UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 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
-------------------------------
(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.)
710 W. 24th St., Kansas City, MO 64108
-----------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(877) 667-9377
-------------
(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 September 30, 2002 was 9,395,788.
1
TABLE OF CONTENTS
PART I
Page
ITEM 1. FINANCIAL STATEMENTS............................................. 3
ITEM 2. PLAN OF OPERATION................................................ 10
PART II
ITEM 1. LEGAL PROCEEDINGS................................................ 12
ITEM 2. CHANGES IN SECURITIES............................................ 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................. 12
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS......................... 12
ITEM 5. OTHER............................................................ 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 12
SIGNATURES....................................................... 13
2
PART I
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 September 30, 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 attached hereto
as Pages F-1 through F-6 and are incorporated herein by this reference.
3
CHINA FOOD AND BEVERAGE COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and December 31, 2001
4
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
September 30, December 31,
2002 2001
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash $ 13,242 $ 21,133
Note receivable-related party 21,003 1,100
Exchange credits 30,809 438,816
Prepaid expenses 164,344 --
----------- -----------
Total Current Assets 229,398 461,049
----------- -----------
PROPERTY AND FIXED ASSETS
Equipment 2,149 2,149
Accumulated depreciation (1,468) (1,146)
----------- -----------
Total Fixed Assets 681 1,003
----------- -----------
OTHER ASSETS
Prepaid salaries, long-term portion 37,500 --
----------- -----------
TOTAL ASSETS $ 267,579 $ 462,052
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 94,666 $ 70,247
----------- -----------
Total Current Liabilities 94,666 70,247
----------- -----------
Total Liabilities 94,666 70,247
----------- -----------
STOCKHOLDERS' EQUITY
Common stock; 100,000,000 shares authorized
of $0.001 par value, 9,395,788 shares issued
and outstanding, respectively 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 (2,580,867) (2,330,660)
----------- -----------
Total Stockholders' Equity 172,913 391,805
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267,579 $ 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 Nine Months Ended For the Three Months Ended 2000 Through
September 30, September 30, September 30,
2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- -----------
NET SALES $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES
General and administrative 251,076 212,242 50,160 40,952 836,288
----------- ----------- ----------- ----------- -----------
Total Costs and Expenses 251,076 212,242 50,160 40,952 836,288
----------- ----------- ----------- ----------- -----------
LOSS BEFORE OTHER EXPENSE (251,076) (212,242) (50,160) (40,952) (836,288)
----------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Refund tax penalties -- -- -- -- 16,237
Interest expense (805) -- -- --
(16,568)
Interest income 1,674 3,337 1,424 796 8,903
----------- ----------- ----------- ----------- -----------
Total Other Income (Expense) 869 3,337 1,424 796 8,572
----------- ----------- ----------- ----------- -----------
LOSS BEFORE TAX, EXTRAORDINARY
ITEM, AND DISCONTINUED
OPERATIONS (250,207) (208,905) (48,736) (40,156) (827,716)
INCOME TAX EXPENSE -- -- -- -- --
----------- ----------- ----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (250,207) (208,905) (48,736) (40,156) (827,716)
GAIN FROM FORGIVENESS OF DEBT -- -- -- -- 237,163
----------- ----------- ----------- ----------- -----------
LOSS BEFORE DISCONTINUED
OPERATIONS (250,207) (208,905) (48,736) (40,156) (590,553)
LOSS ON DISCONTINUED
OPERATIONS -- -- -- -- (1,990,314)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (250,207) $ (208,905) $ (48,736) $ (40,156) $(2,580,867)
=========== =========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.03) $ (0.02) $ (0.01) $ (0.00)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,395,788 9,182,905 9,395,788 9,182,905
=========== =========== =========== ===========
6
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement 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)
Fair value of warrants granted
(unaudited) -- -- 31,315 -- --
Net loss for the nine months ended
September 30, 2002 (unaudited) -- -- -- -- (250,207)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 (unaudited) 9,395,788 $ 9,396 $ 2,110,779 $ -- $(1,947,262)
-========== =========== =========== =========== ===========
7
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Nine Months Ended 2000 Through
September 30 September 30,
2002 2001 2002
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (250,207) $ (208,905) $(2,580,867)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 322 321 1,468
