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EX-31.1 - CERTIFICATION - Pulse Beverage Corp | exhibit31-1.htm |
EX-32.1 - CERTIFICATION - Pulse Beverage Corp | exhibit32-1.htm |
EX-10.1 - AGREEMENT - Pulse Beverage Corp | exhibit10-1.htm |
EX-31.2 - CERTIFICATION - Pulse Beverage Corp | exhibit31-2.htm |
EXCEL - IDEA: XBRL DOCUMENT - Pulse Beverage Corp | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-53586
THE PULSE BEVERAGE
CORPORATION
(Exact name of
registrant as specified in its charter)
NEVADA
(State or other
jurisdiction of incorporation or organization)
36-4691531
(I.R.S. Employer
Identification Number)
12195 Mariposa Street,
Westminster, CO 80234
(Address of principal
executive offices, including zip code)
(720) 382 5476
(Telephone number,
including area code)
________________________________________________
(Former name, former
address of principal executive offices, including zip code.)
(303) 807 4238
(Former telephone
number, including area code)
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 [ ]
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
YES [ ] NO [ ]
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 | [X] |
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
29,825,000 shares of common stock, par value $0.00001, as of August 4, 2011.
THE PULSE BEVERAGE CORPORATION
FORM 10-Q
INDEX
PAGE
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as may, will, expect, believe, estimate, anticipate, intend, continue, or similar terms, variations of such terms or the negative of such terms. Such statements are based on managements current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth herein and under the heading Risk Factors in our Current Report on Form 8-K filed on February 22, 2011.
Unless otherwise indicated, in this Form 10-Q, references to we, our, us, the Company, Pulse or the Registrant refer to The Pulse Beverage Corporation, a Nevada corporation.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The
Pulse Beverage Corporation
(A
Development Stage Company)
Condensed Balance
Sheets
June 30,
2011 $ |
December 31,
2010 $ |
|||||
ASSETS | ||||||
Current Assets | ||||||
Cash | 212,548 | - | ||||
Prepaid expenses | 54,621 | - | ||||
Other current assets | 137,295 | - | ||||
Current portion of loan receivable (Note 3) | 4,789 | - | ||||
Total Current Assets | 409,253 | - | ||||
Loan Receivable (Note 3) | 195,581 | |||||
Property and Equipment (Note 4) | 920,371 | - | ||||
Intangible Assets (Note 4) | 1,012,218 | - | ||||
Total Assets | 2,537,423 | - | ||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | ||||||
Current Liabilities | ||||||
Accounts payable | 68,774 | 25,044 | ||||
Accrued liabilities | 34,300 | - | ||||
Loans payable (Note 5) | - | 30,018 | ||||
Total Current Liabilities | 103,074 | 55,062 | ||||
Contingencies (Note 1) | ||||||
Stockholders Equity (Deficit) | ||||||
Preferred Stock, 1,000,000 share authorized, $0.001 par value, none issued (Note 7) | - | - | ||||
Common Stock, 100,000,000 shares authorized, $0.00001 par value 29,825,000 and 15,520,000 issued and outstanding, respectively (Note 6) | 298 | 155 | ||||
Additional Paid In Capital | 2,844,272 | 101,395 | ||||
Donated Capital | 47,500 | 47,500 | ||||
Accumulated Deficit | (457,721 | ) | (204,112 | ) | ||
Total Stockholders Equity (Deficit) | 2,434,349 | (55,062 | ) | |||
Total Liabilities and Stockholders Equity (Deficit) | 2,537,423 | - |
(See Notes to Financial Statements)
1
The
Pulse Beverage Corporation
(A
Development Stage Company)
Condensed Statements
of Operations
(Unaudited)
Accumulated from
August 23, 2006 (Inception) to June 30, 2011
$ |
For the Three Months
Ended June 30, 2011 $ |
For the Three Months
Ended June 30, 2010 $ |
For the Six Months
Ended June 30, 2011
$ |
For the Six Months
Ended June 30, 2010 $ |
|
Revenue | - | - | - | - | - |
Expenses | |||||
Consulting fees | 96,793 | 81,543 | - | 96,793 | - |
Donated services and rent | 47,500 | - | - | - | - |
General and administrative | 340,901 | 97,989 | (783) | 192,834 | 13,386 |
Less: forgiveness of debt | (36,018) | - | - | (36,018) | - |
Total Expenses | 449,176 | 179,532 | (783) | 253,609 | 13,386 |
Net Loss Before Discontinued Operations | (449,176) | (179,532) | 783 | (253,609) | (13,386) |
Discontinued Operations | (8,545) | - | - | - | - |
Net Income (Loss) | (457,721) | (179,532) | 783 | (253,609) | (13,386) |
Net Loss Per Share Basic and Diluted | (0.01) | 0.00 | (0.01) | (0.00) | |
Weighted Average Shares Outstanding (See Note 6) | 29,825,000 | 42,180,000 | 32,795,000 | 42,180,000 |
(See Notes to Financial Statements)
2
The
Pulse Beverage Corporation
(A
Development Stage Company)
Condensed Statements
of Cash Flows
(Unaudited)
For the Six Months
Ended June 30, 2011
$ |
For the Six Months
Ended June 30, 2010 $ |
|||||
Operating Activities | ||||||
Net Loss | (253,609 | ) | (13,386 | ) | ||
Changes in operating assets and liabilities: | ||||||
