UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2015
☐
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: 333-149158
LIVEWIRE
ERGOGENICS INC.
(Exact name
of small business issuer as specified in its charter)
Nevada |
|
26-1212244 |
(State or other jurisdiction
of incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
24845 Corbit Place
Yorba Linda, CA 92887
(Current Address
of Principal Executive Offices)
714-940-0155
(Issuer Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant
to Section 12(g) of the Act: Common Stock, Par Value $0.0001 |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
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 Exchange
Act. Yes o 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 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Rule 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. x
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.:
Large Accelerated Filer |
☐ |
Accelerated Filer |
☐ |
Non-Accelerated Filer |
☐ |
Smaller Reporting Company |
☒ |
(Do not check of 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 ☒
At August 14, 2015, there were 287,386,428
shares of $0.0001 par value common stock issued and outstanding.
TABLE OF CONTENTS
LiveWire
Ergogenics, Inc. |
Condensed
Consolidated Balance Sheets |
| |
June 30, | |
December 31, |
| |
2015 | |
2014 |
| |
(unaudited) | |
|
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
CURRENT ASSETS | |
| | | |
| | |
Cash and cash equivalents | |
$ | - | | |
$ | 1,448 | |
Accounts receivable, net | |
| - | | |
| 9,447 | |
Inventory, net | |
| 36,672 | | |
| 47,128 | |
Prepaid and other current assets | |
| 182,096 | | |
| 220,391 | |
Security deposits | |
| 23,430 | | |
| - | |
Total current assets | |
| 242,198 | | |
| 278,414 | |
| |
| | | |
| | |
Property and equipment, net | |
| 5,647 | | |
| 7,799 | |
Security deposits | |
| - | | |
| 23,430 | |
| |
| | | |
| | |
Total assets | |
$ | 247,845 | | |
$ | 309,643 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 178,837 | | |
$ | 153,370 | |
Deferred revenue | |
| 79,342 | | |
| 79,342 | |
Due to others | |
| 23,115 | | |
| 23,015 | |
Notes payable | |
| 251,700 | | |
| 235,700 | |
Notes payable - related party | |
| 196,341 | | |
| 196,341 | |
Convertible debentures, net | |
| 323,661 | | |
| 244,778 | |
Derivative liability | |
| 59,384 | | |
| 61,030 | |
Total liabilities | |
| 1,112,380 | | |
| 993,576 | |
| |
| | | |
| | |
| |
| | | |
| | |
COMMITMENT AND CONTINGENCIES (SEE NOTE 8) | |
| - | | |
| - | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Preferred stock, $0.0001 par value, 10,000,000 shares authorized | |
| | | |
| | |
Series B convertible preferred stock, $0.0001 par value, 150,000 shares designated, | |
| | | |
| | |
32,820 shares issued and outstanding at June 30, 2015 and | |
| | | |
| | |
December 31, 2014, liquidation preference is $1 per share | |
| 3 | | |
| 3 | |
Series C convertible preferred stock, $0.0001 par value, 75 shares designated, | |
| | | |
| | |
75 issued and outstanding at June 30, 2015 and | |
| | | |
| | |
December 31, 2014, liquidation preference is $200 per share | |
| - | | |
| - | |
Common stock, $0.0001 par value, 1,500,000,000 and 200,000,000 shares authorized, respectively, | |
| | | |
| | |
226,132,173 and 156,508,559 shares issued and outstanding at June 30, 2015 and | |
| | | |
| | |
December 31, 2014, respectively | |
| 22,613 | | |
| 15,651 | |
Class A convertible common stock, $0.0001 par value, 1,000,000 shares authorized, | |
| | | |
| | |
0 shares issued and outstanding at June 30, 2015 and December 31, 2014 | |
| - | | |
| - | |
Additional paid-in-capital | |
| 7,620,235 | | |
| 7,434,862 | |
Accumulated deficit | |
| (8,507,386 | ) | |
| (8,134,449 | ) |
Total stockholders' deficit | |
| (864,535 | ) | |
| (683,933 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficit | |
$ | 247,845 | | |
$ | 309,643 | |
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements. |
LiveWire
Ergogenics, Inc. |
Condensed
Consolidated Statements of Operations |
(Unaudited) |
| |
For the Three Months Ended | |
For the Six Months Ended |
| |
June 30, | |
June 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
| |
| |
| |
|
Income: | |
| | | |
| | | |
| | | |
| | |
Sales | |
$ | 14,013 | | |
$ | 118,766 | | |
$ | 27,935 | | |
$ | 181,800 | |
Cost of goods sold | |
| 5,138 | | |
| 101,193 | | |
| 27,184 | | |
| 119,642 | |
Gross Profit | |
| 8,875 | | |
| 17,573 | | |
| 751 | | |
| 62,158 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses: | |
| | | |
| | | |
| | | |
| | |
Selling costs | |
| 1,102 | | |
| 33,606 | | |
| 1,420 | | |
| 52,858 | |
General and administrative costs | |
| 164,582 | | |
| 213,632 | | |
| 240,218 | | |
| 2,289,012 | |
Depreciation | |
| 1,082 | | |
| 377 | | |
| 2,152 | | |
| 2,268 | |
Total Operating Expenses | |
| 166,766 | | |
| 247,615 | | |
| 243,790 | | |
| 2,344,138 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (157,891 | ) | |
| (230,042 | ) | |
| (243,039 | ) | |
| (2,281,980 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Expenses (Income): | |
| | | |
| | | |
| | | |
| | |
Other expense | |
| 27,323 | | |
| 216,563 | | |
| 27,323 | | |
| 216,563 | |
Loss (gain) on change in fair value of derivative liability | |
| 12,298 | | |
| - | | |
| (1,646 | ) | |
| - | |
(Gain) loss on settlement of debt | |
| - | | |
| (63,200 | ) | |
| - | | |
| 36,788 | |
Amortization of beneficial conversion feature | |
| 29,190 | | |
| 73,640 | | |
| 79,373 | | |
| 115,768 | |
Interest expense | |
| 13,264 | | |
| 16,546 | | |
| 24,848 | | |
| 639,756 | |
Total other expenses | |
| 82,075 | | |
| 243,549 | | |
| 129,898 | | |
| 1,008,875 | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss Before Provision for Income Taxes | |
$ | (239,966 | ) | |
$ | (473,591 | ) | |
$ | (372,937 | ) | |
$ | (3,290,855 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for income tax | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss | |
$ | (239,966 | ) | |
$ | (473,591 | ) | |
$ | (372,937 | ) | |
$ | (3,290,855 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted loss per share | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.03 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares | |
| | | |
| | | |
| | | |
| | |
outstanding - basic and diluted | |
| 209,052,478 | | |
| 135,106,779 | | |
| 187,742,728 | | |
| 117,132,829 | |
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements. |
LiveWire
Ergogenics, Inc. |
Condensed
Consolidated Statements of Cash Flows |
(Unaudited) |
| |
| For
the Six Months Ended | |
| |
| June
30, | |
| |
| 2015 | | |
| 2014 | |
Cash Flows From Operating Activities: | |
| | | |
| | |
Net loss | |
$ | (372,937 | ) | |
$ | (3,290,855 | ) |
Adjustments to reconcile net loss to net cash
used in operating activities: | |
| | | |
| | |
Depreciation expense | |
| 2,152 | | |
| 2,268 | |
Net loss on settlement of debt | |
| - | | |
| 84,141 | |
Change in fair value of derivative liability | |
| (1,646 | ) | |
| - | |
Amortization of beneficial conversion feature | |
| 79,373 | | |
| 115,768 | |
Amortization of prepaid consulting fees | |
| 163,295 | | |
| 89,351 | |
Common stock issued for services | |
| - | | |
| 140,000 | |
Common stock issued for interest expense | |
| - | | |
| 614,200 | |
Default penalty on convertible notes payable | |
| 26,725 | | |
| - | |
Stock based compensation | |
| - | | |
| 1,751,184 | |
Write off of subscription receivable | |
| - | | |
| 45,000 | |
Bad debt provision | |
| 9,112 | | |
| - | |
Discount on issuance of common stock | |
| - | | |
| 80,600 | |
Change in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable, net | |
| 335 | | |
| (54,608 | ) |
Related party receivables | |
| - | | |
| (85,640 | ) |
Due to others | |
| 100 | | |
| - | |
Inventory, net | |
| 10,456 | | |
| (57,329 | ) |
Prepaid and other current assets | |
| - | | |
| (106,637 | ) |
Accounts payable and accrued expenses | |
| 27,587 | | |
| 44,720 | |
Accounts payable - related party | |
| - | | |
| (24,170 | ) |
Deferred revenue | |
| - | | |
| 64,000 | |
Net cash used in operating
activities | |
| (55,448 | ) | |
| (588,007 | ) |
| |
| | | |
| | |
Cash Flows From Investing Activities | |
| | | |
| | |
Purchase of equipment | |
| - | | |
| (5,000 | ) |
Payments towards security
deposits | |
| - | | |
| (23,430 | ) |
Net cash used in investing
activities | |
| - | | |
| (28,430 | ) |
Cash Flows From Financing Activities | |
| | | |
| | |
Proceeds from notes payable | |
| 16,000 | | |
| 155,000 | |
Repayment of note payable | |
| - | | |
| (38,000 | ) |
Proceeds from convertible notes payable | |
| 38,000 | | |
| 73,500 | |
Proceeds from issuance
of common stock | |
| - | | |
| 424,300 | |
Net cash provided by
financing activities | |
| 54,000 | | |
| 614,800 | |
Net Decrease in Cash | |
| (1,448 | ) | |
| (1,637 | ) |
Cash at Beginning of Period | |
| 1,448 | | |
| 8,342 | |
Cash at End of Period | |
$ | - | | |
$ | 6,705 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information | |
| | | |
| | |
Cash paid for interest | |
$ | - | | |
$ | - | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non Cash Investing and Financing Activities | |
| | | |
| | |
Beneficial conversion
feature on convertible notes | |
$ | 38,000 | | |
$ | 78,500 | |
Common stock issued for
