- ---------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY OR TRANSITIONAL REPORT
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-20549
BRAVO! FOODS INTERNATIONAL CORP.
(Exact name of registrant as specified in its amended charter)
formerly
China Premium Food Corporation
Delaware 62-1681831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11300 US Highway 1, North Palm Beach, Florida 33408 USA
(Address of principal executive offices)
(561) 625-1411
Registrant's telephone number
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15 (d)
of the Exchange Act 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 [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date is as follows:
Date Class Shares Outstanding
11/09/01 Common Stock 13,643,551
BRAVO! FOODS INTERNATIONAL CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial statements F-1
Consolidated balance sheets as of F-1
September 30, 2001 (unaudited) and December 31, 2000
Consolidated statements of operations F-3
(unaudited) for the six and nine months ended
September 30, 2001 and 2000
Consolidated statements of cash flows F-4
(unaudited) for the nine months ended
September 30, 2001 and 2000
Notes to consolidated financial statements (unaudited) F-5
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 2. Changes In Securities and Use of Proceeds 11
Item 6. Exhibits and reports on Form 8-K 11
SIGNATURES 11
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2000 2001
------------ -------------
<s> <c> <c>
Assets
Current assets:
Cash and cash equivalents $ 35,376 $ 15,106
Restricted cash (Note 1) 161,000 161,004
Accounts receivable 30,061 151,647
Note receivable 716,000 -
Other receivable 16,549 23,704
Advance to vendor 13,703 16,029
Inventories 192,574 95,802
Deferred interest 28,500 -
Prepaid expenses 26,153 27,919
------------------------------
Total current assets 1,219,916 491,211
Furniture and equipment, net 162,877 134,395
License rights, net 655,982 398,809
Deposits 10,000 10,000
------------------------------
Total assets $ 2,048,775 $ 1,034,414
==============================
Liabilities and Shareholders' Equity
Current liabilities:
Bank loan - Fujian Bank (Note 1) $ 142,557 $ 142,560
Current portion of note payable 202,743 187,743
Current portion of note payable to
Warner Brothers 335,000 343,750
Other payables 48,274 30,871
Accrued liabilities 695,243 1,255,053
------------------------------
Total current liabilities 1,423,817 1,959,977
Note payable to Warner Brothers, less
current portion 163,750 21,250
Dividends payable 154,342 263,140
------------------------------
Long-term liabilities 318,092 284,390
------------------------------
Total liabilities 1,741,909 2,244,367
------------------------------
Commitments and contingencies
F-1
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2000 2001
------------ -------------
<s> <c> <c>
Shareholders' Equity (Note 2):
Series A convertible preferred stock,
par value $0.001 per share, 500,000
shares authorized, no shares outstanding - -
Series B convertible, 9% cumulative,
and redeemable preferred stock, stated
value $1.00 per share, 1,260,000 shares
authorized, 107,440 and 107,440 shares
issued and outstanding, redeemable
at $107,440 107,440 107,440
Series C convertible, 8% cumulative and
redeemable preferred stock, stated value
$3.00 per share, no shares outstanding - -
Series D convertible, 6% cumulative and
redeemable preferred stock, stated value
$10.00 per share, 110,250 and 106,250
shares issued and outstanding 1,060,178 1,021,713
Series E convertible, 6% cumulative and
redeemable preferred stock, stated value
$2.50 per share, 330,000 shares issued
and converted into common stock, no
shares outstanding - -
Series F convertible and redeemable
preferred stock, stated value $10.00 per
share, 174,999 and 174,999 shares issued
and outstanding 1,616,302 1,616,302
Series G convertible, 8% cumulative and
redeemable preferred stock, stated value
$10.00 per share, 100,000 and 96,375
shares issued and outstanding 888,953 859,929
Common stock, par value $0.001 per share,
20,000,000 shares authorized, 13,095,414
and 13,578,551 shares issued and
outstanding 13,095 13,578
Stock Subscribed - 970,000
Additional paid-in capital 14,870,754 15,023,147
Accumulated deficit (18,249,856) (20,830,615)
Translation adjustment - 8,553
------------------------------
Total shareholders' equity 306,866 (1,209,953)
------------------------------
Total liabilities and shareholders' equity $ 2,048,775 $ 1,034,414
==============================
See accompanying notes to consolidated financial statements.
