U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 0-23920
JAVA GROUP, INC.
------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 11-2987370
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
404-999 Canada Place, Vancouver, B.C. Canada V6C 3E2
-----------------------------------------------------------
(Address of principal executive offices)
(604) 641-1362
---------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES |X| NO |_|
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of February 10, 1997 - 7,580,000
shares of common stock, $.0001 par value.
<PAGE>
INDEX
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PART I -- Financial Information Page
Item 1. Financial statements.................................................2
Consolidated Balance Sheet as of December 31, 1996 and 1995 (unaudited)......3
Consolidated Statement of Operations for the three months and
six months ended December 31, 1996 and 1995 (unaudited)................4
Consolidated Statement of Cash Flows for the six months ended
December 31, 1996 and 1995 (unaudited).................................5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...................................6
PART II -- Other Information.................................................7
Signatures...................................................................8
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<PAGE>
PART I Financial Information
Item 1. Financial statements (Unaudited)
- 2 -
<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
as of December 31, 1996 and 1995
(Unaudited)
December 31,
---------------------
1996 1995
Assets
Current Assets
Cash $ 53,472 $1,390
Accounts receivable 31,551 -
Inventory 28,719 3,322
Loans receivable 50,854 -
Prepaid expenses and deposits 289,347 15,467
---------- --------
453,943 20,179
Capital Assets 283,711 86,754
Investment in Joint Venture (50%) 16,381 9,820
---------- --------
$754,035 $116,753
========== ========
Liabilities and Stockholders' Equity
Current Liabilities
Bank indebtedness $ 79,837 $ -
Accounts payable 76,520 28,476
Loans payable - demand 503,392 361,790
---------- --------
659,749 390,266
Officer's Loan 8,645 58,317
---------- --------
668,394 448,583
---------- --------
Stockholders' Equity (Deficit)
Common Stock, 50,000,000 common shares
authorized, par value $0.0001 per share,
7,080,000 and 4,900,000 shares issued respectively,
140,000 of which are owned by the treasury and
6,940,000 shares are outstanding 708 490
Paid in Capital, subscriptions for stock paid
for in excess of par value 1,119,367 46,800
Deficit Accumulated During the Development Stage (1,034,434) (379,120)
---------- --------
85,641 (331,830)
---------- --------
$754,035 $116,753
========== ========
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<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
for the three months and six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
-------------------------- --------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Coffee House Operations
Revenue $ 55,745 $ 13,444 $ 82,677 $ 13,444
----------- ----------- ----------- -----------
Expenses
Amortization and depreciation 10,558 3,938 14,609 3,938
Bank charges -- 133 12 133
Coffee and supplies 15,328 9,247 31,354 9,247
Office 1,392 313 1,914 313
Rent 24,358 13,674 35,779 13,674
Royalties 2,788 633 4,134 633
Telephone 705 41 881 41
Travel and automobile -- 1,648 81 1,648
Wages 26,938 4,384 37,784 4,384
----------- ----------- ----------- -----------
82,067 34,011 126,548 34,011
----------- ----------- ----------- -----------
Net loss before adjustment for
minority interest (26,322) (20,567) (43,871) (20,567)
Less minority interest 2,540 4,114 4,929 4,114
----------- ----------- ----------- -----------
Net loss from Coffee House operations (23,782) (16,453) (38,942) (16,453)
----------- ----------- ----------- -----------
Coffee House start-up costs
Rent 7,367 -- 9,605 --
Supplies 9,655 -- 9,655 --
Wages 10,685 -- 15,510 --
----------- ----------- ----------- -----------
(27,707) -- (34,770) --
----------- ----------- ----------- -----------
Head Office Expenses
