ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information included in this Quarterly Report Form 10-Q contains forward-looking statements that reflect the views of the management of the Company with respect to certain future events. Forward-looking statements made by penny stock issuers such as the Company are excluded from the safe harbor in Section 21E of the Securities Exchange Act of 1934. Words such as “expects,” “should,” “may,” “will,” “believes,” “anticipates,” “intends,” “plans,” “seeks,” “estimates” and similar expressions or variations of such words, and negatives thereof, are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that matters anticipated in our forward-looking statements will come to pass.
You are cautioned not to place undue reliance on forward-looking statements. You are also urged to review and consider carefully the various disclosures made in the Company’s other filings with the Securities and Exchange Commission, including any amendments to those filings. Except as may be required by applicable laws, the Company undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
GENERAL
Corporate History
Antaga International Corp (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on June 10, 2009. We are in the business of formulation and distribution of nutritional supplements which are designed to have a positive effect on health, wellbeing and improve physical and mental performance. On August 27, 2013, the Company purchased all of the product specifications and branding of Mix1 nutritional products and plans to manufacture and distribute these products nationwide beginning in early 2014.
On September 5, 2013 the Company changed its name to Mix 1 Life, Inc. The change became effective on October 7, 2013. To reflect the name change the Company changed its trading symbol to MIXX which became effective on October 27, 2013.
Business Overview
Mix 1 is an emerging beverage and nutritional supplements company currently with a product line of natural, ready-to-drink protein shakes. Our shakes offer a complete and balanced macronutrient mix and are intended to be consumed as a post work out, snack replacement, meal supplement or a meal replacement. Mix 1 beverages have a high protein content (on average 26 grams per serving) and are unique due to their fruit-based flavors, relatively low calorie count and superior taste. Our shakes have a twelve month shelf life with no need for refrigeration and are currently served in a twelve ounce PET bottle.
Mix 1 has been an established brand with a passionate and loyal customer base since 2005. However, for a number of non-financial reasons, the production and sale of Mix 1 products ceased in 2013. On August 27, 2013, the Company purchased all of the product specifications and branding of Mix1 nutritional products and plans to manufacture and distribute these products nationwide beginning in early 2014. In the last six months, we have re-formulated and re-packaged three shake flavors (Blueberry Vanilla, Strawberry Banana and Chocolate) to strengthen our mass consumer appeal. We have also partnered with a specialty food and beverage producer for the production of our first three (low acid) flavors.
Our first commercial production run is in April 2014, and we are currently using the resulting product to begin to sell into a targeted set of retailers in the western United States. We plan to spend the second half of 2014 getting the Mix 1 brand back into circulation (via distributors) in many of the stores where it has previously been sold, and we expect to see significant brand uptake beginning in 2015 as we expand our sales reach and marketing effort.
Our natural, high-protein shakes will benefit from two large and sustainable food and beverage trends: natural/organic and non-meat protein consumption. The natural/organic market in the U.S. is currently $50 billion, and it is expected to grow at over 10% per year for the next decade, per the Nutrition Business Journal. Mintel claims that protein use in meal replacement and sports beverages has posted 37% growth in the past five years, and Euromonitor expects the U.S. ready-to-drink protein beverage category to grow at a 6.8% CAGR through 2015. Nearly half (46%) of all meal-replacement users in the U.S. state that high-protein is a primary selection attribute.
Our protein shakes differ from other products on the market due to our innovative fruit-based flavors and the use of natural ingredients. Our 99% lactose-free formulations are thick and creamy, which appeals to consumers using the product as a meal replacement. Additionally, we have worked to eliminate the “chalky” aftertaste that typically accompanies drinks that are high in protein, all while keeping the calorie count low (230-240 per twelve ounce serving). We believe that these unique product attributes will not only increase our market share, they will bring a new segment of consumer into the category.
We plan to grow the Mix 1 brand well beyond our three current SKUs. Later in 2014, we will introduce additional ready-to-drink protein shake flavors. We will also add a multi-pack for sale in the grocery, club and mass channels. We are also working with one of the largest domestic protein supplier, on formulations for innovative protein powders.
Due to the fact that we own the formulas, trademarks, and formulations, Mix 1 plans on licensing and marketing its products outside of North America. While the U.S. is currently the largest market for protein drinks, the category is growing rapidly around the world. We have seen particularly strong interest in the Mix 1 brand from a number of strategic and financial groups in Asian countries, namely China, Japan, Singapore and South Korea, as well as Europe. After establishing a strong domestic brand presence, we plan to pursue international growth via either direct distribution, royalty, or JV structure.
Since 2005, Mix 1 has worked to create a strong lifestyle beverage brand with highly engaged, passionate users. Our presence is particularly strong in Colorado and Southern California, areas where we previously had our strongest sales volumes. Today, passion for Mix 1 remains robust – we have approximately 20,000 Facebook fans and 6,000 Twitter followers, and we receive regular email and phone requests from prior Mix 1 users who can’t wait for the product to return to shelves.
Our product was formulated after conducting extensive market research and has been tailored to appeal to a wide range of consumers. Our three initial flavors are all low in acidity, which makes a shelf-stable product more difficult to achieve, especially using a PET bottle (as opposed to a tetra pack). Production would not be possible without our partnership with one of few food and beverage producers that specializes in low acid products.
