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UPLIFT NUTRITION, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operation.(Edgar Glimpses Via Acquire Media NewsEdge) We are a start-up, internet-based eCommerce company that offers and sells a new natural energy and health drink called Active UpLift® in two different flavors and an energy spray called All-Day Energy Spray®. We have other products that we have also developed but to date, we have lacked the advertising capital to introduce them to the public and market them in a significant way. In addition to offering our products for sale on-line, we continue to do what is necessary to get our principal 2 products carried in retail grocery and health food stores around the country. This is exceptionally difficult since we currently lack the advertising capital necessary to maintain any such presence. While we have made substantial progress in this regard over the last two years, our ability to stay in a retail store without a significant and continued advertising budget is limited. As a result of our past retail store placement successes, we are uncertain at the present time about the extent to which we will rely on the Internet for the majority of our business. Our four (4) websites, namely, www.upliftnutrition.com, www.upliftenergy.com, www.alldayenergyspray.com, and www.EpiGaia.com, each offer and sell both Active UpLift® and All-Day Energy Spray®. The first product we developed for commercial sale, Active UpLift®, was only suitable for offer and sale in interstate commerce, and on a retail basis, as recently as four years ago. At the same time, our other product, All Day Energy Spray®, was only recently developed for offer and sale within the last 20 months. Because these products have so recently come to market, we have not yet been able to generate significant revenue. During the quarter, we did not ship any cases of Active UpLift® to re-stock supplies in any Albertsons, Ralphs stores in Southern California, or local Harmon's grocery stores. As of the date of this document, we also did not ship any additional cases of Active UpLift® to the Albertsons distribution center in Oklahoma for the purpose of re-stocking Albertsons grocery stores throughout Colorado and Arizona. What product is not sold out of the cases we have shipped can be returned to us by the retailer and the retailer's account with us is credited accordingly. During the quarter, we did not ship any Active UpLift® product to any Albertsons stores in Florida, Texas, Arizona or Colorado, nor did we ship any cases to Ralphs or Harmon's grocery store chains. In fact, for want of advertising capital, most of these stores are reluctant to continue to carry our product. At this time, we are unable to determine the volume of Active UpLift® inventory remaining in their stores or warehouse to estimate total returns. The reason we have been dropped from some out-of-state grocery store chains is the result of our lack of financial resources and our overall inability to support the necessary promotion that these stores require, not to mention the manpower necessary to keep up with various in-store marketing demands. Aside from Active UpLift®, our principal intention, at this point, is to try and do what is necessary to get our second product, All-Day Energy Spray® carried in retail convenience and grocery stores around the country. We say this because we believe there is a substantially better market for All-Day Energy Spray® as opposed to Active UpLift®. This is because there is more competition with a product like Active UpLift®. On the other hand, a product like All-Day Energy Spray® does not have substantial competition. Because our more recent retail marketing efforts of All-Day Energy Spray® have not been as successful as we would have hoped, even in light of current economic conditions, we have tried to become more aggressive in internet marketing for both Active UpLift® and All Day Energy Spray®. During our second quarter ended June 30, 2011, we generated or realized nominal revenue net of discounts and coupons from sales of Active UpLift® and All-Day Energy Spray®. This lack of internet sales was due, in large part, to our lack of internet and other advertising. Assuming that advertising capital becomes available for such purpose, we hope to follow our current marketing strategy with an aggressive national marketing and advertising campaign for All-Day Energy Spray®. What we anticipate budgeting for this type of expense is set forth in our budget for 2011 contained in our last Annual Report on Form 10-K filed on Edgar, that is, assuming that funds become available for such purpose. Reference is thus made to that document. These promotional activities include not only advertising dollars but contribution of product samples, give-a ways, promotional and retail store cooperative advertising. Our total promotions and marketing expenses were $1,241 for the six months ended June 30, 2011 compared to $8,928 for the six months ended June 30, 2010. Cost of goods sold were minimal as a result of low sales and amounted to $1,169 and $82 for the six months ended June 30, 2011, and 2010, respectively. Consulting and professional fees were $29,372 and $26,565 for the six months ended June 30, 2011 and 2010, respectively. General and administrative expenses were $9,181 and $17,361 for the six months ended June 30, 2011 and 2010, respectively. -------------------------------------------------------------------------------- Selected Financial Data. Because we have not been operating long enough to generate significant sales at the present time, selected financial data would not be particularly meaningful. Reference is made to Part I above and our audited financial statements included in Part F/S of our 2010 Annual Report on Form 10-K recently