payment of notes payable | |
$ | - | | |
$ | 50,000 | |
Common stock issued for
payment of convertible notes payable | |
$ | 152,215 | | |
$ | 171,800 | |
Conversion of interest
to note payable | |
$ | - | | |
$ | 3,620 | |
Conversion of debt to
Class A common stock | |
$ | - | | |
$ | 20,596 | |
Conversion of Class A
common stock to common stock | |
$ | - | | |
$ | 100 | |
Accounts payable and accrued
expenses settled by issuance of common stock | |
$ | - | | |
$ | 15,093 | |
Conversion of accounts
payable - related party to notes payable - related party | |
$ | - | | |
$ | 206,341 | |
Convertible note issued
for prepaid consulting services | |
$ | 125,000 | | |
$ | 296,880 | |
Common stock issued for
conversion of interest | |
$ | 2,120 | | |
$ | - | |
The
accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
LIVEWIRE ERGOGENICS INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE
30, 2015
NOTE 1 – BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The Company
LiveWire MC2, LLC (“LVWR”)
was organized under the laws of the State of California on January 7, 2008 as a limited liability company. LVWR was formed for
the purpose of developing and marketing consumable energy supplements. LVWR adopted December 31 as the fiscal year end.
On June 30, 2011, LVWR,
together with its members, entered into a purchase agreement (the “Purchase Agreement”), for a share exchange with
SF Blu Vu, Inc., (“SF Blu”), a public Nevada shell corporation. SF Blu Vu Inc. was formed in Nevada on October 9, 2007
under the name Semper Flowers, Inc. On May 15, 2009, Semper Flowers, Inc. changed its name to SF Blu Vu, Inc. The Purchase Agreement
was ultimately completed on August 31, 2011. Under the terms of the Purchase Agreement, SF Blu issued 36,000,000 (30,000,000 shares
pre stock split of 1 additional share for every five shares held) of their common shares for 100% of the members’ interest
in LVWR. Subsequent to the Purchase Agreement, the members of LVWR owned 60% of common shares of SF Blu, effectively obtaining
operational and management control of SF Blu. For accounting purposes, the transaction has been accounted for as a reverse acquisition
under the purchase method of business combinations, and accordingly the transaction has been treated as a recapitalization of LVWR,
the accounting acquirer in this transaction, with SF Blu (the shell) as the legal acquirer.
Subsequent to the Purchase Agreement
being completed, SF Blu as the legal acquirer and surviving company, together with their controlling stockholders from LVWR changed
the name of SF Blu to LiveWire Ergogenics, Inc. (“LiveWire”) on September 20, 2011. Hereafter, SF Blu, LVWR, or LiveWire
are referred to as the “Company”, unless specific reference is made to an individual entity.
Interim Financial Statements
These unaudited condensed consolidated
financial statements as of and for the three and six months ended June 30, 2015 and 2014 reflect all adjustments which, in the
opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods
presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
All adjustments are of a normal recurring nature.
These interim unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto
for the years ended December 31, 2014 and 2013 included in the Company’s Form 10-K filed with the United States Securities
and Exchange Commission (“SEC”) on May 8, 2015. The Company assumes that the users of the interim financial information
herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy
of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three
and six month period ended June 30, 2015 are not necessarily indicative of results for the entire year ending December 31, 2015.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Advertising
Advertising is expensed as incurred
and is included in selling costs on the accompanying consolidated statements of operations. Advertising and marketing expense for
the six months ended June 30, 2015 and 2014 was approximately $300 and $52,000, respectively and for the three months ended June
30, 2015 and 2014 was approximately $0 and $33,000, respectively.
Accounts Receivable
Accounts receivable are presented net
of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company
reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability
of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors,
including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic
trends. Accounts are written off after exhaustive efforts at collection. At June 30, 2015 and December 31, 2014, the Company has
established, based on a review of its outstanding balances, an allowance for doubtful accounts in the amount of $58,264 and $49,153,
respectively.
Basis of Accounting
These
unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial statements
and with Form 10-Q and article 8 of the Regulation S-X of the SEC. Under this basis of accounting, revenues are recorded as earned
and expenses are recorded at the time liabilities are incurred.
Cash and Cash Equivalents
The
Company considers all highly liquid instruments purchased with an original maturity of three months or less and money market
accounts to be cash equivalents. There were no cash equivalents at June 30,
2015 and December 31, 2014.
Use of Estimates
The preparation of the financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses
during the reporting period. Actual results could differ from those estimates.
Derivative Liabilities
The Company assessed the classification
of its derivative financial instruments as of June 30, 2015, which consist of convertible instruments and rights to shares of the
Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria
that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing
derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks
of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured
at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings
as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative
instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is
deemed to be conventional, as described.
Inventory
Inventory is stated at the lower of
cost or market value using the FIFO method. Inventory consists primarily of finished goods and packaging materials and
production supplies, i.e. packaged consumable energy supplements, manufactured under contract, and the wrappers and containers
they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain
the optimum stock on hand available for immediate shipment.
Inventory is shown on the balance sheet
net of a reserve, which represents older packaging that may still be used as samples. The Company does not anticipate taking additional
inventory reserves in the future.
Fair Value of Financial Instruments
Effective January 1, 2008, the Company
adopted FASB ASC 820-Fair Value Measurements and Disclosures, or ASC 820, for assets and liabilities measured at fair value on
a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting
principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure
about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or
operating results, but did expand certain disclosures.
ASC 820 defines fair value 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. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable
inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable
market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
The Company did not have any Level 2
or Level 3 assets or liabilities as of June 30, 2015, with the exception of its convertible notes payable and derivative liability.
The carrying amounts of these liabilities at June 30, 2015 approximate their respective fair value based on the Company’s
incremental borrowing rate.
Cash is considered to be highly liquid
and easily tradable as of June 30, 2015 and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair
Value Option, or ASC 825-10-25, was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements
in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.
The Company did not elect the fair value options for any of its qualifying financial instruments.
Convertible Instruments
The Company evaluates and accounts for
conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for
Derivative Instruments and Hedging Activities”.
Professional standards generally provides
three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them
as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of
the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported
in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be
considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument
is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt
Instrument”.
The Company accounts for convertible
instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments)
in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,”
as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when
necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon
the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective
conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt
to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion
options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40
provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement,
then the contract shall be classified as an asset or a liability.
