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 September 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________.
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 (IRS Employer Identification No.)
of 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.
Yes No X
The number of shares of the Registrant's Common Stock, $.001 par value, as of
September 30, 1999 was 17,780,695 outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HAWKINS ACC0UNTING
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CERTIFIED PUBLIC ACC0UNTANT 341 MAIN STREET SALINAS, CA 93901
(831)758-1694 FAX (831) 758-1699
To the Board of Directors
Internet Food Company
Monterey, California
I have reviewed the accompanying balance sheet of Internet Food Company, Inc. as
of September 30. 1999 and the related statements of operations and statement of
cash flows for the periods ending September 30, 1999 and 1998, and the statement
of shareholders equity for the period ended September 30, 1999, 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, Inc.
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 accounting 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 in order for them to be in
conformity with generally accepted accounting principles.
INTERNET FOOD COMPANY, INC.
BALANCE SHEET
September 30, 1999
ASSETS
------
Current assets
Cash and cash equivalents $ 800
Accounts receivable-trade 295
Accounts receivable-barter 3,399
Due from affiliate 100
Inventory 1,500
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Total current assets 6,094
Equipment 700
Equipment (150)
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(Less) Accumulated depreciation 550
Other assets
Trade name 6,050
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Total assets $ 12,694
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LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities $ 2,994
Accounts payable 10,113
Note payable-Monterey Ventures 2,650
Note payable-Robert Strahl 400
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State corporate tax payable
Total current liabilities 16,157
Shareholders' equity
Capital stock, par value $ .10, 50,000,000
authorized 17,780,695 shares issued and
outstanding 1,778,070
Paid in capital (1,645,670)
Common stock offering costs (6,150)
Retained earnings (129,713)
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Total shareholders' equity (3,463)
Total liabilities and shareholders' equity $ 12,694
===========
See accompanying notes and accountant's review report
INTERNET FOOD COMPANY. INC
STATEMENT OF OPERATIONS
For the nine months ended September 30,1999 and
from date of inception to September 30, 1998
Three months ended Nine months ended
1999 1998 1999 1998
------- ------- --------- ---------
Sales $ 2,269 $ 0 $ 15,278 $ 0
Cost of sales 1,230 0 10,258 0
------- ------- --------- ---------
Gross profit 1,039 0 5,020
Operating expenses
Advertising 705 232 751 232
Bank charges 32 91 591 91
Consulting fees 2,724 7,875 26,510 8,055
Depreciation, 50 150
Dues and subscriptions 245 625
Equipment lease 0 2,937
License and Permits 15 225 336 225
Management fees 0 2,037 6,500 2,219
Office expense 56 1,029 1,186 1,039
Postage and delivery 366 288 1,657 288
Professional fees 3,000 3,000 12,885 6,000
Rent 1,950 550 6,364 550
Travel and entertainment 0 200 1,942 200
Telephone 434 1,070
Organization costs 8,163
------ ------- ------- -------
Total operating expenses 9,577 25,537 63,504 37,062
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Loss from operations (8,538) (25,537) (58,484) (37,062)
Other Income and (expense)
Loss on sale of investments 0 0 (499) 0
Interest expense 0 0 (660) 0
------ ------- -------- -------
0 0 (1,159) 0
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Loss prior to income taxes (8,538) (25,537) (59,643) (37,062)
State corporate income tax 0 800 800 800
Net Loss $ (8,538) $(26,337) $ 60,443 $ (37,862)
======= ======== ======== =========
Loss per common share $ (0.0005) $(0.0606) $ (0.0034) $ (0.0871)
======= ======== ======== =========
Weighted average
of shares outstanding 17,148,222 434,500 17,441,067 434,500
=========== ======== =========== ========
INTERNET FOOD COMPANY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
September 30, 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 (93,800)
Stock issued 573,000 57,300
Net loss for the period (60,443)
---------- --------- -------------- --------- -----------
17,780,695 $ 1,778,070 $ (1,645,670) $ (6,150) $(129,713)
========== ========== =========== ======== =========
See accompanying notes and accountant's review report
INTERNET FOOD COMPANY, INC.