filed on Edgar. Reference is also made to the section immediately below titled "Liquidity and Capital Requirements." We are still a development stage company and due to current economic conditions, we have decided, for the time being, to curtail concentrating on retail sales of Active UpLift® and further, given that our newest product, All Day Energy Spray® has only recently been made available for retail sale, we have only generated or realized nominal revenues from our operations through the end of our second quarter of 2011. Our lack of substantial revenue and sales is currently a result of not yet having established normalized operations that would generate significant revenue or establish a pattern of expenditures that correlate with revenue. Since our emergence 5 years ago from several years of dormancy, we have incurred significant accounting costs and other expenses and fees in connection with reactivating ourselves, acquiring Nu Mineral Health, a Wyoming limited liability company, the preparation and filing of our Form 10-SB registration statement in 2007, the recent preparation and filing of our Annual Report on Form 10-K, and otherwise continuing to be current in our reporting obligations with the U.S. Securities and Exchange Commission ("Commission"). Funding of these and other expenses is from working capital provided by our majority stockholder, namely, Uplift Holdings, LLC, an entity which, because of its controlling ownership interest in us, has an obvious vested interest in seeing us successfully market our current and new products. Liquidity and Capital Requirements. During the six months ended June 30, 2011, our current assets decreased from $48,864 to $47,217, primarily due to a decrease in cash of $469 and a decrease in inventory of $1,550. During the same time frame, total assets decreased by $7,840 from $59,821 to $51,981, primarily from the decrease in fixed assets due to depreciation and intangible assets due to amortization. During the six months ended June 30, 2011, current liabilities increased from $277,543 to $327,992, an increase of $50,449. There are several factors that contributed to this net decrease in current liabilities during the six month period. These include an increase of $14,900 in advances from shareholders, an increase of $20,421 in accrued interest payable to related parties, and an increase in accounts payable of $15,128. Our sales during the first six months of 2011 were $504 as compared to $175 during the first six months of 2010. Our cost of sales during the first six months of 2011 was $1,169 as compared to $82 during the same period last year. For the six months ended June 30, 2011, our total operating expenses decreased by $11,973 or approximately 23% as compared to the six months ended June 30, 2010. As of June 30, 2011, our cash balance in our checking account was $607. What we have in our checking or bank account at any given time is insignificant inasmuch as our working capital is provided by our majority shareholder. The continuation of our current plan of operation will depend on our ability to raise substantial additional capital, of which there can be no assurance. During the six months ended June 30, 2011, our majority shareholder, Uplift Holdings, loaned or advanced us an additional $14,900. Though we are accruing 8% interest per annum on the amounts provided by our majority shareholder, these advances do not require interest payments at the present time and, unless or until we become profitable, we do not believe it likely that our agreement with our majority shareholder, Uplift Holdings, would be modified to require such. Uplift Holdings' loans are considered or designated by us as "advances," inasmuch as they do not require that we pay interest payments unless demand is made to do so. While we accrue interest on the on-going balance, we currently have no way of paying any interest payments to Uplift Holdings. As of June 30, 2011, we have accrued approximately $129,000 in interest due and owing stockholders. In the event we modify our agreement in the future with Uplift Holdings so that we are required to pay interest, we do not believe it would have any material impact on us or our liquidity because both we and Uplift Holdings would not agree to such a modification unless we were profitable and could afford to make such interest payments. As of June 30, 2011, stockholder advances and accrued interest totaled approximately $300,000. We hope to be able to satisfy our cash requirements for at least the next 12 months in that our majority shareholder has committed itself to advancing what funds are necessary for us to satisfy all of our cash requirements and otherwise keep us current in our 1934 Exchange Act reporting obligations for at least the ensuing 12 months. Our majority shareholder lacks the capital and resources to fund an advertising campaign, particularly given that we have come to realize how expensive such an endeavor really is. We believe that a year period is consistent with the disclosure in our PLAN OF OPERATION described below in that we believe that within 1 year, we should be able to successfully carry out our business plan if we can find sufficient advertising capital on acceptable terms. If a determination is made by management that we will NOT be successful and that our business -------------------------------------------------------------------------------- plan is or will be a failure for reasons which we can only imagine-something that has not yet occurred- our majority shareholder will likely elect not to advance us any more funds. See the section titled "PLAN OF OPERATION" below. Having said this, we are unable to guarantee that by the end of the fiscal year, and assuming that our business plan is NOT by then successful, that our majority shareholder will