UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from _____________
to _______________.
Commission file number: 0-11734
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CHINA FOOD AND BEVERAGE COMPANY
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(Name of Small Business Issuer in Its Charter)
Nevada 87-0548148
- ------------------------------- --------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
82-66 Austin Street, Kew Gardens, New York 11415
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(Address of Principal Executive Offices) (Zip Code)
(877) 667-9377
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(Issuer's Telephone Number, Including Area Code)
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 Registrant's common stock ($0.001 par value)
as of the quarter ended March 31, 2002 was 9,395,788.
TABLE OF CONTENTS
PART I
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Page
ITEM 1. FINANCIAL STATEMENTS.............................................3 - 13
ITEM 2. PLAN OF OPERATION................................................ 14
PART II
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ITEM 1. LEGAL PROCEEDINGS................................................ 14
ITEM 2. CHANGES IN SECURITIES............................................ 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................. 14
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS......................... 14
ITEM 5. OTHER............................................................ 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 14
SIGNATURES....................................................... 15
2
PART I
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ITEM 1. FINANCIAL STATEMENTS
Unless otherwise indicated, the term "Company" refers to China Food and
Beverage Company and its subsidiaries and predecessors. The accompanying
consolidated unaudited condensed financial statements have been prepared by
management in accordance with the instructions in Form 10-QSB and, therefore, so
not include all information and footnotes required by generally accepted
accounting principle and should, therefore, be read in conjunction with
Company's Annual Report to Shareholders on Form 10-KSB for the fiscal year ended
December 31, 2001. These statements do include all the normal recurring
adjustments which the Company believes is necessary and affords a fair
presentation. The interim results are not necessarily indicative of the results
for the full year ending December 31, 2002. Accordingly, consolidated unaudited
interim financial statements, including a balance sheet for the Company as of
the fiscal quarter ended March 31, 2002, and, statements of operations and
statements of cash flows for the interim period up to the date of such balance
sheet and the comparable period of the preceding fiscal year are incorporated
herein by this reference.
3
CHINA FOOD AND BEVERAGE COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 and December 31, 2001
4
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
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March 31, December 31,
2002 2001
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(Unaudited)
CURRENT ASSETS
Cash $ 12,593 $ 21,133
Account receivable - related party -- 1,100
Exchange credits 238,786 438,816
Prepaid salaries 112,500 --
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Total Current Assets 363,879 461,049
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PROPERTY AND FIXED ASSETS
Equipment 2,149 2,149
Accumulated depreciation (1,254) (1,146)
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Total Fixed Assets 895 1,003
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TOTAL ASSETS $ 364,774 $ 462,052
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 72,303 $ 70,247
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Total Current Liabilities 72,303 70,247
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Total Liabilities 72,303 70,247
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STOCKHOLDERS' EQUITY
Common stock; 100,000,000 shares
at $0.001 par value,9,395,788 shares
issued and outstanding 9,396 9,396
Additional paid-in capital 2,110,779 2,079,464
Retained earnings accumulated
prior to the development stage 633,605 633,605
Deficit accumulated during the development stage (2,461,309) (2,330,660)
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Total Stockholders' Equity 292,471 391,805
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 364,774 $ 462,052
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
5
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
----------------------------
2002 2001 2002
------------ ------------ ------------
NET SALES $ -- $ -- $ --
COSTS AND EXPENSES
General and administrative 130,785 70,422 715,997
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Total Costs and Expenses 130,785 70,422 715,997
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LOSS BEFORE OTHER EXPENSE (130,785) (70,422) (715,997)
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OTHER INCOME (EXPENSE)
Refund tax penalties -- -- 16,237
Interest expense -- -- (15,763)
Interest income 136 1,868 7,365