Increase in prepaid expenses | (54,621 | ) | - | |||
Increase in other assets | (138,055 | ) | - | |||
Increase (decrease) in accounts payable and accrued liabilities | 45,930 | (837 | ) | |||
Net Cash Used in Operating Activities | (400,355 | ) | (14,223 | ) | ||
Investing Activities | ||||||
Related party loan | (200,000 | ) | - | |||
Repayment of related party loan | 390 | - | ||||
Acquisition of property and equipment | (105,371 | ) | - | |||
Acquisition of intangible assets | (41,730 | ) | - | |||
Net Cash Used in Investing Activities | (346,711 | ) | - | |||
Financing Activities | ||||||
Cash received in acquisition | 56 | - | ||||
Short-term loan proceeds | 20,000 | 12,833 | ||||
Short-term loan repayments | (85,442 | ) | - | |||
Proceeds from common stock issued | 1,025,000 | - | ||||
Net Cash Provided by Financing Activities | 959,614 | 12,833 | ||||
Increase (Decrease) in Cash | 212,548 | (1,390 | ) | |||
Cash - Beginning of Period | - | 1,510 | ||||
Cash - End of Period | 212,548 | 120 | ||||
Non-cash Financing and Investing Activities | ||||||
Acquisition of assets for common shares and assumption of liabilities | 1,785,488 | - | ||||
Supplemental Disclosures | ||||||
Interest paid | - | - | ||||
Income taxes paid | - | - |
(See Notes to Financial Statements)
3
The
Pulse Beverage Corporation
(A
Development Stage Company)
Notes
to Condensed Financial Statements
(Unaudited)
1. | Nature of Operations and Continuance of Business |
The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. |
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the period ended January 31, 2011 and notes thereto included in the Company's Form 8-K filed with the SEC on February 22, 2011. The Company follows the same accounting policies in the preparation of interim reports. |
Darlington Mines Ltd. (the Company) was incorporated in the State of Nevada on August 23, 2006. From August 23, 2006 to February 15, 2011 we were first, an exploration stage corporation, and recently a development stage corporation. |
The Board of Directors of the Company approved a 12:1 forward stock split by way of stock dividend (the Split), which was approved by The Financial Industry Regulatory Authority (FINRA) and the Company issued a dividend of eleven shares of common stock of the Company for each share of common stock issued and outstanding as of the record date of February 4, 2011. The stock dividend increased the number of the Companys issued and outstanding common stock to 42,180,000 from 3,515,000. The stock dividend did not affect the number of the Companys authorized common stock, which remains at 100,000,000. |
On February 15, 2011 (the Closing) the Company closed a voluntary share exchange transaction (the Share Exchange Transaction) with The Pulse Beverage Corporation (Pulse) by and among the Company, Pulse and the stockholders of Pulse (the Pulse Stockholders). The Pulse Beverage Corporation manufactures, distributes and markets the PULSE® brand of beverages containing functional ingredients that have been shown to promote health. PULSE® beverages are unique in that they were developed by Baxter Healthcare Corporation and contain ingredients that are widely considered to be critical to adult health. Pulse owns all the formulations, rights and trademarks relating to the PULSE® brand of beverages. The Company now owns the right to use the following Side Panel Statement: Formulation developed under license from BAXTER HEALTHCARE CORPORATION. This right is in perpetuity and does not require any royalty payments. On Closing the Companys former President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary, agreed to surrender 26,660,000 shares of the Companys common stock to the Company for cancellation. As a result of the Share Exchange Transaction, Pulse Stockholders received 13,280,000 shares of Darlington Mines Ltd. in exchange for 100% of the issued and outstanding common stock of Pulse representing approximately 46% of Darlington Mines Ltd. 28,800,000 issued and outstanding shares of common stock. Pulse became a wholly-owned subsidiary. In order to better reflect the Companys business operations and to change the Companys name, subsequent to the acquisition of Pulse, effective February 16, 2011, the Company filed Articles of Merger with the Secretary of State of Nevada and filed a Statement of Merger with the Colorado Secretary of State, in order to effectuate a parent/subsidiary merger. The merged Companys name was changed to The Pulse Beverage Corporation. The Companys stock symbol is OTCBB:PLSB. |
For accounting purposes, the acquisition of Pulse was accounted for as a purchase of the assets of Pulse by the Company under the purchase method for business combinations. Consequently, the historical financial statements of the Company continue as the Companys historical financial statements and the operations of Pulse will be included from February 15, 2011, being the date of acquisition. |
