000 respectively. The Company has imputed interest on these loans at the rate of 9% per annum. As of December 31, 2012 and 2011, the balance of accrued interest payable to this related party was $2,592 and $1,861, respectively.

During the years ended December 31, 2012 and 2011, Frank Ornelas, the Company’s Chief Executive Officers’ annual salary was $50,000. During the years ended December 31, 2012 and 2011, the Company paid for various personal expenses on behalf of the CEO totaling $24,671 and $23,687, respectively. The unpaid portion of the CEO’s salary of $25,329 and $26,313, respectively, for the years ended December 31, 2012 and 2011 has been reflected as capital contributed in accordance with SAB 55.

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

8.	DEFERRED TAX BENEFIT

At December 31, 2012, the Company had net operating loss carry-forwards of approximately $491,000 which begin to expire in the year 2026. No tax benefit has been reported in the December 31, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2012 and 2011 due to the following:

	2012			2011

Book loss	$	(42,800	)	$	(89,500	)
Meals and entertainment		400			400
Contributed services		10,100			10,500
Depreciation		(140	)		(40	)
Allowance for doubtful accounts		(700	)		(200	)
Accrued payroll taxes		4,500			2,100
Related party accrual		300			300
Penalties		200			200
Derivative valuation		(9,000	)		29,500
Gain on extinguishment of debt		(6,300	)		-

Valuation Allowance		43,440			46,740

Income tax expense	$	-		$	-

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax liabilities consist of the following components as of December 31, 2012 and 2011:

	2012			2011
Deferred tax assets:
NOL carryover	$	196,400		$	152,900
Allowance for doubtful accounts		700			1,400
Related party accruals		1,000			700
Accrued payroll taxes		12,700			10,300

Deferred tax liabilites:
Depreciation		(180	)		(40	)

Less Valuation Allowance		(210,620	)		(165,260	)

Net deferred tax asset	$	-		$	-

VITAMIN BLUE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

8. DEFERRED TAX BENEFIT (Continued)

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

9. CONVERTIBLE PROMISSORY NOTES

Through December 31, 2012, the Company has received loans in the form of convertible promissory notes from three individuals in varying amounts for total proceeds of $180,000. The loans bear interest at 8% per annum on the unpaid balance until paid or until default. The convertible promissory notes 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 notes have the right to convert at any time amounts outstanding under the notes 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. During the year ended December 31, 2012 the holders converted a total of $34,704 in outstanding notes into 28,920,000 shares of the Company’s common stock valued at $57,840. This conversion also resulted in the extinguishment of derivative liabilities valued at $38,953 immediately prior to the conversion. These extinguishments resulted in a gain on extinguishment of debt totaling $15,817. As of December 31, 2012 the total outstanding principal balance of these convertible promissory notes was $145,296.

ASC Topic 815 provides guidance applicable 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 $69,907 in interest expense for the year ended December 31, 2012, 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:

The value of the derivative liability at December 31, 2012 and 2011, was $58,562 and $119,991, respectively.

10. SUBSEQUENT EVENTS

Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has reported the following:

During the first quarter of 2013, the Company received convertible loans in the amount of $25,000 each from an investor for operating expenses. The loans bear interest at 8% per annum, and the principal and interest are 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.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Vitamin Blue, Inc.

	By: /s/ Frank D. Ornelas
	Frank D. Ornelas
	President, C.E.O. and C.F.O
	Principal Financial Officer
	Principal Accounting Officer
	Dated: April 15, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date


		April 15, 2013
/s/ Frank D. Ornelas	President, C.E.O., C.F.O. and director
Frank D. Ornelas	Principal Financial Officer
	Principal Accounting Officer

VITAMIN BLUE, INC. - FORM 10-K - April 15, 2013

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