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 June 30, 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
-------
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 June 30, 2003 was 9,395,788.
TABLE OF CONTENTS
PART I
Page
ITEM 1. FINANCIAL STATEMENTS............................................. 4
ITEM 2. PLAN OF OPERATION................................................ 11
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................................. 13
SIGNATURES....................................................... 14
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 June 30, 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 attached hereto
as Pages F-1 through F-8 and are incorporated herein by this reference.
3
CHINA FOOD AND BEVERAGE COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003 and December 31, 2002
4
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
June 30, December 31,
2003 2002
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash $ 6,813 $ 3,268
Exchange credits -- 19,819
Accounts receivable - related party 22,802 21,602
Prepaid expenses 93,674 172,441
----------- -----------
Total Current Assets 123,289 217,130
----------- -----------
PROPERTY AND FIXED ASSETS
Equipment 2,149 2,149
Accumulated depreciation (1,791) (1,576)
----------- -----------
Total Fixed Assets 358 573
----------- -----------
TOTAL ASSETS $ 123,647 $ 217,703
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 71,783 $ 66,879
Accounts payable - related party 11,339 --
----------- -----------
Total Current Liabilities 83,122 66,879
----------- -----------
Total Liabilities 83,122 66,879
----------- -----------
STOCKHOLDERS' EQUITY
Common stock; 100,000,000 shares at $0.001 par
value, 8,870,788 and 9,395,788 shares issued and
outstanding, respectively 8,871 9,396
Additional paid-in capital 2,108,058 2,110,779
Retained earnings accumulated prior to the
development stage 633,605 633,605
Deficit accumulated during the development stage (2,710,009) (2,602,956)
----------- -----------
Total Stockholders' Equity 40,525 150,824
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 123,647 $ 217,703
=========== ===========
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,
2000
For the Three Months Ended For the Six Months Ended Through
June 30, June 30, June 30,
- -------------------------------------------------------------- -------------------------- ---------
2003 2002 2003 2002 2003
----------- ----------- ----------- ----------- ---------
NET SALES $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- ---------
COSTS AND EXPENSES
General and administrative 65,635 70,131 108,723 200,916 967,972
----------- ----------- ----------- ----------- ---------
Total Costs and Expenses 65,635 70,131 108,723 200,916 967,972
----------- ----------- ----------- ----------- ---------
LOSS BEFORE OTHER EXPENSE (65,635) (70,131) (108,723) (200,916) (967,972)
----------- ----------- ----------- ----------- ---------
OTHER INCOME (EXPENSE)
Refund tax penalties -- -- -- -- 16,237
Interest expense -- (805) -- (805) (16,296)
Interest income 600 114 1,670 250 11,173
----------- ----------- ----------- ----------- ---------
Total Other Income (Expense) 600 (691) 1,670 (555) 11,114
----------- ----------- ----------- ----------- ---------
LOSS BEFORE TAX, EXTRAORDINARY
ITEM, AND DISCONTINUED
OPERATIONS (65,035) (70,822) (107,053) (201,471) (956,858)
INCOME TAX EXPENSE -- -- -- -- --
----------- ----------- ----------- ----------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (65,035) (70,822) (107,053) (201,471) (956,858)
GAIN ON DISPOSITION OF DEBT -- -- -- -- 237,163
----------- ----------- ----------- ----------- ---------
LOSS BEFORE DISCONTINUED
OPERATIONS (65,035) (70,822) (107,053) (201,471) (719,695)
LOSS ON DISCONTINUED
OPERATIONS -- -- -- -- (1,990,314)
----------- ----------- ----------- ----------- ---------
NET LOSS $ (65,035) $ (70,822) $ (107,053) $ (201,471) $ --
=========== =========== =========== =========== =========
BASIC LOSS PER SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ --
=========== =========== =========== =========== =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,957,326 9,395,788 9,175,346 9,395,788 $ --
=========== =========== =========== =========== =========
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 Statement of Stockholders' Equity
Common Stock Additional Other Retained
-------------------------- 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)
----------- ----------- ----------- ----------- -----------
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 Statement of Stockholders' Equity (Continued)
Common Stock 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)
Repurchased and cancelled 525,000
shares of common stock (unaudited) (525,000) (525) (2,721) -- --
Net loss for the six months
ended June 30, 2003 (unaudited) -- -- -- -- (107,053)
----------- ----------- ----------- ------------- -----------
