10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

[X]                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2012

[   ]                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to ______

Commission File Number  000-54247

VITAMIN BLUE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0858127
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1005 West 18th Street, Costa Mesa, California 92627

(Address of principal executive offices)

(949) 645-4592

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes  [X]   No  [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  [  ]    No  [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company

Large accelerated filer	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[  ]	Smaller reporting company	[X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  [  ]   No  [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class	Outstanding as of November 14, 2012
Common Stock, $0.0001 par value	575,445,000

Explanatory Note

The purpose of this Amendment No. 1 (“Amendment”) to our quarterly report on Form 10-Q for the period ended September 30, 2012, originally filed with the U.S. Securities and Exchange Commission on November 14, 2012, is solely to furnish Exhibit 101 in accordance with Rule 405 of Regulation S-T.

No other changes have been made in this Amendment.  This Amendment speaks as of the original date of our Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Under Rule 405(a)(2)(ii) of Regulation S-T, this Exhibit 101 is permitted to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

Item 6.	Exhibits
101 INS	XBRL Instance Document

101 SCH XBRL Taxonomy Extension Schema Document

101 CAL XBRL Taxonomy Extension Calculation Linkbase Document

101 LAB XBRL Taxonomy Extension Label Linkbase Document

101 PRE XBRL Taxonomy Extension Presentation Linkbase Document

101 DEF XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VITAMIN BLUE, INC.

Date:  December ___, 2012	By:  /s/  Frank D. Ornelas
	Frank D. Ornelas
	Chief Executive Officer
	Principal Executive Officer)
	Chief Financial Officer
	(Principal Accounting Officer)

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4. Loans Payable (Details) (USD $)	9 Months Ended
	Sep. 30, 2012		Dec. 31, 2011
Proceeds from Loans	$ 0
Loans payable	110,000	[1]	110,000
Notes Payable	$ 169,067	[1]

[1] bears interest at the rate of 8% per annum, and are due upon demand

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2. Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2012

Notes

2. Summary of Significant Accounting Policies

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Vitamin Blue, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Accounts receivable

The Company extends credit to its customers, who are located primarily in California.  Accounts receivable are customer obligations due under normal trade terms.  The Company performs continuing credit evaluations of its customers’ financial condition.  Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been received to determine if any such amounts will potentially be uncollected.  The Company includes any balances that are determined to be uncollectible in its allowance for doubtful accounts.  After all attempts to collect a receivable have failed, the receivable is written off.  The balances of the allowance account at September 30, 2012 and 2011 is $3,589 and $3,475 respectively.

Revenue Recognition

The Company recognizes revenue upon delivery, provided that evidence of an arrangement exits, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future products returns related to current period revenue, current economic trends, changes in customer composition and historical experience. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluation of our customers and historic credit losses have been within our expectations. This is a critical policy, because we want our accounting to show only sales which are “final” with a payment arrangement.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2012 and 2011, the balances reported for cash, inventory, prepaid expenses, accounts payable, accrued expenses, loans payable and convertible promissory notes payable approximate the fair value because of their short maturities.

We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

·         Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

·         Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

·         Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2012:

	Total	(Level 1)	(Level 2)	(Level 3)
Assets	$  0	$  0	$  0	$  0
Total assets measured at fair value	$  0	$  0	$  0	$  0
Derivative Liability	$    166,596	$  0	$  0	$    166,596
Total liabilities measured at fair value	$    166,596	$  0	$  0	$    166,596

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the nine months ended September 30, 2012, and no new pronouncements were adopted during the period.

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7. Subsequent Events (Details) (USD $)	Oct. 09, 2012
Shares Issued in Conversion of Promissory Note	5,620,000
PromissoryNotesConversion	$ 6,744
PromissoryNotesConversionValuePerShare	$ 0.0012
ConvertiblePromissoryNoteAdditional	$ 10,000

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6. Convertible Promissory Notes: Schedule of Derivative Liabilities at Fair Value (Details) (USD $)	Sep. 30, 2012
Stock price on the valuation date	$ 0.0020
Conversion price for the loans	$ 0.0012
Years to Maturity	1
Risk free rate	0.21%
Expected volatility	157.12%

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1. Basis of Presentation

3 Months Ended

Sep. 30, 2012

Notes

1. Basis of Presentation

1.     BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.  Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the financial statements and footnotes for the year ended December 31, 2011.

