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, 2003.
[ ] 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
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
710 W. 24th St., Kansas City, MO 64108
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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, 2003 was 9,395,788.
1
TABLE OF CONTENTS
PART I
Page
ITEM 1. FINANCIAL STATEMENTS............................................. F-1
ITEM 2. PLAN OF OPERATION................................................ 4
PART II
ITEM 1. LEGAL PROCEEDINGS................................................ 5
ITEM 2. CHANGES IN SECURITIES............................................ 5
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................. 5
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS......................... 5
ITEM 5. OTHER............................................................ 5
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 5
SIGNATURES....................................................... 6
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, 2002. 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, 2003. Accordingly, consolidated unaudited
interim financial statements, including a balance sheet for the Company as of
the fiscal quarter ended March 31, 2003, 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 included as
Pages F-1 through F-6 and are incorporated herein by this reference.
3
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2003 and December 31, 2002
F-1
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
2003 2002
(Unaudited)
----------- -----------
CURRENT ASSETS
Cash $ 10,155 $ 3,268
Exchange credits 10,259 19,819
Accounts receivable - related party 22,203 21,602
Prepaid expenses 133,057 172,441
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Total Current Assets 175,674 217,130
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PROPERTY AND FIXED ASSETS
Equipment 2,149 2,149
Accumulated depreciation (1,683) (1,576)
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Total Fixed Assets 466 573
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TOTAL ASSETS $ 176,140 $ 217,703
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 67,334 $ 66,879
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Total Current Liabilities 67,334 66,879
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Total Liabilities 67,334 66,879
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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 2,110,779
Retained earnings accumulated prior to the
development stage 633,605 633,605
Deficit accumulated during the development stage (2,644,974) (2,602,956)
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Total Stockholders' Equity 108,806 150,824
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 176,140 $ 217,703
=========== ===========
The accompanying notes are an integral part of these
financial statements.
F-2
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
- --------------------------------------------------------------------------------
2003 2002 2003
----------- ----------- -----------
NET SALES -- $ -- --
COSTS AND EXPENSES
General and administrative 43,088 130,785 902,337
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Total Costs and Expenses 43,088 130,785 902,337
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LOSS BEFORE OTHER EXPENSE (43,088) (130,785) (902,337)
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OTHER INCOME (EXPENSE)
Refund tax penalties -- -- 16,237
Interest expense -- -- (16,296)
Interest income 1,070 136 10,573
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Total Other Income (Expense) 1,070 136 10,514
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LOSS BEFORE TAX, EXTRAORDINARY
ITEM AND DISCONTINUED OPERATIONS (42,018) (130,649) (891,823)
INCOME TAX EXPENSE -- -- --
----------- ----------- -----------
LOSS BEFORE DISCONTINUED OPERATIONS (42,108) (130,649) (891,823)
LOSS ON DISCONTINUED OPERATIONS -- -- (1,990,314)
----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (42,108) (130,649) (2,882,137)
GAIN ON DISPOSITION OF DEBT -- -- 237,163
----------- ----------- -----------
NET LOSS $ (42,108) $ (130,649) $(2,644,974)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.00) $ (0.01)
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,395,788 9,395,788
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The accompanying notes are an integral part of these
financial statements.
F-3
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Statements of Stockholders' Equity
Common Stock Additional Other
-------------------------- Paid-In Comprehensive Retained
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)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these
financial statements.
F-4
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
Common Stoc Additional Other Retained
------------------------- 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 -- -- 31,315 -- --
Net loss for the year ended
December 31, 2002 -- -- -- -- (272,296)
----------- ----------- ----------- ---------------- -----------
Balance, December 31, 2002 9,395,788 9,396 2,110,779 -- (1,969,351)
Net loss for the three months
ended March 31, 2003 (unaudited) -- -- -- -- (42,018)
----------- ----------- ----------- ---------------- -----------
Balance, March 31, 2003 (unaudited) 9,395,788 $ 9,396 $ 2,110,779 $ -- $(2,011,369)
=========== =========== =========== ================ ===========
Retained earnings accumulated prior to the development stage $633,605
Deficit accumulated during the development stage (2,644,974)
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$ 2,011,369
The accompanying notes are an integral part of these
financial statements.
