Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act:
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 12, 2013 there were 3,643,055,556
common shares outstanding of the registrant’s common stock.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Business
Stakool,
Inc. f/k/a Mod Hospitality, Inc. (
“the Company” or “Stakool”
) was incorporated in the State of Delaware
in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada.
On July 22, 2011, Stakool entered into
an agreement of Purchase and Sale with Anthus Life Corp. (“Anthus”) where Anthus acquired 74,834,313 of the issued
and outstanding shares of Stakool. Anthus operates as a wholly owned subsidiary of Stakool.
Anthus Life Corp. was incorporated in Nevada
on June 4, 2009. Anthus is a developer and manufacturer of natural and organic food products packaged for consumer consumption.
The Company has one product line in the natural food category currently, and will deploy several additional product lines fostering
rapid growth in retail accounts, consumer exposure and revenue.
On August 6, 2013, the Company filed a preliminary information statement
on Schedule 14C regarding a 1 for 100 reverse stock split (the “Reverse Split”), which would reduce the number of issued
and outstanding common shares from 3,463,055,556 to approximately 34,630,556. The Reverse Split has been approved by the
Company’s Board of Directors and a majority of its shareholders. Fractional shares produced as a result of the Reverse
Split will be rounded up to the next whole share. It is anticipated that the Reverse Split will become effective on or about September
6, 2013. The consolidated financial statements have been retroactively adjusted to assume the effectiveness of the Reverse
Split.
Accounting Basis
The Company uses the accrual basis of accounting
and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted
a December 31 fiscal year end.
Basis of Presentation
The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the year ended
December 31, 2012. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for
the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative
of the results to be expected for the full year.
Principles of Consolidation
The consolidated financial statements include
the financial statements of the Stakool, Inc. and its wholly-owned subsidiary Anthus Life Corp. All significant inter-company balances
and transactions within the Company and subsidiary have been eliminated upon consolidation.
Reclassifications
Certain accounts and financial statement captions
in the prior periods have been reclassified to conform to the current period financial statements.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Cash and Cash Equivalents
Stakool considers all highly liquid investments
with maturities of three months or less to be cash equivalents. At June 301, 2013 and December 31, 2012, the Company had $3,739
and $338 of cash, respectively.
Inventories
Inventories previously consisted of natural
and organic food products, wrappers and boxes, and were stated at the lower of cost or market. Cost was determined on the average
cost method. Inventories are reviewed and reconciled periodically. Currently, the company maintains no inventory.
Fair Value of Financial Instruments
The Company’s financial instruments consist
of cash and cash equivalents, accounts payable, other liabilities, accrued interest, notes payable, and an amount due to a related
party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest
rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are computed using the asset and
liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted
tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence,
are not expected to be realized.
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
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements
and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
The Company’s receivables consist of
one temporary cash advance to a related party for services provided. The advance was made during the second quarter of 2013. The
Company charges off receivables if they determine that the amount is no longer collectible. The Company has not recorded any allowance
for bad debts due to the limited sale of our products.
Property and Equipment
The capital assets are being depreciated over
their estimated useful lives, three to seven years using the straight-line method of depreciation for book purposes.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Revenue Recognition
The Company recognizes revenue when there is
persuasive evidence of that an arrangement exists, the revenue is fixed or determinable, the products are fully delivered or services
have been provided and collection is reasonably assured.
Concentration of Credit Risks
The Company maintains its cash and cash equivalents
in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in
such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated
by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At June 30, 2013 the Company had a
convertible note outstanding that could be converted into 6,272,727 common shares. These are not presented in the statement of
operations since the company incurred a loss and the effect of these shares is anti-dilutive.
Stock-Based Compensation
Stock-based compensation
is accounted for at fair value in accordance with ASC Topic 718. The Company did not issue any shares of common stock to management
during the period ended March 31, 2012. There was
$761,063 of stock-based compensation in the six months ended June 30, 2012. The Company issued 2,256,981 common shares to a service
provider during the six months ended June 30, 2013 which had a fair market value of $52,925. The company issued this stock to retire
a past due payable recorded at $29,570. In addition the Company cancelled 35,879 shares of its Preferred C shares in conjunction
with the termination of consulting contracts. The Company also cancelled 2,000,000,000 common shares returned to the Company by
its former CEO. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Recent Accounting Pronouncements
Stakool does not expect the adoption of recently
issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position
or cash flow.