F-2
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
2000 2001 2000 2001
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<s> <c> <c> <c> <c>
Sales $ 57,716 $ 256,971 $ 57,716 $ 587,745
Cost of goods sold 10,208 23,444 10,208 166,875
--------------------------------------------------------------
Gross margin 47,508 233,527 47,508 420,870
Selling expense 61,890 25,117 151,890 172,069
General and administrative expense 845,311 665,332 2,342,003 2,682,476
--------------------------------------------------------------
Loss from operations (895,693) (456,922) (2,446,385) (2,433,675)
Other expense:
Interest expense, net (6,775) (1,447) (13,122) (30,219)
Loss on investment in Meilijian (82,476) - (202,305) -
Other expense, net (76,987) - (76,987) -
--------------------------------------------------------------
Loss before income taxes (1,025,931) (458,369) (2,738,799) (2,463,894)
Income tax provision - - - -
--------------------------------------------------------------
Net loss (1,025,931) (458,369) (2,738,799) (2,463,894)
Dividends accrued for Series B
preferred stock (5,458) (2,417) (39,266) (7,251)
Dividends accrued for Series C
preferred stock - - (883) -
Dividends accrued for Series D
preferred stock (16,350) (16,538) (548,455) (49,614)
Dividends accrued for Series F
preferred stock (22,500) - (444,255) -
Dividends accrued for Series G
preferred stock (13,125) (20,000) (159,292) (60,000)
--------------------------------------------------------------
Net loss applicable to common
shareholders $(1,083,364) $ (497,324) $(3,930,950) $(2,580,759)
==============================================================
Weighted average number of common
shares outstanding 12,929,935 13,578,551 11,703,512 13,195,048
==============================================================
Basic and diluted loss per share $ (0.08) $ (0.04) $ (0.34) $ (0.20)
==============================================================
Comprehensive loss and its components
consist of the following:
Net loss $(1,025,931) $ (458,369) $(2,738,799) $(2,463,894)
Foreign currency translation
adjustment 22 293 121 8,553
--------------------------------------------------------------
Comprehensive loss $(1,025,909) $ (458,076) $(2,738,678) $(2,455,341)
==============================================================
See accompanying notes to consolidated financial statements.
F-3
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Ended September 30,
-------------------------------
2000 2001
---- ----
(Unaudited) (Unaudited)
<s> <c> <c>
Cash flows from operating activities
Net loss $(2,738,799) $(2,463,894)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 199,145 290,779
Issuance of stock in exchange for services 118,486 77,320
Issuance of common stock for penalty expenses 37,500 -
Issuance of common stock for performance bonus 15,000 -
Investment loss - Meilijian 202,304 -
Amortization of deferred interest - 28,500
Increase (decrease) from changes in:
Restricted cash (86,000) -
Other receivable (37,591) 4,985
Prepaids expenses (76,994) (1,766)
Accounts receivable (8,696) (121,586)
Advance to vendors (81,201) (2,326)
Inventories (81,379) 96,772
Accrued liabilities 42,518 530,268
-----------------------------
Net cash used in operating activities (2,495,707) (1,560,948)
-----------------------------
Cash flows from investing activities
Purchase of equipment and machinery (58,497) (5,125)
Note receivable (209,654) 716,000
Purchase of licensing rights from WB (550,000) -
-----------------------------
Net cash used in investing activities (818,151) 710,875
-----------------------------
Cash flows from financing activities
Proceeds from stock subscription - 970,000
Proceeds from issuance of Preferred Series D 490,000 -
Proceeds from issuance of Preferred Series F 1,480,000 -
Proceeds from issuance of Preferred Series G 675,000 -
Proceeds from issuance of common stock 244,303 -
Borrowing from bank loan 76,089 -
Borrowings from note payable 500,000 -
Repayments of note payable (82,498) (148,750)
-----------------------------
Net cash provided by financing activities 3,382,894 821,250
-----------------------------
Effect of exchange rate changes on cash 122 8,553
-----------------------------
Net increase (decrease) in cash and cash equivalents 69,158 (20,270)
Cash and cash equivalents, beginning of period 16,854 35,376
-----------------------------
Cash and cash equivalents, end of period $ 86,012 $ 15,106
=============================
Cash paid during the period:
Interest $ 9,380 $ -
=============================
See accompanying notes to consolidated financial statements.