Accounting and legal 23,008 2,500 26,097 5,000
Advertising 278 1,114 3,567 3,014
Amortization and depreciation 713 -- 1,426 --
Bank charges and interest 974 120 1,739 262
Consulting -- (1,476) -- --
Foreign exchange 11,852 (2,169) 14,329 (1,077)
Investor relations 20,650 3,715 54,734 12,800
Office, rent and telephone (9,563) 11,511 59,990 25,355
Salaries and benefits 16,784 -- 16,784 --
Transfer agent 174 1,003 327 1,003
Travel and promotion 34,760 5,397 62,838 5,397
----------- ----------- ----------- -----------
(99,630) (21,715) (241,831) (51,754)
----------- ----------- ----------- -----------
Other Income and Losses
Interest income -- -- 2,682 --
Other assets written-off -- -- -- --
Income (loss) from equity investments (993) 8,999 (427) 6,315
----------- ----------- ----------- -----------
(993) 8,999 2,255 6,315
----------- ----------- ----------- -----------
Net loss $ (152,112) $ (29,169) $ (313,288) $ (61,892)
=========== =========== =========== ===========
Net Loss Per Share $ (.02) $ (.01) $ (.05) $ (.01)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 6,481,667 4,760,000 6,435,833 4,760,000
=========== =========== =========== ===========
</TABLE>
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<PAGE>
Java Group, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
for the six months ended December 31, 1996 and 1995
(Unaudited)
Six months ended
December 31,
------------------------
1996 1995
Cash Flows to Operating Activities
Net loss $(313,288) $ (61,892)
Adjustments to reconcile net loss to cash
Amortization and depreciation 16,035 3,938
Development costs written-off -- --
(Income) loss from equity investments 427 (6,315)
Gain on extinguishment of debt -- --
(Increase) in accounts receivable (28,290) 2,378
(Increase) decrease in inventory (12,275) (3,322)
(Increase) in loan receivable (18,331) --
(Increase) in prepaid expenses (25,529) (10,044)
Increase (decrease) in accounts payable 59,338 3,467
--------- ---------
Net Cash Used by Operating Activities (321,913) (71,790)
--------- ---------
Cash Flows to Investing Activities
Increase in capital assets (170,455) (23,409)
Increase in other assets -- --
Increase in coffee house investments (7,542) (61)
--------- ---------
Net Cash Used by Investing Activities (177,997) (23,470)
--------- ---------
Cash Flows to Financing Activities
Increase (decrease) in minority interest (1,558) (5,355)
Increase in shares issued -- --
Increase in paid in capital -- --
Increase (decrease) in loans from an officer (47,855) 56,905
Increase in loans from others 82,071 45,100
--------- ---------
Net Cash Provided by Financing Activities 32,658 96,650
--------- ---------
Increase (decrease) in cash (467,252) 1,390
Cash and equivalents - beginning of period 440,887 --
--------- ---------
Cash and equivalents - end of period $ (26,365) $ 1,390
========= =========
Non-cash financing activity
A total of 550,000 shares were issued on
December 12, 1996 pursuant to three separate
consulting and public relations contracts at
$.4687 per share $ 257,785 $ --
========= =========
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The Company started its initial development of gourmet coffee shops in Germany
during the last six months. The Company believes that it is now positioned for
an aggressive expansion program. Extensive research has been completed relative
to the market concentration for gourmet coffee shops in Germany. Based on such
research, the Company believes that competition in Germany is limited for both
liquid coffee and roasted gourmet coffee beans.
The Company has been sponsored in part by a strategic partner in Germany with
high recognition, Warsteiner Brewery. Warsteiner provides approximately 50% of
the capital cost of each coffee house the Company owns in Germany through
non-interest bearing long-term loans to the Company. The Company has been
negotiating with financial institutions in Germany to provide additional
financing to expedite development of coffee houses in Germany. The ability of
the Company to expand its operations in Germany is subject to its procurement of
sufficient capital through loans or the sale of securities.