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the nine months ended September 30, 1999 and
from date of inception to September 30, 1998
Three Months Nine Months
1999 1998 1999 1998
-------- ------- ----------- ----------
Cash flows from operating
activities
Net Loss $ (8,538) $ (26,337) $ (60,443) $ (37,862)
Adjustments to reconcile
net income to net cash
provided by operating activities
Depreciation expense 50 150
(increase) Decrease in current assets 2,587 (1,896) 6,187 (1,896)
Increase (Decrease) in current liabilities 2,605 1,378 (15,763) 8,705
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Net cash provided by operating activities 3,396 (27,163) (69,859) (81,053)
Investing activities
Business name purchase 4,000 4,000
Financing activities
Sale of common stock 34,450 67,700 39,450
Short term borrowing 1,000 1,000
Common stock offering costs (3,000) (4,110)
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Cash provided by financing activities 1,000 31,450 68,700 35,340
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Increase (Decrease) in cash and cash equivalents (2,296) 287 (1,159) 287
Cash and cash equivalent at beginning of the period 3,095 0 1,959 0
------- -------- --------- ---------
Cash and cash equivalent at end of the year $ 800 $ 287 $ 800 $ 287
======= ======== ========= =========
Supplemental disclosure of financing activities
Interest paid $ 585
Taxes paid 1,200
See accompanying notes to the financial statements
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
September 30, 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 and 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 cost of the 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 year0end, 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 or 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 defered 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
September 30, 1999
NOTE 2 ACCOUNTS RECEIVABLE
Accounts Receivable Trade - Accounts receivable trade consists primarily of
sales to hotels and corporations purchasing gift baskets. At September 30,
1999 the total was $295. Terms of all sales 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
September 30, 1999 the balance that the Company is owed in goods and
services was $3,399. The Company uses the barter to purchase goods and
services. For the period ending September 30, 1999 the total amount
recorded as sales was $5,000 and $6,042 was recorded as purchase of goods
and services.
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 September 30, 1999 was $10,113. The Company paid off prior year
borrowings of $12,990.
NOTE 4 COMMON STOCK
Common stock - During the period ended September 30, 1999 and September 30,
1998, 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
September 30, 1999 and twenty different transactions raising a total of
$39,450 for the period ending September 30, 1998.
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.
NOTE 4 COMMON STOCK
(con't)
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 period 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 September
30, 1999 the shareholder advanced the Company $10,133 for operations. There
were no repayments on the advances. There were no advances during the
period ended September 30, 1998.
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 nine month period
ending September 30, 1999. There were no transactions of this type during
the period ended September 30, 1998.
Various shareholders of the Company have performed consulting services for
which the Company has paid them consulting fees. For the period ending
September 30, 1999 this amount paid to the shareholders amounted to
$22,946. Services include clerical support, rent, office supplies etc.
During the period ended September 30, 1998 the Company borrowed $2,500 from
shareholders for working capital purposes.
NOTE 6 INCOME TAXES
The benefit for income taxes from operations consisted of the following
components. Current tax benefit of $9,000 resulting from a net loss before
income taxes, and deferred tax expense $9,000 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
September 30, 1999 was $9,000. 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;
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 defered 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 $.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 September 30, 1999, 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.
During the Third Quarter, the Company's financial condition improved as a result
of operations for the quarter. The Company has received revenues of $15,278 for
the year-to-date. This is an increase of $2,249 from the previous quarter ending
June 30, 1999. It is an increase in revenues of $15,278 vs. the period ending
September 30, 1998.
The trends for increasing revenues are likely to continue as a result of the
Company website that is now fully developed (www.calcheese.com) and its Cheese
of the Month Club whereby members receive a selection of different cheeses each
month throughout the year (www.calcheese.com/cheeseclub). The Company should
also see an increase in the fourth quarter sales resulting from the Christmas
holiday season.
There is no material deficiency in the Third Quarter. Therefore, no action is
required.
At present, the Company has no major source of liquidity, internal or external.
No material commitments for capital expenditures were made during the Third
Quarter and none are expected in the Fourth Quarter. There is no research and
development underway or planned.
The heavy Fourth Quarter seasonal selling period should have an impact on
short-term revenues.
There were no changes in the mix of sources between equity, debt, 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.
The Company website has been the most significant factor resulting in the
increase of sales.
Consumer purchases of products over the Internet have increased dramatically
this year and the Company forecasts continued increases over the next five
years. With the increase in consumer purchases, it will have a very favorable
impact on set sales and revenues for the Company.
Currently, the Company knows of no events that will cause a material changes in
costs and revenues.
The major increase in goods being sold is because the Company now has a fully
operational website and has established accounts with hotels and businesses.
The Company plans to expand its market share by attending major trade shows to
exhibit the products.
The Company has been a development stage company for the past 16 months and,
therefore, has not felt the effects of inflation. The primary concern involves
milk prices. Should 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: December 16, 1999 /s/ Jan Demianew
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NAME: Jan Demianew
TITLE: President
PRESIDENT