Income Taxes
Prior to the Purchase Agreement LVWR
was taxed as a limited liability company, which is a ‘pass through entity’ for tax purposes. Taxable income flowed
through to its members, and income taxes were not levied at the company level. Subsequent to the reverse merger LVWR became a subsidiary
of the SF Blu and is taxed at the Company’s marginal corporate rate. The Company accounts for income taxes under the provisions
of ASC Section 740-10-30, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in their consolidated financial statements or tax
returns.
Stock Based Compensation
The Company accounts for the grant of
stock options and restricted stock awards in accordance with ASC 718, “Compensation-Stock Compensation.” ASC 718 requires
companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation.
Recognition of Revenue
Sales are recorded at the time title
of goods sold passes to customers, which based on shipping terms which generally occurs when the product is shipped to the customer
and collectability is reasonably assured. Based on prior experience, the Company reasonably estimates its sales returns and warranty
reserves. Sales are presented net of discounts and allowances. Discounts and allowances are determined when a sale is negotiated.
The Company does not grant price adjustments after a sale is complete. The Company warrants its products sold on the
internet with a right of exchange by means of an approved Return Merchandise Authorization (RMA). Returns of unused
merchandise are similarly authorized. Warranty and return policy for product sold through retail distribution channels is negotiated
with each customer.
The Company’s revenue is primarily
derived from sales of their consumable energy supplement products through distributors who distribute their products to retailers.
The Company also sells their products directly to consumers; this is normally done through internet sales. This portion of their
sales is minimal.
Deferred revenue is comprised of advances from customers,
which will be applied toward future invoices within one year. As of June 30, 2015 and December 31, 2014, the balance was
$79,342.
Shipping costs
Shipping costs are included in cost
of goods sold and totaled approximately $2,500 and $18,400 for the six months ended June 30, 2015 and 2014, respectively and approximately
$1,100 and $14,000 for the three months ended June 30, 2015 and 2014, respectively.
Earnings (loss) per common share
The Company utilizes the guidance per
FASB Codification “ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect
of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the
weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income
available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation,
plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding,
is not presented separately as it is anti-dilutive. Such securities, shown below, presented on a common share equivalent basis
and outstanding as of June 30, 2015 and 2014 have been excluded from the per share computations:
| |
For the Six Months Ended |
| |
June 30, |
| |
2015 | |
2014 |
Convertible Notes Payable | |
| 162,186,467 | | |
| 2,139,451 | |
Warrants | |
| 6,680,002 | | |
| 6,680,002 | |
Series B Preferred Stock | |
| 32,820 | | |
| 134,724 | |
Series C Preferred Stock | |
| 600,000 | | |
| 600,000 | |
Long Lived Assets
The Company follows Accounting Standards
Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires those long-lived assets
and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant
unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results
over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.
Reclassification
Certain reclassifications have been
made to conform the prior period data to the current presentation. These reclassifications had no effect on reported net loss.
Principles of Consolidation
The accompanying unaudited condensed
consolidated financial statements for the six months ended June 30, 2015, include the accounts of the Company and its wholly-owned
subsidiary LiveWire MC2, LLC (“LVWR”). All significant intercompany balances and transactions have been eliminated
in consolidation.
Recent Accounting Pronouncements
ASU 2015-03
In April 2015, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of
Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance
costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected
by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein
the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance.
We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash
flows.
ASU 2015-02
In February 2015, the FASB issued ASU
No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of
consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures
(collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses
on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain
legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB
Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling
financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial
interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries
that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We
do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-01
In January 2015, the FASB issued ASU
No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from U.S. GAAP the concept of extraordinary items.
ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A
reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect
on our financial position, results of operations or cash flows.
ASU 2014-17
In November 2014, the FASB issued ASU
No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” This ASU provides an acquired entity with an
option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains
control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in
which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election
is irrevocable. ASU 2014-17 was effective on November 18, 2014. The adoption of ASU 2014-17 did not have any effect on our financial
position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU
2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial
instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors
in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial
position, results of operations or cash flows.
ASU 2014-15
In August 2014, the FASB issued ASU
No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance
related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as
a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15,
2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15
to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-12
In June 2014, the FASB issued ASU No.
2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award
Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance
target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.
ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We
do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No.
2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either
enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets
unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the
effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue
recognition standard by one year.
ASU 2014-08
In April 2014, the FASB issued ASU No.
2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 amends the definition for what types of asset
disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations
and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on
or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations
or cash flows.
A variety of accounting standards have
been issued or proposed by FASB that do not require adoption until a future date. We regularly review all new pronouncements that
have been issued since the filing of our Form 10-K for the year ended December 31, 2014 to determine their impact, if any, on our
consolidated financial statements. The Company does not expect the adoption of any of these standards to have a material impact
once adopted.
NOTE 3 – GOING CONCERN
The Company’s unaudited condensed
consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. The Company has a net loss of $372,937 for
the six months ended June 30, 2015, and has an accumulated deficit of $8,507,386 as of June 30, 2015. The Company has
not yet established an adequate ongoing source of revenues sufficient to cover its operating costs and to allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital,
it could be forced to cease development of operations.
In order to continue as a going concern,
develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things,
additional capital resources. Management’s plans to continue as a going concern include raising additional capital
through increased sales of product and by sale of common shares. However, management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – PROPERTY AND EQUIPMENT
| |
June 30, 2015 | | |
December 31,
2014 |
|
| |
(Unaudited) | |
|
Equipment | |
$ | 27,780 | | |
$ | 27,780 | |
Accumulated depreciation | |
| (22,133 | ) | |
| (19,981 | ) |
Total | |
$ | 5,647 | | |
$ | 7,799 | |
Property and equipment is stated at
cost less accumulated depreciation and depreciated using straight line methods over the estimated useful lives of the related assets
ranging from three to five years. Maintenance and repairs are expensed currently. The cost of normal maintenance and
repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When
equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss
is recognized in income.
Depreciation expense amounted to $2,152
and $2,268 for the six months ended June 30, 2015 and 2014, respectively and $1,082 and $377 for the three months ended June 30,
2015 and 2014, respectively.
NOTE 5 – INVENTORY
The Company outsources the manufacturing
of their consumable energy supplements. The wife of the Company’s CEO owns approximately 8% of this food outsource producer.
The Company believes that they are a minor customer of this outsource producer and that production terms with this outsourcer are
conducted on an arms-length basis.
|
|
June
30,
2015 |
|
|
December
31,
2014 |
|
|
|
(Unaudited) |
|
|
|
|
Finished goods |
|
$ |
44,364 |
|
|
$ |
117,376 |
|
Packaging materials and production supplies |
|
|
26,192 |
|
|
|
26,192 |
|
|
|
|
70,556 |
|
|
|
143,568 |
|
Reserve on inventory |
|
|
(33,884 |
) |
|
|
(96,440 |
) |
|
|
$ |
36,672 |
|
|
$ |
47,128 |
|
NOTE 6 – PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets balance
primarily consists of approximately $82,000 related to advances made to suppliers for inventory and approximately $100,000 related
to prepaid consulting fees.
NOTE 7 – RELATED PARTY TRANSACTIONS
AND LOANS FROM STOCKHOLDERS
Included in notes payable – related
party as of June 30, 2015 and December 31, 2014, is $196,341, payable to an entity owned by the controlling shareholders of the
Company. The related entity provides marketing and product development costs and general and administrative expenses to the Company.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
On July 20, 2011 the Company entered
into two employment agreements. The agreements have a five year term and may be terminated upon mutual agreement. The
salary associated with each of the agreements is $260,000 annually, a portion of which will be paid in cash and a portion
of which will be deferred until the Company achieves certain levels of sales and or enters into a merger, purchase or sale agreement
and or if the Company is sold.
During the year ended December 31, 2012,
a total of $209,448, due under these employment agreements, were converted into 1,256,688 (1,047,240 shares pre stock split of
1 additional share for every five shares held) shares of the Company’s common stock and Class A warrants to purchase
1,256,688 (1,047,240 Class A warrants pre stock split of 1 additional share for every five shares held) shares of the Company’s
common stock at $1 per share. These warrants expire on January 31, 2016.
On September 3, 2013, Bill Hodson, the
chief executive officer, and Brad Nichols, the president of the Company, agreed to forgive their deferred salaries to date, the
total amount of which is $460,667, and shall no longer hold the Company responsible for payment of that amount. This has been recorded
as a capital contribution. In addition, Mr. Hodson and Mr. Nichols agreed to change the terms of their employment agreements to
a salary of $1 per year. All other details of the employment agreements shall remain in full effect.