Balance, June 30, 2003 (unaudited) 8,870,788 $ 8,871 $ 2,108,058 $ -- $(2,076,404)
=========== =========== =========== ============= ===========
Retained earnings accumulated prior to the development stage $ 633,605
Deficit accumulated during the development stage $ (2,710,009) $ (2,076,404)
============ ============
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 Statements of Cash Flows
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Six Months Ended 2000 Through
June 30 June 30,
- -----------------------------------------------------------------------------------------------------
2003 2002 2003
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (107,053) $ (201,471) $(2,710,009)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization 215 215 1,791
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) in accounts receivable-related party (1,200) (19,395) (22,802)
(Increase) in exchange credits (842) (254) (1,067)
Increase (decrease) in accounts payable and accrued
expenses 4,904 24,419 (505,053)
(Increase) decrease in prepaid expenses 78,767 (242,213) (93,674)
Increase in related party payable 11,339 -- 7,262
----------- ----------- -----------
Net Cash (Used) by Operating Activities (13,870) (407,384) (1,539,086)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
Proceeds from sale of exchange credits 20,661 399,980 440,641
Increase in note receivable -- -- (80,000)
Receipt of payment on note receivable -- -- 80,000
----------- ----------- -----------
Net Cash Provided (Used) by Investing Activities 20,661 399,980 440,641
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loss of cash from discontinued operations -- -- (424,757)
Common stock issued for cash -- -- 1,200,000
Common stock repurchased for cash (3,246) -- (3,246)
Proceeds from issuance of note payable -- -- 100,000
Payments on notes payable -- -- (323,011)
----------- ----------- -----------
Net Cash Provided (Used) by Financing Activities (3,246) -- 548,986
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 3,545 (7,404) (549,459)
CASH AT BEGINNING OF PERIOD 3,268 21,133 556,272
----------- ----------- -----------
CASH AT END OF PERIOD $ 6,813 $ 13,729 $ 6,813
=========== =========== ===========
Cash Paid For:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
The accompanying notes are an integral part
of these consolidated financial statements.
7
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 2003 and December 31, 2002
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 June 30, 2003 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 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 period ended June 30, 2003 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 Stated 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 - COMMON STOCK TRANSACTIONS
Repurchased Cancellation of Common Stock
On April 15, 2003, the Company repurchased and cancelled 525,000
shares of common stock from a shareholder in exchange for $3,246.
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.
9
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 2003 and December 31, 2002
NOTE 3 - COMMON STOCK TRANSACTIONS (Continued)
Issuance of Warrant (Continued)
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 June 30, 2003, this is the only warrant issued and
outstanding.
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 June 30, 2003, the
Company has recognized $2,802 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.
10
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
toseek 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.
11
Capital Resources and Liquidity
During the quarter ended June 30, 2003, there were no issuances of the
Company's common stock.
Results of Operations
For the three month period ended June 30, 2003, the Company sustained a
loss of ($65,635), or ($0.00) per share (basic and diluted) on revenue of $0.00.
The loss in the second 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
($70,131), or ($0.01) per share on revenue of $0.00. The stockholder's equity
for the quarter ended June 30, 2003 was $40,525.
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 June 30, 2003, there were no changes in
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended June 30, 2003, there were no defaults upon
senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended June 30, 2003, there were no submission of
matters to a vote of security holders.
ITEM 5. OTHER
During the quarter ended June 30, 2003, there were no material events
to report that have not been previously disclosed herein.
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
During the quarter ended June 30, 2003, there were no reports on form
8-K.
Exhibit 31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350
Exhibit 32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2003
13
SIGNATURE
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 18th day of August, 2003.
CHINA FOOD AND BEVERAGE COMPANY
/s/ James A. Tilton
------------------------------
James A. Tilton, President
14