F-4
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Organization and Business
China Premium Food Corporation (the Company) was incorporated under the
laws of the State of Delaware on April 26, 1996. In March 2001, the
Company changed its name to Bravo! Foods International Corp.
The Company and its subsidiaries, Hangzhou Meilijian (Meilijian), China
Premium Food (Shanghai) Co. Ltd. and Bravo! Foods, Inc. were engaged in the
co-production, marketing and distribution of branded dairy and snack food
products in the People's Republic of China and the United States.
The Company purchased a 52% equity interest in Hangzhou Meilijian Dairy
Products Co., Ltd. (Meilijian) from American Flavors China, Inc. in 1998 in
exchange for consideration of approximately $2,000,000, including shares of
the Company's common stock valued at $1,531,685. On November 12, 2000, the
Company signed an agreement with the Chinese partner in Meilijian pursuant
to which the Company's 52% interest in Meilijian was sold to the Chinese
partner for cash consideration of $895,000. Of the $895,000, $179,000 was
received in November 2000 with the remaining $716,000 being received in
January 2001.
In December 1999, the Company obtained Chinese government approval for the
registration of China Premium Food Corp. (Shanghai) Co. Ltd., a wholly
owned subsidiary, in the Wai Gao Qiao "free trade zone" in Shanghai, China.
This subsidiary was formed to import, export and distribute food products
and market and distribute branded dairy products and snack foods on a
wholesale level in China. In December 1999, the Company formed Bravo!
Foods, Inc. in Delaware, a wholly owned subsidiary, to market and
distribute branded dairy products in the United States. Both of these
subsidiaries market and distribute branded milk products through supply
contracts or production with regional dairy processors in the US and China.
On August 14, 2001, the Company decided to eliminate its U.S. subsidiary to
streamline management and achieve greater operating efficiency. The elimination
of this subsidiary will be effective before December 31, 2001.
Note 1 - Basis of Presentation
The accompanying unaudited consolidated 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
Article 10 of Regulation S-X. All significant inter-company accounts and
transactions have been eliminated in consolidation. The consolidated
financial statements are presented in U.S. dollars. Accordingly, the
accompanying financial statements do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for fair
presentation have been included. Operating results for the three-month
period ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report for the year
ended December 31, 2000.
During 2000, the Company wired $161,000 to a Chinese commercial bank in
Shanghai as collateral to borrow RMB loans from the bank. With the
$161,000 of time deposit as collateral, the bank agreed to loan CPFC
Shanghai the maximum RMB amount not to exceed 90% of the value of
certificate of deposit. The bank loans bear interest at 6.435% per annum
and mature on September 11, 2001 for RMB 1,180,000 (equivalent of
US$142,560) at March 31, 2001. The proceeds of RMB loans from the bank can
be used only for working capital purposes. These loans are being renegotiated
to extend the maturity date.
F-5
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity
On January 2, 2001, the Company hired a new President and Chief Operating
Officer and entered into an employment agreement with him pursuant to which
the Company granted the individual 100,000 shares of its common stock and
options to purchase an additional 400,000 shares of common stock at a per
share price of $0.75. Accordingly, the Company recognized a non-cash
compensation expense of $75,000.
On March 6, 2001, a sophisticated and accredited investor deposited
$250,000 with the Company as consideration for 25,000 shares of Series H
convertible preferred stock to be issued. Through the period ended
September 30, 2001 the Company received an additional $720,000. The Series
H convertible preferred stock is priced at $10.00 per unit. The Series H
convertible preferred stock has a stated value of $10.00 per share and a
conversion feature of $0.50 per share. The Series H convertible preferred
stock will be issued pursuant to an exemption to registration provided by
Regulation D, Rule 506 and Section 4(2) of the 1933 Act. The gross
proceeds of $970,000 are part of a total offering of Series H convertible
preferred stock having aggregate gross proceeds of $1,280,000. As of
September 30, 2001 the Series H Preferred Stock had not been issued to the
investor.