Discontinued operations -- -- 1,990,314
Gain on settlement of debt -- -- (237,163)
Fair value of warrants granted 31,315 -- 31,315
Changes in assets and liabilities:
Increase in accounts receivable-related party (19,903) (1,100) (21,003)
Decrease in exchange credits 8,027 -- 8,785
Increase (decrease) in accounts payable and accrued
expenses 24,419 (74,203) (482,170)
Increase in prepaid expenses (201,844) (37,500) (201,844)
Decrease in related party payable -- -- (4,077)
Increase in customer prepayments -- (1,950) --
----------- ----------- -----------
Net Cash Used by Operating Activities (407,871) (323,337) (1,495,242)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
Proceeds from sale of exchange credits 399,980 -- 399,980
Increase in note receivable -- -- (80,000)
Receipt of payment on note receivable -- -- 80,000
----------- ----------- -----------
Net Cash Provided by Investing Activities 399,980 -- 399,980
CASH FLOWS FROM FINANCING ACTIVITIES
Loss of cash from discontinued operations -- -- (424,757)
Common stock issued for cash -- 50,000 1,200,000
Proceeds from issuance of note payable -- -- 100,000
Payments on notes payable -- -- (323,011)
----------- ----------- -----------
Net Cash Provided by Financing Activities -- 50,000 552,232
NET DECREASE IN CASH (7,891) (273,337) (543,030)
CASH AT BEGINNING OF PERIOD 21,133 762,855 556,272
CASH AT END OF PERIOD $ 13,242 $ 489,518 $ 13,242
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF
CASH FLOW ACTIVITIES:
Cash Paid For:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
8
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 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 September 30, 2002 and for all periods presented have been
made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America 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 September 30, 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 accounting
principles generally accepted in the United States of America
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 - RELATED PARTY TRANSACTION - SALE OF BARTER EXCHANGE CREDITS
During the first and second quarters of 2002 the Company sold 399,980
of its barter exchange credits for $399,980. These credits were
purchased by a major shareholder of the Company.
9
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 710 W.
24th St., Kansas City, MO 64108.
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.
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 September 30, 2002, there were no issuances of
the Company's common stock.
10
Results of Operations
- ---------------------
For the three month period ended September 30, 2002, the Company
sustained a loss of ($250,207), or ($0.03) per share (basic and diluted) on
revenue of $0.00. The loss in the third 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 ($208,905), or ($0.02) per share
on revenue of $0.00. The stockholder's equity for the quarter ended September
30, 2002 was $267,579.
Controls and Procedures
- -----------------------
Within 90 days prior to the date of filing of this report, we carried
out an evaluation, under the supervision and with the participation of our
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective in causing material information to be recorded,
processed, summarized, and reported by our management on a timely basis and to
ensure that the quality and timeliness of our public disclosures complies with
SEC disclosure obligations. There were no significant changes in our internal
controls or in other factors that could significantly affect these internal
controls after the date of our most recent evaluation.
11
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended September 30, 2002, there were no changes in
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended September 30, 2002, there were no defaults
upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 2002, there were no submission
of matters to a vote of security holders.
ITEM 5. OTHER
During the quarter ended September 30, 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 September 30, 2002, there were no reports on
form 8-K.
Exhibit 99.1 - Certification by James Tilton pursuant to Filed herewith
Sarbanes-Oxley Act of 2002
12
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 November, 2002.
CHINA FOOD AND BEVERAGE
/s/ James Tilton
----------------
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, November 14, 2002
- ---------------- Treasurer and Director
James Tilton
/s/Jane Zheng Secretary and Director November 14, 2002
- -----------------
Jane Zheng
/s/Gordon Wilson Director November 14, 2002
- -----------------
Gordon Wilson
13
CERTIFICATION
I, James A. Tilton, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of China Food
and Beverage Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-4 and 15d-14) for the registrant and we have: a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function): a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ James A. Tilton
- ----------------------------
James A. Tilton,
Chief Executive Officer
Chief Financial Officer
14