UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q SB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly report ended September 30, 2000
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 000-30180
FRESH BREATH INDUSTRIES, INC.
(Exact name of small business issuer as registrant as specified in charter)
Nevada 88-0404404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
#7-2316 27th Ave. N.E., Calgary, Alberta Canada
(Address of principal executive office)
Registrants telephone no., including area code (403) 259-6838
Check 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), Yes [X] No [ ] and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the last practicable date.
Class Outstanding as of September 30, 2000
Common Stock, $0.01 11,748,900
TABLE OF CONTENTS
Heading Page
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets September 30, 2000
And September 30, 1999 4
Consolidated Statements of Operations nine months
Ended September 30, 2000 and 1999 5
Consolidated Statements of Stockholders Equity 6-7
Consolidated Statements of Cash Flows nine months
Ended September 30, 2000 and 1999 8-9
Notes to Consolidated Financial Statements 10-12
Item 2. Managements Discussion and Analysis and
Result of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Security 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matter to a Vote of
Securities Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports of Form 8-K 15
Signatures 16
PART 1
Item 1. Financial Statement
The following unaudited Financial Statements for the period ended September
30, 2000 have been prepared by the Company.
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
September 30, December 31,
2000 1999
(Unaudited)
CURRENT ASSETS
Cash$ 599 $2,581
Total Current Assets 599 2,581
FIXED ASSETS (NET)(Note 6) 3,750 4,606
TOTAL ASSETS $4,349 $7,187
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 264 $1,801
Notes payable - related parties (Note 5) 69,777 134,440
Accrued interest 23,079 13,445
Total Current Liabilities 93,120 149,686
Total Liabilities 93,120 149,686
STOCKHOLDERS EQUITY (DEFICIT)
Common stock, $0.001 par
value, authorized 50,000,000
shares; 11,748,000 and 8,748,000
shares issued and
outstanding, respectively 11,748 8,748
Additional paid-in capital 481,146 298,146
Stock subscription receivable (15) (15)
Deficit accumulated during the
development stage (581,650) (449,378)
Total Stockholders Equity (Deficit) (88,771) (142,499)
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIT) $ 4,349 $ 7,187
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the For the
Nine Months Ended Three Months
Ended
September 30, September30,
2000 1999 2000
REVENUE $ - $ - $ -
OPERATING EXPENSES
Depreciation and amortization
expenses 856 49,727 428
Professional services 2,337 22,295 -
General and administrative 119,445 45,497 118,704
Total Operating Expenses 122,638 117,519 119,132
LOSS FROM OPERATIONS (122,638) (117,519) (119,132)
OTHER EXPENSES
Loss on inventory discontinuation - - -
Interest expense (9,634) (9,929) (2,912)
Total Other Expenses (9,634) (9,929) (2,912)
NET LOSS $ (132,272) $ (127,448) $(122,044)
BASIC LOSS PER SHARE $ (0.01) (0.02) $ 0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,248,000 8,005,331 9,248,000
From
For The Inception on
Three Months Ended September 1,
September 30, 1998 Through
September 30,
1999 2000
REVENUE $ - $ -
OPERATING EXPENSES
Depreciation and amortization
expenses 17,584 289,898
Professional services 357 32,226
General and administrative 3,382 196,607
Total Operating Expenses 21,323 518,731
LOSS FROM OPERATIONS (21,323) (518,731)
OTHER EXPENSES
Loss on inventory discontinuation - (30,967)
Interest expense - (31,952)
Total Other Expenses - (62,919)
NET LOSS $ (21,323) (581,650)
BASIC LOSS PER SHARE $ (0.00)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,198,449
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders Equity (Deficit)
Additional
Common Stock Paid-in
Shares Amount Capital
From inception of development
stage, August 31, 1998 $ -$ -
September 15, 1998, common
stock issued for cash at $0.01
per share 400,000 400 3,600
September 15, 1998, common
stock issued for services at
$0.01 per share 2,550,000 2,550 22,950
November 15, 1998, common
stock issued for services at
$0.01 per share 600,000 600 5,400
December 1, 1998, common
stock issued for cash at
$0.01 per share 4,250,000 4,250 38,250
Net loss for the year ended
December 31, 1998 - - -
Balance, December 31, 1998 7,800,000 7,800 70,200
February 10, 1999, common
stock issued for conversion
of debt at $0.17 per share 100,000 100 16,794
Receipt of subscription
receivable - - -
March 15, 1999, common
stock issued for cash at
$0.25 per share 186,000 186 46,314
April 29, 1999, common stock
issued for conversion of debt
at $0.25 per share 662,000 662 164,838
Net loss for the year ended
December 31, 1999 - - -
Balance, December 31, 1999 8,748,000 $ 8,748 $ 298,146
Deficit
Accumulated
Stock During the
Subscription Development
Receivable Stage
From inception of development
stage, August 31, 1998 $ - $ -