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenues to date and will not generate revenues until the Company begins operations. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain further equity financing to fund its growth strategy and attain profitability. As at June 30, 2011, the Company had working capital of $306,179. All of these factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
The Company received $1,025,000 and issued, on February 28, 2011, 1,025,000 common shares pursuant to a non-brokered private placement of shares at $1.00 per share. The Company will require a cash injection of an additional $3,000,000 over the next twelve months to launch its products, including a full marketing and branding campaign, and build its inventory and receivables. Management believes this additional capital, the public listing, the management team and the expanded awareness of the Pulse® brand will provide the Company the opportunity to be operationally cash flow positive and profitable over the next twelve months. |
2. | Summary of Significant Accounting Policies |
Fiscal Year End - The Companys fiscal year end was changed from October 31 to December 31. |
4
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents - Cash and cash equivalents will include cash on deposit in overnight deposit accounts and investments in money market accounts. |
Property and Equipment - Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets or, when applicable, the life of the lease, whichever is shorter. Vehicles and equipment are depreciated based on estimated useful lives. Depreciation has not been charged to operations as the property and equipment acquired on February 15, 2011 have not been put to use. |
Intangible Assets - The Companys intangible assets consist of the cost of formulations, manufacturing processes, labeling rights, trademarks and patents pending. To the extent capitalized, the Companys intangible assets will be amortized over their estimated useful lives based on the period the assets are expected to contribute to the Companys cash flows. The Company performs impairment tests whenever events or circumstances indicate that intangible assets might be impaired. |
Valuation of Long-Lived Assets - The Company periodically evaluates the carrying amount of long-lived assets when events and circumstances warrant such a review. |
Income Taxes - Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax bases of particular assets and liabilities and operating losses carried forward, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, including consideration of tax planning strategies, it is more-likely-than-not that some or all of the deferred tax assets will not be realized. |
Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Ownership of, and title to our products pass to customers upon delivery of the products to customers. Certain of our distributors may also perform a separate function as a co-packer on our behalf. In such cases, ownership of and title to our products that are co-packed on our behalf by those co-packers who are also distributors, passes to such distributors when we are notified by them that they have taken transfer or possession of the relevant portion of our finished goods. Net sales have been determined after deduction of promotional and other allowances in accordance with ASC 605-50. |
Financial Instruments - The fair values of financial instruments, which include cash, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Our functional and reporting currency is the United States dollar and therefore there is no financial risk associated with foreign currencies. |
3. | Loan Receivable |
Pursuant to a Letter Agreement dated December 24, 2010 between the Company and Catalyst Development Inc., a company owned by our Chief of Product Development, the Company agreed to loan $200,000 to Catalyst for the purpose of Catalyst establishing a food and beverage production centre. The interest rate of the loan is 4% over 5 years, amortized over 25 years. As at June 30, 2011 the Company has funded $200,000. Monthly payments of $1,055 are due to the Company starting June 20, 2011. The loan matures on May 20, 2016 with a final payment of $174,000 due to the Company. Catalyst has the right to make additional payments on the loan principle without penalty through the term of the loan. The Company and Catalyst have discussed and agree to consider the option of converting the loan to an equity position in the Catalyst production centre pending its successful establishment. The Company has granted Catalyst the right to manufacture and market Pulse beverages in a concentrate form. |
4. | Purchase of Property, Equipment and Intangible Assets |
