UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For quarterly period ended March 31, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 2000 to March 31, 2000
Commission file number: 001-14889
INTERNET FOOD COMPANY, INC.
---------------------------
(exact name of registrant as specified in its charter)
Nevada 88-0390657
------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
631-a Cass Street, Suite 181, Monterey, California 93940
- --------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (831) 647-8553
Indicate by check mark whether the registrant: (1) has filed all reports
required by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing for the
past 90 days. X Yes No
The number of shares of the Registrant's Common Stock, $.001 par value, as of
March 31, 2000 was 17,780,695 outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HAWKINS ACCOUNTING
CERTIFIED PUBLIC ACCOUNTANT
341 MAIN STREET - SALINAS CA 93901
(831) 758-1694 FAX (831) 758-1699
To the Board of Directors and Shareholders
Internet Food Company, Incorporated
Monterey, California
I have reviewed the accompanying balance sheet of Internet Food Company,
Incorporated as of March 31 2000 and 1999, and the related statements of income
and shareholders' equity and cash flows for the three months then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Internet Food Company, Incorporated.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements and the cumulative results of
operations and cash flows in order for them to be in conformity with generally
accepted accounting principles.
/s/ Hawkins Accounting
- ----------------------
May 12, 2000
INTERNET FOOD COMPANY, INC.
BALANCE SHEET
March 31, 2000 and 1999
ASSETS
2000 1999
---- ----
Current assets
Cash and cash equivalents $ 143 $ 4,991
Accounts receivable-trade 0 97
Accounts receivable-barter 1,350 6,744
Due from affiliate 100 100
Inventory 460 4,905
Total current assets 2,053 16,837
Equipment
Equipment 700 700
(Less) Accumulated depreciation 150 (50)
550 650
Other assets
Trade name 6,050 6,050
Total assets $ 8,653 $ 23,537
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,235 $ 1,626
Note payable-R. Strahl 2,650 2,575
Note payable-Monterey Ventures 10,913 4,780
State corporate tax payable 400 1,600
Total current liabilities 18,198 10,581
Shareholders' equity
Capital stock, par value $ .10, 50,000,000 authorized
17,780,695 shares issued and outstanding 1,778,070 1,778,070
Paid in capital (1,645,670) (1,645,870)
Common stock offering costs (6,150) (6,150)
Retained earnings 135,795 (113,294)
Total shareholders' equity (9,545) 12,956
Total liabilities and shareholders' equity $8,653 $ 23,537
See accompanying notes and accountant's review report
INTERNET FOOD COMPANY, INC.
STATEMENT OF OPERATIONS
For the three months ended March 31, 2000 and 1999
2000 1999
---- ----
Sales $ 1,503 $ 10,429
Cost of sales
Beginning inventory 891 4,905
Purchases 479 7,033
Supplies 101 246
Total available for sale 1,471 12,184
(Less) ending inventory 460 (4,905)
Total cost of goods sold 1,011 7,279
Gross profit 4.92 3,150
operating expenses
Advertising 214 31
Bank charges 48 527
Consulting fees 400 22,231
Depreciation 50
Dues and subscriptions 438
Equipment lease
2,937
License and permits 46
Management fees 6,500
Office expense 33 869
Postage and delivery 639 679
Professional fees 8,755
Rent 900 1,515
Travel and entertainment 818
Telephone 680 332
Total operating expenses 3,352 45,290
Loss from operations (2,860) (42,140)
Other income and (expense)
Loss on sale of investments (499)
Interest expense (585)
0 (1,084)
Loss prior to Income taxes (2,860) (43,224)
State corporate income tax 840 800
Net loss $ 3,660 $ (44,024)
Loss per common share $ ($0.0002) $ (0 .0026)
Weighted average
of shares outstanding 17,760,695 17,148,222
See accompanying notes and accountant's review report
INTERNET FOOD COMPANY, INC.
STATEMENT OF SHAREHOLDERS` EQUITY
March 31, 2000 and 1999
Common Stock Paid in Offering Retained
Shares Amount Capital Costs Earnings
------ ------ ------- ----- --------
Balance,
December 31, 1998 16,167,695 $ 1,616,770 $ (1,552,070) $ (6,150) $ (69,270)
Options issued 1,040,000 104,000 (93,600)
Stock issued 573,000 57,300
Net loss for the period 44,024
17,780,695 $ 1,778,070 $ 1,645,1370 $ 6,150 $(113,294)
Balance,
December 31, 1999 17,780,695 $ 1,778,070 $ (1,645,670) $ (6,150) $(132,135)
Net loss for the period (3,660)
17,780,695 $ 1,778,070 $ (1 645,670) $ 6,150 $ 135,795
See accompanying notes and accountant's review report
INTERNET FOOD COMPANY, INC.