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Total Other Income (Expense) 136 1,868 7,839
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LOSS BEFORE TAX, EXTRAORDINARY
ITEM AND DISCONTINUED OPERATIONS (130,649) (68,554) (708,158)
INCOME TAX EXPENSE -- -- --
------------ ------------ ------------
LOSS BEFORE DISCONTINUED OPERATIONS (130,649) (68,554) (708,158)
LOSS ON DISCONTINUED OPERATIONS -- -- (1,990,314)
------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM (130,649) (68,554) (2,698,472)
GAIN ON DISPOSITION OF DEBT -- -- 237,163
------------ ------------ ------------
MINORITY INTEREST -- -- --
------------ ------------ ------------
NET LOSS $ (130,649) $ (68,554) $ (2,461,309)
============ ============ ============
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,395,788 10,966,019
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
6
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Additional Other Retained
Common Stock Paid-In Comprehensive Earnings
Shares Amount Capital Income (Deficit)
----------- ----------- ----------- ------------- -----------
Balance, January 1, 2000 5,546,505 $ 5,547 $ 872,070 $ 8,421 $ 633,605
Common stock issued for cash
at $1.00 per share 50,000 50 49,950 -- --
Common stock issued for cash
at $1.00 per share 200,000 200 199,800 -- --
Common stock issued for cash
at $0.50 per share 200,000 200 99,800 -- --
Common stock issued for cash
at $0.25 per share 400,000 400 99,600 -- --
Common stock issued for cash
at $0.25 per share 800,000 800 199,200 -- --
Common stock issued for cash
at $0.25 per share 800,000 800 199,200 -- --
Common stock issued for cash
at $0.10 per share 2,000,000 2,000 198,000 -- --
Common stock issued for cash
at $0.10 per share 1,000,000 1,000 99,000 -- --
Related party forgiveness of interest -- -- 11,244 -- --
Change in currency translation -- -- -- (8,421) --
Net loss for the year ended
December 31, 2000 -- -- -- -- (2,039,898)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 10,996,505 10,997 2,027,864 -- (1,406,293)
Canceled shares (717) (1) -- -- --
Common stock issued for cash
at $0.10 per share 500,000 500 49,500 -- --
Canceled shares (2,100,000) (2,100) 2,100 -- --
Net loss for the year ended
December 31, 2001 -- -- -- -- (290,762)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 9,395,788 $ 9,396 $ 2,079,464 -- $(1,697,055)
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The accompanying notes are an integral part
of these consolidated financial statements.
7
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Additional Other Retained
Common Stock Paid-In Comprehensive Earnings
Shares Amount Capital Income (Deficit)
----------- ----------- ----------- ------------- -----------
Balance, December 31, 2001 9,395,788 $ 9,396 $ 2,079,464 -- $(1,697,055)
Fair value of warrants granted
(unaudited) -- -- 31,315 -- --
Net loss for the three months ended
March 31, 2002 (unaudited) -- -- -- -- (130,649)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2002 (unaudited) 9,395,788 $ 9,396 $ 2,110,779 $ -- $(1,827,704)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
8
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
2002 2001 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (130,649) $ (68,554) $(2,461,309)
Adjustments to reconcile net (loss) to net cash
used by operating activities:
Depreciation and amortization 108 108 1,254
Discontinued operations -- -- 1,990,314
Gain on settlement of debt -- -- (237,163)
Fair value warrants granted 31,315 -- 31,315
Changes in assets and liabilities:
Decrease in accounts receivable - related party 1,100 -- --
Decrease in exchange credits 30 -- 788
Increase (decrease) in accounts payable and
accrued expenses 2,056 (35,960) (504,533)
Increase in prepaid expenses (112,500) (112,500) (112,500)
Decrease in related party payable -- -- (4,077)
Increase in customer prepayments -- (1,950) --
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Net Cash Used Provided by Operating Activities (208,540) (218,856) (1,295,911)
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CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
Proceeds from sale of exchange credits 200,000 -- 200,000
Increase in note receivable -- (80,000) (80,000)
Receipt of payment on note receivable -- -- 80,000
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Net Cash Provided (Used) by Investing Activities 200,000 (80,000) 200,000
CASH FLOWS FROM FINANCING ACTIVITIES
Loss of cash from discontinued operations -- -- (424,757)
Common stock issued for cash -- -- 1,200,000
Proceeds from issuance of note payable -- -- 100,000
Payments on notes payable -- -- (323,011)
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Net Cash Provided by Financing Activities -- -- 552,232
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NET DECREASE IN CASH (8,540) (298,856) (543,679)
CASH AT BEGINNING OF PERIOD 21,133 762,855 556,272
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CASH AT END OF PERIOD $ 12,593 $ 463,999 $ 12,593
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
Cash Paid For:
Income taxes $ -- $ -- $ --
Interest $ -- $ -- $ 3,000
The accompanying notes are an integral part
of these consolidated financial statements.