continue to advance us sufficient money to allow us to continue in our reporting obligations. We do not mean to imply, however, that our majority shareholder will NOT continue to advance us funds beyond the end of the year, particularly if it appears that we will indeed be able to successfully carry out our business plan if we continue beyond this year. If our majority shareholder does not desire to loan or advance us sufficient funds for us to continue for the simple reason that the prospects of our business plan look bleak, we may be required to look at other business opportunities, the form of which we cannot predict at this time, as to do so would be highly speculative on our part. It is possible, however, that we would consider a private placement of our shares, the form of which we also cannot predict or determine at this time. Current Status. During the quarter, we did not market All Day Energy Spray® in any retail convenience stores. Currently, we are primarily marketing the product on-line through our various websites. All Day Energy Spray® is an energy spray product on which we completed development during the third quarter of our 2009 fiscal year. Active UpLift®, our health and energy drink, comes in a powder that is mixed with water. Other than our marketing this product on-line, this product is currently only featured in some Harmon's grocery stores in Utah. This product currently comes in two flavors, Active UpLift® - Raspberry Lemonade and Active UpLift® - Apple Cinnamon PLAN OF OPERATION. Our principal business plan has been to promote, market and sell our new energy spray, All Day Energy Spray® and our powdered natural energy and health drink, Active UpLift®, through traditional retail distributors, who, in turn, will supply our product to retail health and food stores. We feel that our best markets will be large food store chains and specialty health food outlets. Unfortunately, as stated elsewhere herein, we have lacked and currently lack the necessary advertising capital to spend in such stores and this fact hinders our overall ability to not only "get into" such stores but to thereafter maintain a presence. The viability of retail stores for our products, however, has proven correct so far in that we now have relationships with at least 3 large retailers and their distributors. Our principal business plan, which had been to promote market and sell our unique powdered natural energy and health drink, Active UpLift®, through traditional retail distributors, has changed due to a lack of advertising funds. Because of the success of a 10 store market test of All Day Energy Spray® and the large number of retail distribution inquiries we have received, we have decided to focus our marketing efforts and finances on the distribution and sale of All Day Energy Spray®. The best markets for our spray product are on-line and in retail convenience stores which utilize point of sale marketing. Unfortunately, with the current recession, we have not been able to generate significant sales of our first product, Active UpLift®. Because we have come to the realization that our principal product, Active Uplift®, has substantial industry competition, we have decided to focus our marketing efforts and resources on All Day Energy Spray®. This product does not face the direct competition in the marketplace that an energy drink does. We began marketing All Day Energy Spray® during the middle of the third quarter of 2009 and have had encouraging responses from retail users about how good it tastes and how effective the energy boost it gives actually is. Although it would have taken a long time for Active UpLift® to actually catch on and begin selling and would have further required spending substantial sums of money on advertising-capital we don't have at the present time-we are hopeful that it won't take nearly as long nor will it require as much to be spent on advertising for All-Day-Energy Spray® to "catch on" and generate meaningful sales. This remains to be seen, however. As stated above, we believe this because All-Day-Energy Spray® has relatively little competition compared to Active UpLift® and the overall energy drink market. As a result of winding down our marketing efforts with respect to Active UpLift®, we had, and will have, less than anticipated sales and gross revenue during this 2011 year. This is because we have, to a large degree, been overly side-tracked on developing product and have otherwise been devoting more time and energy to the completion of EpiGaia™, a third product. These efforts to complete this new product, and, at the same time, obtain the necessary intellectual property protections, significantly detracted from our ability to concentrate on increasing sales of All Day Energy Spray®. Because All Day Energy Spray® is a relatively new product, however, we have no any way of knowing or predicting what sales might be. As of the date of this report, we are primarily marketing All-Day-Energy Spray® on-line through our various websites. Our principal goal during 2011 and into 2012 is to raise capital in some fashion in order to embark on a serious advertising campaign in conjunction with a large retail chain store, many of whom we have contacted and communicated with for this -------------------------------------------------------------------------------- purpose. As disclosed above, our majority shareholder is continuing to investigate the possibility of further selling its debt securities (i.e., convertible notes) and then allowing the new debtor to exchange the debt securities it receives for common stock. Our Websites. During our fourth quarter of 2009, we redesigned our UpLift website and added three other website addresses for the convenience of our eCommerce customers. Along with our principal web addresses www.upliftnutrition.com