U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1998
OR
[ ] 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: 33-43621
INTERNATIONAL FOOD & BEVERAGE, INC. (1)
(Exact name of registrant as specified in its charter)
Delaware 33-0307734
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
30152 Aventura, Rancho Santa Margarita, California (2) 92688(2)
(Address of principal executive offices) (Zip Code)
Registrants telephone number: (714) 858-8800 (2)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed 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) been subject to such filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]. Not Applicable.
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of May 10, 1999: Common Stock,
par
value $0.001 per share - $27,085,595. As of May 10, 1999, the
registrant had 177,302,997 shares of common stock issued and
outstanding.
(1)As of February 17, 1999, the name was change to: Internet
Businesss International, Inc.
(2) As of March 1, 1999, the address and telephone number was
changed to: 3900 Birch Street, Suite 111, Newport Beach,
California 92660; (949) 833-0261.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF DECEMBER 31, 1998
AND JUNE 30, 1998 3
STATEMENTS OF OPERATIONS FOR THE THREE
AND SIX MONTHS ENDED DECEMBER 31, 1998
AND DECEMBER 31, 1997 4
STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED DECEMBER 31, 1998 AND
DECEMBER 31, 1997 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURE 13
PART I.
ITEM 1. FINANCAL STATEMENTS.
INTERNATIONAL FOOD & BEVERAGE, INC.
BALANCE SHEETS (Unaudited)
June 30, 1998 December 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,102 $ 0
Accounts Receivable 0 0
Inventories 0 0
Prepaid expenses 0 0
Total current assets 1,102 0
FIXED ASSETS: 0 0
OTHER ASSETS:
Note Receivable:
Iron Horse Holdings 2,500,000
Total Assets $ 1,102 $2,500,000
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 0 $ 0
Accounts payable 1,819,644 0
Accrued wages and benefits 0 0
Accrued commissions
and marketing 0 0
Other accrued expenses 0 0
Total current liabilities 1,819,644 0
LONG TERM DEBT: 455,000 0
SHAREHOLDERS EQUITY (DEFICIT):
Preferred Stock Issued 0 2,090,000
Preferred Stock Subscribed 0 300,000
Common Stock 428,000 462,224
Additional paid-in capital 1,000 111,000
Retained earnings (deficit) (2,702,542) (2,702,542)
Current earnings (deficit) 2,239,318
Total Shareholders Equity (2,273,542) 2,500,000
Total Liabilities &
Shareholders Equity $ 1,102 $2,500,000
INTERNATIONAL FOOD & BEVERAGE, INC.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31
1997 1998 1997 1998
REVENUES
$374,566 $ 0 $2,304,000 $ 0
COST OF SALES
281,863 0 1,975,000 0
GROSS PROFIT
92,703 0 329,000 0
EXTRAORDINARY INCOME
Debt forgiveness
2,274,644 2,274,644
OPERATING EXPENSES:
Selling and distribution
65,381 0 417,998 0
General and administration
29,289 34,224 257,002 37,712
Interest expense, net
_9,103 0 50,000 0
Total Operating Expenses
103,773 34,224 725,000 37,712
OTHER INCOME
2,386
NET INCOME (LOSS)
$(11,070) $2,240,420 $ (396,000) $2,239,318
NET (INCOME) LOSS PER COMMON SHARE
$(nil) $0.01 $(nil) $0.01
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
154,763,438 158,060,194 154,763,438 158,060,194
See Accompanying Notes to Financial Statements
INTERNATIONAL FOOD & BEVERAGE, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
December 31, 1997 December 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(396,000) $2,239,318
Adjustments for non-cash items:
Debt forgiveness (2,274,644)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 75,000 0
Changes in assets and liabilities:
Accounts receivable 134,000 0
Inventories 143,161 0
Prepaid expenses (2,417) 0
Accounts payable 105,001 34,224
Accrued wages and benefits (28,273) 0
Accrued commissions
and marketing (44,792) 0
Other accrued expenses (37,839) 0
Net cash provided by (used in)
operating activities (52,159) (1,102)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to, and reduction
of, fixed assets 0 0
Net cash provided by (used in)
investing activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of notes payable 0 0
Principal payments on
notes payable 25,200 0
Net cash provided by (used in)
financing activities 25,200 0
NET INCREASE (DECREASE) IN CASH (26,959) (1,102)
CASH AND CASH EQUIVALENTS,
beginning of period 28,000 1,102
CASH AND CASH EQUIVALENTS,
end of period $ 1,041 $ 0
See Accompanying Notes to Financial Statement
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Note 1. Description of the Business
International Food & Beverage, Inc. (the Company) was in the
business,
of the manufacturing and marketing of fully prepared pizzas..
