U.S. 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, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _________to_________
Commission file number 0-32067
Coffee Exchange, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 59-3646899
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
609 Kiowa, McKinney, Texas 75071
--------------------------------------------------------
(Address of principal executive offices)
(817)-335-9664
-----------------------------------
(Issuer's telephone number)
Big Sky Industries I, Inc.
-----------------------------------
(Former Name or address, if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange ACT after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date: As of August 1, 2008, 1,050,000
shares of the registrant's common stock, $.001 par value, issued and
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
COFFEE EXCHANGE, INC.
(A Development Stage Company)
FORM 10-QSB
June 30, 2008
INDEX Page Number
PART 1- FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet as of June 30, 2008 (unaudited) 2
Statements of Operations for the three and nine months ended
June 30, 2008 and 2007 and the period of inception January 31,
2000 to June 30, 2008 (unaudited) 3
Statements of Cash Flows for the nine months ended June 30, 2008
and 2007 and the period of inception January 31, 2000 to June
30, 2008 (unaudited) 4
Notes to Financial Statements (unaudited) 5
Item 2 - Management's Discussion and Analysis or Plan of Operation 10
Item 3- Controls and Procedures 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 13
Exhibits
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COFFEE EXCHANGE, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
June 30,
2008
---------
ASSETS
Cash $ --
TOTAL ASSETS $ --
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Advances payable $ 11,750
Accrued expenses 3,568
-------
TOTAL LIABILITIES 15,318
-------
STOCKHOLDERS' DEFICIT
Preferred stock, no par value; 5,000,000 shares authorized,
500,000 shares issued and outstanding 5,000
Common stock, $.001 par value, 50,000,000 shares authorized,
1,050,000 shares issued and outstanding 1,050
Additional paid-in capital 187
Deficit accumulated during the development stage (21,555)
-------
TOTAL STOCKHOLDERS' DEFICIT (15,318)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ --
=======
The accompanying notes are an integral part of these financial statements.
Page 2
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
Period From
January 31,
2000
Three Months Ended Nine Months Ended (Inception) to
June 30, June 30, June 30,
------------------ - --------------- --------
2008 2007 2008 2007 2008
------ ------ ------ ----- ------
Revenues $ -- $ -- $ -- $ -- $ --
General and administrative expenses (1,500) -- (7,750) -- 21,555
------- ------ --------- ------ ------
Operating loss (1,500) -- (7,750) -- (21,555)
Provision for income taxes -- -- -- -- --
------- ------- --------- ------ -------
Net loss $ (1,500) $ -- $(7,750) $ -- $ (21,555)
====== ======= ====== ====== =======
Basic and diluted loss per share $ (0.001) $ (0.000) $ (0.007) $(0.000)
======= ======== ========= ======
Weighted average number of common
shares outstanding
(basic and diluted) 1,050,000 1,050,000 1,050,000 1,050,000
========== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
Page 3
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COFFEE EXCHANGE,INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
Period From
January 31,
Nine Months Ended 2000
June 30, (Inception) to
---------------------- June 30,
2008 2007 2008
---------- --------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,750) -- $ (21,555)
Adjustments to reconcile net loss to net
cash used by operating activities:
Preferred stock exchanged for services 5,000 -- 5,000
Common stock exchanged for services -- -- 50
Decrease in cash in bank deficit -- -- --
Increase in accrued liabilities 2,750 -- 15,318
-------- ----- -------
NET CASH USED BY OPERATING ACTIVITIES -- -- (1,187)
-------- ----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock -- -- 1,000
Contribution of capital by shareholders -- -- 187
------- ----- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 1,187
------- ----- -------
NET INCREASE (DECREASE) IN CASH -- -- --
CASH AND EQUIVALENTS - BEGINNING OF PERIOD -- -- --
------- ----- -------
CASH AND EQUIVALENTS - END OF PERIOD $ -- $ -- $ --
======= ===== =======
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ -- $ -- $ --
======= ===== =======
Cash paid during the period for income taxes $ -- $ -- $ --
======= ===== =======
The accompanying notes are an integral part of these financial statements.