On February 20, 2015, Brad Nichols submitted
his resignation as an executive officer and a director of the Board of Directors of the Company effective as of the Board’s
acceptance of his resignation on March 2, 2015. Mr. Nichols is no longer a member of the Board or any of its committees. As a result
of the resignation of Mr. Nichols, the Board will consist of one director. The Board does not intend to appoint new directors to
replace Mr. Nichols, and has determined that the Board will consist of one director going forward.
Litigation
The Company is subject to certain legal
proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements
may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial
position, results of operations or liquidity.
NOTE 9 – NOTES PAYABLE
On April 22, 2014, the Company issued
a non-interest bearing promissory note for $206,341 to a related party as settlement of the accounts payable- related party. The
principal is payable every 90 days beginning on September 30, 2014 at the rate of $25,000 per quarter until the balance is zero.
As of June 30, 2015, the remaining balance of this note payable is $196,341. This note is technically in default but the Company
has an understanding with the note holder that payments will be made when the Company is able to do so.
On April 22, 2014, the Company issued
a promissory note for $150,000 to a third party for cash, which is due on October 22, 2014. Interest accrued at a rate of 12% per
annum. Monthly interest payments of $1,500 is payable every 30 days beginning on May 22, 2014. This note is technically in default
but the Company has an understanding with the note holder that payments will be made when the Company is able to do so.
On August 13, 2014, the Company issued
a promissory note for $10,000 to a third party for cash, which is due on August 13, 2015. Annual compounded interest accrues at
a rate of 6%, per annum. This note is technically in default but the Company has an understanding with the note holder that payments
will be made when the Company is able to do so.
On December 31, 2014, the Company issued
a promissory note for $10,000 to a third party for cash, which is due on June 30, 2015. Annual compounded interest accrues at
a rate of 8%, per annum. This note is technically in default but the Company has an understanding with the note holder that payments
will be made when the Company is able to do so.
On February 23, 2015, the Company issued a promissory note for $5,000 to a third
party for cash, which is due on August 30, 2015. Annual compounded interest accrues at a rate of 8%, per annum.
On March 19, 2015, the Company issued
a promissory note for $5,000 to a third party for cash, which is due on September 30, 2015. Annual compounded interest accrues
at a rate of 8%, per annum.
On April 3, 2015, the Company issued
a promissory note for $6,000 to a third party for cash, which is due on October 30, 2015. Annual compounded interest accrues at
a rate of 8%, per annum.
As of June 30, 2015, the remaining balance
for notes payable totaled $251,700.
As of June 30, 2015 and December
31, 2014, the Company had accrued interest of $41,017 and $30,192 respectively, related to notes payable, which is included in
accounts payable and accrued expenses on the condensed consolidated balance sheets.
NOTE 10 – CONVERTIBLE NOTES PAYABLE
At June 30, 2015 and December 31, 2014
convertible debentures consisted of the following:
| |
June
30,
2015 | |
December
31,
2014 |
| |
(Unaudited) | |
|
Convertible notes payable | |
$ | 361,010 | | |
$ | 323,500 | |
Unamortized debt discount | |
| (37,349 | ) | |
| (78,722 | ) |
Total | |
$ | 323,661 | | |
$ | 244,778 | |
Note issued on May 7, 2013:
On May 7, 2013, the Company entered
into an agreement with a third party non-affiliate to a 6% interest bearing convertible debentures for $12,000 due on May 6, 2014,
along with redemption premium of 110% of principal amount and conversion features commencing immediately. The loan is convertible
at $0.03 per share. In connection with this debenture, the Company recorded a $12,000 discount on debt, related to the beneficial
conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. As of June 30,
2015 this note has not been converted.
During the year ended December 31, 2014,
the Company fully amortized the remaining debt discount balance of $4,154 as amortization of beneficial conversion feature.
Note issued on August 16, 2013:
On August
16, 2013, the Company entered into an agreement with a third party non-affiliate to a 10% interest bearing convertible debentures
for $100,000 due on August 16, 2016. The loan is convertible immediately at $0.25 per share. In connection with this debenture,
the note holder was issued 500,000 warrants and recorded a $5,167 discount, related to the beneficial conversion feature of the
note to be amortized over the life of the note or until the note is converted or repaid. As of June 30, 2015 this note has not
been converted.
As of December 31, 2014, a net discount
of $2,756 remained. During the six months ended June 30, 2015, the Company amortized a total debt discount of $867 as amortization
of beneficial conversion feature. As of June 30, 2015, a net discount of $1,889 remained.
Note issued on October 3, 2013:
On October 3, 2013, the Company entered
into an agreement with a third party non-affiliate to a 10% interest bearing convertible debentures for $25,000 due on October
2, 2016. The loan is convertible immediately at $0.25 per share. In connection with this debenture, the note holder was issued
125,000 warrants and recorded a $3,637 discount, related to the beneficial conversion feature of the note to be amortized over
the life of the note or until the note is converted or repaid. As of June 30, 2015 this note has not been converted.
As of December 31, 2014, a net discount
of $2,138 remained. During the six months ended June 30, 2015, the Company amortized a total debt discount of $596 as amortization
of beneficial conversion feature. As of June 30, 2015, a net discount of $1,542 remained.
Note issued on October 3, 2013:
On October 3, 2013, the Company entered
into an agreement with a third party non-affiliate to a 10% interest bearing convertible debentures for $25,000 due on October
2, 2016. The loan is convertible immediately at $0.25 per share. In connection with this debenture, the note holder was issued
125,000 warrants and recorded a $3,637 discount, related to the beneficial conversion feature of the note to be amortized over
the life of the note or until the note is converted or repaid. As of June 30, 2015 this note has not been converted.
As of December 31, 2014, a net discount
of $2,138 remained. During the six months ended June 30, 2015, the Company amortized a total debt discount of $596 as amortization
of beneficial conversion feature. As of June 30, 2015, a net discount of $1,542 remained.
Note issued on October 30, 2013:
On October 30, 2013, the Company entered
into an agreement with a third party non-affiliate to a 10% interest bearing convertible debentures for $25,000 due on October
29, 2016. The loan is convertible immediately at $0.25 per share. In connection with this debenture, the note holder was issued
125,000 warrants and recorded a $2,687 discount, related to the beneficial conversion feature of the note to be amortized over
the life of the note or until the note is converted or repaid. As of June 30, 2015 this note has not been converted.
As of December 31, 2014, a net discount
of $1,648 remained. During the six months ended June 30, 2015, the Company amortized a total debt discount of $438 as amortization
of beneficial conversion feature. As of June 30, 2015, a net discount of $1,210 remained.
Note issued on July 21, 2014:
On July 21, 2014, the Company entered
into an agreement with a third party non-affiliate to a 8% interest bearing convertible debentures for $53,000 due on April 24,
2015, with conversion features commencing after 180 days following the date of this note. The loan is convertible at 58% of the
average of the lowest three trading prices for the common stock during the ten trading day prior to the conversion date. In connection
with this debenture, the Company recorded a $53,000 discount on debt, related to the beneficial conversion feature of the note
to be amortized over the life of the note or until the note is converted or repaid. During the six months ended June 30, 2015,
the Company converted the principal balance of $53,000 and accrued interest of $2,120 into 16,308,772 shares of common stock.
As of December 31, 2014, a net discount
of $21,812 remained. During the six months ended June 30, 2015, the Company fully amortized and wrote off a total debt discount
of $21,812 to current period operations as amortization of beneficial conversion feature.
Note issued on September 5, 2014:
On September 5, 2014, the Company entered
into an agreement with a third party non-affiliate to a 8% interest bearing convertible debentures for $83,500 due on June 9, 2015,
with conversion features commencing after 180 days following the date of this note. The loan is convertible at 58% of the average
of the lowest three trading prices for the common stock during the ten trading day prior to the conversion date. In connection
with this debenture, the Company recorded a $83,500 discount on debt, related to the beneficial conversion feature of the note
to be amortized over the life of the note or until the note is converted or repaid. This note was bifurcated with the embedded
conversion option recorded as a derivative liability at fair value (See Note 11). On April 15, 2015, pursuant to a notice of default
received from the note holder demanding immediate payment of 150% of the remaining outstanding principal balances of the note,
the Company recognized a default penalty of $26,725 as additional principal on this note. During the six months ended June 30,
2015, the Company converted $55,465 of the principal balance into 35,814,842 shares of common stock. As of June 30, 2015, a principal
balance of $54,760 remained.