Our current product line consists of three all-natural protein shakes: Blueberry Vanilla, Strawberry Banana and Chocolate. All of our shakes are low-fat, 99% lactose-free and made with non-GMO ingredients. A single-serve twelve ounce bottle ranges from 230 to 240 calories and contains on average 26 grams of milk isolate protein. Our shakes provide 19 essential vitamins and minerals, including 70% of the recommended amount of daily calcium. The product is sweetened from only natural sugar and stevia, and the only fat in our products is a small amount of sunflower oil. We have five additional formulations that we plan to bring to market in late 2014/early 2015, including Mixed Berry.
Our target customer is the rapidly growing segment of men and women ages 24 to 49 that are focused on living a healthy lifestyle. Many of these individuals make fitness a priority and aspire to consume natural and organic foods. They view Mix 1’s natural ingredient list and fruit flavors as key differentiating factors in the protein drink category, which separates us from our primary competitors and will also attract new customers to the category. More so than other ready-to-drink protein shakes, Mix 1 shakes are consumed as a meal replacement for breakfast or lunch, making the product a routine purchase. This repeat consumption pattern drives recurring revenue and customer passion, which will enable us to ultimately become a “lifestyle” beverage brand.
We have a strong brand that evokes passion, which is evidenced by our active Facebook fans and Twitter followers. We plan to continue to support the Mix 1 brand by engaging in traditional and digital advertising, promotions, in-store sampling and displays, contests and other exciting outreach and events. While our marketing budget is modest in 2014, we recognize the requirement for lifestyle beverage brands to spend on customer engagement, and we have included this expense in our financial projections.
Mix1’s mission:
“Create products with natural, high-quality ingredients that are truly functional. We believe natural products are better than artificial ones and are the key to leading a healthy balanced life. As a company we want to improve people’s lives by promoting active lifestyles and overall health. These beliefs are what lead to creating Mix1. Never again should you need to miss getting the necessary nutrients because you were too busy to eat. We strive to help you make healthy choices during your busy day in order to help you feel your best not only today, but every day
.”
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED NOVEMBER 30, 2013 COMPARED TO THE THREE MONTH PERIOD ENDED NOVEMBER 30, 2012.
Operating and Net Loss
THREE and SIX MONTH PERIOD ENDED February 28, 2014 COMPARED TO THE THREE and SIX MONTH PERIOD ENDED
February 29, 2013.Our net loss for the three and six month periods ended February 28, 2014 were $878,247 and $1,176,066 respectively compared to a net loss of $1,295 and $14,100 respectively during the three and six month periods ended February 28, 2013. The Company did not generate any revenue.
During the three and six month periods ended February 28, 2014, we incurred general and administrative expenses of $475,851 and $773,670 respectively compared to $1,295 and $14,100 respectively incurred during the three and six month periods ended February 28, 2013. The expenses incurred during the six month period ended February 28, 2014 consisted of noncash expenses for services of $194,780, noncash expenses for corporate payroll $114,000, professional fees of 52,927 compared to $8,600 of professional fees for the six month period ended February 28, 2013.
The weighted average number of shares outstanding was 39,541,351 and 39,426,873, respectively for the three and six month periods ended February 28, 2014 and 29,310,000 for February 29, 2013.
Financial Condition
As of February 28, 2014, our total assets were $20,284,235 as compared to $19,880,000 as of August 31, 2013, and our total liabilities as of February 28, 2014 were $630,013 as compared to $32,771 as of August 31, 2013.
As of February 28, 2014 the Company’s cash balance was $354,377 compared to $0.00 as August 31, 2013.
Stockholders’ equity was $19,654,222 as of February 28, 2014 as compared to $19,847,229 as of August 31, 2013.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the six month period ended February 28, 2014, net cash flows used in operating activities was ($439,402). For the six month period ended February 28, 2013, net cash flows used in operating activities was ($14,100).
Cash Flows from Investing Activities
For the six month period ended February 28, 2014, net cash flows used in investing activities was ($5,788). For the six month period ended February 28, 2013, net cash flows used in investing activities was ($0.00).
Cash Flows from Financing Activities
We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the six month period ended February 28, 2014, there was $4,567 cash generated from loans from officer, $295,000 cash generated for the sale of common stock and 500,000 proceeds from debt. For the period from inception (June 10, 2009) to February 28, 2014, net cash provided by financing activities was $500,000 from debt, $320,000 received from issuances of common stock and 7,567 cash generated from loans from officer.
Liquidity and Capital Resources
As of February 28, 2014 the Company’s cash balance was $354,377 compared to $0.00 as August 31, 2013.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on commercial acceptable terms, if at all, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations.
CRITICAL ACCOUNTING POLICIES
We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States (“GAAP”). We describe our significant accounting policies in the notes to our audited financial statements filed with our Form 10-K for the fiscal year ended August 31, 2013.
Some of the accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of our assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgment and assumptions we use are based on historical experience and other factors that we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates and could materially affect the carrying values of our assets and liabilities and our results of operations.