Pulse, prior to the Share Exchange Transaction, acquired all of the property and equipment, formulations, rights and trademarks associated with the Pulse® brand from Health Beverage, LLC pursuant to an Asset Purchase Agreement dated July 26, 2010 and closed January 31, 2011 with a cash payment of $245,000. On February 15, the Company acquired all of these assets from Pulse. Consideration was the assumption of net liabilities of Pulse of $167,468, the elimination of a $100,000 loan and the issuance of 13,280,000 common shares at a deemed price of $.122 per share all totaling $1,885,488. These assets have not been put into use as at June 30, 2011 and as a result no depreciation or amortization has been charged to operations. The purchase price was allocated as follows: |
5
$ | |||||
Manufacturing Equipment and Molds | 670,000 | ||||
Display Equipment | 120,000 | ||||
Automobile | 125,000 | ||||
Formulations, specifications and manufacturing methods | 720,488 | ||||
Trademarks | 75,000 | ||||
Rights Side Panel Statement | 125,000 | ||||
Patents Pending | 50,000 | ||||
1,885,488 |
5. | Loans Payable |
On January 18, 2011 the Company received a non-interest bearing unsecured demand loan of $20,000 which was repaid on March 14, 2011. |
The Company assumed loans of $165,442 pursuant to the Share Exchange Transaction. A total of $65,442 was repaid in cash and $100,000 is treated as an advance against a non-brokered private placement of 166,667 units at $0.60 per unit. |
On January 31, 2011 a loan of $36,018 was forgiven and a gain of $36,018 was recognized. |
6. | Common Stock |
The Board of Directors of the Company approved a 12:1 forward stock split by way of stock dividend (the Split), which was approved by The Financial Industry Regulatory Authority (FINRA) and the Company issued a dividend of eleven shares of common stock of the Company for each share of common stock issued and outstanding as of the record date of February 4, 2011. The stock dividend increased the number of the Companys issued and outstanding common stock to 42,180,000 from 3,515,000. The stock dividend did not affect the number of the Companys authorized common stock, which remains at 100,000,000. On February 15, 2011 the Companys former President, Chief Executive Officer, Chief Financial Officer and Treasurer, agreed to surrender 26,660,000 shares of the Companys common stock to the Company for cancellation. For weighted average shares outstanding these two transactions were applied retroactively. |
On February 15, 2011, as a result of the Share Exchange Transaction, Pulse Stockholders received 13,280,000 shares of the Company in exchange for 100% of the issued and outstanding common stock of Pulse. |
On February 18, 2011, the Company closed a non-brokered private placement of common stock to a number of foreign accredited investors pursuant to a $1.00 Post-Split Private Placement Subscription Agreement. On February 28, 2011, the Company issued 1,025,000 shares of the Companys common stock at $1.00 per share for gross proceeds of $1,025,000. |
On March 31, 2011 the Company received $100,000 as an advance against a non-brokered private placement of 166,667 Units at $0.60 per unit. Each unit will contain one common share and one-half share purchase warrant. Each whole warrant is exercisable into one common share at $0.90 per share for a period of five years. These shares have not yet been issued. |
On June 15, 2011, the Company authorized the issuance of 30,000 post-split shares of its commons stock as annual compensation pursuant to an Advisory Board Agreement. The fair value of the shares on the date of grant was $32,400 and has been recorded as a prepaid expense to be amortized over a one year period. |
7. | Subsequent Events |
Pursuant to a Special Meeting of Shareholders of the Company held on July 29, 2011, the following resolutions were passed: |
a) | to amend the Articles of Incorporation to authorize the issuance of 1,000,000 shares of preferred stock, par value $.001, issuable in series with rights, preferences and limitations to be determined by the Board of Directors from time to time; |
b) | approval of the Companys 2011 Equity Incentive Plan (The 2011 Plan"). A total of 4,500,000 common shares are reserved under The 2011 Plan. The 2011 Plan authorizes the Board of Directors to grant options, restricted stock awards, performance stock awards and stock appreciation rights. |
6
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this quarterly report. This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
CORPORATE HISTORY
Darlington Mines Ltd. (the Company) was incorporated in the State of Nevada on August 23, 2006. From August 23, 2006 to February 15, 2011 the Company was first, an exploration stage corporation, and recently a development stage corporation. On February 4, 2011, our board of directors approved a 12:1 forward stock by way of stock dividend resulting in the issuance of eleven shares of our common stock for each share of common stock issued and outstanding as of the record date of February 4, 2011.