As of December 31, 2014, a net discount
of $48,231 remained. During the six months ended June 30, 2015, the Company fully amortized the remaining debt discount balance
of $48,231 to current period operations as amortization of beneficial conversion feature.
Note issued on March 30, 2015:
On March 30, 2015, the Company entered
into a six month consulting agreement and as compensation, issued a convertible promissory note for $125,000. The note bears 4%
interest per annum and matures at April 1, 2017. The note is convertible at any time into shares of the Company’s common
stock at a rate of $0.0025 per share. During the six months ended June 30, 2015, the Company converted $43,750 of the principal
balance into 17,500,000 shares of common stock. As of June 30, 2015, a principal balance of $81,250 remained.
Note issued on May 12, 2015:
On May 12, 2015, the Company entered
into an agreement with a third party non-affiliate to a 12% interest bearing convertible debentures for $38,000 due on February
14, 2016, with conversion features commencing after 180 days following the date of this note. The loan is convertible at 51% of
the average of the lowest three trading prices for the common stock during the ten trading day prior to the conversion date. In
connection with this debenture, the Company recorded a $38,000 discount on debt, related to the beneficial conversion feature of
the note to be amortized over the life of the note or until the note is converted or repaid. As of June 30, 2015, a principal balance
of $38,000 remained.
During the six months ended June 30,
2015, the Company amortized a total debt discount of $6,835 as amortization of beneficial conversion feature. As of June 30, 2015,
a net discount of $31,165 remained.
NOTE 11 – DERIVATIVE FINANCIAL
INSTRUMENTS
The Company
applies the provisions of ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”),
under which convertible instruments, which contain terms that protect holders from declines in the stock price (reset provisions),
may not be exempt from derivative accounting treatment. As a result, embedded conversion options in convertible debt are recorded
as a liability and are revalued at fair value at each reporting date. If the fair value of the warrants exceeds the face value
of the related debt, the excess is recorded as change in fair value in operations on the issuance date. The Company has $54,760
of convertible debt with variable conversion pricing outstanding at June 30, 2015.
The Company
calculates the estimated fair values of the liabilities for derivative instruments using the Black Scholes (“BSM”)
option pricing model. The closing price of the Company’s common stock at June 30, 2015 was $0.0014. Volatility, expected
remaining term and risk free interest rates used to estimate the fair value of derivative liabilities at June 30, 2015, are indicated
in the table that follows. The volatility for the valuation was based on the historical volatility of the closing price of the
Company’s common stock at June 30, 2015, the expected term is equal to the remaining term of the note, and the risk free
rate is based upon rates for treasury securities with the same term.
At June 30, 2015, the Company valued
the conversion features using the assumptions specified in the below table and determined that, during the six months ended June
30, 2015, the Company’s derivative liability amounted to $59,384. The Company recognized a corresponding loss of $12,298
and a gain of $1,646 on derivative liability in conjunction with this valuation during the three and six months ended June 30,
2015, respectively.
| |
Valuation at June 30, 2015 |
Volatility | |
| 267 | % |
Expected remaining term | |
| .25 | |
Risk-free interest rate | |
| 0.26 | % |
Expected dividend yield | |
| None | |
NOTE 12 – STOCKHOLDERS’ DEFICIT
Common Stock
On February 3, 2015, the Company issued
2,448,980 shares of common stock valued at $0.0049 per share totaling $12,000 for partial conversion of a $53,000 convertible note.
On February 20, 2015, the Company issued
7,703,125 shares of common stock valued at $0.0032 per share totaling $24,650 for partial conversion of a $53,000 convertible note.
On February 20, 2015, the Company issued
6,156,667 shares of common stock valued at $0.0030 per share totaling $16,350 in principal and $2,120 in accrued interest for the
remaining conversion of a $53,000 convertible note.
On March 13, 2015, the Company issued
7,705,000 shares of common stock valued at $0.0020 per share totaling $15,410 for partial conversion of a $83,500 convertible note.
On March 19, 2015, the Company issued
7,705,263 shares of common stock valued at $0.0019 per share totaling $14,640 for partial conversion of a $83,500 convertible note.
On April 10, 2015, the Company 8,000,000
shares of common stock valued at $0.0025 per share totaling $20,000 for partial conversion of a $125,000 convertible note.
On April 21, 2015, the Company 9,500,000
shares of common stock valued at $0.0025 per share totaling $23,750 for partial conversion of a $125,000 convertible note.
On May 11, 2015, the Company issued
10,214,706 shares of common stock valued at $0.0017 per share totaling $17,365 for partial conversion of a $83,500 convertible
note.
On June 23, 2015, the Company issued
10,189,873 shares of common stock valued at $0.0008 per share totaling $8,050 for partial conversion of a $83,500 convertible note.
2013 Stock Incentive Plan
On May 1, 2013, the Board of Directors
of the Company adopted and approved the 2013 Stock Incentive Plan (“2013 Plan”) whereby it reserved for issuance up
to 7,500,000 shares of its common stock. The purpose of the Plan is to provide directors, officers and employees of, and consultants,
to the Company with additional incentives by increasing their ownership in the Company. Directors, officers, employees and consultants
of the Company are eligible to participate in the 2013 Plan. Incentive stock options may be granted only to employees of the Company.
Options in the form of Non-Statutory Stock Options (“NSO”) may be granted under the 2013 Plan. Restricted Stock may
also be granted under the 2013 Plan. On May 3, 2013, the Company filed Form S-8 with the SEC to register those 7,500,000 shares
of common stock. On May 24, 2014, the Company filed Form S-8 with the SEC to register an additional 10,000,000 shares of common
stock under the 2013 Plan. On May 24, 2014, the Company filed Form S-8 with the SEC to register an additional 10,000,000 shares
of common stock under the 2013 Plan. On April 10, 2015, the Company filed Form S-8 with the SEC to register an additional 135,000,000
shares of common stock under the 2013 Plan.
Series B Convertible Preferred Stock
Designation and Rank
On October 17, 2013, the Company created
its new Series B preferred class of stock. The series of Preferred Stock shall be designated the “Series B Preferred Stock”
and shall consist of 150,000 shares. The Series B Preferred Stock shall be senior to the common stock and all other shares of Preferred
Stock that may be later authorized. Each share of Series B Preferred Stock shall have a Stated Value of $1.00 per share.
Voting, Liquidation, Dividends, and Redemption
Each outstanding share of Series B Preferred
Stock shall vote with the common stock on all matters. The shares of Series B Preferred Stock shall (i) have a liquidation preference
of $1.00 per share; (ii) accrue, earn, or participate in any dividends on the common stock; and (iii) were subject to redemption
by the Corporation prior to December 31, 2014 at a fixed redemption price of $1.10 per share.
Conversion
After March 31, 2014, each outstanding
share of Series B Preferred Stock may be converted, at the option of the owner, into common stock using a conversion formula that
delivers common stock worth $1.25 for every $1.00 of Series B converted. The owner shall provide a written Notice of Conversion
that specifies the amount of Series B Preferred Stock to be converted into common stock and the lowest closing bid price of the
Corporation’s common stock during the preceding 10 trading days.
Limitation on Conversion
In no event (except while there is outstanding
a tender offer for any or all of the shares of the Company’s Common Stock) shall the owner be entitled to convert any shares
of Series B Preferred Stock to the extent that, after such conversion the sum of (1) the number of shares of Common Stock then
beneficially owned by the owner and its affiliates, and (2) the number of shares of Common Stock issuable upon the conversion of
the shares of Series B Preferred Stock with respect to which the determination of this proviso is being made, would result in beneficial
ownership by the owner and its affiliates of more than 9.99% of the outstanding shares of Common Stock (after taking into account
the shares to be issued to the owner upon such conversion). For purposes of the proviso to the preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. Nothing herein shall preclude the owner from disposing of a sufficient number of other shares of Common
Stock beneficially owned by the owner so as to thereafter permit the continued conversion of shares of Series B Preferred Stock.
Equity Designation and Issuances:
Effective January 29, 2014 the Company
amended its Series B Preferred Stock designation in order to permit the issuance of junior Preferred Stock which have enhanced
or “super-majority” voting rights. The amendment was approved by the holders of the Series B Preferred Stock. The amended
Series B Preferred Stock designation is attached as Exhibit 10.1 in Form 8-K filed with the SEC on February 6, 2014.