Going Concern

The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion.  The Company has obtained funds from its shareholder through the period ended September 30, 2012. Management believes this funding will continue, and has also obtained funding from new investors.  Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business.

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BALANCE SHEETS (USD $)	Sep. 30, 2012		Dec. 31, 2011
CURRENT ASSETS
Cash	$ 347		$ 1,416
Accounts receivable, net	12,284		5,776
Inventory	10,913		13,041
Prepaid expenses	33,750
TOTAL CURRENT ASSETS	57,294		20,233
Vehicles	21,811		21,811
Machinery & equipment	2,420		2,420
Office equipment	1,839		1,839
Property & Equipment, gross	26,070		26,070
Less accumulated depreciation	(25,953)		(24,792)
NET PROPERTY AND EQUIPMENT	117		1,278
TOTAL ASSETS	57,411		21,511
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable	98,273		84,842
Accrued expenses	33,397		29,458
Accrued interest, related party	2,412		1,861
Accrued interest, other	75,434		60,629
Derivative liability	166,596		119,991
Convertible promissory notes	132,040		110,000
Loans payable	110,000	[1]	110,000
Loan payable, related party	8,000	[2]	10,000
TOTAL CURRENT LIABILITIES	626,152		526,781
SHAREHOLDERS' DEFICIT
Preferred Stock, $0.0001 par value 100,000,000 authorized preferred shares; none issued or outstanding
Common Stock, $0.0001 par value; 900,000,000 shares authorized 569,825,000 and 526,525,000 shares issued and outstanding, respectively	56,983		52,653
Additional paid in capital	212,038		97,197
Accumulated deficit	(837,762)		(655,120)
TOTAL SHAREHOLDERS' DEFICIT	(568,741)		(505,270)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 57,411		$ 21,511

[1] bears interest at the rate of 8% per annum, and are due upon demand

[2] The Company has imputed interest on these loans at the rate of 9% per annum

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STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net loss	$ (182,642)	$ (165,038)
Depreciation	1,161	98
Bad debt expense	158	(382)
Contributed services	19,736	19,239
Common stock issued for services	40,000
Amortization of debt discounts recognized as interest expense	49,906	57,545
Derivative valuation gain/(loss)	28,174	(4,564)
Change in accounts receivable	(6,666)	(2,740)
Change in prepaid expenses	(33,750)
Change in inventory	2,128	2,404
Change in accounts payable	13,431	20,638
Change in accrued expenses	19,295	17,936
NET CASH USED IN OPERATING ACTIVITIES	(49,069)	(54,863)
Purchase of warehouse equipment		(1,400)
NET CASH USED IN INVESTING ACTIVITIES		(1,400)
Payments on related party loans payable	(2,000)
Proceeds from convertible promissory notes	50,000	60,000
NET CASH PROVIDED IN FINANCING ACTIVITIES	48,000	60,000
NET INCREASE/(DECREASE) IN CASH	(1,069)	3,737
CASH, BEGINNING OF PERIOD	1,416	1,830
CASH, END OF PERIOD	347	5,567
Interest paid
Taxes paid

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2. Summary of Significant Accounting Policies: Accounts Receivable (Details) (USD $)	Sep. 30, 2012	Sep. 30, 2011
Allowance for Doubtful Accounts Receivable, Current	$ 3,589	$ 3,475

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3. Capital Stock (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Common stock shares authorized	900,000,000	900,000,000
Common stock par value	$ 0.0001	$ 0.0001
Preferred stock shares authorized	100,000,000	100,000,000
Preferred stock par value	$ 0.0001	$ 0.0001
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Common stock in conversion promissory note value per share	$ 0.0012
Common Stock
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Issuance of common stock for conversion of promissory notes	$ 2,330
Issuance of common stock for services at fair value - shares	20,000,000
Issuance of common stock for services at fair value	2,000
Equity
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Issuance of common stock for conversion of promissory notes	27,960
Issuance of common stock for services at fair value - shares	20,000,000
Issuance of common stock for services at fair value	$ 40,000

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STATEMENT OF CASH FLOWS PARENTHETICAL (USD $)	9 Months Ended
	Sep. 30, 2012
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Convertible promissory notes payable	$ 30,050
Shares Issued for settlement of subscription payable - shares	16,252,000
Settlement of subscription payable	$ 33,050