ACQUISITION OF THE PULSE BEVERAGE CORPORATION
On February 15, 2011 (the Closing) the Company closed a voluntary share exchange transaction (the Share Exchange Transaction) with The Pulse Beverage Corporation (Pulse) by and among the Company, Pulse and the stockholders of Pulse (the Pulse Stockholders). At Closing, the Companys former President, Chief Executive Officer, Chief Financial Officer, and Treasurer agreed to surrender 26,660,000 shares of the Companys common stock to the Company for cancellation.
As a result of the Share Exchange Transaction, Pulse Stockholders received 13,280,000 shares of our common stock in exchange for 100% of the issued and outstanding common stock of Pulse representing approximately 46% of our issued and outstanding shares of common stock. Pulse became our wholly-owned subsidiary. In order to better reflect the Companys business operations and to change the Companys name, subsequent to the acquisition of Pulse, effective February 16, 2011, the Company filed Articles of Merger with the Secretary of State of Nevada and filed a Statement of Merger with the Colorado Secretary of State, to effectuate a parent/subsidiary merger. The Companys name was changed to The Pulse Beverage Corporation and the Company was issued a new stock symbol - OTCBB:PLSB.
For accounting purposes, the acquisition of Pulse was accounted for as a purchase of the assets of Pulse by the Company under the purchase method for business combinations. Consequently, the historical financial statements of the Company continue as the Companys historical financial statements and the operations of Pulse will be included from February 15, 2011, being the date of acquisition.
BUSINESS OVERVIEW OF PULSE
The Pulse Beverage Corporation (Pulse), based in Denver, Colorado, was formed in 2010 for the purpose of exploiting niche markets in the beverage industry. Pulse is a beverage company that manufactures, distributes and markets the PULSE® brand of beverages containing functional ingredients that have been shown to promote health. PULSE® beverages are unique in that they were scientifically developed by Baxter Healthcare Corporation to include ingredients that are widely considered to be critical to adult health. Pulse owns all the formulations, rights and trademarks relating to the PULSE® brand of beverages. The Company owns the right to use the following Side Panel Statement: Formulation developed under license from BAXTER HEALTHCARE CORPORATION. This right is in perpetuity and does not require any royalty payments. The Company has recently started using the trademarks NutriPurpose and Nutripurposed to describe its Pulse® brand of beverages. NutriPurpose" is a term combining the essence of nutrition and purposed functionality and is intended to depict a food product that provides health and nutritional benefits, including the prevention and treatment of disease.
Pulses mission is to be one of the market leaders in the development and marketing of nutritional beverage products that: (i) provide real health benefits to a significant segment of the population (ii) are endorsed by clinicians through the utilization of nutritional ingredients with clinically demonstrated benefits for targeted areas of health and wellness and (iii) are convenient, simple and appealing to the consumers.
Although Pulse has acquired or developed several products, it will continue to acquire products that complement or extend its current product mix. Pulse intends to conduct a study of the companies occupying the highly fragmented beverage industry, many of which are undercapitalized. Management believes that one or two strategic product acquisitions would shorten Pulses maturation cycle, allowing it to reach critical mass sooner than only developing additional products in-house.
Pulse intends to outsource many of its operating activities such as manufacturing, sales and distribution. Management believes it will need fewer than fifteen full-time employees.
