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 March 31, 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.
---------------------------
(exact name of registrant as specified in its charter)
Nevada 88-0390657
- ------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
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
March 31, 1999 was 17,780,695 outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Hawkins Accounting
Certified Public Accounting
To the Board of Directors
Internet Food Company, Incorporated
Monterey, California
I have reviewed the accompanying balance sheet of Internet Food Company, Inc. as
of March 31, 1999 and the related statement of income and Shareholders' Equity
and the statement of cash flows for the three months then ended, 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 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 auditing standards, the objective of
which is the expression of an opinion regarding the financial statements takenas
a whole. Accordingly, I do not express such as 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.
September 15,1999
<PAGE>
INTERNET FOOD COMPANY, INC.
BALANCE SHEET
March 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets
Cash and cash equivalents $ 4,991
Accounts receivable-trade 97
Accounts receivable-barter 6,744
Due from arriliate 100
Inventory 4,905
Total current assets 16,837
Equipment
Equipment 700
(Less) Accumulated depreciation (50)
Other assets
Trade name 6,050
Total assets $ 23,537
Current liabilities
Accounts payable $ 1,626
Note payable-R. Strahl 2,575
Note payable-Monterey Ventures 4,780
State corporate tax payable 1,600
Total current liabilities 10,581
Shareholders' equity
Capital stock, par value $10, 50,00
17,780,695 shares issued and outstanding 1,788,070
Paid in capital (1,645,670)
Common stock offering costs (6,150)
Retained earnings (113,294)
Total shareholders' equity 12,956
Total liabilities and shareholders' equity $ 23,537
</TABLE>
See Accompanying notes and accountant's review report
2
<PAGE>
INTERNET FOOD COMPANY, INC.
STATEMENT OF OPERATIONS
For the three months ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Sales $ 10,429
Cost of sales
Beginning inventory 4,905
Purchases 7,033
Supplies 246
Total available for sale 12,184
(Less) ending inventory
Total cost of goods sold 7,279
Gross profit 3,150
Operating expenses
Advertising 31
Bank charges 527
Consulting fees 22,231
Depreciation 50
Equipment lease 2,937
License and pennits 46
Management fees 6,600
Office expense 869
Postage and delivery 679
Professional fees 8,755
Rent 1,515
Travel and entertainment 818
Telephone 332
Total operating expenses 46,290
Loss from operations (42,140)
Other income and (expense)
Loss on sale of investments (499)
Interest expense (585)
(1,084)
Loss prior to income taxes (43,224)
State corporate income tax 800
Net loss $ (44,024)
Loss per common share (0.0026)
Weighted average
of shares outstanding 17,148,222
</TABLE>
See accompanying notes and accountant's review report
3
<PAGE>
INTERNET FOOD COMPANY, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
For the three months ending March 31, 1999
<TABLE>
<CAPTION>
Common Stock
Paid in Offering Retained
Shares Amount Capital Costs Earninqs
------ ------ ------- ----- --------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 16,167,695 $ 1,616,770 $ (1,552,070) $ (6,150) $ (69,270)
Options issued 1,040,000 104,000 (93,600)
Stock issued 573,000 57,300
Not loss for the period (44,024)
17,780,695 1,778,070 $ (1,645,670) $ (6,150) $ (113,294)
</TABLE>
See accompanying notes and accountant's review report
4
<PAGE>
INTERNET FOOD COMPANY, INC.
STATEMENT OF CASH FLOWS - INDIRECT METHOD
For the three months ending March 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities $ (44,024)
Not loss
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense 50
Increase in current assets (365)
Decrease in current liabilities (20,329)
Net cash provided by operating activities (64,668)
Financing activities
Sale of common stock 67,700
Cash provided by financing activities 67,700
Increase (Decrease) in cash and cash equivalents 3,032
Cash and cash equivalent at beginning of the year 1,959
Cash and cash equivalent at end of the year 4,991
Supplemental disclosure of financing activities
Interest paid 585
</TABLE>
See accompanying notes to the financial statements
5
<PAGE>
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - SUMMARY SIGNIFICANT ACCOUNTING POLICIES
Nature of the business
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Internet Food Company, Inc. was formed to sell retail gourmet and specialty
cheese on the internet and at a retail location. The Company was incorpomed
under the laws of the State of Nevada on April 14, 1998. The Company is
currently doing business as California Cheese Connection.