Page 4
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY:
The unaudited financial statements have been prepared by the Company, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such SEC rules and regulations; nevertheless, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements and the notes hereto should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended September 30, 2007, which was filed
January 7, 2008. In the opinion of the Company, all adjustments, including
normal recurring adjustments necessary to present fairly the financial position
of Coffee Exchange, Inc. as of June 30, 2008 and the results of its operations
and cash flows for the nine months then ended, have been included. The results
of operations for the interim period are not necessarily indicative of the
results for the full year.
Coffee Exchange, Inc. was incorporated in Florida on January 31, 2000 as Big Sky
Industries I,Inc. On November 16, 2007, the Company was redomiciled as a Nevada
corporation. On July 25, 2008, the Company changed its name to Coffee Exchange,
Inc. The company was organized as a "shell" company and conducts virtually no
business operation, other than investigating opportunities to associate with a
suitable business partner and identifying merger partners or acquisition
candidates. The Company is a development stage enterprise, as defined by
Financial Accounting Standards, ("FAS") No 7, "Accounting and Reporting by
Development Stage Enterprises."
The financial statements of the Company have been prepared assuming that the
Company will continue as a going concern. However, since inception the Company
has a loss from operations of approximately $22,000. Cash losses from operations
since inception have been approximately $1,200. The Company has a working
capital deficiency of $15,318 at June 30, 2008.
In light of the Company's current financial position and the uncertainty of
raising sufficient capital to achieve its business plan, there is substantial
doubt about the Company's ability to continue as a going concern.
There have been no changes in accounting policies used by the Company during the
quarter ended June 30, 2008.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of operating expenses during the reporting periods. Actual
results could differ from these estimates.
Page 5
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
Cash and cash flows
- -------------------
For purposes of the statements of cash flows, cash includes demand deposits and
time deposits with maturities of less than three months. None of the Company's
cash is restricted.
The Company has not maintained any cash accounts which exceed federally insured
limits. Management believes that the Company does not have significant credit
risk related to its cash accounts.
Fair value of financial instruments
- -----------------------------------
In accordance with the reporting requirements of SFAS No. 107, Disclosures About
Fair Value of Financial Instruments, the Company calculates the fair value of
its assets and liabilities which qualify as financial instruments under this
statement and includes this additional information in the notes to the financial
statements when the fair value is different than the carrying value of those
financial instruments. At June 30, 2008, the Company did not have any financial
instruments.
Stock Based Compensation
- ------------------------
Effective September 30, 2005, the Company adopted Statement of Financial
Accounting Standards (SFAS) 123R, Share-Based Payment, using the modified
prospective method. This statement requires the Company to recognize
compensation cost based on the grant date fair value of options granted to
employees and directors.
Income taxes
- ------------
The Company employs the asset and liability method in accounting for income
taxes pursuant to Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are determined based on temporary differences between the financial
reporting and tax bases of assets and liabilities and net operating loss
carryforwards, and are measured using enacted tax rates and laws that are
expected to be in effect when the differences are reversed.
Net loss per share
- ------------------
Basic net loss per share is computed based upon the weighted average number of
common shares outstanding during the periods and is computed by dividing net
loss by the adjusted weighted average number of shares during the periods.
Page 6
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which
provides enhanced guidance for using fair value to measure assets and
liabilities. The standard applies whenever other standards require or permit
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new circumstances. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. The Company adopted SFAS No. 157
as of January 1, 2008 and the adoption did not have a material impact on the
consolidated financial statements or results of operations of the Company, as
disclosed in Note 2.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities--Including an Amendment of FASB
Statement No. 115 which permits entities to choose to measure financial
instruments and certain warranty and insurance contracts at fair value. The SFAS
No. 159 applies to all reporting entities, including not-for-profit
organizations, and contains financial statement presentation and disclosure
requirements for assets and liabilities reported at fair value. SFAS No. 159 is
effective as of the beginning of an entity's first fiscal year that begins after
November 15, 2007. The Company adopted SFAS No. 159 on January 1, 2008. The
Company chose not to elect the option to measure the fair value of eligible
financial assets and liabilities.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. The new standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles for
nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board Auditing amendments to
AU Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. We are evaluating the impact of adoption of SFAS
No. 162 and we do not currently expect adoption to have a material impact on our
results of operations, cash flows or financial position.