On August 14, 2001 the Company granted to an employee, 232,000 options to
purchase common stock of the Company at the price of $0.35 per share, which
was $0.01 lower than the market price on that date. Accordingly, the
Company recognized a non-cash compensation expense of $2,320 in accordance
with APB No. 25.
On August 14, 2001 the Company granted to 4 employees, a total of 110,000
options to purchase common stock of the Company at the market price on that
date.
On August 14, 2001 the Company resolved to issue to the Board of Directors
a total of 250,000 options to purchase common stock of the Company at the
price of $0.60 per share, which was $0.24 higher than the market price on
that date. No compensation expense was recognized in accordance with Fin
No.44.
On September 30, 2001, 4000 Series D Convertible Preferred Shares and 3,265
Series G Convertible Preferred Shares were converted to 383,137 shares of
Common Stock.
Note 3 - Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill
and Other Intangible Assets (SFAS 142).
SFAS 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001. SFAS 141 also requires
that the Company recognize acquired intangible assets apart from goodwill
if the acquired intangible assets meet certain criteria. SFAS 141 applies
to all business combinations initiated after June 30, 2001 and for purchase
business combinations completed on or after July 1, 2001. It also requires,
upon adoption of SFAS 142, that the Company reclassify the carrying amounts
of intangible assets and goodwill based on the criteria in SFAS 141. The
adoption of SFAS 141 is not expected to have a material impact on the
consolidated financial statements.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets,
and cease amortization of intangible assets with an indefinite useful life.
An intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS 142. SFAS 142 is
required to be applied in fiscal years beginning after December 15, 2001 to
all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized. SFAS 142
requires the Company to reassess the useful lives of other intangible
assets within the first interim quarter after adoption of SFAS 142. The
implementation of SFAS 142 did not have a material effect on the
consolidated financial statements.
F-6
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001
RESULTS OF OPERATIONS
The Company grants production and marketing rights to regional dairies to
produce Looney Tunes(tm) flavored milk and generates revenue primarily through
the sale of "kits" to these dairies. The price of the "kits" consists of
an invoiced price for a fixed amount of flavor ingredients per kit used to
produce the flavored milk and a fee charged to the diaries for the
production, promotion and sales rights for the branded flavored milk. New
dairies participating in this program typically submit an initial order
that is larger than subsequent orders to create an inventory of flavor
ingredients sufficient to meet current production needs and a "pipeline"
reserve for production needs on a continuing basis. The creation of
"pipeline" reserves has the potential effect of increasing revenues in
those quarters in which new dairies initiate kit orders.
Financial Condition September 30, 2001
As of September 30, 2001, the Company had an accumulated deficit of
$20,830,615. As of September 30, 2001, the Company had cash on hand of
$15,106 and reported negative total shareholders' equity of $1,209,953. For
this same period of time, the Company had revenues of $587,745 and general
and administrative expenses of $2,682,476.
Revenues increased 38% by approximately $98,288 in the three months ended
September 30, 2001 compared to the three months ended June 30, 2001. The
Company's U.S. operation reported a 34.5% revenue increase of approximately
$73,500, while the China operation revenues increased 56% by $24,788 for
this later period. The increased revenues of the China operation resulted
from the Company's implementation of the Looney Tunes(tm) branded milk "kit"
business model in lieu of a direct production based business model.
General and administrative expenses decreased 16% by approximately $122,558
in the three months ended September 30, 2001 compared to the three months
ended June 30, 2001. The decrease in general and administrative expenses
from prior periods is a result of the implementation of a new business
model by the Company's wholly owned subsidiary, China Premium Food Corp.
(Shanghai) Co., Ltd., in moving out of the production business to the sale
of "kits" model.
After net interest expense of $30,219 and selling expenses of $172,069, the
Company had a net loss of $2,463,894.