Pervasiveness of estimates
- --------------------------
The preparailon of financial statements in conformity with generally accepted
accounting principles requires management to take 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 froin those estimates.
Cash and cash equivalents
- -------------------------
For financial statement presentation purposes, the Company considers all short
tenn investments with a maturity date of three months or less to be cash
equivalents
Inventories
- -----------
Inventories are recorded at the lower of cost or 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 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 year-end, 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 of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of 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.
7
<PAGE>
INTERNET FOOD COMPANY
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 ACCOUNTS RECEIVABLE
Accounts receivable - Trade
- ----------------------------
Accountants receivable trade consists primarily of sales to hotels and
corporations purchasing gift baskets. At March 31, 1999 the total was $97. Terms
of all sales to these customers 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 March 31, 1999 the balance that the Company is owed in
goods and services was $ 6,744. The Comparty uses the barter to purchase goods
and services. For the period ending March 31, 1999 the total arnount recorded as
sales was $ 4,297 and S 1,994 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 bocomes 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 March 31,
1999 was $ 4,780. The Company paid off prior year borrowings of $ 12,990.
NOTE 4 COMMON STOCK
Common Stock
- ------------
During the period ended March 31, 1999, 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, Fach share has a par value of S.10. There were twenty different
transactions to different investors raising a total of $167,700 during the year
period ended March 31, 1999.
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.
The Company also issued 135,695 shares common stock with a fair
8
<PAGE>
INTERNET FOOD COMPANY
NOTES THE FINANCIAL STATEMENTS
March 31,1999
Paid in capital (con't.)
- ------------------------
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 prior 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 March 31, 1999 the
shareholder advanced the Company $ 4,780 for operations. There were no
repayments on the advances.
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 S 15,490 during the prior year. The
Company repaid $ 12,990 of the loans during the three month period ending March
31, 1999.
NOTE 6 - INCOME TAXES
The benefit for income taxes from operations consisted of the following
components. Current tax benefit of $ 6,604 resulting from a net loss before
income taxes, and deferred tax expense of $ 6,604 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
March 31, 1999 was $ 6,604. Net operating loss carryforward will expire 2014.
The valuation allowance will be evalvatod at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At tbe
time the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of hte deferred tax asset is no longer required. It is management's
position that the deferred 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 axe to be exercised
9
<PAGE>
INTERNET FOOD COMPANY
NOTES T0 THE FINANCIALSTATEMENTS
March 31, 1999
NOTE 7 (con't)
at a price of $.01 exercised. 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 CONERN
As of March 31, 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 this First Quarter, the Company received $10,429 in revenues for the
Quarter ending March 31, 1999. There are no comparisons for the first quarter of
1998 because the Company was not incorporated until April 14, 1998.
The trends for income are likely to continue as a result of the Company's
marketing of the products and services of the company.
There is no deficiency in the First Quarter.
At present the Company's major sources of internal liquidity are cash in bank
($4,991) , accounts receivable ($6,744), and inventory ($4,905).
No material commitments for capital expenditures were made during the First
Quarter and none are expected in the Second Quarter. The only development under
way is for the completion of the Company's website.
The Second Quarter selling period should bring in additional, but limited,
revenues because of the cyclical nature of the business. The revenue will have
little impact on short term revenues.
The Company had minor changes to its equity as a result of the completion of its
stock offering as of February 18, 1999. The Company also had a $10,000 reduction
of accounts receivable and $10,000 in notes payable.
The Company has not been affected by any unusual events or transactions that
would have any impact on reported income or operations.
The Company's marketing efforts has been the most significant factor resulting
in the sales increase.
Consumer purchasing in this business segment has continued to grow along with
the growth of internet sales.
Currently, the Company knows of no events that will cause a material change in
costs and revenues.
The major increase in sales is because the Company has been in business for over
10 months and has established accounts with hotels and businesses.
The Company is a development stage company. Its primary concern is a possible
increase in milk prices which would increase cheese prices. An increase would
cause an increase in the Company's cost of sales.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
As of March 31, 1999, there were 1,778,070 in outstanding shares issued compared
to 1,616,770 that were outstanding as of December 31, 1998.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
The Company has not filed any quarterly reports for the 1999 year and is
planning on filing the quarterly reports for the periods ending June 30, 1999
and September 30, 1999.
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.
/s/ Jan Demianew
----------------
NAME: Jan Demianew
TITLE: President
