U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-83375
GOURMET HERB GROWERS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0575571
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2302 Parley's Way, Salt Lake City, Utah 84109
(Address of principal executive offices)
(801) 466-4614
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (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 report(s), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
The number of $.001 par value common shares outstanding at September 30, 1999:
1,600,000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See attached.
<PAGE>
GOURMET HERB GROWERS, INC.
UNAUDITED BALANCE SHEETS
ASSETS
September 30, December 31,
1999 1998
___________ ___________
CURRENT ASSETS:
Cash in bank $ 13,798 $ 25,006
___________ ___________
Total Current Assets 13,798 25,006
___________ ___________
PROPERTY, PLANT AND EQUIPMENT:
Building, net 2,675 2,904
___________ ___________
$ 16,473 $ 27,910
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 233 $ 244
___________ ___________
Total Current Liabilities 233 244
___________ ___________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
1,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
24,000,000 shares authorized,
1,600,000 shares issued and
outstanding 1,600 1,600
Capital in excess of par value 38,939 36,869
Deficit accumulated during the
development stage (24,299) (10,803)
___________ ___________
Total Stockholders' Equity 16,240 27,666
___________ ___________
$ 16,473 $ 27,910
___________ ___________
The accompanying notes are an integral part of these financial
statements.
1
<PAGE>
GOURMET HERB GROWERS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
From Inception
For the Three For the Nine on January 22,
Months Ended Months Ended 1998 through
September 30, September 30, September 30,
____ ______ ___________ ______ ______
1999 1998 1999 1998 1999
______ ______ ___________ ______ ______
REVENUE $ 4,359 $1,836 $ 5,604 $ 5,606 $11,150
COST OF SALES 201 949 1,280 844 2,796
______ ______ _________ ______ ______
GROSS PROFIT 4,158 887 4,324 4,762 8,354
EXPENSES:
General and
administrative 10,792 2,527 17,820 11,501 32,653
______ ______ _________ ______ ______
LOSS BEFORE INCOME
TAXES (6,634) (1,640) (13,496) (6,739) (24,299)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
______ ______ _________ ______ ______
NET LOSS $(6,634)$(1,640) $ (13,496) $(6,739)$(24,299)
______ ______ _________ ______ ______
LOSS PER COMMON
SHARE $ (.00)$ (.00) $ (.01) $ (.00)$ (.02)
______ ______ _________ ______ _______
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
GOURMET HERB GROWERS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
From Inception
on January 22,
For the Nine 1998 through
Months Ended September 30,
September 30, ___________________
1999 1998 1999
___________ _________ _________
Cash Flows from Operating Activities:
Net loss $ (13,496) $ (6,739) $ (24,299)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Non-cash expense 2,070 1,610 4,370
Depreciation 229 185 503
Change in assets and liabilities:
Increase (decrease) in accounts
Payable and accrued expenses (11) - 233
__________ _________ _________
Net Cash (Used) by Operating Activities(11,208) (4,944) (19,193)
__________ _________ _________
Cash Flows from Investing Activities:
Payments for building and equipment - (3,178) (3,178)
__________ _________ _________
Net Cash (Used) by Investing Activities - (3,178) (3,178)
__________ _________ _________
Cash Flows from Financing Activities:
Proceeds from common stock issuance - 41,850 41,850
Payments for stock offering costs - (5,681) (5,681)
__________ _________ _________
Net Cash Provided by Financing Activities- 36,169 36,169
__________ _________ _________
Net Increase in Cash (11,208) 28,047 13,798
Cash at Beginning of Period 25,006 - -
__________ _________ _________
Cash at End of Period $ 13,798 $ 28,047 $ 13,798
__________ _________ _________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing
Activities:
For the period ended September 30, 1999:
An officer/shareholder allowed the Company to use his property
rent-free. The value of the rent-free use of the property was
estimated at $2,070 for the nine month period and was accounted
for as a contribution to capital.
For the period ended September 30, 1998:
An officer/shareholder allowed the Company to use his property
rent-free. The value of the rent-free use of the property was
estimated at $1,610 for the nine month period and was accounted
for as a contribution to capital.
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the
State of Nevada on January 22, 1998. The Company is growing
gourmet herbs and vegetables for restaurants and delicatessens.