7
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001
(Continued)
Nine Months Ended September 30, 2001, Compared to Nine Months Ended
September 30, 2000
The Company generated revenue of $587,745 for the nine months ended
September 30, 2001 compared to $57,716 for the same period of 2000. The
revenue consisted of two parts: $484,500 was generated in the Company's US
operation and $103,245 was generated in the China operation. The overall
gross profit ratio was approximately 71.6%.
General and administrative expenses increased by $340,473 to $2,682,476 for
the nine months ended September 30, 2001, representing an increase of
approximately 12.7%, compared to $2,342,003 for the same period of 2000.
This increase reflects the costs associated with the continued
establishment and funding the daily operations of new businesses in China
and the United States.
The Company's net loss decreased approximately 10% to $2,463,894 in 2001
from $2,738,799 in 2000. The Company reported a loss per share of $0.34 in
2000 and $0.20 in 2001. The decrease in the loss per share was due to the
decrease in the Company's net loss during this period.
Accrued and paid dividends decreased approximately 90% to $116,865 in 2001
from $1,192,151 in 2000. This decrease was the result of deemed dividends
associated with the beneficial conversion features of three classes of
convertible preferred stock issued in the period ended September 30, 2000,
and the lack of the issuance of convertible preferred stock in the period
ended September 30, 2001.
As of September 30, 2001 there were 13,578,551 shares of common stock
outstanding compared with 12,929,935 shares of common stock outstanding as
of September 30, 2000. Due to the timing of the issuance of new shares,
the weighted average number of shares of common stock outstanding in 2000
was 11,703,512 and 13,195,048 in 2001. The $0.20 loss per share in 2001
decreased by approximately 41% compared with $0.34 loss per share in 2000.
Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000
The Company generated revenue of $256,971 for the three months ended
September 30, 2001 compared to $57,716 for the same period of 2000: during
the 2001 period, $213,000 was generated in the US operations and $43,971
was generated in the China operation. The consolidated gross profit ratio
was approximately 91%.
General and administrative expenses decreased by approximately 21% to
$665,332 in 2001 from $845,311 in 2000. This decrease reflects the reduced
costs associated with the funding of the day to day operations of the new
business model in China from the costs of operating a production business
model in 2000 for the same period.
The Company's net loss decreased approximately 55% to $458,369 in 2001 from
$1,025,931 in 2000. The Company reported a loss per share of $0.08 in 2000
and $0.04 in 2001. The 50% decrease in the loss per share was due to the
decrease in the net loss and the increase in the number of shares of common
stock outstanding as of September 30, 2001.
8
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001
(Continued)
Accrued and paid dividends decreased approximately 32% to $38,955 in 2001
from $57,433 in 2000. This decrease was the result of deemed dividends
associated with the beneficial conversion features of three classes of
convertible preferred stock issued in the three month period ended
September 30, 2000, and the lack of the issuance of convertible preferred
stock in the three month period ended September 30, 2001.
As of September 30, 2001 there were 13,578,551 weighted average shares of
common stock outstanding compared with 12,929,935 weighted average shares
of common stock outstanding for the same period ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Company reported that net cash used in
operating activities was $1,560,948, net cash used in investing activities
was $710,875, and net cash provided by financing activities was $821,250.
As of September 30, 2000, net cash used in operating activities was
$2,495,707, net cash used in investing activities was $818,151, and net
cash provided by financing activities was $3,382,894.
Net cash used in operating activities decreased by $934,723 to $1,560,448
for the nine months ended September 30, 2001, representing a decrease of
approximately 37.4%. The decrease in negative cash flow in operating
activities reflects the increase in accrued liabilities and other noncash
expense.
Net cash provided by investing activities increased by $1,592,026 to $710,875,
for the nine months ended September 30, 2001, representing a 219% increase,
compared to $818,151 net cash used for the same period of 2000. The increase
was due in part to the Company's receipt, in 2001, of the balance of proceeds
from the sale of its 52% equity interest in Meilijian.
Net cash provided by financing activities decreased by $2,561,644 to
$821,250 for the nine months ended September 30, 2001, representing a 75.7%
decrease, compared to $3,382,894 for the same period of 2000. The decrease
was due mainly to the decrease in fund raising.