7
The PULSE® NutriPurpose brand of beverages are formulated and aimed at providing functional ingredients to specific health platforms:
Pulse® - Heart Health Formula contains safe and effective levels of a number of important heart and health friendly nutrients in a great tasting beverage. It has vitamin C and selenium, both of which are considered important nutrients to help maintain heart health. Pulse® Heart Health is an excellent source of dietary fiber which may help maintain healthy cholesterol levels. |
Pulse® - Mens Health Formula is a unique combination of nutritional ingredients that include a variety of antioxidants that may reduce free radicals in our bodies. Free radicals are generally associated with aging, cardiovascular problems, cancer and many health concerns for men. While it is designed to support health in particular areas, such as prostate health, the combination of green tea catechins, vitamins E & C, lycopene and selenium may help men maintain an ongoing counter attack in the battle against free radical damage to our bodies. |
Pulse® - Womens Health Formula is a convenient nutritional beverage designed specifically for women. Our ability to be active and healthy is directly affected by the strength of our bodies. Pulse contains meaningful levels of the key ingredients that work in concert to enhance bone health calcium, magnesium and Vitamin D. Additionally, these ingredients coupled with folic acid and other B vitamins, may help women prepare for pregnancy while soy isoflavones may help buffer symptoms of menopause. |
Pulse has announced the launch of Cabana Lemonades by Pulse®, a line-up of refreshing, all-natural, good-for-you, ready-to-drink lemonades in five distinct and great tasting flavors, offering significantly reduced calories without the use of artificial sweeteners or coloring.
Cabana Lemonades by Pulse offer approximately 40% less calories than its competitors and are positioned to enter the market as the only All-Natural Lemonade brand. The fact that Pulses Cabana Lemonades contain no preservatives or artificial sweeteners means that they can be sold in health food stores such as Whole Foods, GNC Live Well, Vitamin Cottage and Sunflower. Nationally, only a handful of companies market ready-to-drink lemonades and there are only two major brands, AriZona® and Calypso®, and a few other brands, such as Country Time Lemonade, none of which contain 100% natural ingredients. Pulses premium lemonades will be packaged in 20 fl. oz. glass bottles and management believes the combination of superior product and packaging will readily position Pulse to successfully penetrate the market. Pulse aims to have its Cabana Lemonades on store shelves by September, 2011. Pulse intends to position its Cabana Lemonades as natural complements to food in an effort to broaden their appeal and insulate against any seasonal fall-off. Pulse has contracted its first bottling facility and aims to start production of its lemonade products in August, 2011. Pulse believes that the lemonade market is well established and that there is an immediate demand. Pulses Cabana Lemonades, being all-natural, lower calorie, and good for you, are in-line with its corporate mission to reach a large demographic by aiming to be the healthiest, all-natural lemonade in the marketplace. |
PULSE: NUTRITION MADE SIMPLE® - Pulse offers consumers necessary nutrients in a convenient package. The nutrients in all of the Companys PULSE® Nutripurpose beverages are generally considered to promote health in targeted areas. The nutritional ingredients were specifically selected in recommended serving sizes to provide and achieve targeted health benefits. These nutrients normally cannot be consumed in adequate amounts by eating food without substantially increasing calories.
RESULTS OF OPERATIONS
The discussion that follows is derived from the unaudited interim balance sheets of The Pulse Beverage Corporation as at June 30, 2011 and December 31, 2010 and the unaudited statements of operations for the three and six months ended June 30, 2011 and 2010 and the period from August 26, 2006 (date of inception) to June 30, 2011 and the cash flows for the six months ended June 30, 2011 and 2010.
Revenues
We have had no operating revenues since inception as production and sales of our Cabana Lemonades are planned for late August, 2011. We plan to have revenues from our Pulse® NutriPurpose beverages in October, 2011
Expenses and Net Loss for the Three Months Ended June 30, 2011 and 2010
Since inception we have only incurred expenses of an administrative and financing nature and expenses associated with the launch and production of our products. During the three months ended June 30, 2011 we have incurred $180,000 of general and administrative expenses, comprised of audit and legal fees of $14,000, investor relations costs of $42,000, regulatory fees of $15,000, financing due diligence fees of $11,000, rent of $8,000 and management consulting fees of $81,000. We incurred $4,000 of general and administration expenses in the corresponding comparative period.
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Expenses and Net Loss for the Six Months Ended June 30, 2011 and 2010
During the six months ended June 30, 2011 we have incurred $254,000 of general and administrative expenses, comprised of audit and legal fees of $89,000, investor relations costs of $51,000, regulatory fees of $25,000, financing due diligence fees of $11,000, rent of $8,000 and management consulting fees of $96,000. We incurred $13,000 of general and administration expenses in the corresponding comparative period.