June 2006, the FASB issued Interpretation No. 48 ("FIN No 48"), ACCOUNTING FOR
UNCERTAINTY IN INCOME TAXES - an interpretation of FASB Statement 109, which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, ACCOUNTING
FOR INCOME TAXES: The Interpretation provides a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Under FIN No. 48,
the Company may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater
likelihood of being realized upon ultimate settlement. FIN No. 48 also provides
guidance on de- recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. FIN No. 48 is effective for us
beginning July 1, 2007. We do not expect FIN No. 48 to have a material impact on
our financial statements.
Page 7
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
In March 2008, the FASB issued No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133
("SFAS 161"). SFAS 161 requires enhanced disclosures about an entity's
derivative and hedging activities and thereby improves the transparency of
financial reporting. This Statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. This Statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. Management is
currently evaluating the effects of this statement, but it is not expected to
have any impact on the Company's financial statements.
Management has reviewed these new standards and believes that they have no
impact on the financial statements of the Company.
NOTE 4 - IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2003, the Securities and Exchange Commission ("SEC") adopted final rules
under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), as amended.
Commencing with the Company's Annual Report for the year ending December 30,
2009, the Company is required to include a report of management on the Company's
internal control over financial reporting. The internal control report must
include a statement of management's responsibility for establishing and
maintaining adequate internal control over financial reporting for the Company;
of management's assessment of the effectiveness of the Company's internal
control over financial reporting as of year-end and of the framework used by
management to evaluate the effectiveness of the Company's internal control over
financial reporting. Furthermore in the following year the Company's independent
accounting firm has to issue an attestation report separately on the Company's
internal control over financial reporting on whether it believes that the
Company has maintained, in all material respects, effective internal control
over financial reporting.
In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations." SFAS
141(R requires all business combinations completed after the effective date to
be accounted for by applying the acquisition method (previously referred to as
the purchase method). Companies applying this method will have to identify the
acquirer, determine the acquisition date and purchase price and recognize at
their acquisition date fair values of the identifiable assets acquired,
liabilities assumed, and any noncontrolling interests in the acquirer. In the
case of a bargain purchase the acquirer is required to reevaluate the
measurements of the recognized assets and liabilities at the acquisition date
and recognize a gain on that date if an excess remains. SFAS 141(R) becomes
effective for fiscal periods beginning after December 15, 2008. The Company is
currently evaluating the impact of SFAS 141(R).
In February 2008, the FASB issued Staff Position (FSP) FAS 157-2, Effective Date
of FASB Statement No. 157, which defers the implementation for the non-recurring
financial assets and liabilities from fiscal years beginning after November 15,
2007 to fiscal years beginning after November 15, 2008. The provisions of SFAS
No. 157 will be applied prospectively. The statement provisions effective as of
December 29, 2007, do not have a material effect on the Company's financial
position and results of operations. Management does not believe that the
remaining provisions will have a material effect on the Company's financial
position and results of operations when they become effective on January 1,
2009. The adoption of FSP FAS 157-2 is not expected to have a material impact.
Page 8
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5 - ADVANCES PAYABLE -OFFICERS AND DIRECTORS
Advances payable represents short-term advances to the Company by its Chief
Executive Officer for the payment of certain operating expenses incurred during
the fourth quarter of its fiscal year ended September 30, 2007 and the quarter
ended June 30, 2008. At June 30, 2008 the amount advanced was $11,750; the
advances are non-interest bearing and due on demand.
NOTE 6 - LOSS PER COMMON SHARE
Net loss per common share outstanding for the three and nine months ended June
30, 2008 and 2007, as shown on the Statement of Operations, is based on the
number of common shares outstanding at June 30, 2008 and 2007. Weighted average
shares outstanding was not computed since it would not be meaningful in the
circumstances, as all shares issued during the period from incorporation through
June 30, 2008 were for initial capital and were issued to just two individuals.
