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 June 30, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 001-14889
INTERNET FOOD COMPANY, INC.
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(exact name of registrant as specified in its charter)
Nevada 88-0390657
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
631-a Cass Street, Suite 181, Monterey, California 93940
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(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
June 30, 2000 was 17,780,695 outstanding.
PART I - FINANCIAL INFORMATION
To the Board of Directors
Internet Food Company, Incorporated
Monterey, California
I have reviewed the accompanying balance sheets of Internet Food Company,
Incorporated, as of June 30, 2000 and 1999 and the related statement of
operations stockholders' equity and the statement of cash flows for the six
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 as 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
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August 15, 2000
INTERNET FOOD COMPANY, INC.
BALANCE SHEET
June 30, 2000 and 1999
2000 1999
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 129 $ 3,096
Accounts receivable-trade 97
Accounts receivable-barter 794 5,546
Due from affiliate 100 100
Inventory 460 2,138
Total current assets 1,483 10,977
Equipment
Equipment 700 700
(Less) Accumulated depreciation (200) (100)
500 600
Other assets
Trade name 6,050 6,050
Total assets $ 8,033 $ 17,627
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 17,312 $ 389
Note payable-R. Strahl 2,850 2,650
Note payable-Monterey Ventures 10,913 9,113
State corporate tax payable 400 400
Total current liabilities 31,275 12,552
Shareholders' equity
Capital stock, per value $ .10, 50,000,000 authorized
17,780,866 shares Issued and outstanding 1,778,070 1,778,070
Paid in capital (1,645,670) (1,645,670)
Common stock offering casts (6,150) (6,150)
Retained earnings (149,492) (21,175)
Total shareholders' equity (23,242) 5,075
Total liabilities and shareholders' equity $ 8,033 $ 17,627
see accompanying notes and accountant's review report
2
INTERNET FOOD COMPANY, INC.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 and 1999
Six months ended
2000 1999
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Sales $ 2,237 $ 13,009
Cost of sales 2,174 9,028
Gross profit 63 3,981
Operating expenses
Advertising 214 45
Bank charges 74 559
Consulting fees 872 23,786
Depreciation 50 100
Dues and subscriptions 562 380
Equipment Jease 2,937
License and perrru'ts 321
Management fees 6,500
Office expense 333 1,130
Postage and delivery 1,108 1,290
Professional fees 4,575 9,885
Rent 1,250 4,416
Travel and entertainment 1,942
Telephone 841 636
Organization costs
Total operating expenses 9,679 53,927
Loss from operations (9,616) (49,946)
Other income and (expense)
Loss on sale of investments (499)
Interest expense (660)
(1,159)
Loss prior to income taxes (9,616) (51,105)
State corporate income tax 800 800
Net loss $ (10,416) $ (51,905)
Loss per common share $ (0.0006} $ (0.0030)
Weighted average
of shares outstanding 17,780,695 17,441,067
See accompanying notes and accountant's review report
3
INTERNET FOOD COMPANY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
June 30, 2000 and 1999
1999
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Common Stock
Paid in Offering Retained
Shares Amount Capital Costs Earnings
------ ------ ------- ----- --------
Balance,
December 31, 1998 16,167,696 $ 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 (51,905)
17,780,695 $ 1,778,070 $ 1,645 670 $ 6,150 $ 121,175
2000
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Balance,
December 31, 1999 17,780,695 $ 1,778,070 $ (1,645,670) $ (6,150) $ (139,076)
Net loss for the period 10,416
17,780,695 1,778,070 1,645,670 6,150 (149,492)
See accompanying notes and accountant's review report
4
INTERNET FOOD COMPANY, INC.
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the six months ended June 30, 2000 and 1999
2000 1999
---- ----
Cash flows from operating activities
Net loss $ (10,416) $ (51,905)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense 50 100
(Increase) Decrease in current assets 1,382 3,600
Increase (Decrease) in current liabilities 8,541 (18,358)
Net cash provided by operating activities (443) (66,563)
Financing activities
Sale of common stock 67,700
Common stock offering costs
Cash provided by financing activities 67,700
Increase (Decrease) in cash and cash equivalents (443) 1,137
Cash and cash equivalent at end of the period 572 1,959
Cash and cash equivalent at end of the year $ 129 $ 3,096
Supplemental disclosure of financing activities
Interest paid 585
Taxes paid 1,200
See accompanying notes and accountant's review report
5
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000 and 1999
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. Operations did not commence until July, 1998.