9
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2002 and December 31, 2001
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations an cash flows at March 31, 2002 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 2001 audited consolidated financial statements. The results of
operations for periods ended March 31, 2002 and 2001 are not
necessarily indicative of the operating results for the full
years.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to seek a merger with an existing,
operating company. Until that time, the stockholders have
committed to covering the operating costs of the Company.
NOTE 3 - NEGOTIATIONS WITH TRITRADEX, INC.
The Company is in negotiations to acquire Tritradex, Inc. (a New
York corporation), the parent company of Shanghai Tritradex
Machinery, Inc., a manufacturer and distributor of gasoline
dispensing pumps in the Peoples' Republic of China. As part of the
negotiations, the Company has advanced $80,000 to Tritradex as an
interest free loan. In September 2001, Tritradex paid back the
$80,000. Although the loan was paid in full, negotiations for the
acquisition of Tritradex are ongoing.
The Company's Board of Directors is committed to the acquisition
of Tritradex and in a special board meeting held on March 5, 2002
authorized the Company to execute a share transfer agreement with
Tritradex. As of the date of this report the agreement has not
been finalized.
NOTE 4 - DISSOLUTION OF SUBSIDIARY
In September 2001, the Company's wholly owned subsidiary, Victoria
Beverage, was dissolved. The only asset of the subsidiary was
6,000,000 shares of Gourmet's Choice Coffee Company. These shares
were transferred to the Company. The Company will carry the shares
at Victoria's cost of $0.00. Gourmet's Choice is a related entity.
10
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2002 and December 31, 2001
NOTE 5 - COMMON STOCK WARRANT
During the quarter ended March 31, 2002, the Company issued a
warrant to acquire 550,000 shares of common stock. This warrant
was issued at an exercise price of $0.06. The warrant has a
maturity of five years. The warrant was issued to a non-employee
of the Company. This is the only warrant outstanding at March 31,
2002.
The Company applies SFAS No. 123 for warrants issued, which
requires the Company to estimate the fair value of each warrant
issued at the grant date by using the Black-Scholes pricing model
with the following assumptions:
Risk-free interest rate 3.50%
Expected life 3 Years
Expected volatility 1.71
Dividend yield 0.0
As a result of applying SFAS No. 123, the Company had an expense
of $31,315 during the quarter ended March 31, 2002. The expense is
included in the general and administrative amount in the statement
of operations.
11
ITEM 2. PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Company financial statements and notes thereto included elsewhere in
this Form 10-QSB. Except for the historical information contained herein, the
discussion in this Form 10-QSB contains certain forward looking statements that
involve risks and uncertainties, such as statements of the Company plans,
objectives, expectations and intentions. The cautionary statements made in this
Form 10-QSB should be read as being applicable to all related forward statements
wherever they appear in this Form 10-QSB. The Company actual results could
differ materially from those discussed here.
Other than what has been disclosed herein and in the year end report
for year 2001, filed on March 27, 2002, the Company is not aware of any
immediate circumstances or trends which would have a negative impact upon future
sales or earnings. There have been no material fluctuations in the standard
seasonal variations of the Company business. The accompanying financial
statements include all adjustments, which in the opinion of management are
necessary in order to make the financial statements not misleading.
The Company
The Company presently occupies office space, free of charge at 82-66
Austin Street, Kew Gardens, New York 11415.
