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HIGH PERFORMANCE BEVERAGES CO. - 10-K/A - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

June 23, 2014



Our independent registered auditors included an explanatory paragraph in their opinion on our financial statements as of and for the fiscal years ended July 31, 2013 and 2012 that states that our lack of resources causes substantial doubt about our ability to continue as a going concern.

Operations

A detailed description of our operating history is set forth under BUSINESS.

A summary of operations for the fiscal years ended July 31, 2013 and 2012 follows: 2013 2012 REVENUES $ 55,143 $ - COST OF GOODS SOLD 36,411 - Gross Profit 18,732 - OPERATING EXPENSES General, administrative and other 485,527 66,235 Marketing 982,637 5,863 Product development 37,077 45,413 Compensation 364,004 20,000 TOTAL OPERATING EXPENSES 1,869,245 137,511



Interest expense and finance costs 120,329 5,863 Change in derivative liability

242,430 45,413



LOSS FROM CONTINUING OPERATIONS (2,213,272 ) (137,511 )

DISCONTINUED OPERATION - net - (25 ) NET LOSS $ (2,213,272 )$ (137,536 ) 16

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General, administrative and other expenses consist of professional fees, office supplies and travel expenses relating to the introduction of the new product line. The increase of $419,292 during the year ended July 31, 2013, from $66,235 at July 31, 2012 to $485,527 at July 31, 2013, is primarily due to amortization of deferred financing costs of $303,893 that were not incurred in the prior year, an increase in professional fees of $18,774, bad debt expense of $37,042, license fees of $13,959, royalty fees of $25,624, and commissions of $20,000.

Marketing costs relate to the costs of press releases and meetings with individuals considered important to the marketplace introduction of our new product line. The increase of $976,774 during the year ended July 31, 2013, from $5,863 at July 31, 2012 to $982,637 at July 31, 2013, is primarily due to share based compensation paid to professional athletes under product endorsement agreements of $942,400 and an increase in advertising costs of $29,801.

Product development costs consist of costs for planning for product packaging, samples and similar introductory costs. The decrease of $8,336 during the year ended July 31, 2013, from $45,413 at July 31, 2012 to $37,077 at July 31, 2013, is due to the reduced need for product development as our products have been launched and are on the market.

Compensation increased by $344,004, from $20,000 during the year ended July 31, 2012 to $364,004 during the year ended July 31, 2013. The increase was due to $321,504 in share based in the current period and none in the prior year and an increase in cash compensation expense of $42,500. All cash compensation was paid to Messrs. Holley and McBride and one sales manager.

Other income (expense) increased ($362,759) during the year ended July 31, 2013 compared to the year ended July 31 , 2012, when Other income (expense) was zero. The increase is due to interest expense of $120,329 and the change in derivative liability of $242,430.

Net loss for the year ended July 31, 2013 increased by $2,075,737, from ($137,536) during the year ended July 31, 2012 to ($2,213,273), primarily due to share based compensation expense, deferred financing cost and note discount amortization, interest expense and change in derivative liability.

Other

As a corporate policy, we will incur few cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in "Liquidity" below.

Liquidity and Capital Resources

The Company has financed its operations through the private placement of debt and its common stock.

We will continue to seek financing as necessary but cannot give any assurances that we will be successful in doing so.

We are a public company and, as such, have incurred and will continue to incur additional significant expenses for legal, accounting and related services. Once we become a public entity, subject to the reporting requirements of the Exchange Act of '34, we will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required.

Seasonality

We do not yet have a basis to determine whether our business will be seasonal.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future.

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Source: Edgar Glimpses


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