The Company has, at the present time, not paid any dividends and
any dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Interim Financial Statements - The accompanying interim financial
statements have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at
September 30, 1999 and for all the periods presented have been
made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's December 31, 1998 audited financial
statements. The results of operations for the periods ended
September 30, 1999 and 1998 are not necessarily indicative of the
operating results for the full year.
Property, Plant and Equipment - Property, plant and equipment is
stated at cost. Expenditures for major renewals and betterments
that extend the useful lives of property and equipment are
capitalized, upon being placed in service. Expenditures for
maintenance and repairs are charges to expense as incurred.
Depreciation is computed for financial statement purposes using
the straight-line method over the estimated useful life of the
asset, which is 10 years.
Loss Per Share - The computation of loss per share is based on
the weighted average number of shares outstanding during the
period presented in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earning Per Share" [See
Note 2].
Cash and Cash Equivalents - For purposes of the financial
statements, the Company considers all highly liquid debt
investments purchased with a maturity of three months or less to
be cash equivalents.
Accounting 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, the disclosures of
contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from
those estimated.
4
<PAGE>
GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 2 - LOSS PER SHARE
The following data show the amounts used in computing loss per
share for the periods ended September 30, 1999 and 1998:
From Inception
For the Three on January 22,
Months Ended For the Nine 1998 through
September 30, Months Ended September 30,
_______ _______ September 30, _______ _______
1999 1998 1999 1998 1999
_______ _______ ____________ _______ _______
Loss from continuing
operationsavailable to
common shareholders
(numerator) $(6,634) $(1,640) $ (13,496) $(6,739) $(24,299)
________ _______ ____________ _______ _______
Weighted average
number of common
shares outstanding
used in loss per
share for the period
(denominator) 1,600,000 1,600,000 1,600,000 1,540,837 1,575,893
_________ ________ ___________ ________ _________
NOTE 3 - CAPITAL STOCK
Common Stock - During January 1998, in connection with its
organization, the Company issued 1,450,000 shares of its
previously authorized, but unissued common stock. Total proceeds
from the sale of stock amounted to $4,350 (or $.003 per share).
During April and May, 1998 the Company issued 150,000 shares of
its previously authorized, but unissued common stock in a public
offering. Total proceeds from the sale of stock amounted to
$37,500 (or $.25 per share). Offering costs of $5,681 were
offset to additional paid in capital.
Preferred Stock - The Company has authorized 1,000,000 shares of
preferred stock $.001 par value, with such rights, preferences
and designations and to be issued in such series as determined by
the board of Directors. No shares are issued and outstanding at
September 30, 1999.
NOTE 4 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes". SFAS 109 requires the Company to provide a
net deferred tax asset/liability equal to the expected future tax
benefit/expense of temporary reporting differences between book
and tax accounting methods and any available operating loss or
tax credit carryforwards. At September 30, 1999, the Company has
available unused operating loss carryforwards of approximately
$19,100, which may be applied against future taxable income and
which expire in 2018.
5
<PAGE>
GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES [Continued]
The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is
dependent, in part, upon the tax laws in effect, the future
earnings of the Company, and other future events, the effects of
which cannot be determined. Because of the uncertainty
surrounding the realization of the loss carryforwards the Company
has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has
been recognized for the loss carryforwards. The net deferred tax
assets are approximately $6,500 and $2,900 as of September 30,
1999 and December 31, 1998, respectively, with an offsetting
valuation allowance at each period end of the same amount
resulting in a change in the valuation allowance of approximately
$3,600 for the nine months ended September 30, 1999.
NOTE 5 - RELATED PARTY TRANSACTIONS
Management Compensation - During the nine months ended September
30, 1999 the Company paid $4,100 in salary to the Company's
president.
Office Space - The Company has not had a need to rent office
space. An officer/shareholder of the Company is allowing the
Company to use his home as a mailing address, as needed, at no
expense to the Company.
Greenhouse - During the period ended December 31, 1998 the
Company built a greenhouse on the property of an
officer/shareholder of the Company. The officer/shareholder is
allowing the Company to use his property at no expense to the
Company. However, the Company is recording rent expense of $230
per month for the rent-free use of the property with an
offsetting capital contribution to capital in excess of par value
of the same amount. Rent expense for the nine months ended
September 30, 1999 was $2,070.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment, at
cost, less accumulated depreciation:
September 30, December 31,
1999 1998
___________ ___________
Greenhouse $ 3,178 $ 3,178
Less accumulated depreciation (503) (274)
___________ ___________
$ 2,675 $ 2,904
___________ ___________
Depreciation expense for the nine months ended September 30, 1999
amounted to $238.