These
operations ceased as of December 31, 1997. In December 1998,
after new
management was in place, a decision was made to change the
company into
an internet company offering E-commerce, internet access as an
Internet
Service Provider, hosting through our own server and other
enhancements
and service through and for the Internet. It was also determined
to
change the companies name to better reflect the companies
operation:
Internet Businesss International, Inc.. The management will,
after
January 1, 1999, begin looking for ways to implement the Companys
plan
of business.
Note 2. Change in Control
In November 1998 new stock holders bought majority control from
Michael
W. Hogarty, and other stock holders, in a private transaction.
Immediately after the stock ownership changed Michael W. Hogarty
resigned as the Chief Executive Officer and President of the
Company,
and Michael W. Hogarty who was also the sole director resigned
after
nominating and electing two new directors from the group that
bought the
controlling shares of stock.
Note 3. Summary of Significant Accounting Policies
Fiscal Year
The Companys fiscal year was the 52-53 week period ending on the
Saturday closest to June 30. For clarity of presentation, fiscal
year
end and period end dates in the accompanying financial statements
and
notes are referred to as June 30 and December 31 for the
applicable
periods presented.
Accounts Receivable and Revenues
With the new venture for the company into E-commerce, revenues
will be
generated though credit card sales over the Internet. minimizing
the
risk of bad debt.
Inventories
With this new line of business inventories will be kept to a
minimum.
.
Fixed Assets
All of the Companys fixed assets will be Internet related. The
exact
extent of what this will consist of will be determined with time.
Other Assets
Other assets will consists primarily of software for Internet
programs
and other related assets.
Goodwill
Due to the change in the new nature of the business the company
will not
include goodwill in its financial reports at this time.
Income Taxes
The Company follows Statement of Financial Accounting Standards
(SPAS)
No. 109, Accounting for Income Taxes. Under this method, deferred
income taxed was recognized for the tax consequences in future
years of
difference between the tax bases of assets and liabilities, and
their
financial reporting amounts at each year-end based on enacted tax
laws
and statutory tax rates applicable to the periods in which the
differences were expected to affect taxable income. Valuation
allowances
were established, when necessary, to reduce deferred tax assets
to the
amount expected to be realized. Under this standard the provision
for
income taxes represents the tax payable for the period and the
change
during the period in deferred tax assets and liabilities.
Stockholders Equity Common Share
Stockholders equity common share is based on the reported net
equity
divided by the weighted average number of common shares
outstanding.
Cash Equivalents
The Company considered highly liquid debt instruments purchased
with a
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying value of the Companys cash and cash equivalents,
accounts
receivable, accounts payable, accrues expenses and notes payable
approximates fair value.
Management Estimates
The preparation of financial statements in conformity with
generally
accepted accounting principles required management to make
estimates and
assumptions that affect the reported amounts of 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.
Additional Paid In Capital
The additional paid in capital represented on the balance is from
the
difference of the Preferred Stock Issuance as noted in Note 5.
Stock
Issuance as per the agreement and actual amount issued which is
$110,000.
Note 4. Commitments
Leases
The company doesnt currently lease a corporate office facility. A
more
permanent base of operation will be determined after January 1,
1999.
Note 5 - Stock Issuance
Current stock authorized
The company is currently authorized to issue up to 199,000,000
share of
common stock and 1,000,000 of preferred stock.
Issued and outstanding stock
Common Stock: The company prior to this Quarter had issued
158,060,207
common shares of which 131,256,247 were restricted.
Preferred Stock : There was no Preferred Stock issued prior to
this
Quarter
Preferred Stock Issuance
On December 15, 1998 the company entered into an agreement with
Iron
Horse Holdings, Inc. (IHHI) wherein IHHI agreed to buy up to
25,000
the Companys preferred shares at the price of at the price of
$100.00
per share. Shares purchased under this agreement are to be issued
to
IHHI or its designee. Payment for shares sold under this
agreement is to
be in the form of a promissory note bearing interest at the rate
of 9%
per annum, and the obligation created thereby is to be secured by
a
blanket, or all inclusive security agreement executed by IHHI and
perfected by filings as specified by law. Until such note is
paid in
full, IHHI shall pay the 3% coupon on such shares as are issued
under
this agreement directly to the shareholder(s) of record at the
time such
payment becomes due.
Common Stock Issuance
On December 15, 1998 the company agreed to issue common shares
to Iron
Horse Holdings, Inc. IHHI for IHHI to pay its bills in exchange
for the
issuance of restricted common stock. Under the terms to this
agreement
the company issued an additional 4,452,885 shares by December 31,
1998.
