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 March 31, 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)
Registrant's 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 [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Class Outstanding as of March 31, 2000
Common Stock, $0.01 8,748,000
TABLE OF CONTENTS
Heading Page
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets - March 31, 2000
And March 31, 1999 6
Consolidated Statements of Operations - three months
Ended March 31, 2000 and 1999 7
Consolidated Statements of Stockholders' Equity 8
Consolidated Statements of Cash Flows - three
Ended March 31, 2000 and 1999 10
Notes to Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis and
Result of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Security 15
Item 3. Defaults Upon Senior Securities 15
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 March 31, 2000 have been prepared by the Company.
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
C O N T E N T S
Independent Accountants' Review Report 3
Balance Sheets 4
Statements of Operations 5
Statements of Stockholders' Equity (Deficit) 6
Statements of Cash Flows 8
Notes to the Financial Statements 9
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Fresh Breath Industries, Inc.
Vancouver, British Columbia
We have reviewed the accompanying balance sheet of Fresh
Breath Industries, as of March 31, 2000 and the related
statements of operations, stockholders' equity (deficit)
and cash flows for the periods ended March 31, 2000 and
1999. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying financial statements referred
to above for them to be in conformity with accounting principles
generally accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the balance sheet of Fresh
Breath Industries, Inc. (a development stage company) as of December
31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended (not presented herein)
and in our report dated April 20, 2000, we expressed an unqualified
opinion on those financial statements.
HJ & Associates, LLC
Salt Lake City, Utah
May 9, 2000
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, December 31,
2000 1999
CURRENT ASSETS
Cash $ 331 $ 2,581
Total Current Assets 331 2,581
FIXED ASSETS (NET)(Note 6) 4,392 4,606
TOTAL ASSETS $ 4,723 $ 7,187
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 264 $ 1,801
Notes payable - related
parties (Note 5) 134,440 134,440
Accrued interest 16,805 13,445
Total Current Liabilities 151,509 149,686
Total Liabilities 151,509 149,686
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value,
authorized 50,000,000
shares; 8,748,000 shares
and outstanding 8,748 8,748
Additional paid-in capital 298,146 298,146
Stock subscription receivable (15) (15)
Deficit accumulated during
the development stage (453,665) (449,378)
Total Stockholders'
Equity (Deficit) (146,786) (142,499)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 4,723 $ 7,187
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
September 1,
For the Three Months Ended 1998 Through
March 31, March 31,
2000 1999 2000
REVENUE $ - $ - -
OPERATING EXPENSES
Depreciation and
amortization expenses 214 15,075 289,256
Professional services - 16,587 29,889
General and administrative 712 37,559 77,874
Total Operating Expenses 926 69,221 397,019
OTHER EXPENSES
Loss on inventory
discontinuation - - 30,967
Interest expense 3,361 9,928 25,679
Total Other Expenses 3,361 9,928 56,646
NET LOSS $ (4,287) $ (79,149) $ (453,665)
BASIC LOSS
PER SHARE $ (0.00) $ (0.01)
WEIGHTED AVERAGE
NUMBER OF
SHARES
OUTSTANDING 8,483,227 8,086,000
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional Stock During the
Common Stock Paid-in Subscriptions Development
Shares Amount Capital Received Stage
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 (5,515) -
Net loss for the year ended
December 31, 1998 - - - - (37,026)
Balance, December
31, 1998 7,800,000 7,800 70,200 (5,515) (37,026)
February 10, 1999,
Common stock
issued for conversion
of debt at $0.17
per share 100,000 100 16,794 - -
Receipt of subscription
receivable - - - 5,500 -
March 15, 1999, common
stock issued for cash at
$0.25 per share 186,000 186 46,314 - -
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Continued
Deficit
Accumulated
Additional Stock During the
Commom Stock Paid-in Subscriptions Development
Shares Amount Capital Received Stage
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 - - - - (412,352)
Balance, December
31, 1999 8,748,000 $ 8,748 298,146 $ (15) $(449,378)
Net loss for the
three months
ended March
31, 2000 - - - - (4,287)
Balance, March
31, 2000 8,748,000 $ 8,748 $ 298,146 $ (15) $(453,665)
FRESH BREATH INDUSTRIES, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
September 1,
For the Three Months Ended 1998 Through
March 31, March 31,
2000 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) from operations $ (4,287) $ (79,149) $ (453,665)
Adjustments to reconcile
net (loss) to net cash provided
