In February 2012, the Company approved a 31.25 for 1 forward split of its common
stock effective March 17, 2012, All share and per share disclosures give
retroactive effect to this forward split.
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, 2012 and 2011 that states that our lack of resources causes substantial
doubt about our ability to continue as a going concern.
We were founded as an unincorporated DBA in February 1997 and were incorporated
as a C corporation under the laws of the State of Nevada on October 11, 2010.
The incorporation effort included the Company issuing 10,000,000 shares of
common stock to Patricia G. Skarpa, who founded and managed the business which
had been operating continuously as a DBA since February 1997, and 300,000 shares
to Hallie Beth Skarpa, our other director, for services rendered. These services
involving the incorporation planning were valued at $10,300. Hallie Beth Skarpa
is the daughter of Patricia G. Skarpa. The day-to-day operations of the Company
did not change as a result of the change in legal structure.
On January 10, 2012, the Company incorporated a wholly-owned subsidiary, TO
Sports Innovation, Inc. ("TO"), in Nevada. TO was inactive until March 15, 2012.
Its name was changed to Dethrone Beverage, Inc. ("DB").
In April 2012, DB entered into an exclusive license agreement with Dethrone
Royalty, Inc. giving DB the right to use the Dethrone trademark worldwide in
connection with the manufacture and sale of sports performance or energy drinks
along with any other non-alcoholic beverage under the trade name, Dethrone
The License Agreement with Dethrone Royalty, Inc. is for five years and requires
payments as follows:
1 12% of Gross Profit
2 $50,000 plus 8% of Gross Profit
3 $100,000 or 6% of Gross profit, whichever is higher
4 $150,000 or 6% of Gross profit, whichever is higher
5 $200,000 or 6% of Gross profit, whichever is higher
The License Agreement with Dethrone Royalty, Inc.
specifies minimum levels of
sales which, if not attained by DB, gives Dethrone Royalty, Inc.
the right to
terminate the License Agreement. These minimums are as follows:
Year Minimum Sales
1 $ -0-
The License Agreement with Dethrone Royalty, Inc.
also requires DB to maintain
various liability insurance coverage.
The Company's officers have formulas that will be used for the initial products
that are planned. They have undertaken efforts to raise the financing necessary
to manufacture the initial products using outside contractors and implement
marketing programs. The initial expenditures are being used for:
- Production of bottles, labels and caps,
- Purchase of inventory needed for beverage content,
- Marketing materials,
- Travel and business expenses, and
- Shipping costs of our first orders.
Spinoff and Related Matters
On March 26, 2012
, the Company entered into a Spinoff Agreement with Patricia G.
and Hallie Beth Skarpa
, who were its officers and directors, as well as
its largest shareholders, under which the Company agreed to sell all of the
assets relating to the segment of its business that provided commercial cleaning
services to office buildings in exchange for all of the liabilities, as defined,
of the commercial cleaning business and the return by Patricia G. Skarpa
Hallie Beth Skarpa
of an aggregate of 265,625,000 shares of the Company's common
stock. As a result of the Spinoff Agreement the Company ceased to be engaged in
providing commercial cleaning services to office buildings, and the commercial
cleaning operations became a discontinued operation for financial reporting
On March 26, 2012
, Patricia G. Skarpa
and Hallie Beth Skarpa
agreements with Toby McBride
and Michael Jay Holly
under which they agreed to
sell 28,125,000 shares of common stock to each (or an aggregate of 56,250,000
Concurrent with the execution of the Spinoff Agreement described above, the
Board of Directors elected Toby McBride
and Michael J. Holly
as Directors. Mr.
was also appointed as President and Chief Executive Officer, and Mr.
was appointed Vice President and Secretary.
Messrs. Holley and McBride each devote 100% of their time to us.
Upon electing Messrs. McBride and Holly to the Board of Directors, Patricia G.
and Hallie Beth Skarpa
each resigned their positions as officers and
directors effective immediately. The resignations of Patricia G. Skarpa
Hallie Beth Skarpa
were not in connection with any known disagreement with us on
We plan on distributing our product for the first time during the first calendar
quarter of 2013. Initially we will have two flavors of one product and will
distribute in California
to convenience stores, gas stations, grocery stores and
gyms. We currently work with a beverage manufacturer in Florida
companies for packaging materials. Our initial purchase required payment
upfront. Thereafter we will get net 30 day payment terms. We will ship product
to two distributors with net 30 day terms
We have also entered into an agreement with Dethrone Royalty, Inc.
- Enables us to change our corporate name to Dethrone Royalty Holdings, Inc.
("DRH"), which we did in August 2012.
- Have the right to match any offer that Dethrone Royalty, Inc. receives to be
- Dethrone Royalty, Inc. and the Company will create links to each other's
- Dethrone Royalty, Inc. will produce and distribute lines of shirts/clothing
for each sports figure signed as endorsers by the Company and market the shirts
through its normal distribution channels. The Company will receive commissions
equal to 12.5% of the net sales generated by these shirts.