Liquidity and Capital Resources
During the six months ended June 30, 2011 the Company received $1,025,000 and issued, on February 28, 2011, 1,025,000 common shares pursuant to a non-brokered private placement of shares at $1.00 per share. As at June 30, 2011, the Company had cash reserves of $213,000 and working capital of $ 306,000.
The Company will require a cash injection of an additional $3,000,000 over the next twelve months to launch its products, including a full marketing and branding campaign, and build its inventory and receivables. Management believes this additional capital, the public listing, the management team and the expanded awareness of the Pulse® brand will provide the Company the opportunity to be operationally cash flow positive and profitable over the next twelve months.
Cash Used in Operating Activities
During the six months ended June 30, 2011 we used $400,000 which was made up of our net loss of $254,000, increase in prepaid expenses of $54,000, increase in inventory of $138,000and increase in accounts payable and accrued liabilities of 46,000. In 2010 we used $14,000 in operating activities which was made up of our net loss of $13,000 and a decrease in accounts payable of $1,000.
Cash Used in Investing Activities
During the six months ended June 30, 2011 we used $347,000 which was made up of a $200,000 loan to Catalyst Development (a related party) pursuant to a Letter Agreement, paying the balance of the purchase price of the Asset Purchase Agreement of $100,000 which was allocated to property and equipment, $5,000 spent on office equipment and $42,000 spent on the development of our website and labels. In 2010 we had no investing activities.
Cash Provided by Financing Activities
During the six months ended June 30, 2011 we received $960,000 from financing activities. We received $1,025,000 and issued, on February 28, 2011, 1,025,000 common shares pursuant to a non-brokered private placement of shares at $1.00 per share. We also received $20,000 from a short-term loan and repaid $85,000 of short-term loans. In 2010 we received $13,000 from a related party loan.
Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We are a development stage corporation and have not generated any revenues from operations and do not expect sales until late August, 2011. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.
The Company has not generated any revenues to date and will not generate revenues until the Company begins operations. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to fund its growth strategy and to begin operations, and the attainment of profitability. The Company will require a cash injection of an additional $3,000,000 over the next twelve months to launch its products, including a full marketing and branding campaign, and build its inventory and receivables. Management believes this additional capital, the public listing, the management team and the expanded awareness of the Pulse® brand will provide the Company the opportunity to be operationally cash flow positive and profitable over the next twelve months.
We have no assurance that future financing will be available to us, or if available, on terms acceptable to us. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Additional equity financing could result in additional dilution to our existing shareholders.
Off Balance-Sheet Arrangements
As of June 30, 2011, we had no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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Recently Issued Accounting Pronouncements
There have been no recently issued Accounting Pronouncements that impact us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer along with our Chief Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e) and 15a-15(e)) as of June 30, 2011 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Principal Executive Officer along with our Principal Financial Officer concluded that our disclosure controls and procedures are not effective as of June 30, 2011 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.
This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Companys interim financial statements will not be prevented or detected on a timely basis. These material weaknesses include the following:
1. The Company has limited segregation of duties which is not consistent with good internal control procedures. |
2. The Company does not have a written internal control procedurals manual which outlines the duties and reporting requirements of the Directors and any staff to be hired in the future. This lack of a written internal control procedurals manual does not meet the requirements of the SEC or good internal controls. |
3. We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the managements view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over our financial statements. |
Management believes that the material weaknesses set forth above did not have an affect on the Companys financial results. We are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes once we have adequate funds to do so, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources and personnel to potentially mitigate these material weaknesses.
Management will continue to monitor and evaluate the effectiveness of the Companys internal controls and procedures and its internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
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PART II. OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS. |
None.
ITEM 1A. | RISK FACTORS. |
Not applicable.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
On March 31, 2011 we received $100,000 from a foreign accredited investor as an advance against a non-brokered private placement of 166,667 Units at $0.60 per Unit. Each Unit, when issued, will contain one common share and one-half share purchase warrant. Each whole warrant is exercisable into one common share at $0.90 per share for a period of five years. These units have not yet been issued. The Units are being sold in reliance upon Regulation S of the Securities Act to investors who are accredited investors, as such term is defined in Rule 501(a) under the Securities Act in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representations made by such investors.