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BALANCE SHEETS (PARENTHETICAL) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock par value	$ 0.0001	$ 0.0001
Preferred stock shares authorized	100,000,000	100,000,000
Preferred stock shares issued
Preferred stock shares outstanding
Common stock par value	$ 0.0001	$ 0.0001
Common stock shares authorized	900,000,000	900,000,000
Common stock shares issued	569,825,000	526,525,000
Common stock shares outstanding	569,825,000	526,525,000

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2. Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

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Document and Entity Information	3 Months Ended
	Sep. 30, 2012	Nov. 14, 2012
Document and Entity Information
Entity Registrant Name	Vitamin Blue, Inc.
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	true
Entity Central Index Key	0001483623
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		575,445,000
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
AmendmentDescription	1

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2. Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2012 and 2011, the balances reported for cash, inventory, prepaid expenses, accounts payable, accrued expenses, loans payable and convertible promissory notes payable approximate the fair value because of their short maturities.

We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

·         Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

·         Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

·         Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2012:

	Total	(Level 1)	(Level 2)	(Level 3)
Assets	$  0	$  0	$  0	$  0
Total assets measured at fair value	$  0	$  0	$  0	$  0
Derivative Liability	$    166,596	$  0	$  0	$    166,596
Total liabilities measured at fair value	$    166,596	$  0	$  0	$    166,596

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STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUE	$ 38,835	$ 36,579	$ 99,254	$ 84,531
COST OF SALES	22,820	23,532	57,176	58,013
GROSS PROFIT	16,015	13,047	42,078	26,518
OPERATING EXPENSES	51,009	49,843	125,636	124,561
DEPRECIATION EXPENSE	385	41	1,161	98
TOTAL OPERATING EXPENSES	51,394	49,884	126,797	124,659
LOSS FROM OPERATIONS BEFORE OTHER EXPENSES	(35,379)	(36,837)	(84,719)	(98,141)
OTHER EXPENSES
Penalties	(111)	(106)	(322)	(421)
Derivative valuation gain/(loss)	(24,902)	2,965	(28,174)	4,564
Interest expense	(16,475)	(24,578)	(69,427)	(71,040)
TOTAL OTHER EXPENSES	(41,488)	(21,719)	(97,923)	(66,897)
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES	(76,867)	(58,556)	(182,642)	(165,038)
NET LOSS	$ (76,867)	$ (58,556)	$ (182,642)	$ (165,038)
BASIC AND DILUTED LOSS PER SHARE	$ 0.00	$ 0.00	$ 0.00	$ 0.00
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED	533,729,348	526,525,000	528,943,978	523,014,194

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5. Related Party

3 Months Ended

Sep. 30, 2012

Notes

5. Related Party

5.     RELATED PARTY

During the nine months ended September 30, 2012, the Company had loans outstanding from Veronica Ornelas, Vice President and Secretary of the Company, totaling $10,000 of which $2,000 was paid prior to September 30, 2012. The balance remaining as of September 30, 2012 is $8,000. The Company has imputed interest on these loans at the rate of 9% per annum.  As of September 30, 2012, the balance of accrued interest payable to this related party was $2,412.

Frank Ornelas, the Company’s Chief Executive Officer, receives an annual salary of $50,000. During the nine month period ended September 30, 2012 and 2011, the Company paid for various personal expenses on behalf of the CEO totaling $17,764 and $18,261, respectively, which have been recognized as payments against his annual salary. The unpaid portions of the CEO’s salary of $19,736 and $19,239, respectively, for the nine months ended September 30, 2012 and 2011, have been reflected as contributed capital in accordance with SAB Topic 5T.  The CEO has agreed to waive the unpaid portions of his salary and no shares have been or will be issued to the CEO in exchange for this unpaid salary.

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4. Loans Payable

3 Months Ended

Sep. 30, 2012

Notes

4. Loans Payable

4.     LOANS PAYABLE

The Company received $0 in new loan proceeds for the period ended September 30, 2012. As of September 30, 2012, the principal balance of the Company’s outstanding loans payable were $110,000, which bears interest at the rate of 8% per annum, and are due upon demand. The balance due for the period ended September 30, 2012 including all accrued and unpaid interest was $169,067. The loans do not contain any type of conversion feature. The Company intends to retire these loans at a future date through the issuance of shares of common stock at a rate to be agreed upon by both the lenders and the Company at the time the retirement is to be completed. There was no interest paid during the period ended September 30, 2012.