On October 17, 2013, the Company issued
134,724 shares of Series B convertible preferred stock as the result of the conversion of debt and accrued liabilities totaling
$134,724, valued at $1 per share.
On August 27, 2014, three unrelated
parties converted a total of 101,904 shares of Series B preferred stock into 3,112,955 of common stock at the conversion rate of
$0.03288.
Series C Convertible Preferred Stock
Effective January 29, 2014 the Board
of Directors authorized the creation of 75 shares of a new Series C convertible preferred stock. Each share of Series C Preferred
has the right to convert into 8,000 shares of the Company’s common stock and have a liquidation preference of $200. Additionally,
the Series C Preferred is allowed to cast a vote, on all matters that the Company’s shareholders are permitted to vote upon,
equal to .7% of all outstanding securities that are eligible to vote at the time of such shareholder action for each share
of Series C Preferred (.7% X 75 shares = 52.5% of total vote).
On January 31, 2014 the Company issued
75 shares of Series C Preferred Stock valued at $24,000 to its Chief Executive Officer, Bill Hodson in exchange for a $15,000 as
stock based compensation to the Executive by the Company. In addition the remaining $9,000 was recorded as a loss on settlement
of debt.
Class A Common Stock
Effective February 3, 2014 the Board
of Directors recommended, and the Company’s shareholders approved by written consent, the creation of 1,000,000 shares of
Class A Common Stock. Each share of Class A Common Stock is entitled to convert into one (1) share of regular common stock at any
time at the option of the holder and to cast two hundred (200) votes on all matters as to which holders of the common stock, voting
together as a class, are entitled to vote.
On February 3, 2014 the Company issued
1,000,000 shares of Class A Common Stock valued at $67,000 to its Chief Executive Officer, Bill Hodson in exchange for $20,596
owed to the Executive by the Company. In addition, the $4,404 was recorded as a stock based compensation and $42,000 was recorded
as a loss on settlement of debt.
On February 6, 2014 Bill Hodson converted
his 1,000,000 shares of Class A Common Stock into 1,000,000 shares of regular Common Stock. Following the conversion the Class
A Common Stock is no longer outstanding.
Amendment of Articles of Incorporation
Effective February 3, 2014, following
the enactment of the First Amendment, Article Eight of the Company’s Articles of Incorporation was amended to (i) increase
the authorized common stock from 100,000,000 shares to 150,000,000 shares, and (ii) to permit the holders of the Company’s
outstanding Preferred Stock voting together as a class to effect a change in the number of authorized shares of regular Common
Stock or Series A Common Stock by amending the Articles of Incorporation without the affirmative vote, either separately or as
a class, of the holders of regular Common Stock and Series A Common Stock.
Effective July 24, 2014, Article Eight
of the Company’s Articles of Incorporation was amended to increase the authorized common stock from 150,000,000 shares to
200,000,000 shares.
Effective April 6, 2015, Article Eight
of the Company’s Articles of Incorporation was amended to increase the authorized common stock from 200,000,000 shares to
1,500,000,000 shares.
As of June 30, 2015 and December 31,
2014, the Company had 226,132,173 and 156,508,559 shares of its common stock issued and outstanding, respectively.
As of June 30, 2015 and December 31,
2014, the Company had 0 shares of its Class A common stock issued and outstanding.
As of June 30, 2015 and December 31,
2014, the Company had 32,820 shares of its series B preferred stock issued and outstanding.
As of June 30, 2015 and December 31,
2014, the Company had 75 of its series C preferred stock issued and outstanding.
Warrants
The following table summarizes the changes
in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at June 30,
2015:
Exercise
Price |
|
|
Number
Outstanding |
|
|
Warrants
Outstanding
Weighted Average
Remaining
Contractual
Life (years) |
|
|
Weighted
Average
Exercise price |
|
|
Number
Exercisable |
|
|
Warrants
Exercisable
Weighted
Average
Exercise Price |
|
$ |
0.20 – 1.00 |
|
|
|
6,680,002 |
|
|
|
.67 |
|
|
$ |
0.90 |
|
|
|
6,680,002 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions involving the Company’s warrant issuance
are summarized as follows:
| |
Number of Shares | |
Weighted Average Price Per Share |
| Outstanding at December 31, 2013 | | |
| 6,680,002 | | |
$ | 0.90 | |
| Issued | | |
| - | | |
| - | |
| Exercised | | |
| - | | |
| - | |
| Expired | | |
| - | | |
| - | |
| Outstanding at December 31, 2014 | | |
| 6,680,002 | | |
$ | 0.90 | |
| Issued | | |
| - | | |
| - | |
| Exercised | | |
| - | | |
| - | |
| Expired | | |
| - | | |
| - | |
| Outstanding at June 30, 2015 | | |
| 6,680,002 | | |
$ | 0.90 | |
NOTE 13 – CONCENTRATIONS
The following table sets forth information
as to each customer that accounted for 10% or more of the Company’s revenues for the six months ended June 30, 2015 and 2014.
At June 30, 2015, three customers accounted for 79% of the Company’s total revenue. At June 30, 2014, three customers
accounted for 50% of the Company’s total revenue.
Customer |
|
Six Months Ended
June 30, 2015 |
|
|
Six Months Ended
June 30, 2014 |
|
A |
|
|
30 |
% |
|
|
23 |
% |
B |
|
|
14 |
% |
|
|
14 |
% |
C |
|
|
35 |
% |
|
|
13 |
% |
For
the six months ended June 30, 2015, the Company had no purchases used for production.
For the six months ended June 30, 2014, the Company had two suppliers who accounted
for approximately $22,276 of their purchases used for production, or approximately 38% of total purchases for the six months then
ended.
NOTE 14 – SUBSEQUENT EVENTS
The Company evaluated subsequent events
through the date the unaudited condensed consolidated financial statements were available to be issued as follows:
Conversions:
On July 16, 2015, the Company converted
$7,150 of debt into 10,214,286 shares of common stock valued at $0.0007 per share for partial conversion of a $83,500 convertible
note.
On July 20, 2015, the Company converted
$7,150 of debt into 10,214,286 shares of common stock valued at $0.0007 per share for partial conversion of a $83,500 convertible
note.
On July 23, 2015, the Company converted
$5,310 of debt into 10,211,538 shares of common stock valued at $0.0005 per share for partial conversion of a $83,500 convertible
note.
On July 28, 2015, the Company converted
$4,490 of debt into 10,204,545 shares of common stock valued at $0.0004 per share for partial conversion of a $83,500 convertible
note.
On August 3, 2015, the Company converted
$3,775 of debt into 10,202,703 shares of common stock valued at $0.0004 per share for partial conversion of a $83,500 convertible
note.
On August 10, 2015, the Company converted
$2,960 of debt into 10,206,897 shares of common stock valued at $0.0003 per share for partial conversion of a $83,500 convertible
note.
Item 2 – Management’s Discussion and Analysis
of Financial Condition and Results of Operation
The following discussion and analysis
should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes included
elsewhere in this report. It contains forward-looking statements that reflect our future plans, estimates, beliefs and expected
performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control.
Our actual results could differ materially from those discussed in these forward-looking statements.
Factors that could cause or contribute
to such differences include, but are not limited to, market prices for natural gas and oil, economic and competitive conditions,
capital expenditures and other uncertainties, as well as those factors discussed below, all of which are difficult to predict and
which expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our
behalf. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not have
any intention or obligation to update forward-looking statements included in this report after the date of this report, except
as required by law.
INTRODUCTION
The following discussion and analysis
summarizes the significant factors affecting: (i) our plan of operations for the six months ended June 30, 2015. This discussion
and analysis should be read in conjunction with our consolidated financial statements and notes included in our Annual Report on
Form 10-K for the year ended December 31, 2014.
EXECUTIVE SUMMARY
We are engaged in the sale and marketing
of energy chew products. Our product delivers a blend of ingredients that provides an energy boost similar to an energy drink,
such as Red Bull or 5-Hour Energy, but is about the size of a Starburst candy. The product is not a gum; it dissolves quickly and
is an alternative to drinks or shots.
