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: June 30, 2000
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 June 30, 2000:
1,600,000
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See attached.
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GOURMET HERB GROWERS, INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000
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GOURMET HERB GROWERS, INC.
CONTENTS
PAGE
Accountants' Review Report 1
Unaudited Condensed Balance Sheets,
June 30, 2000 and December 31, 1999 2
Unaudited Condensed Statements of Operations,
for the three and six months ended June 30,
2000 and 1999 and from inception on January 22,
1998 through June 30, 2000 3
Unaudited Condensed Statements of Cash Flows,
for the six months ended June 30, 2000 and
1999 and from inception on January 22, 1998
through June 30, 2000 4
Notes to Unaudited Condensed Financial
Statements 5 - 8
<PAGE>
ACCOUNTANTS' REVIEW REPORT
Board of Directors
GOURMET HERB GROWERS, INC.
Salt Lake City, Utah
We have reviewed the accompanying condensed balance sheet of
Gourmet Herb Growers, Inc. as of June 30, 2000 and the related
condensed statements of operations for the three and six months
ended June 30, 2000 and the statements of cash flows for the six
months ended June 30, 2000 and for the period from inception on
January 22, 1998 through June 30, 2000. All information included
in these financial statements is the representation of management
of Gourmet Herb Growers, Inc..
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. 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, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed financial
statements reviewed by us, in order for them to be in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that Gourmet Herb Growers, Inc. will continue as a going concern.
As discussed in Note 7 to the financial statements, Gourmet Herb
Growers, Inc. has current liabilities in excess of current
assets, has incurred losses since its inception and has not yet
been successful in establishing profitable operations, raising
substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also
described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
/s/PRITCHETT, SILER & HARDY, P.C.
PRITCHETT, SILER & HARDY, P.C.
August 10, 2000
Salt Lake City, Utah
1
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GOURMET HERB GROWERS, INC.
CONDENSED BALANCE SHEETS
[Unaudited - See Accountants' Review Report]
ASSETS
June 30, December 31,
2000 1999
___________ ___________
CURRENT ASSETS:
Cash in bank $ 1,077 $ 3,730
___________ ___________
Total Current Assets 1,077 3,730
PROPERTY, PLANT AND EQUIPMENT, Net 3,039 3,267
___________ ___________
$ 4,116 $ 6,997
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,554 $ 2,881
Accounts payable and accrued expenses
- related parties 1,350 -
Advances from related parties 5,400 -
___________ ___________
Total Current Liabilities 8,304 2,881
___________ ___________
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 39,629 39,629
Deficit accumulated during the
development stage (45,417) (37,113)
___________ ___________
Total Stockholders' Equity (4,188) 4,116
___________ ___________
$ 4,116 $ 6,997
___________ ___________
Note: The balance sheet at December 31, 1999 was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
2
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GOURMET HERB GROWERS, INC.
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited - See Accountants' Review Report]
For the For the
Three Month Six Month From Inception
Period Ended Period Ended on January 22,
June 30, June 30, 1998, Through
___________________ _________________ June 30,
2000 1999 2000 1999 2000
_________ _________ ________ ________ ___________
REVENUE $ 1,818 $ 1,245 $ 2,966 $ 1,365 $ 17,186
COST OF SALES 273 456 565 1,079 3,532
_________ _________ ________ ________ ___________
GROSS PROFIT (LOSS) 1,545 789 2,401 286 13,654
EXPENSES:
General and
administrative 5,936 3,981 10,705 7,148 59,071
_________ _________ ________ ________ ___________
LOSS BEFORE INCOME
TAXES (4,391) (3,192) (8,304) (6,862) (45,417)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
_________ _________ ________ ________ ___________
NET LOSS $ (4,391)$ (3,192) $ (8,304)$ (6,862) $ (45,417)
_________ _________ ________ ________ ___________
LOSS PER COMMON
SHARE $ (.00)$ (.00) $ (.01)$ (.00) $ (.03)
_________ _________ ________ ________ ___________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
3
<PAGE>
GOURMET HERB GROWERS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited - See Accountants' Review Report]
From Inception
For the Six on January 22,
Months Ended 1998 Through
June 30, June 30,
_______________________ __________________
2000 1999 2000
__________ ___________ __________________
Cash Flows From Operating
Activities:
Net loss $ (8,304) $ (6,862) $ (45,417)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Non cash expense - 1,380 5,060
Depreciation and
amortization 228 149 838
Changes in assets and
liabilities:
Increase (decrease)
in accounts payable
and accrued expenses (1,327) 437 1,554
Increase in accounts
payable - related
party 1,350 - 1,350
__________ ___________ __________________
Net Cash (Used) by
Operating Activities (8,053) (4,896) (36,615)
__________ ___________ __________________
Cash Flows From Investing
Activities:
Payments for building and
equipment - - (3,877)
__________ ___________ __________________
Net Cash (Used) by
Investing Activities - - (3,877)
__________ ___________ __________________
Cash Flows From Financing
Activities:
Proceeds from common
stock issuance - - 41,850
Proceeds from advances
from shareholders 5,400 - 5,400
Payments for stock
offering costs - - (5,681)
__________ ___________ __________________
Net Cash Provided by
Financing Activities 5,400 - 41,569
__________ ___________ __________________
Net Increase (Decrease)
in Cash (2,653) (4,896) 1,077
Cash at Beginning of Period 3,730 25,006 -
__________ ___________ __________________
Cash at End of Period $ 1,077 $ 20,110 $ 1,077
__________ ___________ __________________
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 six months ended June 30, 2000:
None.