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
NOTES TO THE FINANCIAL STATEMENTS
June 30, 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 June 30, 2000
there were no amounts in trade receivables. At June 30, 1999 the total was
$97. Terms of all sales to these customers are net 30 days.
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 June
30, 2000 and 1999 the balance that the Company is owed in goods and
services of $794 and $5,544 respectively. The Company uses the barter to
purchase goods and services. For the period ending June 30, 1999 the total
amount recorded as sales was $ 4,812 and $ 3,707 was recorded as purchase
of goods and services. For the six months ended June 30, 2000 $260 were
recorded as sales and $839 for services and purchases.
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 June 30, 1999 was $ 10,113 and $9,113respectively.
NOTE 4: COMMON STOCK
Common stock -During the period ended June 30, 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 period ended June 30, 1999. There
were no securities transactions for the six month period ending June 30,
2000.
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
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE 4: COMMON STOCK (con't)
amount was reflected on the Company's books for the consideration The
Company also issued 135,695 shares of common stock with a fair 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 June 30,
1999 the shareholder advanced the Company $ 9,133 for operations. There
were no repayments on the advances. There were no advances during the
period ended June 30, 2000.
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 six month period
ending June 30, 1999. There were no transactions of this type during the
period ended June 30, 2000.
Various shareholders of the Company have performed consulting services for
which the Company has paid them consulting fees. For the period ending June
30, 1999 this amount paid to the shareholders amounted to $ 22,946.
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 $21,000 resulting from a net loss before
income taxes, and deferred tax expense $21,000 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
June 30, 2000 was $21,000. Net operating loss carryforward 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;
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE 6: INCOME TAXES (con't)
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.
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 $.O1 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 June 30, 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 additional 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
Operations have decreased during the reporting period. The Company has received
revenues of $2,237 for the year-to-date. This is a decrease of $10,772 for the
same period in1999. During the quarter ended June 30, 200 the Company had
revenues of $2,237 compared to $ 10,977 for the same period in 1999.
The decreasing revenues trend should not continue as the Company is refocusing
its efforts in marketing, the website, and moving to a new location.
The Company had previously shared office space with another company, as well as
joining in their marketing efforts. This joint venture has not been as
successful and the relationship has been terminated. As of June1, 2000, the
Company relocated its operations to the Cannery Row area in Monterey. It is now
sharing a 1600 sq. ft. location with The Three Lady's Gift Shop and paying $150
in monthly rent.
Several other steps are being taken in order to increase revenues such as:
producing a new catalog for the Fall to sell orders for the holidays and
updating the Company's website. The Company has introduced "Grand Avenue", a new
cookie product. There is no contractual commitment. The Company buys the product
on a cash basis.
There is no material deficiency in the Second Quarter and no contract is in
default.
At June 30, 2000, the Company's major sources of liquidity are $129 cash, $894
accounts receivable, and $460 inventory. The Company's principals will provide
funds for other capital needs of the Company.
No material commitments for capital expenditures were made during the secured
quarter and none are expected in the Third Quarter. The company will require
funds for the printing and distribution of its catalog.
Sales for the Third Quarter should increase due to increased marketing efforts,
distribution of the new catalog and the establishment of a new location.
The Company was negatively affected by the move from its previous location to
the 711 Cannery Site causing sales to decrease.
Consumers purchases over the Internet continue to increase in the industry. The
Company has had difficulty drawing consumer traffic to its web. The Company will
continue to improve its website and attempt to be listed on more search engines
to draw more consumers. If the traffic to the site increases the sales will
increase.
Currently, the Company knows of no events that will cause a material change in
cost and revenues other than increased traffic to the site.
The Company is still an early stage development company. The effects of
inflation have had little impact.
No material commitments for capital expenditures were made during the second
quarter and none are expected in the third quarter.
There were no changes in the mix of funding between equity, debt, and
off-balance sheet financing arrangements. Any additional capital is expected to
come from contributed capital of the officers and directors. Some funding may be
received through the private sale of equity.
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 of the officers, directors or persons required under the Securities
Exchange Act of 1934, as amended have filed, timely, the appropriate forms 3, 4
or 5.
Item 6. Exhibits and Reports on Form 8-K
See attached.
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 singed on
its behalf by the undersigned, thereunto duly authorized.
INTERNET FOOD COMPANY, INC.
By:
Its:
Dated: 8/21/00