On December 21, 1998 the company agreed to acquire several
internet
sites with issuance of common stock. Under to the terms of this
agreement 8,000,000 shares were issued.
As of December 31, 1998, the total common stock issued and
outstanding
was 170,513,092 shares. At year end the total preferred stock
issued
and outstanding was 20,900 shares
Note 6. Extraordinary Income
After review by legal consul about the collectability of previous
unsecured debts, it was determined by management to show those
debts as
uncollectable. Therefore management has decided to write those
debts
off and according to the Internal Revenue Code that uncollectable
debt
has to be shown as extraordinary income.
Note 7. Net Loss Carry Forward
The Net Loss Carry Forward that incurred due to the prior
companies
operation will be used to offset the impact of the extraordinary
income
as indicated above.
Note 8. Wages Payable
The corporate officers are due wages for the months of November
and
December of 1998. In lieu of cash payments, the officers will
take
additional shares of stock at the higher of $.02 per share or
market
price of the stock at the end of each month, November 30, 1998
and
December 31, 1998. These shares will not be issued until the
Company is
current with its filings as required by State, and Federal
Governments.
The wages are for $15,000.00 per month per officer. As of
December 31,
1998, there were only two officers of the Company, Albert R. Reda
and
Louis Cherry.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FIINANCIAL
CONDITION
AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Company and notes thereto contained
elsewhere in this report.
Results of Operations.
Revenues for the six month period ended December 31, 1998 of $0
decreased 100% when compared with revenues of $2,304,000 in the
prior
year comparable period due to the shut down of operations of the
Company
on December 31, 1997.
Liqiudity and Capital Resources.
Net cash used by the Company was $1,102 for the six month period
ended December 31, 1998 versus cash used in operating activities
of
$52,159 in the comparable prior year period.
Capital Expenditures.
No capital expenditures were made during the quarter ended on
December 31, 1998.
Year 2000 Issue.
The Year 2000 issue arises because many computerized
systems use
two digits rather than four to identify a year. Date sensitive
systems
may recognize the year 2000 as 1900 or some other date, resulting
in
errors when information using the year 2000 date is processed.
In
addition, similar problems may arise in some systems which use
certain
dates in 1999 to represent something other than a date. The
effects of
the Year 2000 issue may be experienced before, on, or after
January 1,
2000, and if not addressed, the impact on operations and
financial
reporting may range from minor errors to significant system
failure which
could affect the Companys ability to conduct normal business
operations.
This creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be
certain that all aspects of the Year 2000 issue affecting the
Company,
including those related to the efforts of customers, suppliers,
or other
third parties, will be fully resolved.
The Company, now under new management, is in the process of
developing an ongoing program to determine the extent to which
Year 2000
compliance issues will affect the Company. There can be no
assurance
that the Company will be able to develop a contingency plan that
will
adequately address issues that may arise in the Year 2000.
The Companys Year 2000 plans are based on managements best
estimates. Based on currently available information, management
does
not believe that the Year 2000 issues will have a material
adverse
impact on the Companys financial condition or results of
operations;
however, because of the uncertainties in this area, no assurances
can be
given in this regard.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis contains
forward looking statements within the meaning of Section 27A of
the
Securities Act of 1933, as amended, and Section 21E of the
Securities
Act of 1934, as amended, and as contemplated under the Private
Securities Litigation Reform Act of 1995, including statements
regarding, among other items, the Companys business strategies,
continued growth in the Companys markets, projections, and
anticipated
trends in the Companys business and the industry in which it
operates.
The words believe, expect, anticipate, intends, forecast,
project, and similar expressions identify forward-looking
statements.