Therefore, the total shares outstanding at the end of the period were deemed to
be the most relevant number of shares to use for purposes of this disclosure. At
June 30, 2008 and 2007, basic and diluted weighted average common shares for the
three months ended, respectively, include only common shares outstanding, since
there were no common share equivalents.
NOTE 7 - CAPITAL STRUCTURE DISCLOSURES
The Company's capital structure is not complex. The Company is authorized to
issue 5,000,000 shares of preferred stock with a no par value. The Company is
authorized to issue 50,000,000 shares of common stock with a par value of $.001
per share.
The holders of the common stock are entitled to one vote per share; they have
non-cumulative voting rights. The holders are also entitled to receive dividends
when, as, and if declared by the board of directors. Additionally, the holders
of the common stock do not have any preemptive right to subscribe for, or
purchase any shares of any class of stock.
In January 2000, the Company issued 1,000,000 shares of common stock at par
value per share, for a total of $1,000. A stock subscription receivable was
recorded at the date of issuance for the same amount, which was paid in June
2000.
In January 2000, the Company issued 50,000 shares valued at $50 as consideration
for services rendered by one of the two founding stockholders of the Company for
the formation of the Company.
Preferred stock
- ---------------
The board of directors of the Company is authorized to provide for the issuance
of preferred stock in classes or series, and, by filing the appropriate articles
of amendment with the Secretary of State of Nevada, is authorized to establish
the number of shares to be included in each class or series, which may include a
conversion feature into common stock.
Page 9
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Preferred stock - Continued
- ---------------------------
On January 24, 2008, the Company issued 500,000 shares of preferred stock to
Carl Olivieri as compensation for searching out, securing and structuring the a
merger agreement with potential coffee shop operations and/or securing financing
to build out new coffee shops. The Company had a potential merger agreement with
Coffee Exchange of The Americas, Inc., but it has not closed as of the date of
these financial statements and it is uncertain at this time whether the
transaction will close. The Company valued the shares at $5,000. The 500,000
preferred shares have 100,000 voting rights on any shareholder vote as long as
Mr. Olivieri owns the shares.
Stock options, warrants and other rights
- ----------------------------------------
As of August 5,2008, the Company has not adopted any employee stock option
plans.
NOTE 8 - RELATED PARTY TRANSACTION
In January 2000, the Company issued 50,000 shares valued at $50 as consideration
for services rendered by one of the two founding stockholders of the Company for
the formation of the Company.
On January 22, 2008, Carl Olivieri purchased 900,000 shares of the Company's
Common stock from Ramon Chimelis, which represented approximately 85.7% of the
Company's issued and outstanding common shares.
On January 23, 2008, the Company filed amended Articles of Incorporation with
The Nevada Secretary of State to increase its authorized common shares from
50,000,000 million shares, $0.001 par value to 200,000,000 million shares,
$0.001 par value.
On January 24, 2008, the Company issued 500,000 shares of preferred stock to
Carl Olivieri as compensation for securing and structuring the merger agreement
with Coffee Exchange of The Americas, Inc.
NOTE 9 - INCOME TAXES
At December 31, 2007, the Company had a net operating loss carryforward of
approximately $20,000. This loss may be carried forward to offset federal income
taxes in future years through the year 2027. However, if subsequently there are
ownership changes in the Company, as defined in Section 382 of the Internal
Revenue Code, the Company's ability to utilize net operating losses available
before the ownership change may be restricted to a percentage of the market
value of the Company at the time of the ownership change.
Therefore, substantial net operating loss carryforwards could, in all likely-
hood, be limited or eliminated in future years due to a change in ownership as
defined in the Code. The utilization of the remaining carryforwards is dependent
on the Company's ability to generate sufficient income during the carryforward
periods and no further significant changes in ownership.