(used) by operating activities:
Depreciation and
amortization expense 214 15,075 289,256
Common stock issued for services - 31,500 31,500
Changes in operating assets and liabilities:
Decrease in goodwill - - 41,063
(Increase) in inventory - (16,000) -
Increase in accounts payable (1,538) (5,000) 263
Increase in interest payable 3,361 1,055 16,805
Increase in notes payable - related - (4,500) 3,650
Net Cash (Used) by
Operating Activities (2,250) (57,019) (71,128)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - - (5,726)
Purchase of distribution rights - - (15,800)
Net Cash (Used) by
Investing Activities - - (21,526)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock - 36,394 92,985
Net Cash Provided by
Financing Activities - 36,394 92,985
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,250) (20,625) 331
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,581 39,673 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 331 $ 19,048 $ 331
NON-CASH FINANCING ACTIVITIES:
Issuance of stock for
payment on notes $ - $ - $ 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
March 31, 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 Company's 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
March 31, 2000 due to accumulated operating losses. The
minimum state franchise tax has been accrued.
The Company has accumulated approximately $4,000 of net operating
losses as of March 31, 2000, which may be used to reduce taxable
income and income taxes in future years through 2019. 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
March 31, 2000 and December 31, 1999
NOTE 3 - GOING CONCERN
The Company's 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.
Currently, management is committed to covering all operating and other
costs until sufficient revenues are generated.
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 March 31, 2000 and December 31, 1999. The
note is due on demand, unsecured and bears interest at 10%
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:
March 31,
2000
Office equipment $ 4,283
Computer equipment 1,152
Leasehold improvements 291
Total 5,726
Less: accumulated depreciation (1,334 )
Total Net Equipment $ 4,392
Total depreciation expense for the three months
ended March 31, 2000 and 1999 was $214 and $-0- respectively.
Item 2. Management's 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 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 of debt of $40,000.00 to
complete the asset purchase
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.
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.
Prior to March 31, 1999 the Company sold an additional 150,000 shares
for $37,500 pursuant to Regulation D, Rule 504 of the Securities Act of
1934, as amended. These funds were also used for working capital.
Products
Breath Freshener: Cigar-Gone, a sugarless, all natural chewable
gel-cap breath freshener, considered one of the accessories, is
being successfully marketed and sold through major retail tobacco
and convenience stores in North America by Quantum Cigar in Canada,
J&D Cigar Company in Canada and the United States and by the Company
in the United States. The product Cigar Gone was first introduced at
the Cigar Expo in Las Vegas, Nevada in April 1997 and is now being
distributed and marketed by several wholesalers in over 10,000 different
retail outlets throughout North America. The Company has three other
breath products market ready, Coffee Gone, Garlic Gone and an all natural
breath spray will be available in four flavors.
Cigars and Accessories: J&D Cigar, a subsidiary of the Company,
is located in Alberta Calgary Canada. J&D is currently carrying 45
different cigars manufactured by 12 different companies including a
full line of Cuban Cigars. In its prior seven years in business its
been able to secure exclusive Canadian rights to many of these cigars.
As a major Canadian importer of cigars and accessories, J&D has established
a client base of about 100 wholesale and retail customers throughout Canada.
Fresh Breath Industries, Inc., will wholesale the Breath products and
the cigar products and other accessories in the United States and through
its divisions in Canada.
Results of Operations the First Three Month of 2000
The Company had revenues of $ 0 for the first quarter with
operating expenses of $ 926. The Company also had no revenues
in the first quarter of 1999. These amounts represent no
increase or decrease and a 98.5% decrease over first quarter 1999 figures.
Net Operating Loss
The Company has accumulated approximately 453,665of net operating
loss carryforwards as of March 31, 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 Company's 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
None.
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 three months
ended March 31, 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: May 15, 2000
By:_____________________
Catherine Edwards
Secretary
2
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