STATEMENT OF GASH FLOWS - INDIRECT METHOD
For the three months ending March 31, 2000 and 1999
Cash flows from operating activities
Net loss $ (3,660) (44,024)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense 50
(increase) Decrease in current assets 826 (365)
Increase (Decrease) in current liabilities 2,405 (20,329)
Net cash provided by operating activities (429) (64,668)
Financing activities
Sale of common stock 67,700
Cash provided by financing activities 67,700
Increase (Decrease) in cash and cash equivalents (429) 3,032
Cash and cash equivalent at beginning of the year 572 1,959
Cash and cash equivalent at end of the year $ 143 4,991
Supplemental disclosure of financing activities
Interest paid $ 0 585
See accompanying notes to the financial statements
INTERNET FOOD COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000 and1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the business - Internet Food Company, Inc. was formed to sell
retail gourmet and specialty cheese on the internet and at a retail
location. The Company was incorporated under the laws of the State of
Nevada on April 14, 1998. The Company is currently doing business as
California Cheese Connection.
Pervasiveness of 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 date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents - For financial statement presentation purposes,
the Company considers all short term investments with a maturity date of
three months or less to be cash equivalents.
Inventories - Inventories are recorded at the lower of cost or market,
using the first-in, first-out method. Inventories consist principally of
cheeses and specialty food items.
Bad debts and accounts receivable - No allowance for doubtful accounts has
been recorded as management believes all amounts to be fully collectible.
Equipment - Equipment is recorded at cost. Maintenance and repairs are
expensed as incurred; major renewals and betterments are capitalized. As
the equipment on the balance sheet was purchased at year-end, no provision
for depreciation is made in the current year.
Income taxes - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to differences between
the recorded book basis and tax basis of assets and liabilities for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes are also recognized for operating
losses that are available to offset future taxable income and tax credits
that are available to offset future federal income taxes.
INTERNET FOOD COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE 2 ACCOUNTS RECEIVABLE
Accounts receivable-Trade - Accounts receivable trade consists primarily of
sales to hotels and corporations purchasing gift baskets. At March 31, 1999
the total was $97. Terms of all sales to these customers are net 30 days.
As of March 31, 2000, there were no accounts receivable.
Accounts receivable-Barter - The Company is involved with an exchange group
whereby goods and services are bartered. The individual members of this
group purchase goods from another member and a voucher is written for
payment of the goods or services provided. The Company then has a credit to
purchase goods and services from other members of the barter group. At
March 31, 1999 the balance that the Company is owed in goods and services
was $ 6,744. The Company uses the barter to purchase goods and services.
For the period ending March 31, 1999 the total amount recorded as sales was
$ 4,297 and $ 1,994 was recorded as purchase of goods and services. As of
March 31, 2000 the balance of the barter receivable account is 1,350.
NOTE 3 NOTES PAYABLE
The notes payable are from shareholders of the Company. The notes are for
working capital until the Company becomes profitable. The notes will be
repaid from operations when there is sufficient working capital. Interest
is being charged at 1% a month. Total amount of borrowings for the period
ended March 31, 1999 was $ 4,780. The Company paid off prior year
borrowings of $ 12,990. As of March 31, 2000 there were $13,563 of short
term borrowings from related parties.
NOTE 4 COMMON STOCK
Common stock - During the period ended March 31, 1999, pursuant to an
exemption under Rule 504 of Regulation D of the Securities Act of 1933, as
amended (the Act), the Company sold solely to accredited and/or
sophisticated investors, its common stock. Each share has a par value of
$.10. There were twenty different transactions to different investors
raising a total of $ 67,700 during the year period ended March 31, 1999.
Paid in capital - At incorporation the Company issued 15,385,000 shares of
common stock with a fair value of $0.1 in payment of services. This amount
is shown as a negative paid in capital amount since consideration was given
in the form of services at the time of incorporation and no amount was
reflected on the Company?s books for the consideration.
The Company also issued 135,695 shares of common stock with a fair
INTERNET FOOD COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE 4 (con't)
Paid in capital (con't) - value of $.10 to three individuals. The shares
were given to these individuals for advancing the Company money for working
capital purposes. These transactions occurred during the prior year.
NOTE 5 RELATED PARTY TRANSACTIONS
On August 1, 1998 the Company entered into an agreement with a shareholder
to provide investment-banking services. During the period ending March 31,
1999 the shareholder advanced the Company $ 4,780 for operations. There
were no repayments on the advances.
As previously discussed, the Company entered into agreements with some of
its shareholders to provide bridge loans for continuing operations of the
Company. Total proceeds from the borrowings were $ 15,490 during the prior
year. The Company repaid $ 12,990 of the loans during the three-month
period ending March 31, 1999.
Various shareholders of the Company have performed consulting services for
which the Company has paid them consulting fees. For the period ending
March 31, 1999 this amount paid to the shareholders amounted to $ 17,536.