NOTE 9 - INCOME TAXES - CONTINUED
It is management's opinion that the entire deferred tax benefit of approximately
$6,000, resulting from the net operating loss carryforward may not be recognized
in future years. Therefore, a valuation allowance of $6,000, equal to the
deferred tax benefit, has been established, resulting in no deferred tax
benefits as of the balance sheet date.
Page 10
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COFFEE EXCHANGE, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 - SUBSEQUENT EVENT
On July 29, 2008, the Company entered into an agreement with Coffee Exchange of
The Americas, Corporation to acquire a coffee shop in Dallas, Texas and a coffee
shop in Arlington, Texas. The acquisition cost funded by the issuance of the
Company's restricted common stock and the assumption of a promissory note are
shown by the following table which summarizes the purchase consideration and
fair values of the assets acquired at the date of acquisition:
Purchase Price Consideration
Promissory Note assumed $225,000
Value of common stock issued 75,000
--------
Total consideration paid $300,000
--------
Net Assets Acquired
Equipment $130,000
Furniture 40,000
Leasehold improvements 130,000
--------
Total net assets $300,000
--------
We will include the results of operations for the two coffee shops in our
financial statements beginning August 1, 2008.
The following table reflects unaudited pro forma results of operations assuming
that the Occupational Testing, Inc. acquisition had occurred on October 1, 2007:
Nine Months Ended
June 30, 2008
-------------
Revenue $ 163,952
Net income (loss) $ (72,791)
Net income (loss) per share $ 0.0058
Page 11
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Item 2. Management's Discussion and Analyses of Financial Condition and Results
of Operation
The following discussion should be read in conjunction with our financial
statements provided in this quarterly report on Form 10-QSB. Certain statements
contained herein may constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements involve a
number of risks, uncertainties and other factors that could cause actual results
to differ materially, as discussed more fully herein.
The forward-looking information set forth in this annual report is as of the
date of this filing, and we undertake no duty to update this information. More
information about potential factors that could affect our business and financial
results is included in the section entitled "Risk Factors" of our Annual Report
on Form 10-KSB for the year ended September 30, 2007 filed with the Securities
and Exchange Commission.
Overview
The following discussion "Management's Plan of Operation" contains
forward-looking statements. The words "anticipate," "believe" "expect," "plan,"
"intend," "estimate," "project," "will," "could," "may," and similar expressions
are intended to identify forward-looking statements. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties. Should one or more risks or uncertainties
occur, or should underlying assumptions prove incorrect, actual results may vary
materially and adversely from those anticipated, believed, expected, planned,
intended, estimated, projected, or otherwise indicated.
The following is qualified by reference to, and should be read in conjunction
with the Company's financial statements, and notes thereto, included elsewhere
in this Form 10-QSB, as well as the discussion hereunder "Management's Plan of
Operation"; our significant accounting policies are disclosed in Note 1 to our
financial statements included on our Annual Report on Form 10-KSB for the year
ended September 30, 2007 filed with the Securities and Exchange Commission.
Plan of Operation
Coffee Exchange, Inc. (formerly Big Sky Industries I, Inc.) is presently a
development stage company that conducts virtually no business operations, other
than investigating opportunities to effect a merger, exchange of capital stock,
asset acquisition, or other similar business combination (a "Business
Combination") with an operating or development stage business ("Target
Business"), which desires to employ the Company to become a reporting
corporation under the Securities Exchange Act of 1934. To date, we have not
engaged in any operations, nor have we generated any revenue.
We do not have cash in the bank or other material assets, nor do we have an
established source of revenue needed to cover the costs of normal operations,
which would allow us to continue as a going concern. These financial statements
have been 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. Our ability to meet those
obligations and continue as a going concern is dependent upon us raising new
capital through advances from current shareholders and issuing equity securities
to complete a Business Combination transaction with a Target Business. If it
becomes necessary for us to raise additional funds to support normal operations
during the next twelve months, our principal shareholder Carl Olivieri, will
advance funds as needed. If we need to raise funds beyond funds needed for
normal operations, we may choose to sell additional common stock, especially if
we enter into an agreement to effectuate a Business Combination with a Target
Business.