Results of Operations
The financial information with respect
to the three and six months ended June 30, 2015 and 2014 that is discussed below is unaudited. In the opinion of management, such
information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results
for such periods. The results of operations for interim periods are not necessarily indicative of the results of operations for
the full fiscal years.
Company Overview for the six months ended June 30, 2015
and 2014
During the six months ended June 30,
2015 and 2014, we incurred net losses of $372,937 and $3,290,855, respectively.
Comparison of the results of operations for the six months
ended June 30, 2015 and 2014
Sales. During the six months
ended June 30, 2015 and 2014, sales of our products amounted to $27,935 and $181,800, respectively. Our sales decreased by $153,865
or 85% primarily because of the greater restrictions we placed on the credit worthiness of our distributors, which has resulted
in us requiring 50% minimum payments prior to shipping. Additionally, the decrease is also a result of lower than expected re-orders
from private label customers.
Cost of goods sold. For the six
months ended June 30, 2015, cost of goods sold was $27,184 compared to $119,642 for the six months ended June 30, 2014. Our decrease
of $92,458 or 77% in cost of goods is a direct result of our decrease in sales during the six months ended June 30, 2015.
Gross profit. For the six months
ended June 30, 2015, our gross profit was $751 (3% of revenue) compared to gross profit of $62,158 (34% of revenue) for the six
months ended June 30, 2014. The decrease in gross profit dollar amount and in gross profit percentage in 2015 from 2014, is a direct
result of lower sales volume.
Costs and Expenses
General
and Administrative. During the six months ended June 30, 2015, general and administrative expenses amounted to $240,218
as compared to $2,289,012 for the six months ended June 30, 2014, a decrease of $2,048,794 or 90%. The decrease in general and
administrative expenses was primarily due to $1,751,184 of stock based compensation during the six months ended June 30, 2014 compared
to $0 in the corresponding period in 2015.
Selling
Costs. During the six months ended June 30, 2015 and 2014, selling costs amounted to $1,420 or 5% of sales and $52,858
or 29% of sales, respectively. The decrease in selling costs is attributable to reduced sales volume.
Depreciation. During
the six months ended June 30, 2015 and 2014, depreciation expense amounted to $2,152 and $2,268, respectively.
Interest
expense. During the six months ended June 30, 2015 interest expense decreased to $24,848 from $639,756 during the six months
ended June 30, 2014, a decrease of $614,908. The primary reason for the decrease is due to the issuance of shares recorded as interest
totaling $614,200 in the first quarter of 2014.
Loss on
settlement of debt. During the six months ended June 30, 2015 loss on settlement of debt totaled $0 compared to $36,788 loss
on settlement of debt for the six months ended June, 2014. The decrease relates to the Company settling debts by issuing shares
of common and preferred stock as well as the forgiveness of approximately $45,000 in convertible debt during the first quarter
of 2014.
Gain on
change in fair value of derivative liability. As described in our accompanying unaudited condensed consolidated financial statements,
we issued convertible notes with certain conversion features that have certain reset provisions. All of which, we are required
to bifurcate from the host financial instrument and mark to market each reporting period. We recorded the initial fair value of
the reset provision as a liability with an offset to equity or debt discount and subsequently mark to market the reset provision
liability at each reporting cycle.
For the six
months ended June 30, 2015, we recorded a gain of $1,646 in change in fair value of the derivative liability including initial
non-cash interest as compared to a gain of $0 for the six months ended June 30, 2014. Also, the Company amortized beneficial conversion
feature expense on convertible notes of $79,373 during the six months ended June 30, 2015 as compared to $115,768 for the same
period in the previous year.
Company Overview for the three months ended June 30, 2015
and 2014
During the three months ended June 30,
2015 and 2014, we incurred net losses of $239,966 and $473,591, respectively.
Comparison of the results of operations for the three
months ended June 30, 2015 and 2014
Sales. During the three
months ended June 30, 2015 and 2014, sales of our products amounted to $14,013 and $118,766, respectively. Our sales decreased
by $104,753 or 88% primarily because of the greater restrictions we placed on the credit worthiness of our distributors, which
has resulted in us requiring 50% minimum payments prior to shipping. Additionally, the decrease is also a result of lower than
expected re-orders from private label customers.
Cost of goods sold. For the three
months ended June 30, 2015, cost of goods sold was $5,138 compared to $101,193 for the three months ended June 30, 2014. Our decrease
of $96,055 or 95% is a direct result of our decrease in sales during the three months ended June 30, 2015.
Gross profit. For the three months
ended June 30, 2015, our gross profit was $8,875 (63% of revenue) compared to gross profit of $17,573 (15% of revenue) for the
three months ended June 30, 2014. The decrease in gross profit dollar amount in 2015 from 2014, is a direct result of lower sales
volume and the increase in gross profit percentage in 2015 from 2014, is a result of our streamlining of manufacturing and production.
Costs and Expenses
General
and Administrative. During the three months ended June 30, 2015, general and administrative expenses amounted to $164,582,
as compared to $213,632 for the three months ended June 30, 2014, a decrease of $49,050 or 23%. The decrease in general and administrative
expenses was primarily due to a decrease in consulting fees during the three months ended June 30, 2015 compared to the corresponding
period in 2014.
Selling
Costs. During the three months ended June 30, 2015 and 2014, selling costs amounted to $1,102 or 8% of sales and $33,606
or 28% of sales, respectively. The decrease in selling costs is attributable to reduced sales volume.
Depreciation. During
the three months ended June 30, 2015 and 2014, depreciation expense amounted to $1,082 and $377, respectively.
Interest
expense. During the three months ended June 30, 2015 interest expense decreased to $13,264 from $16,546 during the three months
ended June 30, 2014, a decrease of $3,282. The primary reason for the decrease is due to a decrease in interest expense from our
subsidiary during the three months ended June 30, 2015 compared to the corresponding period in 2014.
Gain/Loss
on settlement of debt. During the three months ended June 30, 2015 loss on settlement of debt totaled $0 compared to $63,200
gain on settlement of debt for the three months ended June 30, 2014. The decrease relates to the Company settling debts by issuing
shares of common and preferred stock during the three months ended June 30, 2014. There was no settlement of debt during the three
months ended June 30, 2015.
Gain on
change in fair value of derivative liability. As described in our accompanying unaudited condensed consolidated financial statements,
we issued convertible notes with certain conversion features that have certain reset provisions. All of which, we are required
to bifurcate from the host financial instrument and mark to market each reporting period. We recorded the initial fair value of
the reset provision as a liability with an offset to equity or debt discount and subsequently mark to market the reset provision
liability at each reporting cycle.
For the three
months ended June 30, 2015, we recorded a loss of $12,298 in change in fair value of the derivative liability including initial
non-cash interest as compared to a gain of $0 for the three months ended June 30, 2014. Also, the Company amortized beneficial
conversion feature expense on convertible notes of $29,190 during the three months ended June 30, 2015 as compared to $73,640 for
the same period in the previous year.
Going Concern
The Company’s unaudited condensed
consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. We have an accumulated deficit of $8,507,386 and
our current liabilities exceeded our current assets by $870,182 as of June 30, 2015. We may require additional funding to sustain
our operations and satisfy our contractual obligations for our planned operations. Our ability to establish the Company as a going
concern is may be dependent upon our ability to obtain additional funding in order to finance our planned operations.
In order to continue as a going concern,
develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things,
additional capital resources. Management’s plans to continue as a going concern include raising additional capital
through increased sales of product and by sale of common shares. However, management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Liquidity and Capital Resources
During the six months ended June 30,
2015, our cash flows from operations were not sufficient for us to meet our operating commitments. Our cash flows from
operations continue to be, and are expected to continue to be, insufficient to meet our operating commitments.
Working Capital. As of
June 30, 2015, we had a working capital deficit of $870,182 and cash of $0, while at December 31, 2014 we had a working capital
deficit of $715,162 and cash of $1,448. The increase in our working capital deficit is primarily attributable to an increase in
current liabilities in the current year versus the prior year. We do not expect our working capital deficit to increase in the
near future.
Cash Flow. Net cash used
in or provided by operating, investing and financing activities for the six months ended June 30, 2015 and 2014 were as follows:
| |
Six Months Ended June 30, |
| |
2015 | |
2014 |
| |
| |
|
Net cash used in operating activities | |
$ | (55,448 | ) | |
$ | (588,007 | ) |
Net cash used in investing activities | |
$ | - | | |
$ | (28,430 | ) |
Net cash provided by financing activities | |
$ | 54,000 | | |
$ | 614,800 | |
Net Cash Used in Operating Activities.