September 15, 1998, common
stock issued for cash at $0.01
per share - -
September 15, 1998, common
stock issued for services at
$0.01 per share - -
November 15, 1998, common
stock issued for services at
$0.01 per share - -
December 1, 1998, common
stock issued for cash at
$0.01 per share (5,515) -
Net loss for the year ended
December 31, 1998 - (37,026)
Balance, December 31, 1998 (5,515) (37,026)
February 10, 1999, common
stock issued for conversion
of debt at $0.17 per share - -
Receipt of subscription
receivable - -
March 15, 1999, common
stock issued for cash at
$0.25 per share 5,500 -
April 29, 1999, common stock
issued for conversion of debt
at $0.25 per share - -
Net loss for the year ended
December 31, 1999 - (412,352)
Balance, December 31, 1999 $ (15) $ (449,378)
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders Equity (Deficit) (Continued)
Additional
Common Stock Paid-in
Shares Amount Capital
Balance, December 31, 1999 8,748,000 $ 8,748 $ 298,146
September 14, 2000, common
stock issued for conversion of
debt and services at $0.062
per share 3,000,000 3,000 183,000 -
Net loss for the nine months
ended September 30, 2000
(unaudited) - - -
Balance, September 30, 2000
(unaudited) 11,748,000 $ 11,748 $ 481,146
Deficit
Accumulated
Stock During the
Subscription Development
Receivable Stage
Balance, December 31, 1999 $ (15) $(449,378)
September 14, 2000, common
stock issued for conversion of
debt and services at $0.062
per share -
-
Net loss for the nine months
ended September 30, 2000
(unaudited) - (132,272)
Balance, September 30, 2000
(unaudited) $ (15) $(581,650)
FRESH BREATH INDUSTRIES,INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the For the
Nine Months Ended Three Months
September 30, Ended September 30
2000 1999 2000
CASH FLOWS FROM OPERATING
ACTIVITIES
(Loss) from operations $ (132,272) $ (127,448) $(122,044)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities:
deprciation and amortization expense 856 49,727 428
Common stock issued for services 111,000 - 111,000
(Increase) decrease in accounts
receivable - (14,275) -
Decrease in goodwill - - -
(Increase) decrease in inventory - 7,939 -
Increase (decrease) in accounts payable (1,538) (3,831) (2,337)
Increase (decrease) in interest payable 9,633 10,055 2,912
Net Cash (Used) by Operating
Activities (12,321) (77,833) (10,041)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of equipment - (13,208) -
Purchase of distribution rights - - -
Net Cash (Used) by Investing
Activities - (13,208) -
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in notes
payable - related 10,339 - 10,339
Contributed capital - 3,374 -
Proceeds from common stock - 52,000 -
Net Cash Provided by Financing
Activities 10,339 55,374 10,330
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,982) (35,667) 298
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,581 39,673 301
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 599 $ 4,006 $ 599
From
Inception on
For the September 1
Three months ended 1998 through
September 30 June 30
1999 2000
CASH FLOWS FROM OPERATING
ACTIVITIES
(Loss) from operations $ (29,539) $ (581,650)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization expense 21,701 289,898
Common stock issued for services - 142,500
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable 5,422 -
Decrease in goodwill - 41,063
(Increase) decrease in inventory 7,939 -
Increase (decrease) in accounts payable (13,66) 263
Increase (decrease) in interest payable 9,000 23,078
Net Cash (Used) by Operating
Activities 855 (84,848)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of equipment (13,208) (5,726)
Purchase of distribution rights - (15,800)
Net Cash (Used) by Investing
Activities (13,208) (21,526)
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in notes
notes payable - related - 13,988
Contributed capital - -
Proceeds from common stock 5,500 92,985
Net Cash Provided by Financing
Activities 5,500 106,973
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,853) 599
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,859 -
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,006 $ 599
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
For the For the
Nine months ended Three months ended
September 30, September 30,
2000 1999 2000
NON-CASH FINANCING ACTIVITIES:
Issuance of stock for
payment on notes $ 75,000 $179,000 $ 75,000
Purchase of distribution
rights for notes payable $ - $ - $ -
Cash Paid For:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
From
Inception on
For the September 1
three months ended 1998 through
September 30 September 30
1999 2000
NON-CASH FINANCING ACTIVITIES:
Issuance of stock for
payment on notes $179,000 $179,394
Purchase of distribution
rights for notes payable $ - $300,790
Cash Paid For:
Interest $ - $ -
Income taxes $ - $ -
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
On September 1, 1998, Fresh Breath Industries, Inc. (the Company) was
incorporated under the laws of Nevada to engage in marketing cigars and
cigar-related products.