and www.upliftenergy.com, we have created www.alldayenergyspray.com and www.EpiGaia.com, as additional platforms from which to promote these two new products. That is to say, we have created new websites specifically designed to market our EpiGaia™ and All Day Energy Spray® products, websites that have only recently been launched. As of now, we offer both Active UpLift® and All Day Energy Spray® directly on our websites and eventually plan to offer EpiGaia™ on all of them as well. We have spent an enormous amount of time and energy on these websites and encourage any investor or interested person to visit them. Inventory. As of June 30, 2011, inventory consisted of $36,342 in raw materials, which includes our newly redesigned 14-pack display boxes, and $9,895 in finished goods. As of June 30, 2011, we have in inventory, 479 boxes (each box contains 14 packets ) of our "new" Active UpLift® apple-cinnamon cold or hot flavor drink, and 249 boxes of the original Active UpLift® raspberry-lemonade flavored drink. As of June 30, 2011, we had, on hand, bottles of All Day Energy Spray® as follows: 1,284 Citrus flavored bottles,1,716 Grape flavored bottles,1,260 Mint flavored bottles, and 1,980 Cinnamon flavored bottles. On June 30, 2011, we had one (1) kilo of EpiGaia™ in our inventory. The entire finished goods inventory and majority of our product box inventory, including raw materials, is currently held in our warehouse located at 252 West Cottage Avenue, Sandy, Utah. Any bulk product and other packaging raw material had been held at Rocky Mountain Co Pack, but Rocky Mtn Co-pack has gone out of business. As a result, all of our raw ingredients are now kept at our Company warehouse in Sandy, Utah. We are NOT Dependent on One Supplier for Our Potential Success. In addition to obtaining most of our ingredients for Active UpLift® through our current manufacturer, Harmony Concepts located in Weber County, Utah, which, by the way has excellent manufacturer relationships and thus, the purchasing power to get us the best possible prices, we have identified at least three other manufacturers/packagers capable of buying, producing and mixing that product. Up until the end of 2010, our Active UpLift® product has been packaged and placed in boxes for us by Rocky Mountain Co Pack. However, in mid 2010, Rocky Mtn. Co-Pack ceased doing business and returned all the raw ingredients and materials they had to us. In the meantime, we have found at least two more companies that can manufacture and package our Active UpLift® product. As yet, we have not had to use them. Up until the end of 2009, our All-Day-Energy Spray® product was mixed and packaged by DaiShin Packaging in Springville, Utah. During the first quarter of 2010, we contracted with Mtn. View Packaging, a new mixing and packaging company that we wanted to re-formulate and re-package All Day Energy Spray®. We were very satisfied and would use them again, if necessary. Our EpiGaia™ health drink product, a product that is currently not for sale to the public, has been mixed and packaged by Harmony Concepts. Significantly, we do not believe that we are reliant on one vendor for our success. For example, we have discovered other, new bulk food packagers in the Salt Lake City area. One of these other new suppliers that we could contract with is Wasatch Product Development, a company capable of mixing and packaging the products mentioned above. All of these companies have been in business for many years and appear to have excellent reputations in mixing and packaging circles. Our manufacturer/packagers sign a non-disclosure, non-compete agreement with us and thus, we are assured that they will not disclose our formula to anyone else. We also feel comfortable in this regard in that these companies' continued success is dependent on their ability to keep their customers' formulas secret. -------------------------------------------------------------------------------- Our Business Plan over the Remainder of the Year. As a result of the recession and people tightening their belts and not spending as much money, we have had a difficult time generating sales for Active UpLift®. As a result, and as stated above, we have decided to concentrate our advertising and marketing efforts on All Day Energy Spray®. To accomplish this, we have completely updated and expanded our existing websites, and even added three more to our marketing strategy, making a total of four websites available for advertising, marketing and sales. Though these websites, we have been offering and will continue to offer our Active Uplift® product on a "try it free" promotional effort to anyone who wants the product. Any order placed through this program from the internet will receive a 14 pack "combo" box of Active Uplift® containing 7 packets of Raspberry Lemonade flavor and 7 packets of Apple Cinnamon for free. All the person needs to do is pay for the shipping charges. Our more urgent plan over the next 12 months is to do what is necessary to raise advertising capital. Only then will we be able to get into a large retail chain store on a long-term basis. No assurance can be made that we will be successful in this regard. Our Current Marketing/Advertising Strategy. As disclosed above, we have changed directions during the last six months and have decided to concentrate our marketing efforts on All Day Energy Spray® instead of Active Uplift® or EpiGaia™. In this regard, we are concentrating our new marketing efforts in several areas. First, we are concentrating on website advertising and marketing through several new websites and otherwise keeping all of our websites updated and fully functional. Through these efforts, we have now started a marketing effort on various popular and more significant search engines. In order for our Internet/eCommerce