The changes in net cash used in operating activities are attributable to our net loss adjusted for non-cash charges as presented
in the condensed consolidated statements of cash flows and changes in working capital as discussed above.
Net Cash Used in Investing Activities.
There were no capital expenditures for the six months ended June 30, 2015. Net cash used in investing activities for the six months
ended June 30, 2014 was related to purchases of equipment as well as payments towards security deposits.
Net Cash Provided by Financing Activities. Net
cash provided by financing activities for the six months ended June 30, 2015 relates primarily to cash received from issuance of
our notes payable and convertible notes payable. Net cash provided by financing activities for the six months ended June 30, 2014
relates primarily to cash received from issuance of note payable and convertible notes payable and cash received from the issuance
of our common stock offset by the repayments of our notes payable and shareholder loans.
Off-Balance Sheet Arrangements
We do not have off-balance sheet arrangements.
Inflation
The effect of inflation on the Company's revenue and operating
results was not significant.
Contractual Obligations
None.
Recently Issued Accounting Pronouncements
ASU 2015-03
In April 2015, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of
Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance
costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected
by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein
the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance.
We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash
flows.
ASU 2015-02
In February 2015, the FASB issued ASU
No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of
consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures
(collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses
on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain
legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB
Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling
financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial
interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries
that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We
do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-01
In January 2015, the FASB issued ASU
No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from U.S. GAAP the concept of extraordinary items.
ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A
reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect
on our financial position, results of operations or cash flows.
ASU 2014-17
In November 2014, the FASB issued ASU
No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” This ASU provides an acquired entity with an
option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains
control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in
which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election
is irrevocable. ASU 2014-17 was effective on November 18, 2014. The adoption of ASU 2014-17 did not have any effect on our financial
position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU
2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial
instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors
in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial
position, results of operations or cash flows.
ASU 2014-15
In August 2014, the FASB issued ASU
No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40)". ASU 2014-15 provides guidance
related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as
a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15,
2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15
to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-12
In June 2014, the FASB issued ASU No.
2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award
Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance
target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.
ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We
do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No.
2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either
enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets
unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the
effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue
recognition standard by one year.
ASU 2014-08
In April 2014, the FASB issued ASU No.
2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 amends the definition for what types of asset
disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations
and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on
or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations
or cash flows.
The Company has evaluated recent accounting
pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC and we have not identified
any that would have a material impact on the Company’s financial position, or statements.
Item 3 – Quantitative and Qualitative Disclosures
About Market Risk
The Company is a smaller reporting company
as defined by Rule 12b-2 under the Exchange Act and is not required to provide the information required under this item.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls
and Procedures
Our Principal Executive Officer and
Principal Accounting Officer have carried out an evaluation of the effectiveness of our disclosure, controls and procedures. Based
upon that evaluation, our Principal Executive Officer and Principal Accounting Officer concluded that as of the end of the period
covered by this report, our disclosures, controls and procedures are not effective to ensure that information required to be disclosed
in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and forms. During the most recently completed six months
ended June 30, 2015, there has been no significant change in the Company’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
We do not have an independent body to oversee our internal
control over financial reporting and lack segregation of duties due to the limited nature and resources of the Company.
In light of these material weaknesses,
we performed additional analysis and procedures in order to conclude that our financial statements included in this report were
fairly stated in accordance with accounting principles generally accepted in the United States. Accordingly, we believe that despite
our material weaknesses, our financial statements included in this report are fairly stated, in all material respects, in accordance
with United States generally accepted accounting principles.
We plan to rectify these weaknesses
by implementing an independent board of directors and hiring additional accounting personnel once we have additional resources
to do so.
Changes in Internal Control over
Financial Reporting
Our management, with the participation
of the Principal Executive Officer and Principal Accounting Officer performed an evaluation as to whether any change in our internal
controls over financial reporting occurred during the six months ended June 30, 2015. Based on that evaluation, the Company's Principal
Executive Officer and Principal Accounting Officer concluded that no change occurred in the Company's internal control over financial
reporting during the six months ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect,
the Company's internal controls over financial reporting.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company” as defined by
Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
No. |
|
Description |
2.1 |
|
Purchase Agreement dated June 30 , 2011 incorporated by reference from Form 8-K filed September 2, 2011 (SEC Accession No. 0001013762-11-002422) |
3.1(i) |
|
Articles of Incorporation incorporated by reference from Form S-1 filed February 11, 2008 (SEC Accession No. 0001013762-08-000306) |
3.1(ii) |
|
Certificate of Amendment on Name Change to SF Blu Vu, Inc. incorporated by reference from Form 8-K filed October 16, 2009 (SEC Accession No. 0001013762-09-001684) |
3.1(iii) |
|
Certificate of Amendment on Name Change to LiveWire Ergogenics, Inc. incorporated by reference from Form 8-K filed November 14, 2011 (SEC Accession No. 0001013762-11-003020) |
3.2 |
|
Bylaws incorporated by reference from Form S-1 filed February 11, 2008 (SEC Accession No. 0001013762-08-000306) |
4.1 |
|
Certificate of Designation of the Series A Preferred Stock |
10.1 |
|
Purchase Agreement dated June 30 , 2011 incorporated by reference from Form 8-K filed September 2, 2011 (SEC Accession No. 0001013762-11-002422) |
10.2 |
|
Fee Agreement with Weed & Co. LLP dated July 1, 2011 incorporated by reference from Form 8-K/A filed November 28, 2011 (SEC Accession No. 0001013762-11-003194) |
10.3 |
|
Executive Employment Agreement – Brad Nichols dated July 20, 2011 incorporated by reference from Form 8-K/A filed November 28, 2011 (SEC Accession No. 0001013762-11-003194) |
10.4 |
|
Executive Employment Agreement – Bill Hodson dated July 20, 2011 incorporated by reference from Form 8-K/A filed November 28, 2011 (SEC Accession No. 0001013762-11-003194) |
10.5 |
|
Contingent Option Agreement dated July 21, 2011 incorporated by reference from Form 8-K/A filed November 28, 2011 (SEC Accession No. 0001013762-11-003194) |
21.1 |
|
Subsidiaries of the Registrant. |
31.1 |
|
Rule 13a-14(a)/15(d)-14(a) Certificate of Chief Executive Officer filed herewith. |
31.2 |
|
Rule 13a-14(a)/15(d)-14(a) Certificate of Chief Accounting Officer filed herewith. |
32.1 |
|
Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 filed herewith. |
32.2 |
|
Chief Accounting Officer Certification Pursuant to 18 U.S.C. Section 1350 filed herewith. |
101.INS |
|
XBRL Instance Document * |
101.SCH |
|
XBRL Taxonomy Extension Schema Document * |
101.CAL |
|
XBRL Taxonomy Calculation Linkbase Document * |
101.LAB |
|
XBRL Taxonomy Labels Linkbase Document * |
101.PRE |
|
XBRL Taxonomy Presentation Linkbase Document * |
101.DEF |
|
XBRL Definition Linkbase Document * |
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
LIVEWIRE ERGOGENICS INC. |
|
|
|
Dated: August 19, 2015 |
By: |
/s/ Bill J. Hodson |
|
|
Bill J. Hodson |
|
|
Chief Executive Officer |
|
|
Chief Accounting Officer |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Bill Hodson, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of LiveWire Ergogenics Inc. for the period ended June 30, 2015;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d) disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting;
5. The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) all significant
deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls;
and
b) any fraud,
whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls
over financial reporting.
August 19, 2015
Bill Hodson
Principal Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bill Hodson, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of LiveWire Ergogenics Inc. for the period ended June 30, 2015;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of
the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d) disclosed in this report any change
in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in
the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
August 19, 2015
Bill Hodson
Principal Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the annual report of LiveWire Ergogenics, Inc.
(the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission
(the “Report”), the undersigned principal executive officer of the Company, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
Date: August 19, 2015
Bill J. Hodson, Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the annual report of LiveWire Ergogenics, Inc.
(the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission
(the “Report”), the undersigned principal financial officer of the Company, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
Date: August 19, 2015
Bill J. Hodson, Chief Financial Officer
(Principal Financial Officer)
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