Derivative Instruments
The Company enters into financing arrangements
that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments
and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with this standard,
derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with
gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are
bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or a loss in earnings. The Company
determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation
models, considering all of the rights and obligations of each instrument.
We estimate fair values of derivative financial
instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair
values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks
that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants,
we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions
(including trading volatility, estimated terms, dilution and risk fee rates) necessary to fair value these instruments. Estimating
fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and
are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition,
option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price
of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense)
going forward will reflect the volatility in these estimates and assumption changes. Under the terms of the new accounting standard,
increases in the trading price of the company’s common stock and increases in fair value during a given financial quarter
result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common
stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost.
The Company depreciates the equipment using the straight-line method over the useful lives of the equipment. The useful lives are
estimated to be between 3 and 7 years.
Property and equipment consisted of the following
at June 30, 2013 and December 31, 2012:
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
Furniture and fixtures
|
|
$
|
1,841
|
|
|
$
|
1,334
|
|
Equipment
|
|
$
|
|
|
|
$
|
507
|
|
Total property and equipment
|
|
$
|
1,841
|
|
|
$
|
1,841
|
|
Less: Accumulated depreciation
|
|
$
|
(1,213
|
)
|
|
$
|
(1,013
|
)
|
Property and equipment, net
|
|
$
|
628
|
|
|
$
|
828
|
|
NOTE 3 – NOTE PAYABLE
The Company issued six promissory notes during
the six month period ended June 30, 2013. These notes totaled $136,750 and are generally convertible into common stock of the Company
180 days after the date of the note at discounts of 30 % to 60% of the lowest average trading prices for the stock during periods
ten to ninety days prior to the conversion date. The note bears interest at 8%, are unsecured, and matures within one year of the
date issued. One of the notes for $45,000, issued for legal services, is due on demand and bears no interest.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 3 – NOTE
PAYABLE (CONTINUED)
|
|
Balance Due
|
|
|
|
at June 30, 2013
|
|
On May 15, 2013 the Company executed a promissory note for $16,250. The note bears interest at 8 % and is secured by common stock of the Company. The loan matured July 10, 2013. The note represented an obligation due as a result of a penalty clause in a note issued in 2012. On June 14, 2013 the note was converted into 235,000,000 shares of common stock representing which represented $14,100 of the amount due.
|
|
$
|
16,250
|
|
|
|
|
|
|
On October 5, 2012 the Company executed a promissory note for $32,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures July 10, 2013. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %. On June 14, 2013 a portion of the note was converted into 2,350,000 shares representing $14,100 of the note.
|
|
$
|
18,400
|
|
|
|
|
|
|
On January 16,, 2012 the Company executed a promissory note for $50,000. The note bears interest at 10’% and is secured by common stock of the Company. The loan matured January 16, 2013. The note was renewed and amended allowing conversion into common stock of the Company at a discount from the market price of 50% or the lowest trading price for the 3 day period prior to the conversion date. In 2012, the note holder converted $30,000 of the note into 2,639,327 shares of common stock. The $20,000 balance on the note remains outstanding.
|
|
$
|
20,000
|
|
|
|
|
|
|
On February 6, 2013 the Company executed a promissory note for $10,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures November 11, 2013. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %.
|
|
$
|
10,500
|
|
|
|
|
|
|
On March 5, 2013 the Company executed a promissory note for $45,000. The note bears interest at 8 % and is unsecured. The loan matures March 5, 2014 If agreed to by the Company, the note may be amended to allow it to be converted into common stock of the Company at a discount rate to be determined.
|
|
$
|
45,000
|
|
|
|
|
|
|
On April 6, 2013 the Company executed a promissory note for $27,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures January 18, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %.
|
|
$
|
27,500
|
|
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
On May 6, 2013 the Company executed a promissory note for $22,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures January 18, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the 3 day average lowest trading price for a 10 day period prior to the conversion date. The discount rate is 45 %.
|
|
$
|
22,500
|
|
|
|
|
|
|
On June 4, 2013 the Company executed a promissory note for $15,000. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures March 10, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the 3 day average lowest trading price for a 10 day period prior to the conversion date. The discount rate is 30 %.