For the six months ended June 30, 1999:
An officer/shareholder is allowing the Company to use his
property for a greenhouse and to grow crops
rent-free. The value for the rent-free use of the property was
estimated at $1,380 for the six months ended June 30, 1999 and
was accounted for as a contribution to capital.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
4
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GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Gourmet Herb Growers, Inc. (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.
Condensed Financial Statements - The accompanying 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 June
30, 2000 and 1999 and for the periods then ended 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, 1999 audited financial
statements. The results of operations for the periods ended June
30, 2000 are not necessarily indicative of the operating results
for the full year.
Loss Per Share - The computation of loss per share is based on
the weighted average number of shares outstanding during the
periods presented in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earning Per Share" [See
Note 6].
Cash and Cash Equivalents - For purposes of the financial
statements, the Company considers all highly liquid debt
investments purchased with a maturity of six months or less to be
cash equivalents.
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 charged to expense as incurred.
Depreciation is computed for financial statement purposes using
the straight-line method over the estimated useful lives of the
assets, which range from five to ten years.
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.
Revenue Recognition - The Company recognizes revenue upon
delivery of the product. Direct costs including fertilizer,
chemicals, seeds and soil are charged to cost of goods sold.
Indirect costs are included in general and administrative.
5
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GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at June
30, 2000 and December 31, 1999:
June 30, December 31,
2000 1999
____________ ____________
Greenhouse and equipment $ 3,877 $ 3,877
Less accumulated depreciation (838) (610)
____________ ____________
$ 3,039 $ 3,267
____________ ____________
Depreciation expense for the periods ended June 30, 2000 and 1999
amounted to $228 and $149, respectively.
NOTE 3 - CAPITAL STOCK AND WARRANTS
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
June 30, 2000.
Common Stock Warrants Offering -. During 1999 the Company
declared a dividend of 800,000 warrants to purchase common stock
("the warrants") to shareholders of record as of November 5,
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 to register the shares of common stock
underlying the warrants. 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.
6
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GOURMET HERB GROWERS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 No. 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 June 30, 2000, the Company has
available unused operating loss carryforwards of approximately
$45,000, which may be applied against future taxable income and
which expire in 2019 and 2020.
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 $16,500 as of June 30, 2000, with an
offsetting valuation allowance at June 30, 2000 of the same
amount. The change in the valuation allowance for the six months
ended June 30, 2000 is approximately $5,500.
NOTE 5 - RELATED PARTY TRANSACTIONS
Management Compensation - During the six months ended June 30,
2000, the Company paid $1,500 in salary to the Company's
president. During the six months ended June 30, 1999, the
Company paid $1,000 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 and Property - During the period ended December 31,
1998 the Company built a greenhouse on the property of an
officer/shareholder of the Company. From inception to December
31, 1999, the Company recorded rent expense of $230 per month
for the rent-free use of the property with an offsetting capital
contribution entry to capital in excess of par value of the same
amount. Beginning January 1, 2000 the Company is paying $275
rent per month to the Company's president. Rent expense for the
six months ended June 30, 2000 was $1,650. At June 30, 2000 the
Company owed the President $850 in past rent and $500 for
expenses paid on behalf of the Company. Rent expense recorded
for the six months ended June 30, 1999 was $1,380.
Sales - During the six months ended June 30, 2000 and 1999 the
Company sold $791 (approximately 27% of total sales) and $1,021
(approximately 75% of total sales) of the Company's product to a
restaurant owned by the Company's president.
Advances - During the six months ended June 30, 2000 a
shareholder of the Company advanced the Company $5,400. The
advances are non-interest bearing and payable on demand.
7
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GOURMET HERB GROWERS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per
share for the periods presented:
For the For the
Three Month Six Month From Inception
Period Ended Period Ended on January 22,
June 30, June 30, 1998, Through
___________________ _________________ June 30,
2000 1999 2000 1999 2000
_________ _________ _________ _________ ___________
Loss from continuing
operations available
to common
shareholders
(numerator) $ (4,391)$ (3,192) $ (8,304)$ (6,862)$ (45,417)
_________ _________ _________ _________ ___________
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 1,600,000 1,583,315
_________ _________ _________ _________ ___________
Dilutive earnings (loss) per share was not presented, as the
Company had no common equivalent shares for all periods presented
that would affect the computation of diluted earnings (loss) per
share.
At June 30, 2000 the Company had 800,000 outstanding warrants
which were not used in the computation of loss per share because
their effect would be anti-dilutive.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
However, the Company has incurred losses since its inception, and
has not yet been successful in establishing profitable
operations. Further, the Company has current liabilities in
excess of current assets. These factors raise substantial doubt
about the ability of the Company to continue as a going concern.
In this regard, management is proposing to raise any necessary
additional funds not provided by operations through loans and/or
through additional sales of its common stock. There is no
assurance that the Company will be successful in raising this
additional capital or in achieving profitable operations. The
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
8
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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 files annual and
quarterly reports and other information with the Commission. 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 to provide
general working capital during the next twelve months.
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, $7,163 for the year ended December 31, 1999, and $2,401 for
the six months ended June 30, 2000. 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, $20,577 during the year ended
December 31, 1999, and 8,503 during the six months ended June 30, 2000.
General and administrative expenses were $14,893 for the year ended December
31, 1998, resulting in a net loss of $10,893; $33,473 for the year ended
December 31, 1999, resulting in a net loss of $26,310, and $10,705 for the six
months ended June 30, 2000, resulting in a net loss of $8,304. Management's
plan of operation for the next twelve months is to continue using existing
capital and any funds received from exercise of warrants to provide general
working capital during the next twelve months. Capital commitments consist
principally of rent for the use of the ground and management compensation,
both totaling $525 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.
<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: August 14, 2000 by: /s/ Rino Di Meo
Rino Di Meo, President & Director