F-5
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
- -----------------------------------------------------------------------------------------------------------
2003 2002 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (42,018) $ (130,649) $(2,644,974)
Adjustments to reconcile net (loss) to net cash
used by operating activities:
Depreciation and amortization 107 108 1,683
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:
(Increase) decrease in accounts receivable - related party (601) 1,100 (22,203)
(Increase) decrease in exchange credits (440) 30 (665)
Increase (decrease) in accounts payable and
accrued expenses 456 2,056 (509,501)
(Increase) decrease in prepaid expenses 39,383 (112,500) (133,058)
Decrease in related party payable -- -- (4,077)
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Net Cash Used Provided by Operating Activities (3,113) (208,540) (1,528,329)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of exchange credits 10,000 200,000 429,980
Increase in note receivable -- -- (80,000)
Receipt of payment on note receivable -- -- 80,000
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Net Cash Provided by Investing Activities 10,000 200,000 429,980
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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 INCREASE (DECREASE) IN CASH 6,887 (8,540) (546,117)
CASH AT BEGINNING OF PERIOD 3,268 21,133 556,272
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CASH AT END OF PERIOD $ 10,155 $ 12,593 $ 10,155
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
Cash Paid For:
Income taxes $ -- $ -- $ --
Interest $ -- $ -- $ 3,000
The accompanying notes are an integral part of these
financial statements.
F-6
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2003 and December 31, 2002
8
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying 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, 2003 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 financial statements
be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 2002 audited
financial statements. The results of operations for periods ended
March 31, 2003 and 2002 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 - COMMON STOCK TRANSACTIONS
Issuance of Warrant
On March 5, 2002, the Company issued a warrant to a non-employee.
The warrant allows the holder to purchase 550,000 shares of common
stock at an exercise price of $0.06 per share, and will expire
five years from the date of issuance.
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 recorded an
expense of $31,315 during the year ended December 31, 2002. The
expense is included in general and administrative expense in the
statement of operations.
As of March 31, 2003, this is the only warrant issued and
outstanding.
F-7
NOTE 4 - RELATED PARTY TRANSACTIONS
Accounts Receivable
On April 17, 2002, the Company advanced $20,000 to the president
and CEO of the Company. The advance is payable on demand and
accrues interest at 12% per annum. As of March 31, 2003, the
Company has recognized $2,203 of interest income related to the
note.
Prepaid Expenses
During the first quarter of 2002, the Company prepaid two years of
salaries to two employees and officers of the Company. As of
December 31, 2002, one half of the prepayment, representing one
year of salaries and payroll taxes, had been fully expensed. The
remaining prepaid salaries and taxes, of $157,532, is being
expensed evenly over the year ending December 31, 2003.
F-8
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 2002, filed on April 14, 2003, 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 Annu Hui Brewery, 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 March 31, 2003, there were no issuances of the
Company's common stock.
Results of Operations
For the three month period ended March 31, 2003, the Company sustained
a loss of ($42,108), or ($0.00) per share (basic and diluted) on revenue of
$0.00. The loss in the first quarter of 2003 can be contributed to the fact the
Company had no revenue producing operations yet still had administrative
expenses. For the comparable period of 2002, the Company sustained a loss of
($130,649), or ($0.01) per share on revenue of $0.00. The stockholder's equity
for the quarter ended March 31, 2003 was $108,806.
4
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.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 2003, there were no changes in
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended March 31, 2003, there were no defaults upon
senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended March 31, 2003, there were no submission of
matters to a vote of security holders.
ITEM 5. OTHER
During the quarter ended March 31, 2003, 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, 2003, there were no reports on form
8-K.
5
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, 2003.
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 16, 2003
- ---------------- Treasurer and Director
James Tilton
/s/Jane Zheng Secretary and Director May 16, 2003
- -----------------
Jane Zheng
/s/Gordon Wilson Director May 14, 2003
- -----------------
Gordon Wilson
6
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: May 16, 2003
/s/ James A. Tilton
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James A. Tilton,
Chief Executive Officer Chief Financial Officer
7