ITEM 3. | DEFAULT UPON SENIOR SECURITIES. |
None.
ITEM 4. | [REMOVED AND RESERVED]. |
ITEM 5. | OTHER INFORMATION. |
Executive Services Agreement
On June 30, 2011, we entered into an Executive Services Agreement (“Executive Agreement”) with Parley (Paddy) Sheya whereby Mr. Sheya agreed to serve as our Vice-President and National Sales Manager. The Executive Agreement is for an initial term of one year commencing on July 5, 2011 and will automatically renew unless terminated in accordance with the terms and conditions of the Executive Agreement. Pursuant to the Executive Agreement, Mr. Sheya shall be entitled to a monthly fee of $8,333 as consideration for his services. The foregoing description of the Executive Agreement is qualified in its entirety by reference to the Executive Agreement filed as Exhibit 10.1 to this Quarterly Report and incorporated herein.
Appointment of Director
On August 4, 2011, the Company’s Board of Directors (“Board”) appointed Parley (Paddy) Sheya as a member of the Company’s Board effective immediately. It is contemplated that Mr. Sheya may serve on certain committees of the Company’s Board, but no such committee appointments have been made at this time. Since June, 2011, Mr. Sheya has served as the Company’s Vice President and National Sales Manager. There is no arrangement or understanding pursuant to which Mr. Sheya was appointed as a member of the Company’s Board of Directors. Mr. Sheya has no family relationships with any other executive officers or directors of the Company, or persons nominated or chosen by the Company to become directors or executive officers. Furthermore, the Company is not aware of any transaction requiring disclosure under Item 404(a) of Regulation S-K.
Mr. Sheya has over twenty-nine (29) years of international executive sales and distribution management experience in the beverage industry. In addition to his current VP and National Sales Manager roles with the Company, Mr. Sheya is currently the Director of New Business and National Account Manager for Inspiration Beverage/Bing Energy Drink, where he is responsible for developing the national expansion of the Bing Energy Drink through new distribution channels, securing new product placement and creating brand awareness. Mr. Sheya has held these positions since 2010. From 2008 to 2009, Mr. Sheya was the General Sales Manager (Western US) for New Leaf Brands, Inc. where he was responsible for key account management, developing marketing support programs, sales and general business operations. From 2006 to 2008, Mr. Sheya was the owner and operator of Clear Bev, LLC, a regional beverage company and brokerage. Previously, from 1988 to 2004, Mr. Sheya served as International Vice President of Vancol Industries, based in Denver, Colorado. At Vancol, Mr. Sheya was responsible for hiring, managing and supervising Vancol’s national and international sales force, brand development, strategic marketing and distribution for all brands carried and manufactured by Vancol, including Clearly Canadian, Orbitz, Kwencher Fruit Flavored Waters and Blue Ox Energy Drinks.
Mr. Sheya was educated at Eastern New Mexico University where he received a Bachelor of Science in Education with a Minor in Sociology. He was awarded an Athletic Scholarship (football) and inducted into the ENMU Hall of Fame in 2005.
ITEM 6. | EXHIBITS. |
The following documents are included herein:
Exhibit No. | Document Description |
2.1 | Share Exchange Agreement dated February 15, 2011 (incorporated by reference to the Registrants Current Report on Form 8-K filed on February 22, 2011) |
3.1 | Articles of Merger dated February 17, 2011 (incorporated by reference to the Registrants Current Report on Form 8-K filed on February 22, 2011) |
3.2 | Articles of Incorporation of the Registrant, including all amendments to date (incorporated by reference to the Registrants Registration Statement on Form SB-2 filed on December 7, 2007) |
3.3 | Bylaws of the Registrant (incorporated by reference to the Registrants Registration Statement on Form SB-2 filed on December 7, 2007) |
10.1 | Executive Services Agreement with Paddy Sheya dated June 30, 2011* |
31.1 | Certification of Principal Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certification of Principal Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002.* |
* Filed herewith.
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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 thereunto duly authorized.
THE PULSE BEVERAGE CORPORATION | ||
Date: August 5, 2011 | BY: | /s/ Robert Yates |
Robert Yates, President, Chief Executive Officer | ||
Chief Financial Officer, Chief Operating Officer, | ||
and Treasurer (Principal Executive Officer, Principal Financial Officer & Principal Accounting Officer) |