business to succeed, we additionally plan, among those things mentioned above, and on an on-going basis, to: -- make significant investments in our Internet/eCommerce business, including upgrading our website as it becomes necessary -- get other food and nutrition websites to link to ours -- significantly increase online traffic and sales volume in every way we can -- attract and retain a loyal base of frequent visitors to our website who will give us feedback about our product -- expand the products and services offered on our various websites -- respond to competitive developments and maintain our distinct brand identity -- form and maintain relationships with strategic partners, particularly retail food stores and outlets -- provide quality customer service -- continue to develop and upgrade our services and technologies Our Immediate Ability to Be Placed in Retail Stores. Because we already feature our 2 principal products in a colored retail box with a bar code (see our website, www.upliftnutrition.com, which carries pictures of our box), we are one step ahead of the overall retail process. In other words, we are already set up to be carried, right now, in large retail chain stores. We believe this is a significant milestone or accomplishment that we have already achieved in that many companies sell their products on the Internet without having a colored retail box and bar code for retail purposes. Without this asset, one's product isn't capable of being carried in a retail store. We Intend to Pursue Additional Marketing Ideas and Avenues on an On-Going Basis . Marketing ideas that have not as yet been implemented by us but which we intend to seriously consider and which are designed to additionally promote us and our website: -------------------------------------------------------------------------------- (1) through reciprocal links with other websites; (2) through advertising on other health and nutrition websites; (3) through ads placed in various health and nutrition food magazines such as Healing Lifestyles & Spas, Shape, Prevention, and Woman's Day; (4) through the attendance at health and nutrition tradeshows and expos across the country; (5) through contacting and then supplying retail food stores across the country, including health food stores, with our product, either on consignment basis or, on a high volume discounted basis for which they will pay us in advance; and (6) through the giving of product demonstrations in store locations and shopping malls. Employees, Experts, Consultants and Advisors. Currently, we have no employees. Employees are not necessary at this stage of our development. Our officers and directors are performing daily duties as needed. We only intend to hire employees if and when the need develops. Currently, there is no such need. Our directors and officers do not receive any remuneration for their services nor are they accruing earned compensation. We might however, approve the issuance of stock from time to time as a bonus for work that has been performed. In implementing our business plan, we are holding expenses to a minimum and we plan to obtain expert and other services on a contingency basis if and when needed. Until now when we need advertising capital, we have not had a particular or specific need for any outside experts, advisors or consultants. If we engage outside advisors or consultants for any particular purpose, we will have to make a determination as to how such persons will be compensated. So far, we have NOT made any arrangements or definitive agreements as yet to use outside experts, advisors or consultants for any reason. This is because, so far, we have not needed to. We do have a website technician whom we have hired to, among other things, enhance our html source or description codes, namely, Keywords, on our website so that information is more easily susceptible to Yahoo! and Google's search "crawler" or "spider." We do NOT intend to use or hire any employees or other consultants, with the possible exception of part-time clerical assistance on an as-needed basis. Outside advisors or consultants will be used only if they are needed and can be obtained for minimal cost or on a deferred payment basis. Other than our website maintenance technician that we shall continue to use to update or revise our websites as it becomes necessary, we are not currently aware of any situation in which we would need an outside advisor or consultant. Commitment of Our Principal Shareholder to Keep Us "Current" in Our "Reporting Obligations ." As has been previously reported in our Edgar filings, our principal shareholder, Uplift Holdings, intends to provide us with sufficient funding, throughout this fiscal year, to keep us current in our SEC reporting obligations. This does NOT include advancing us the funds necessary to embark on a national or other advertising campaign. The only caveat with regard to this commitment is if it is determined by us and our majority shareholder that our business plan will NOT work and cannot succeed. If that occurs, and we can make no prediction about whether it will occur or not, our majority shareholder will likely elect to cease funding us. We have NOT entered into any formal, written agreement with Uplift Holdings that contractually binds or obligates it, in writing, to fund us for the next year. Having said this, we will nonetheless be required to continue to evaluate our business plan. At the expiration of this fiscal year, and assuming that we have not been able to obtain the needed capital to expend on advertising, management will have to re-evaluate our overall plans, intentions and strategies and, in particular, Uplift Holdings will then have to evaluate whether, and to what extent, it wants to continue to fund our continued existence as a fully reporting company. |