These forward-looking statements are based largely on the
Companys
expectations and are subject to a number of risks and
uncertainties,
certain of which are beyond the Companys control. The Company
cautions
that these statements are further qualified by important factors
that
could cause actual results to differ materially from those in the
forward looking statements, including, among others, the
following:
reduced or lack of increase in demand for the Companys products,
competitive pricing pressures, changes in the market price of
ingredients used in the Companys products and the level of
expenses
incurred in the Companys operations. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to
be
accurate. The Company disclaims any intent or obligation to
update
forward looking statements.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or
against the company has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Companys stockholders
during the first quarter of the fiscal year covered by this
report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. A report on Form 8-K has been filed
during the second quarter of the fiscal year covered by this Form
10-Q
report. This report, dated November 23, 1998, covered the
following
items:
On November 23,1998, control of Registrant changed by virtue
of the purchase of 90,119,431 shares of the common stock of
Registrant by Arnold Sock, Albert Reda, Cherry Family Trust,
Reda Family Trust, hereinafter the Control Group (Control
Group), at private sale from Michael Hoggarty, (who, prior
to the following transactions held control of Registrant) as
follows:
Purchaser
No. Of Shares
Percentage of
Outstanding Shares
Arnold Sock
32,867,259
21%
Reda Family Trust
29,600,000
19%
Cherry Family Trust
26,086,086
17%
Albert Reda
1,566,086
1%
In addition, on November 23, 1998 the following persons, not
in the Control Group, purchased 18,132,791 shares, at
private sale, from Michael Hoggarty (who, prior to the
following transactions held control of Registrant) in the
following amounts:
Purchaser
No. Of Shares
Percentage of
Outstanding Shares
Michael Cherry
2,000,000
1%
Roxanne Cherry
2,000,000
1%
Iron Horse Trading,
Inc.
14,132,791
8%
Control Group members, Michael Cherry and Reda Family Trust
are shareholders of Iron Horse Trading, Inc.
On November 23,1998, Michael Hoggarty resigned from his
capacity as Director of Registrant. In his oral
resignation, Mr. Hoggarty cited no disagreement with the
Registrant on any matter relating to the Registrants
operations, policies or practices.
(b) Reports on Form 8-K. A second report on Form 8-K has been
filed during the second quarter of the fiscal year covered by
this Form
10-Q report. This report, dated December 15, 1998, covered the
following item:
On December 15, 1998, Registrant entered into an agreement
with Iron Horse Holdings, Inc. (IRON HORSE). Under the
terms of this agreement, Registrant will sell, and IRON
HORSE will buy up to 25,000 shares of Registrants preferred
stock at the price of $100.00 per share. Shares purchased
under this agreement are to be issued to IRON HORSE or its
designee. Payment for shares sold under this agreement is to
be in the form of a promissory note bearing interest at the
rate of 9% per annum, and the obligation created thereby is
to be secured by a blanket or all inclusive security
agreement executed by IRON HORSE and perfected by filings as
specified by law. Until such note is paid in full, IRON
HORSE shall pay the 3% coupon on such shares as are issued
under this agreement directly to the shareholder(s) of
record at the time such payment becomes due.
(b) Exhibits included or incorporated by reference herein: See
Exhibit
Index
SIGNATURE
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 BUSINESSS
INTERNATIONAL, INC.
(formerly known as
International Food & Beverage,
Inc.)
Dated: May 10, 1999 By: /s/ Albert R. Reda
Albert R. Reda
Chief Executive Officer,
Secretary
EXHIBIT INDEX
Exhibit No. Description
3.01 Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3.01 of the Registrants
Annual Report on Form 10-K for the fiscal year ended June 26,
1993).
3.02 Bylaws (incorporated by reference to Exhibit 3.02 to
the Companys registration statement on Form S-1 filed with the
Securities and Exchange Commission on October 29, 1991, the
Registration Statement).
4.01 Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.01 to the Registration Statement).
10.1 Employment Agreement, dated March 15, 1988, as
amended January 5, 1989, and November 9, 1990 between Michael W.
Hogarty and the Company (incorporated by reference to Exhibit
10.11 to the Registration Statement).
10.2 1988 Stock Option Plan for Key Employees of
International Food & Beverage, Inc. (incorporated by reference to
Exhibit 10.19 to the Registration Statement).
10.3 Promissory Note of the Company dated June 29, 1995,
in the principal amount of $100,000 in favor of Michael W.
Hogarty. Promissory Notes of the Company in substantially the
same form as in Exhibit 10.5 herein were issued at various times
between October 16, 995 and January 31, 1996 in the total
principal amount of $355,000 in favor of Michael W. Hogarty
(incorporated by reference to Exhibit 10.6 of the Registrants
Annual Report on Form 10-K for the fiscal year ended June 30,
1995).
10.4 Loan and Security Agreement, dated June 29, 1995
between the Company and Michael W. Hogarty (incorporated by
reference to Exhibit 10.7 of the Registrants Annual Report on
Form 10-K for the fiscal year ended June 30, 1995).
10.5 Loan and Security Agreement, dated March 15, 1996
between Fremont Business Credit and the Company and related
documents and agreements executed in connection therewith
(incorporated by reference to Exhibit 10.7 of the Registrants
Annual Report on Form 10-K for the fiscal year ended June 30,
1996).
22.1 Subsidiaries (incorporated by reference to Exhibit
22.1 to the Registration Statement).
27 Financial Data Schedule.