The Company has authorized 50,000,000 shares of $0.001 par value common
stock.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Companys financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
b. Cash Equivalents
The Company considers all highly liquid investment with a maturity of three
months or less when purchased to be cash equivalents.
c. 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 and
disclosure of contingent 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
from those estimates.
d. Income Taxes
No provision for federal income taxes has been made at September 30, 2000
due to accumulated operating losses. The minimum state franchise tax has been
accrued.
The Company has accumulated approximately $581,000 of net operating losses
as of September 30, 2000, which may be used to reduce taxable income and income
taxes in future years through 2020. The use of these losses to reduce future
income taxes will depend on the generation of sufficient taxable income prior to
the expiration of the net operating loss carryforwards.
In the event of certain changes in control of the Company, there will be an
annual limitation on the amount of net operating loss carryforwards which can be
used. The potential tax benefits of the net operating loss carryforwards have
been offset by a valuation allowance of the same amount.
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Basic Loss Per Common Share
Basic loss per common share has been calculated based on the weighted
average number of shares of common stock outstanding during the period.
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
Numerator - loss $ (132,273) $ (127,448) $ (122,044) $ (21,323)
Denominator - weighted
average number of
shares outstanding 9,248,000 8,005,331 9,248,000 8,198,449
Loss per share $ (0.01) $ (0.02) $ (0.01) $ (0.00)
NOTE 3 - GOING CONCERN
The Companys financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has not established revenues sufficient to cover its
operating costs and allow it to continue as a going concern. Management believes
that the Company will soon be able to generate revenues sufficient to cover its
operating costs through the sales of products under its distribution rights.
NOTE 4 - COMMON STOCK TRANSACTIONS
During the month of December 1998, the Company had a 504 common stock
issuance. 4,250,000 shares were issued at $0.01; the gross proceeds of which
totaled $42,500. $5,500 was received subsequent to December 31, 1998. In
September 1998, 2,550,000 shares were issued at $0.01 for services, and 400,000
shares were issued for cash at $0.01. In November 1998, 600,000 additional
shares were issued at $0.01 for services rendered, totaling 7,800,000 shares
outstanding at December 31, 1998.
During 1999, the Company issued 762,000 shares at an average price of $0.24
per share for payment on notes payable and related interest totaling $182,394.
The Company had a 504 common stock issuance. 186,000 shares were issued at
$0.25, the gross proceeds of which totaled $46,500.
NOTE 5 - RELATED PARTY TRANSACTIONS
An officer of Quantum Cigar Corporation and 545-205 B.C. Ltd., who is also
an officer of the Company, which held the distribution rights of Irvine Breath
Products, sold these rights to the Company (Note 4). The officer is owed
$134,440 at June 30, 2000 and December 31, 1999. The note is due on demand,
unsecured and bears interest at 10%. In September 2000, common stock was issued
to reduce the above note by $75,000. The balance at September 30, 2000 is
$59,440.