We have also entered into contracts with several professional sports
personalities (Jonathan Quick
, Aldon Smith Haloti Nagata
and Taj Gibson
represent us by endorsing our products. All contracts cover three years and
require us to issue an aggregate of 3,500,000 restricted shares of common stock
over the lives of the contracts plus up to an additional 1,800,000 contingent
shares based on performance criteria. We have recorded an aggregate Marketing
Expense of $188,000
relating to the shares that are issuable for Year One of
each of the agreements.
The Company is also negotiating an agreement with the agent who introduced the
sports figures to the Company and may issue an additional 750,000 restricted
shares of common stock to that agent and has letters of intent with additional
sports figures (Pablo Sandavol
, Matt Mulson
, Kevin Shattenberg
) for endorsement agreements. There are no assurances that agreements
described in letters of intent will result in executed contracts.
Six Months Ended January 31, 2013 compared with Six Months Ended January 31,
REVENUES $ - $ -
General and administrative 175,673 16,461
Marketing 183,129 -
Product development 37,019 -
Compensation 314,500 -
TOTAL OPERATING EXPENSES 710,321 16,461
OTHER INCOME (EXPENSE)
Interest expense and finance costs (8,389 ) -
LOSS FROM CONTINUING OPERATIONS $ (718,710 )$ (16,461 )
Marketing - includes $188,000
relating to the shares that are issuable for Year
One of each of the agreements with the four athletes who have agreed to endorse
Compensation - all compensation has been paid to Messrs. McBride and Holley.
Interest expense and finance costs consist of $40,625
in connection with the
issuance of the 2,500,000 shares associated with receiving a loan for $100,000
and interest of $4,167
on that loan.
Private capital has been sought from former business associates of our two
officers or private investors referred to us by those business associates.
On May 4, 2012
, the Company sold 400,000 newly-issued restricted shares of
common stock for $50,000
In August 2012
, the Company raised $12,000
for 120,000 restricted shares of
common stock, and $100,000
for 670,000 restricted shares of common stock. The
stock certificate for these shares was issued in November 2012
On November 15, 2012
, the Company entered into a Senior Secured Promissory Note
with an unaffiliated party under which the Company received a one-year loan with
a principal balance of $100,000
. The loan bears interest at 20% per annum with
interest payments due quarterly. In addition, the Company issued 2,500,000
shares of restricted common stock to the lender and Messrs. Holley and McBride
pledged their 56,250,000 shares of the Company's common stock as collateral. If
the Company goes into default of the provisions of the loan, it becomes
convertible into the Company's common stock at a price of $.001
per share (or up
to 100 million shares). If a default occurs, the lender will have the ability of
becoming the controlling shareholder of the Company. The Company recorded a
deferred loan cost in the amount of $60,000
in connection with the issuance of
the 2,500,000 shares and has reflected amortization of those costs in the form
of interest expense in the amount of $385,143
for the six months ended January
In January 2013
we received an investment of $15,000
for 300,000 restricted
shares. The shares have not been issued as of the date of this report.
On February 27, 2013
, the Company entered into a $335,000
agreement. The agreement provides for a $35,000
original issue discount. The
lender, at its discretion, may provide funds up to $300,000
to the Company. It
at the closing of the agreement. All loans under the agreement
are payable in full one year after the funds are issued together with a prorated
portion of the original issue discount. All amounts outstanding under the
agreement become convertible, at the lender's discretion, into shares of the
Company's common stock starting 180 days from the execution date of the
agreement. The conversion rate per share is the lower of (i) $0.044
or (ii) 60%
of the lowest trade price during the 25 trading days prior to a conversion
notice. The lender has agreed that it will not execute any short trades and, at
not time, will hold more than 4.9% of the Company's outstanding common stock.
If the Company repays all amounts outstanding under the agreement within 90 days
of the execution date, there will be no interest amounts due. If it does not pay
all amounts due within 90 days of the execution date, it cannot make any other
prepayments of the amounts outstanding without the consent of the lender. In
addition, there will be a one-time interest charge of 12% of the amounts
outstanding. The Company must also register all shares that are issuable under
the agreement in any Registration Statement that it files with the SEC
The Company is negotiating with other potential funding sources, the proceeds
from which, if received, would repay all amounts due under this agreement within
90 days of the execution date. If all amounts are repaid within the 90 day
period, the agreement will be considered terminated and all convertibility
features would no longer exist.
We will continue to seek financing for working capital 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.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect
and that may impact its financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
Critical Accounting Policies
The preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. There are no critical policies or decisions that rely on
judgments that are based on assumptions about matters that are highly uncertain
at the time the estimate is made. The financial statements include a summary of
the significant accounting policies and methods used in the preparation of our
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