6
<PAGE>
GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 7 - SUBSEQUENT EVENTS
Proposed Common Stock Warrants Offering - In July 1999, the
Company filed a registration statement with the United States
Securities and Exchange Commission on Form SB-2 under the
Securities Act of 1933. The Company proposes to declare a
dividend of 800,000 warrants to purchase common stock ("the
warrants") to shareholders of record as of the date of the
registration statement. Each warrant allows the holder to
acquire one share of common stock at $1.25 per share. The
warrants are exercisable at any time until June 30, 2002. The
Company may redeem all or a portion of the warrants, at $.01 per
warrant, at any time upon 30 days' prior written notice to the
warrant holders. Direct offering costs are expected to be
approximately $20,000. The Company has not incurred any offering
costs as of September 30, 1999, but any such costs will be netted
against the proceeds of the proposed offering.
7
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF OPERATIONS
The Company was only recently incorporated January 22, 1998. Upon
inception, the Company issued 1,450,000 shares of common stock to its founding
stockholders. On April 2, 1998, the Company commenced a public offering of up
to 150,000 shares of its common stock, in reliance upon Rule 504 of Regulation
D, promulgated by the U.S. Securities & Exchange Commission under the
Securities Act of 1933. The offering closed in May, 1998. Pursuant thereto,
the Company sold 150,000 shares, increasing the total issued and outstanding
common stock to 1,600,000 shares.
In July, 1999, the Company filed a registration statement on Form SB-2
with the U.S. Securities & Exchange Commission under the Securities Act of
1933, to register the distribution and exercise of warrants. This
registration statement was declared effective on November 5, 1999. At that
time the Company became subject to the information requirements of the
Securities Exchange Act of 1934. Accordingly, the Company will file annual
and quarterly reports and other information with the Commission, starting with
this report on Form 10-QSB. No securities have yet been sold pursuant to this
offering.
PLAN OF OPERATIONS.
Management's plan of operation for the next twelve months is to continue
using existing capital and any funds from exercise of warrants in this
offering to provide general working capital during the next twelve months.
Capital commitments consist principally of management compensation of $500 per
month throughout the year, and the costs of seed, fertilizer, equipment, etc.
during the growing season. Management believes existing funds will be
sufficient to sustain Gourmet Herb Growers for at least another year or
growing season, during which time management hopes to increase production and
generate sufficient revenues to operate profitably, and internally generate
sufficient cash flows to fund operations on an ongoing basis, but this is not
assured. At this time, we do not know how long it will be necessary to fund
operations from existing capital.
Gourmet Herb Growers commenced planned principal operations and began to
generate revenues from sales of its produce during the first year of
operations in amounts sufficient to generate a gross profit, so it is not
still considered a development stage company for accounting and financial
reporting purposes. Gross profit of $4,090 was generated for the year ended
December 31, 1998, and $4,324 for the nine months ended September 30, 1999.
However, revenues have not yet been generated in sufficient amounts to offset
operating costs. Operating activities have not provided any net cash flows to
date, but used net cash of $7,985 during the year ended December 31, 1998, and
$11,208 during the nine months ended September 30, 1999. General and
administrative expenses were $14,893 for the year ended December 31, 1998,
resulting in a net loss of $10,893; and $17,820 for the nine months ended
September 30, 1999, resulting in a net loss of $13,496.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) See Part I, Item 1 (financial statements) and Item 2 (management's
discussion) for financial information and a discussion regarding
use of proceeds.
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
<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.
GOURMET HERB GROWERS, INC.
Date: November 30, 1999 by: /s/ Rino Di Meo
Rino Di Meo, President & Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GOURMET HERB GROWERS, INC. FOR THE NINE-MONTH PERIOD
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,798
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,798
<PP&E> 3,178
<DEPRECIATION> 503
<TOTAL-ASSETS> 16,473
<CURRENT-LIABILITIES> 233
<BONDS> 0
0
0
<COMMON> 1,600
<OTHER-SE> 14,640
<TOTAL-LIABILITY-AND-EQUITY> 16,473
<SALES> 5,604
<TOTAL-REVENUES> 5,604
<CGS> 1,280
<TOTAL-COSTS> 1,280
<OTHER-EXPENSES> 17,820
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,496)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