Revenues from coffee house operations increased by $69,233 to $82,677 during the
six months ended December 31, 1996 compared to $13,444 during the prior period,
and increased by $42,301 to $55,745 during the three months ended December 31,
1996 compared to $13,444 during the prior period. The increases were principally
attributable to the opening of coffee houses in Germany. Combined expenses,
coffee house start-up costs, and head office expenses increased by $317,384 to
$403,149 during the six months ended December 31, 1996 compared to $85,765
during the prior period, and increased by $153,678 to $209,404 during the three
month period ended December 31, 1996 compared to $55,726 during the prior
period. The increases were principally attributable to (i) approximately
$118,000 ($36,000 for the three months) related to administrative costs in
establishing the Company's business and becoming a reporting company under the
Securities Exchange Act of 1934, (ii) approximately $74,000 ($8,000 for the
three months) related to travel and administrative costs incurred in connection
with the Company's expansion into Germany, (iii) approximately $35,000 ($28,000
for the three months) related to start-up rent, supplies and wages incurred in
connection with the new German operations, (iv) approximately $85,000 ($61,000
for the three months) for operation of the German coffee houses and (v)
approximately $6,000 ($21,000 for the three months) for operation of the
Vancouver coffee house.
The Company incurred a net loss of $313,288 during the six months ended December
31, 1996 compared with a net loss of $61,892 during the prior period and a net
loss of $152,112 during the three months ended December 31, 1996 compared to
$29,169 for the prior period. The increased losses were attributable, in part,
to increased expenses as discussed above and to losses of $20,000 in the
Broadway, Vancouver coffee house operation compared to a loss of $16,000 during
the comparable prior year period and to $19,000 ($11,000 of which is
amortization and depreciation) in the first five months of coffee house
operations in Germany. The Company believes that the $19,000 loss from German
operations was due, in large part, to seasonal fluctuations and long holidays in
December. A total of $16,000 was recognized as a loss on translation of the
German accounts from Deutschmarks into U.S. dollars.
During the six months ended December 31, 1996, the Company financed its
operations in part from proceeds of demand loans aggregating $82,000. Net cash
used in operating activities increased to $321,913 during the six months ended
December 31, 1996 compared to $71,790 during the six months ended December 31,
1995. The increase was principally attributable to the increased net loss
described above. Net cash used in investing activities increased to $177,997
during the six months ended December 31, 1996 compared to $23,470 during the
prior period. The increase was principally attributable to $170,000 spent on
capital assets for the two Dresden, Germany coffee house operations. Net cash
provided by financing activities decreased to $32,658 during the six months
ended December 31, 1996 compared to $96,650 during the prior period. The
decrease was principally attributable to the repayment of an officer's loan in
the amount of $48,000, offset somewhat by the $82,000 loan from third parties
referred to above.
At December 31, 1996 the Company had a working capital deficiency of $206,000,
compared with a deficiency of $370,000 at December 31, 1995. Subsequent to
December 31, 1996, the Company settled a $193,000 demand loan by issuing 500,000
shares of Common Stock (based on a price of $.386 per share).
- 6 -
<PAGE>
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
None
Item 6. Exhibits and Reports on Form 8-K
None
- 7 -
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: February 11, 1997 JAVA GROUP, INC.
By:/s/ Robert P. Gillingham
--------------------------------------------------
Robert P. Gillingham, President (Principal
Executive Officer and Principal Financial Officer)
- 8 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 53,472
<SECURITIES> 0
<RECEIVABLES> 31,551
<ALLOWANCES> 0
<INVENTORY> 28,719
<CURRENT-ASSETS> 453,943
<PP&E> 307,966
<DEPRECIATION> 24,255
<TOTAL-ASSETS> 754,035
<CURRENT-LIABILITIES> 659,749
<BONDS> 0
0
0
<COMMON> 1,120,075
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 85,641
<SALES> 82,677
<TOTAL-REVENUES> 85,359
<CGS> 0
<TOTAL-COSTS> 121,619
<OTHER-EXPENSES> 277,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (313,288)
<INCOME-TAX> 0
<INCOME-CONTINUING> (313,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (313,288)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