Business of Issuer
Since the disposition of Anhui Brewery (Please see year ended 2001
10-KSB, Item 1. Management's Discussion and Analysis, filed on March 27, 2002),
the Company will continue to seek to acquire businesses both in China and other
countries. The Company intends to locate its target investment opportunities
through contacts which management has in China and Southeast Asia. The Company
has no full or part time employees, aside from its officers and directors. If
the Company requires additional personnel to carry out its business objectives,
it will retain outside consultants. In the past, the Company has been successful
in retaining consultants through the issuance of its Common Stock and the
Company intends to continue this practice in an attempt to avoid expending
valuable cash flows.
12
On March 4, 2001, the Company entered into an investment agreement with
Tritradex, Inc., a US based parent corporation of Shanghai Tritradex Machinery,
Inc., a manufacturer and distributor of gasoline assemblies in the People's
Republic of China, under license from the Wayne Division of Houston-based
Dresser, Inc.
Tritradex was incorporated in the state of New York in 1994 and
established a Sino-foreign venture in Pudong, Shanghai, the People's Republic of
China, named Shanghai Tritradex Machinery, Inc. ("STM"). The main business of
STM is designing manufacturing and selling electronic fuel dispensing pumps and
related products for use in gasoline stations in China. In 1995 STM entered into
a license and technical agreement with Wayne Division of Dresser Industries,
Inc. The agreement allowed STM to manufacture, assemble, sell and service
Wayne's products in China.
Wayne is the technological leader in the manufacture and supply of
retail petrol fuel dispensers; dispenser control systems, credit/debit card
processing terminals and point-of-sale systems for petroleum markets worldwide.
They are also the industry leader in developing new technologies. Over 75
countries use their products.
On September 17, 2001, Tridradex, Inc. re-paid an $80,000 investment
which the Company had previously proffered on March 4, 2001. The Company is
continuing to explore the possibility of further investment or a business
combination with Tritradex, Inc.
Since the Company does not have significant liquid assets, the Company
intends to acquire business opportunities through the issuance of its equity
securities. This will likely result in future dilution of the ownership interest
enjoyed by the Company's current shareholders. The Company has had some past
experience in acquiring subsidiaries in this manner. However, the Company can
provide no assurance that it will be able to continue such acquisitions in the
future. It is also likely that any future acquisitions by the Company will
require the Company to make capital contributions to the acquired businesses.
Capital Resources and Liquidity
During the quarter ended March 31, 2002, there were no issuances of the
Company's common stock. However, during the quarter ended March 31, 2002, the
Company issued a warrant to a non-employee of the Company to acquire 550,000
shares of common stock. This warrant was issued at an exercise price of $0.06.
The warrant has a maturity of five years.
Results of Operations
For the three month period ended March 31, 2002, the Company sustained
a loss of ($130,649), or ($0.01) per share (basic and diluted) on revenue of
$0.00. The loss in the first quarter of 2002 can be contributed to the fact the
Company had no revenue producing operations. For the comparable period of 2001,
the Company sustained a loss of ($68,554), or ($0.02) per share on revenue of
$0.00.
13
PART II
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ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 2002, there were no changes in
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended March 31, 2002, there were no defaults upon
senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended March 31, 2002, there were no matters
submitted to a vote of the Company's shareholders.
ITEM 5. OTHER
During the quarter ended March 31, 2002, there were no material events
to report that have not been previously disclosed herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
During the quarter ended March 31, 2002, there were no reports on form
8-K.
14
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized this 14th day of May, 2002.
CHINA FOOD AND BEVERAGE
/s/ James Tilton
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James Tilton, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
- ----------------- ---------------------------------- ------------
/s/James Tilton Chief Executive Officer, President, May 14, 2002
- ----------------- Treasurer and Director
James Tilton
/s/Jane Zheng Secretary and Director May 14, 2002
- -----------------
Jane Zheng
Director May 14, 2002
- -----------------
Li, Lin Hu
15