|
|
$
|
15,000
|
|
|
|
|
|
|
On June 21, 2013 the Company amended a promissory note issued in 2012 with an outstanding balance of $22,800. The note can now be converted into common stock of the company at a discount of 45 % from the average lowest trading price for a 10 day period prior to the conversion date. On July 26, 2013 the note was converted into 320,000,000 shares of common stock.
|
|
$
|
22,800
|
|
|
|
|
|
|
Unamortized discount due to derivative
liabilities
|
|
$
|
(26,544
|
)
|
|
|
|
|
|
Total convertible notes outstanding, net
|
|
$
|
171,406
|
|
NOTE 4 – STOCK
The Company has 4,000,000,000 shares of common
stock authorized with a par value of $0.00001, 100,000,000 shares of Series A Preferred stock with a par value of $0.00001, 10
shares of Series B Preferred stock with a par value of $0.00001, and 30,000,000 shares of Series C Preferred stock with a par value
of $0.00001.
During the six month period ended June 30,
2013, the Company issued 17,995,872 shares of common stock. This included 2,256,982 shares to service providers valued at $29,570,
8,500,000 due under our financing agreement with IronRidge Global valued at $98,300, and 7,238,890 in conjunction with the conversion
of notes payable valued at $46,600. The company also cancelled 20,000,000 shares of common stock returned to the Company by the
former CEO and made an adjustment to its records, reducing common shares outstanding by 15,000 shares, correcting an error. Before
the recent change in management, the Company had limited staff and did not retain a full time financial manager. No attempt was
made by the company to reconcile its internal record of stock issued to the records of the transfer agent. As a result the Company
ledger of stock was incorrect, prompting the reduction. The Company terminated two consulting agreements and cancelled 35,000 shares
of Series C Preferred stock. The Company also sold 2,000 shares of Series C Preferred stock at $2.50 per share to an investor.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,
2013
NOTE 5 – COMMITMENTS AND CONTINGENCIES
On September 29, 2010, the Company signed a
lease for office space in Jacksonville, Florida. The lease commenced on November 1, 2010 and is for a term of three years and one
month. The monthly rent is $1,073.33 with annual increases. The lease required a security deposit of $1,700. Total rent expense
was $8,545 which included common area maintenance during the period ended June 30, 2013. The landlord has cancelled this lease
due to non-failure to timely pay rent.
NOTE 6 – GOING CONCERN
The accompanying consolidated financial statements
have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as
a going concern. However, the Company had limited revenues as of June 30, 2013. The Company currently has a working capital deficit,
and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended
period of time.
Management anticipates that the Company will
be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position
itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there
are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue
as a going concern.
NOTE 7 – INCOME TAXES
As of June 30, 2013, the Company had net operating
loss carry forwards of approximately $7,175,000 that may be available to reduce our tax liability in future years. We estimate
the benefits of this loss carry forward at $2,482,000 if the Company produces sufficient taxable income. No adjustments to the
financial statements have been recorded for this potential tax benefit.
NOTE 8 – FAIR VALUE MEASUREMENT
The Company has adopted new guidance under
ASC Topic 820, effective January 1, 2009. New authoritative accounting guidance (ASC Topic 820-10-15) under ASC Topic 820, Fair
Value Measurement and Disclosures, delayed the effective date of ASC Topic 820-10 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until
2009.
ASC Topic 820 establishes a fair value hierarchy,
giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures
for assets and liabilities measured at fair value based on their level in the hierarchy. Further new authoritative accounting guidance
(ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price in an active market
for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques
provided for in this update.
The standard describes a fair value hierarchy
based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to
measure fair value, which are the following:
Level 1 – Quoted prices in active markets
for identical assets and liabilities.
Level 2 – Input other than
Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices
in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the asset or liabilities.
STAKOOL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 8 – FAIR
VALUE MEASUREMENT (CONTINUED)
Level 3 – Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The Company analyzes all financial instruments
with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives
and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions
between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.
In addition, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the
Black-Scholes model.
The Company uses Level 3 inputs for its valuation
methodology for the embedded conversion option liabilities as their fair value as their fair value were determined by using the
Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect
fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments
to fair value of derivatives.
The following table sets forth the liabilities
at June 30, 2013, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy.