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2. Summary of Significant Accounting Policies: Fair Value of Financial Instruments: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) (USD $)	Sep. 30, 2012
Estimate of Fair Value, Fair Value Disclosure
Other Assets, Fair Value Disclosure	$ 0
Assets, Fair Value Disclosure	0
Derivative Financial Instruments, Liabilities, Fair Value Disclosure	166,596
Liabilities, Fair Value Disclosure	166,596
Fair Value, Inputs, Level 1
Other Assets, Fair Value Disclosure	0
Assets, Fair Value Disclosure	0
Derivative Financial Instruments, Liabilities, Fair Value Disclosure	0
Liabilities, Fair Value Disclosure	0
Fair Value, Inputs, Level 2
Other Assets, Fair Value Disclosure	0
Assets, Fair Value Disclosure	0
Derivative Financial Instruments, Liabilities, Fair Value Disclosure	0
Liabilities, Fair Value Disclosure	0
Fair Value, Inputs, Level 3
Other Assets, Fair Value Disclosure	0
Assets, Fair Value Disclosure	0
Derivative Financial Instruments, Liabilities, Fair Value Disclosure	166,596
Liabilities, Fair Value Disclosure	$ 166,596

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2. Summary of Significant Accounting Policies: Recently Issued Accounting Pronouncements (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Management reviewed accounting pronouncements issued during the nine months ended September 30, 2012, and no new pronouncements were adopted during the period.

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2. Summary of Significant Accounting Policies: Accounts Receivable (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Accounts Receivable

Accounts receivable

The Company extends credit to its customers, who are located primarily in California.  Accounts receivable are customer obligations due under normal trade terms.  The Company performs continuing credit evaluations of its customers’ financial condition.  Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been received to determine if any such amounts will potentially be uncollected.  The Company includes any balances that are determined to be uncollectible in its allowance for doubtful accounts.  After all attempts to collect a receivable have failed, the receivable is written off.  The balances of the allowance account at September 30, 2012 and 2011 is $3,589 and $3,475 respectively.

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6. Convertible Promissory Notes

3 Months Ended

Sep. 30, 2012

Notes

6. Convertible Promissory Notes

6.   CONVERTIBLE PROMISSORY NOTES

As of September 30, 2012, the Company received loans in the form of convertible debentures from investors for a total of $160,000. The loans bear interest at 8% per annum on the unpaid balance until paid or until default. The convertible promissory note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.

The Holders of the debentures have the right to convert at any time amounts outstanding under the debentures into shares of common stock at a conversion price per share equal to sixty (60%) of the average bid and ask price of the common stock for the previous five (5) trading days or if the common stock has not traded in the last thirty (30) business days, then sixty percent (60%) of the price that the Maker’s common stock was last issued to a non-affiliated investor. The holders may elect payment of the principal of this note, before any repayment of interest. During the period ended September 30, 2012, one holder converted $27,960 in convertible notes and was issued 23,300,000 shares of common stock at a price of $0.0012 per share. The total outstanding principal balance of convertible promissory notes at September 30, 2012 was $132,040.

ASC Topic 815 provides applicable guidance to the convertible promissory notes issued by the Company in instances where the number into which a note can be converted is not fixed.  For example, when a note converts at a discount to market based on the stock price on the date of conversion, ASC Topic 815 requires that the embedded conversion option of the convertible promissory notes be bifurcated from the host contract and recorded at their fair value. In accounting for derivatives under accounting standards, the Company recorded a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the embedded derivative. The discount is amortized over the life of the convertible promissory notes,  which resulted in the recognition of $49,906 in interest expense for the period ended September 30, 2012, and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, the remaining derivative liability of $31,475 was charged to additional paid-in capital.  For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Stock price on the valuation date	$0.0020
Conversion price for the loans	$0.0012
Years to Maturity	1
Risk free rate	0.21%
Expected volatility	157.12%

        The value of the derivative liability at September 30, 2012 was $166,596.

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7. Subsequent Events

3 Months Ended

Sep. 30, 2012

Notes

7. Subsequent Events

7.   SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of the financial statements according to the requirements of ASC TOPIC 855 and has reported the following:

On October 9, 2012, the Company issued 5,620,000 shares of common stock in the conversion of $6,744 promissory notes at a price of $0.0012 per share.