Page 12
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Item 2. Management's Discussion and Analyses of Financial Condition and Results
of Operation (Continued)
Since inception, we have received a cash infusion of $1,165. With the exception
of certain other professional fees and costs related to a Business Combination,
we expect that we will incur minimal operating costs and, as indicated above,
our principal shareholder and founder will advance funds, as needed, to meet our
cash requirements during the next twelve months. It is likely, however, that a
Business Combination might not occur during the next twelve months; and in the
event that our principal shareholder does not advance adequate funds to support
normal operations prior to completing a Business Combination transaction with a
Target Business, we may cease operations and a Business Combination may not
occur.
Other than the Related Party transaction disclosed in Note 7 to the financial
Statements presented in this filing, we have not yet identified another Business
Combination opportunity; therefore, we are unable to predict our cash
requirements subsequent to a Business Combination with an unidentified Target
Business. As indicated above, we may be required to raise capital through the
sale of or issuance of additional securities, in order to ensure that we can
meet our operating costs for the remainder of our fiscal year, if we complete a
Business Combination transaction with a Target Business. In the event that we
elect to raise additional capital by selling common stock, prior to, or in
connection with, completing a Business Combination transaction, we expect to do
so through the private placement of restricted securities.
Our cash reserves have been minimal since inception; therefore, we have not
compensated our officers or directors. In the near term, we may compensate them
for their services by issuing them stock in lieu of cash. Presently, there are
no arrangements or anticipated arrangements to pay any type of additional
compensation to any officer or director. Regardless of whether our cash assets
prove to be inadequate to meet our operational needs, we might seek to
compensate providers of services by the issuance of stock in lieu of cash.
There are no agreements or understandings of any kind with respect to any loans
from officers or directors of the Company on behalf of the Company, other than
that in Note 3 to the financial statements.
Going Concern
We continue to be a development stage company that has not generated any
revenues and has experienced losses from operations since exception. In our
Annual Report on Form 10-KSB for the year ended September 30, 2007 filed with
the Securities and Exchange Commission, our independent auditors indicated that
these factors raised substantial doubt about our ability to continue as a going
concern. These concerns were addressed in a separate footnote (Note 1) to the
Annual Report for the year ended September 30, 2007.
The continuation of our business is dependent upon obtaining further financing
and achieving a break even or profitable level of operations. The issuance of
additional equity securities by us could result in a significant dilution in the
equity interests of our current or future stockholders.
There are no assurances that we will be able to either (1) achieve a level of
revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through either private placement, public offerings
and/or bank financing necessary to support our working capital requirements. To
the extent that funds generated from operations and any private placements,
public offerings and/or bank financing are insufficient, we will have to raise
additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on terms acceptable to us. If
adequate working capital is not available we may not increase our operations.
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These conditions raise substantial doubt about our ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should we be unable to
continue as a going concern.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements and do not engage in
trading activities involving non-exchange traded contracts. In addition, we have
no financial guarantees, debt or lease agreements or other arrangements that
could trigger a requirement for an early payment or that could change the value
of our assets.
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of
management, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures as defined in rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
("Exchange Act") were effective as of June 30, 2008 to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is (i) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms and
(ii) accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during
the quarter ended June 30, 2008, which were identified in connection with
management's evaluation required by paragraph (d) of rules 13a-15 and 15d-15
under the Exchange Act, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submissions of Matters to a Vote of Security Holders
None
Item 5 - Other Information
On July 25, 2008, the Company filed amended articles of incorporation with the
Nevada Secretary of State to change its name from Big Sky Industries I, Inc. to
Coffee Exchange, Inc.
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Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement with Coffee Exchange of The Americas, Inc.*
31.1 Certification by Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002*
31.2 Certification by Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002*
32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 *
32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 *
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* Filed herewith
(b) Reports on Form 8-K.
NONE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Coffee Exchange, Inc.
Dated: August 6, 2008 By: /s/Carl Olivieri
-----------------
Carl Olivieri
Chief Executive Officer
Dated: August 6 ,2008 By: /s/Randy Moseley
-----------------
Randy Moseley
Chief Financial Officer
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