As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
Quoted Prices in
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Identical Assets
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
6/30/13
|
|
|
(Level 1)
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Convertible
promissory note with embedded conversion option
|
|
$
|
57,203
|
|
|
-0-
|
|
|
-0-
|
|
|
$
|
57,203
|
|
Total
|
|
$
|
57,203
|
|
|
-0-
|
|
|
-0-
|
|
|
$
|
57,203
|
|
The following table sets forth a summary of
change in fair value of our derivative liabilities for the six months ended June 30, 2013:
Beginning balance
|
|
|
-0-
|
|
Change in fair value of embedded conversion feature of convertible promissory notes included in earnings
|
|
$
|
57,203
|
|
Ending balance
|
|
$
|
57,203
|
|
NOTE 9 – SUBSEQUENT EVENTS
On April 16, 2013 the Company issued a convertible
note for $27,500. The note bears interest at 8% and matures within a year.
On
April 17, 2013 the Company issued 101,666,667 shares of common stock for partial conversion of a note payable.
On
April 19, 2013 the Company issued 101,666,667 shares of common stock for partial conversion of a note payable.
On
May 6, 2013 the Company issued a convertible note for $22,500. The note bears interest at 8% and matures within a year.
On
May 8, 2013 the Company issued 148,888,889 shares of common stock for partial conversion of a note payable.
On July 23, 2013 the Company issued a convertible
note for $15,500. The note bears interest at 8% and matures within a year
As reported in our April 22, 2013 8K filing,
the Company appointed Kevin P. Quirk President and Chief Executive Officer of the Company. He was also appointed as a member of
the Board of Directors.
On August 6, 2013 the Company filed a Schedule
14C Information statement with the United States Securities and Exchange Commission reporting that it intends to effect a 1 for
100 reverse stock split of the Company’s common stock to be effective on or about September 6, 2013.
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to June 30, 2013 through the date these financial statements were issued and has determined
that it does not have any material subsequent events to disclose in these financial statements other than the events described
above.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This quarterly report on Form 10-Q and other
reports filed by StaKool, Inc. (“we,” “us,” “our,” or the “Company”) from time
to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements
(collectively the “Filings”) and information that are based upon beliefs of, and information currently available to,
the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not
to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When
used in the Filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”,
“intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company
or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company
with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these
risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations
reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance,
or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not
intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance
with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us
to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely
are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These
estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial
statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would
be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its
application. There are also areas in which management’s judgment in selecting any available alternative would not produce
a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto
appearing elsewhere in this report.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Plan of Operations
Anthus Life maintains its Natural plus Energy
product line, and maintains its relationship with its contract manufacturer. During 2012, the Company completed a complete redesign
of its packaging related to wrappers and display boxes to be more in-line with consumer demand and expectations.
Under the direction of Kevin Quirk, the Company’s
recently appointed Chief Executive Officer, the Company anticipates leveraging management’s experience and knowledge of the
natural food and beverage industry. The vertical integration of this knowledge of the natural food and beverage industry will allow
for the better redeployment of the Natural plus Energy product line, and will allow for a more comprehensive understanding of the
distribution channels and retail positioning. In addition, the natural food and beverage market continues to grow at a relatively
substantial pace, and allows for the introduction of many functional food and beverage products.
Our management team will explore all aspects
of the all-natural functional food and beverage industry, and effectively integrate and develop products tailored to those markets.
The management team feels confident that its understanding of the market will allow for the addition of several functional food
and beverage products within the next 24-36 months that effectively capitalize on our knowledge and experience, and are capable
of developing velocity throughout the all-natural retail market space. The Company has access to a talented packaging and design
team that will assist in the future development of well-conceived products and the appropriate consumer packaging that will allow
for rapid consumer interest, appeal and adoption.
Results of Operations
For the Six Months Ended JUNE 30, 2013 Compared
to the Six Months Ended JUNE 30, 2012
|
|
For the Six Months Ended June 30,
|
|
|
|
2013
|
|
|
2012
|
|
Net sales
|
|
$
|
64
|
|
|
$
|
15,137
|
|
Gross margin
|
|
$
|
(2,451
|
)
|
|
$
|
(385
|
)
|
Operating expenses
|
|
$
|
152,648
|
|
|
$
|
920,134
|
|
Loss from operations
|
|
$
|
(155,099
|
)
|
|
$
|
(920,519
|
)
|
Other income (expense)
|
|
$
|
(42,453
|
)
|
|
$
|
(2,844
|
)
|
Net loss
|
|
$
|
(197,552
|
)
|
|
$
|
(923,363
|
)
|
Loss per common share – basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.04
|
)
|
Revenue
Total revenue for the six months ended June
30, 2013 was $64. Total revenues were from the sale of health food products.