Going forward, the Company's primary requirements for cash consist of (1)
the continued implementation of the new business model in China, the United
States and on an international basis; (2) general overhead expenses for
personnel to support the new business model activities; and (3) payments of
guaranteed royalty payments to Warner Bros. under existing licensing
agreements. The Company estimates that its needs for cash from financing
will continue until early 2002, when cash supplied by then current
operating activities will enable the Company to meet the anticipated cash
requirements for the 2002 fiscal year.
Through the three months ended September 30, 2001, the Company received
$420,000 of a $1,280,000 investment in 42,000 shares of convertible
preferred stock to be issued. The Company has received $85,000 in October
2001 and a commitment for an additional $225,000 in the period ending
December 31, 2001.
The Company currently has monthly working capital needs of approximately
$200,000. The Company anticipates 2002 revenues to satisfy those working
capital needs.
9
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 (Continued)
Debt Structure
During the third quarter of 2001, the Company paid $108,750 to Warner Bros.
A promissory note of $187,743 payable to International Paper currently is
in arrears. The Company will raise the necessary funds to pay off this
note or to extend this note again, if possible. Regarding the note payable
to Warner Brothers, the Company believes that the cash flow generated
through its U.S. operation will be sufficient to satisfy its obligations to
Warner Bros. during 2002.
EFFECTS OF INFLATION
The Company believes that inflation has not had a material effect on its
net sales and results of operations.
EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES
The Company's operating subsidiary, China Premium Food Corporation
(Shanghai), is located in China. It buys and sells products in China using
Chinese Renminbi as the functional currency. Based on Chinese government
regulation, all foreign currencies under the category of current account
are allowed to be freely exchanged with hard currencies. During the past
two years of operation, there were no significant changes in exchange
rates. However, there is no assurance that there will be no significant
change in exchange rates in the near future.
10
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On January 2, 2001, an employment agreement with a new President and Chief
Operating Officer became effective pursuant to which the Company granted
100,000 shares of its common stock and options to purchase an additional
400,000 shares of common stock at a per share price of $0.75.
On March 6, 2001, a sophisticated and accredited investor deposited
$250,000 with the Company as consideration for 25,000 shares of Series H
convertible preferred stock to be issued. Through the period ended June
30, 2001 the Company received an additional $550,000. The Series H
convertible preferred stock is priced at $10.00 per unit. The Series H
convertible preferred stock has a stated value of $10.00 per share and a
conversion feature of $0.50 per share. The Series H convertible preferred
stock will be issued pursuant to an exemption to registration provided by
Regulation D, Rule 506 and Section 4(2) of the 1933 Act. The gross
proceeds of $800,000 were part of a total offering of Series H convertible
preferred stock having aggregate gross proceeds of $1,280,000. As of June
30, 2001 the Series H Preferred Stock had not been issued to the investor.
On August 14, 2001, the Company granted to an employee, 232,000 options to
purchase common stock of the Company at the price of $0.35 per share.
These options are for five years and are exercisable immediately. These
options were issued as compensation for services rendered in the
development of the business of Company's U.S. subsidiary.
On August 14, 2001, the Company granted to 4 employees, a total of 110,000
options to purchase common stock of the Company at the market price on that
date ($0.36 per share). These options are for five years and are
exercisable immediately. These options were issued as incentive options
for future services.
On August 14, 2001, the Company voted to issue to the Board of Directors
25,000 options each, for a total of 250,000 options, to purchase common
stock of the Company at the exercise price of $0.60 per share. These
options are for five years and are exercisable immediately. These options
were issued as incentive options for future services.
On September 30, 2001, 4000 Series D Convertible Preferred Shares and 3,265
Series G Convertible Preferred Shares were converted to 383,137 shares of
Common Stock. These shares were issued to two accredited and sophisticated
investors pursuant to an exemption from registration provided by Regulation
D, Rule 506 and Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
Exhibits - Required by Item 601 of Regulation S-B.
None
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf of the
undersigned, duly authorized.
BRAVO! FOODS INTERNATIONAL CORP.
(Registrant)
Date: November 13, 2001
/s/ Roy G. Warren
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Roy G. Warren, Chief Executive Officer