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LVVV > SEC Filings for LVVV > Form 10-Q on 20-May-2013All Recent SEC Filings

Show all filings for LIVEWIRE ERGOGENICS INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for LIVEWIRE ERGOGENICS INC.


20-May-2013

Quarterly Report


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 three months ended March 31, 2013. 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, 2012.

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 a large cup of coffee, 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 months ended March 31, 2013 and 2012 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 three months ended March 31, 2013 and 2012

During the three months ended March 31, 2013, we incurred a net loss of $280,876. During the three months ended March 31, 2012, we incurred a net loss of $248,112. The increase is primarily attributable to amortization of debt discount related to convertible notes payable.

Comparison of the results of operations for the three months ended March 31, 2013 and 2012

Sales. During the three months ended March 31, 2013, sales of our products amounted to $17,788, as compared to $44,218, in the corresponding 2012 period. The decrease is primarily attributable to focusing on the education of new brokers and distributors signed on in the fourth quarter of 2012. The new distributors and brokers require approximately a six month lead time to get educated properly on the product, set appointments and engage in sales calls. The company also introduced a new 4-pack packaging option in the first quarter and has been sending samples with updated sales information to all sales channels. The company is confident the newly signed brokers and additional packaging options will result in increased revenue in the coming quarters.

Costs and Expenses

Cost of goods sold. For the three months ended March 31, 2013, cost of goods sold was $8,297 compared to $46,042 for the three months ended March 31, 2012. The reduction in revenue had a direct effect on the cost of sales for the three month period ended March 31, 2013

Gross profit (loss). For the three months ended March 31, 2013, our gross profit was $9,491 (53.36% of revenue) compared to a gross loss of ($1,914) (4.34%) of revenue) for the three months ended March 31, 2012. The increase in our gross profit relates to the streamlining of manufacturing and production as well as the Company's concentration on bulk sales which requires less packaging and in turn increases gross profit.

General and Administrative. During the three months ended March 31, 2013, general and administrative expenses amounted to $233,165, as compared to $222,603 in the corresponding 2012 period. The increase in general and administrative expenses in 2013 resulted from increases in salaries, legal expenses, contract labor and office expenses.


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Selling Costs. During the three months ended March 31, 2013 and 2012, selling costs amounted to $13,751 and $22,759, respectively. The decrease in selling costs is attributed to developing packaging and sales materials for all sales channels. As well as a reduction in advertising and promotions while collateral material was being finalized.

Depreciation. During the three months ended March 31, 2013 and 2012, depreciation expense amounted to $1,898 and $507, respectively. The increase in depreciation expense in 2013 resulted from purchase of equipment of $16,700 in later part of 2012.

Financing expenses. During the three months ended March 31, 2013 and 2012, finance expenses were $4,900 and $329, respectively. The primary increase is due to incurred increase in borrowings.

Loss 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 March 31, 2013, we recorded a gain of $42,767 in change in fair value of the derivative liability including initial non-cash interest as compared to $nil for the same period in the previous year. Also, the Company amortized beneficial conversion feature expense on convertible notes of $79,420 during the three months ended March 31, 2013 as compared to $nil for the same period in the previous year.

Going Concern

We have an accumulated deficit of $2,965,871 and our current liabilities exceeded our current assets by $1,184,542 as of March 31, 2013. 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.

Plan of Operations

For the remainder of fiscal 2013, we will focus on attempting to continue increase our revenue through the sale of our products which we hope to achieve through increased market penetration.

Liquidity and Capital Resources

During the three months ended March 31, 2013, 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 throughout the remainder of the fiscal year ending December 31, 2013.

Working Capital. As of March 31, 2013, we had a working capital deficit of $1,184,542 and cash of $0, while at December 31, 2012 we had a working capital deficit of $905,564 and cash of $2,110. The increase in our working capital deficit is primarily attributable to the increase in convertible notes payable, notes payable and derivative liability.

Cash Flow. Net cash used in or provided by operating, investing and financing activities for the three months ended March 31, 2013 and 2012 were as follows:

                                                Three Months Ended
                                                     March 31,
                                               2013            2012

Net cash used in operating activities       $ (139,468)     $ (107,633)
Net cash used in investing activities       $         -     $     3,558
Net cash provided by financing activities   $   137,358     $    77,500

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 consolidated statements of cash flows and changes in working capital as discussed above.

Net Cash Provided by Financing Activities. Net cash provided by financing activities relates primarily to cash received from issuance and payment of our notes payable as well as advances from a Company officer.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.


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Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements have been prepared by management in accordance with U.S. GAAP.

Inflation

The effect of inflation on the Company's revenue and operating results was not significant.

Recently Issued Accounting Pronouncements

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.

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