Gross Margin
Gross margin for the six months ended June
30, 2013 was a loss of $2,451 due to a lack of revenue. Revenue declined from $15,137 to $64 for the six month period ending June
30, 2012 and 2013 respectively.
Operating Expenses
For the six month periods ending June 30,
operating expenses declined from $920,134 in 2012, to $152,648 in 2013. Of this decrease, $716,063 was produced by a
reduction in stock based compensation. In 2012 the Company had issued common stock to compensate various consultants and
service providers, due to a lack of revenue, which resulted in a shortage of cash-flow. This expense represented 83 % of
Total Operating Expenses for the six months ended June 30, 2012. For the same period in 2013, this expense decreased to 29%.
We also had a decrease in Professional Fees. This expense declined $31,068, from $114,401 in 2012, to $83,333 in 2013, due to
a reduction in the number of consultants employed.
Loss from Operations
Loss from operations for the six months ended
June 30, 2013 was $155,099. The loss was primarily attributable to a lack of revenue. However, operating expenses decreased significantly,
as discussed above.
Other Income (Expense)
For the six month periods ended June 30,
Other Expenses increased $84,614, from $2,844 in 2012 to $87,458 in 2013. In 2013 Other Expense included $29,700 representing
a loss on stock issued in conjunction with our settlement with IronRidge Capital, as previously reported. Stock issued under
this court ordered agreement is issued at a discount from the current market price, which results in a non-cash expense.
Other Expense also included interest expense of $137,807 comprised of the amortization of discount on derivative liabilities
of $83,293, a penalty of $16,250 incurred under the terms of a convertible note previously issued by the Company, placement
commission expense of $1,150 for assistance in selling convertible notes, and interest of $3,712 accrued on convertible
notes. The increases in Other Expense discussed above were offset, in part, by non-cash income of $80,249 which resulted
from the temporary decline in the derivative value of convertible notes the Company has issued to finance operations.
Net Loss
Net Loss for the six months ended June 30,
2013, was $197,552. The net loss was primarily attributable to a lack of revenue and the operating expenses and other expenses
as described above.
Inflation did not have a material impact on
the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or uncertainties
that are reasonably likely to have a material impact on the Company’s results of operations.
Liquidity & Capital Resources
The following table summarizes total current
assets, liabilities and working capital at June 30, 2013 and December 31, 2012.
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
Current Assets
|
|
$
|
6,555
|
|
|
$
|
338
|
|
Current Liabilities
|
|
$
|
757,275
|
|
|
$
|
665,321
|
|
Working Capital Deficit
|
|
$
|
750,720
|
|
|
$
|
664,983
|
|
At June 30, 2013, we had a working capital
deficit of $750,720, as compared to a working capital deficit of $664,983, at December 31, 2012, an increase in the deficit of
$85,737. The increase is primarily related to an increase in convertible notes payable issued in order to fund operating activities.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization
of assets and satisfaction of liabilities in the ordinary course of business.
The Company sustained a loss of $197,552 for
the six months ended June 30, 2013. Because of the absence of positive cash flows from operations, the Company requires additional
funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
We are presently unable to meet our obligations
as they come due. At June 30, 2013 we had minimal assets and a working capital deficit of $750,720. Our working capital deficit
is due to the results of operations.
Net cash used in operating activities for the
six months ended June 30, 2103 was $93,349. Net cash used in operating activities includes our net loss and an increase in accounts
payable. This was offset by depreciation, a reduction in prepaid expenses, and an increase in accrued interest.
Net cash provided by financing activities for
the six months ended June 30, 2103 was $96,750. Net cash provided by financing activities for this period consists primarily of
the issuance of a convertible note, and the sale of Preferred stock.
We anticipate that our future liquidity requirements
will arise from the need to fund operations, pay current obligations and future capital expenditures. The primary sources of funding
for such requirements are expected to be cash generated raising additional funds from the private equity sources and debt financing.
However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and obtain additional
financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon
our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability.
In addition, our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. We are
presently engaged in capital raising activities through one or more private offering of our company’s securities. See “Note
7 – Going Concern” in our financial statements for additional information as to the possibility that we may not be
able to continue as a “going concern.”
Off-Balance Sheet Arrangements
As of June 30, 2013, we do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.