On October 2, 2012 the Company received an additional $10,000 convertible promissory note.  The terms of the note are the same as those disclosed in Note 6.

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2. Summary of Significant Accounting Policies: Revenue Recognition (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Revenue Recognition

Revenue Recognition

The Company recognizes revenue upon delivery, provided that evidence of an arrangement exits, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future products returns related to current period revenue, current economic trends, changes in customer composition and historical experience. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluation of our customers and historic credit losses have been within our expectations. This is a critical policy, because we want our accounting to show only sales which are “final” with a payment arrangement.

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6. Convertible Promissory Notes: Schedule of Derivative Liabilities at Fair Value (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of Derivative Liabilities at Fair Value

Stock price on the valuation date	$0.0020
Conversion price for the loans	$0.0012
Years to Maturity	1
Risk free rate	0.21%
Expected volatility	157.12%

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5. Related Party (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012		Sep. 30, 2012		Sep. 30, 2011	Dec. 31, 2011
Loan payable, related party	$ 8,000	[1]	$ 8,000	[1]		$ 10,000
Payments on related party loans payable			2,000
Accrued interest, related party	2,412		2,412			1,861
Chief Executive Officerannual salary	50,000
Related Party Transaction, Expenses from Transactions with Related Party			17,764		18,261
Contributed services			$ 19,736		$ 19,239

[1] The Company has imputed interest on these loans at the rate of 9% per annum

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STATEMENTS OF SHAREHOLDERS' DEFICIT (USD $)	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Equity
Balance at Dec. 31, 2011	$ 52,653	$ 97,197	$ (655,120)	$ (505,270)
Balance - shares at Dec. 31, 2011	526,525,000			526,525,000
Issuance of common stock for conversion of promissory notes	2,330	25,630		27,960
Issuance of common stock for conversion of promissory notes - shares	23,300,000			23,300,000
Issuance of common stock for services at fair value	2,000	38,000		40,000
Issuance of common stock for services at fair value - shares	20,000,000			20,000,000
Adjustment to derivative liability for converted promissory notes			31,475	31,475
Contributed services of shareholder		19,736		19,736
Net loss			(182,642)	(182,642)
Balance at Sep. 30, 2012	$ 56,983	$ 212,038	$ (837,762)	$ (568,741)
Balance - shares at Sep. 30, 2012	569,825,000			569,825,000

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3. Capital Stock

3 Months Ended

Sep. 30, 2012

Notes

3. Capital Stock

3.     CAPITAL STOCK

As of September 30, 2012, the Company has 900,000,000 shares of common stock authorized at par value of $0.0001 and 100,000,000 shares of preferred stock authorized at par value of $0.0001. During the nine months ended September 30, 2012, the Company issued 23,300,000 shares of common stock at a price of $0.0012 per share in conversion of promissory notes in the amount of $27,960. Also, the Company issued 20,000,000 shares of common stock for services at fair value of $40,000.

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6. Convertible Promissory Notes (Details) (USD $)	9 Months Ended
	Sep. 30, 2012		Dec. 31, 2011
Convertible debentures from investors	$ 160,000	[1]
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Common stock in conversion promissory note value per share	$ 0.0012
Convertible promissory notes	132,040		110,000
Convertible promissory interest expense	49,906
Adjustment to derivative liability for converted promissory notes	31,475
Derivative liability	166,596		119,991
Equity
Issuance of common stock for conversion of promissory notes	27,960
Issuance of common stock for conversion of promissory notes - shares	23,300,000
Adjustment to derivative liability for converted promissory notes	31,475
Common Stock
Issuance of common stock for conversion of promissory notes	$ 2,330
Issuance of common stock for conversion of promissory notes - shares	23,300,000

[1] Bear interest at 8% per annum on the unpaid balance until paid or until default

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2. Summary of Significant Accounting Policies: Fair Value of Financial Instruments: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Tables)

3 Months Ended

Sep. 30, 2012

Tables/Schedules

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

	Total	(Level 1)	(Level 2)	(Level 3)
Assets	$  0	$  0	$  0	$  0
Total assets measured at fair value	$  0	$  0	$  0	$  0
Derivative Liability	$    166,596	$  0	$  0	$    166,596
Total liabilities measured at fair value	$    166,596	$  0	$  0	$    166,596