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 6 - FIXED ASSETS
During 1999, the Company received office equipment from J&D Cigar. The
equipment is depreciated over a five year life using the straight-line method of
depreciation. The equipment is valued as follows:
September 30,
2000
Office equipment $ 4,283
Computer equipment 1,152
Leasehold improvements 291
Total 5,726
Less: accumulated depreciation (1,976)
Total Net Equipment $ 3,750
Total depreciation expense for the nine months ended September 30, 2000 and
1999 was $856 and $-0- respectively.
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with financial
statements and notes thereto appearing elsewhere in this Form 10-QSB.
Overview
Fresh Breath Industries, Inc. (the Company) is a development stage
Company incorporated under the laws of Nevada on September 1, 1998, to engaged
in the marketing of cigars and cigar related products. As a start up enterprise
the Company had no significant business operations in 1998.
The Company has entered into various agreements with related companies to
acquire the distribution rights of breath freshening products and cigars and
cigar accessories. The Company entered into asset purchase agreements; (1) on
October 16, 1998, the exclusive Canadian distribution rights to Irvine Breath
Products and Gel Cap Breath Freshener products for $135,590 which consisted of
$130,950 note and 500,000 shares of common stock, (2) on October 21, 1998,
bought for the sum of $130,000 the product line called Cigar-Gone, Coffee Gone
and other breath related products, and (3) on October 25, 1998, the Company
bought for the sum of $50,000 and 100,000 shares of common stock the product
lines and promotional materials of J&D Cigar Company, Ltd. On April 21, 1999
100,000 shares were issued to Irvine Breath Products for the cancellation of a
$13,500.00 debt. 502,000 shares were issued to Irvine June 30, 1999 in lieu of
debt of $125,500. J&D Cigar 160,000 shares in lieu of debt of $40,000.00 to
complete the asset purchase of both companies.
During the month of December 1998, the Company sold 4,250,000 shares for
$0.01, the gross proceeds were $42,500 of which $5,515 was received subsequent
to December 31, 1998. The offering under the provisions of Regulation D, Rule
504 of the Securities Act of 1934, as amended (the Act). The proceeds were
used for working capital. For the year ended December 31, 1999 the Company
issued 8,748,000 shares of common stock for cash and debt. As of September 30,
2000 there were 11,858,900 shares outstanding.
On September 14, 2000 three million (3,000,000) shares of common stock were
issued in cancellation of debt.
Results of Operations the First Nine Months of 2000
The Company had revenues of $ 0 for the nine months with operating expenses of
$ 122,638 and other expenses of $9,634. The Company also had no revenues in
the first nine months of 1999 and operating expense of $117,519 and other
expenses of $9,929. These amounts represent no change in the revenues and a
3.8% increase in operating expenses for the first nine months of 2000.
Net Operating Loss
The Company has accumulated approximately 581,650 net operating loss
carryforwards as of September 30, 2000, which may be offset against taxable
income and income taxes in future years. The use of these losses to reduce
future income taxes will depend on the generation of sufficient taxable income
prior to the expiration of the net operating loss carryforwards. The
carryforwards expire in the year 2015. In the event of certain changes in
control of the Company, there will be an annual limitation on the amount of net
operating loss carryforwards, which can be used.
Inflation
In the opinion of management, inflation has not had a material effect on
the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company wishes to advise readers that actual results may differ substantially
from such forward-looking statements. Forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those expressed on or implied by the statements, including, but not limited to,
the following: the ability of the Company to successfully meet its cash and
working capital needs, the ability of the Company to successfully market its
product, and other risks detailed in the Companys periodic report filings with
the Securities and Exchange Commission.
Part II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries in a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against the Company
are contemplated or threatened.
Item 2. Changes in Securities
Three million shares (3,000,000) of common stock were issued September14,
2000 for a cancellation of $75,000 of debt.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to be a Vote of Security Holders
None.
Item 5. Other Information
This item is not applicable to the Company.
Item 6. Exhibits and Reports on 8-K
a. Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
No report on Form 8-K was filed by the Company during the nine months ended
September 30, 1999.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FRESH BREATH INDUSTRIES, INC.
Dated: October 25, 2000
By:/S/ Catherine Edwards
Catherine Edwards
Secretary