Services include clerical support, rent, office supplies etc.
NOTE 6 INCOME TAXES
The benefit for income taxes from operations consisted of the following
components. Current tax benefit of $20,250 resulting from a net loss before
income taxes, and deferred tax expense of $20,250 resulting from the
valuation allowance recorded against the deferred tax asset resulting from
the net operating loss. The change in the valuation allowance for the
period ending March 31, 2000 was $20,250. Net operating loss carry forward
will expire 2014.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At the time the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer required. It is management's position that the deferred tax asset be
recorded when there is positive evidence it will be realized.
INTERNET FOOD COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE 7 STOCK OPTIONS
On January 1, 1999 and January 28, 1999 the Board of Directors voted to
issue stock options to various individuals. The options are to be exercised
at a price of $.01 per share. There were a total of 1,040,000 options to be
exercised. All options were exercised by the due date. The options were
granted for services rendered.
NOTE 8 MATERIAL ADJUSTMENTS
Management represents that all material adjustments to the financial
statements have been made.
NOTE 9 GOING CONCERN
As of March 31, 2000, the Company has net losses since inception, which
raises substantial doubt about its ability to continue as a going concern.
Management has subsequently been able to get its internet site up and
running. This is expected to provide a dditional sales. Also, management
has stepped up its efforts to increase its sales to hotels and other
businesses.
The Company's ability to continue as a going concern is dependent upon
successful public offering and ultimately achieving profitable operations.
There is no assurance that the Company will be successful in its efforts to
raise additional proceeds or achieve profitable operations. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
During the First Quarter, the net sales for the three-month period were
$1,471.00 representing a decrease of approximately 80% from the first quarter of
1999. This decrease is principally attributable to the company's lack of success
selling its products over the Internet and not focusing on its traditional
marketing and promotion effort that had proven to be successful in 1999.
The Company is currently implementing a promotion campaign to hotels,
businesses and consumers for their specialty gourmet food and gift baskets. The
Company has demonstrated from its previous marketing that their products were
well received by the hotels and businesses. The Company will also double its
trade show attendance in order to get more exposure for its products.
The Company is also pursuing jointly marketing its products with wineries
located in Northern and Central California and by penetrating the Southern
California market. The Company is also marketing its products at fairs and
special events starting in the spring and summer.
Gross profit for the three-month period that ended March 31, 2000 was
$492.00 compared to $3,150.00, for the corresponding period in 1999. The
decrease in the gross margin from the corresponding period of the prior year is
principally attributable to the lack of sales of the company's gourmet food
products over the Internet.
Selling, general and administrative expenses were $3,352 for the period
ended March 31, 2000 compared to $45,290 for the corresponding period in 1999.
The decrease in expense from 2000 to 1999 was due to less consulting fees,
management fees and professional fees, which were related to the private
placement offering.
The equipment lease also reflected a decrease of $2,937 from 2000 to 1999
as well as a decrease in rent resulting from pay offs of leased equipment and
moving into a less costly location. As a result, the Company incurred a net loss
of ($3,660) or ($0.0002) per share for the first three months ended March 31,
2000 compared with a net loss of ($44,024) or ($0.0026) per share for the
corresponding period in 1999. This reduction in loss is due to lessened activity
and decreased administrative expenses.
There is no material deficiency in the first quarter and the Company will
seek no additional funds externally. The officers of the Company will continue
to fund operations as necessary. The Company has no major source of liquidity,
internal or external with the exception of the company's principals.
There are no material commitments for capital expenditures and none are
expected in the second quarter. There is no research and development under way
or planned at this time.
Changes in marketing, promotion and sales as well as continued sales on the
Internet should have a positive impact on short-term revenues.
There were no changes in the mix of sources between equity and off-balance
sheet financing arrangements. The Company has not been affected by any unusual
events or transactions that would have any impact on reported income or
operations. Currently the Company knows of no events that will cause material
changes in costs and revenues. The Company will expand its trade shows, Hotel
and business marketing in order to increase revenues.
Because the Company is still in its development stage, it has not felt the
effects of inflation. Primary concerns would be milk prices in regards to the
cheese products and wine prices increasing. Should these prices increase, the
Company will have to increase its cost of sales.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
- -----
Item 2. Changes in Securities.
None.
- -----
Item 3. Defaults Upon Senior Securities.
None.
- -----
Item 4. Submission of Matters to a Vote of Security Holders.
None.
- -----
Item 5. Other Information.
None.
- -----
Item 6. Exhibits and Reports on Form 8-K
None.
- -----
Signature Page
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.
INTERNET FOOD COMPANY, INC.
Dated: May 17, 2000
/s/ Jan Demianew
----------------
NAME: Jan Demianew
TITLE: President