UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number:
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La Jolla Fresh Squeezed Coffee Co., Inc.
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(Exact name of registrant as specified in its charter)
Washington 33-0758795
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9060 Activity Road, Suite A, San Diego, California 92126
(Address of principal executive offices) (Zip Code)
858.273.5282
(Registrant's Telephone Number, Including Area Code)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of September 30, 2000, there were
34,431,002 shares of the issuer's $.001 par value common stock issued and
outstanding.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements:
Consolidated Balance Sheet as of September 30, 2000
(unaudited).............................................................F-2
Consolidated Statements of Operations for the
Three Months Ended September 30, 1999 and 2000
(unaudited), and for the Nine Months Ended
September 30, 1999 and 2000 (unaudited).................................F-3
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 2000
(unaudited).............................................................F-4
Notes to Consolidated Financial Statements..............................F-5
F-1
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LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
CONSOLIDATED BALANCE SHEET
September 30,
2000
------------
(unaudited)
ASSETS
Current assets:
Cash $ 6,876
Accounts receivable 8,500
-----------
Total current assets 15,376
Property and equipment, net 116,850
-----------
$ 132,226
===========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 71,809
Accrued expenses 149,797
Accrued payroll and related benefits 9,500
Other current liabilities 22,170
-----------
Total current liabilities 253,276
Due to related party 76,046
-----------
Total liabilities 329,322
-----------
Commitments and contingencies (Note 4)
Stockholders' deficit:
Common stock, $0.001 par value; 50,000,000
shares authorized; 34,431,002 issued and outstanding 34,432
Additional paid-in capital 5,223,454
Accumulated deficit (4,399,982)
Note receivable from officers (1,055,000)
-----------
Total stockholders' deficit (197,096)
-----------
$ 132,226
===========
The accompanying notes are an integral part of these consolidated financial
statements
F-2
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales $ -- $ 10,117 $ -- $ 20,289
Cost of sales -- 7,589 -- 13,468
------------ ------------ ------------ ------------
Gross profit -- 2,528 -- 6,821
Operating expenses:
Research and development 22,573 94,236 806,274 218,418
Selling and marketing 14,792 5,506 732,752 143,138
General and administrative 55,585 153,098 817,911 446,112
------------ ------------ ------------ ------------
Net loss $ (92,949) $ (250,311) $ (2,356,938) $ (800,847)
============ ============ ============ ============
Basic and diluted loss per share $ (0.00) $ (0.01) $ (0.11) $ (0.02)
============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding 21,779,971 33,791,136 21,779,971 33,791,136
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-3
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
1999 2000
----------- -----------
Cash flows from operating activities: (unaudited) (unaudited)
Net loss $(2,356,938) $ (800,847)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 8,678 26,378
Value of stock options issued below fair value
1,000,000 --
Issuance of common stock for services rendered 890,000 146,075
Changes in operating assets and liabilities:
Accounts receivable -- (4,728)
Accounts payable 829 60,172
Accrued expenses (3,664) 86,425
Accrued payroll and related benefits -- (3,521)
Other liabilities -- 14,170
----------- -----------
Net cash used in operating activities (461,095) (475,876)
----------- -----------
Cash flows from investing activities-
Purchases of property and equipment (71,323) (41,004)
----------- -----------
Cash flows from financing activities:
Repayments to related parties (2,000) (2,500)
Exercise of stock options -- 6,030
Issuance of common stock for cash 595,120 503,700
----------- -----------
Net cash provided by financing activities 593,120 507,230
----------- -----------
Net increase in cash 60,702 (9,650)
Cash at beginning of period 13,096 16,526
----------- -----------
Cash at end of period $ 73,798 $ 6,876
=========== ===========
Non cash financing activities-
Stock issued to officers for promissory notes $ 510,000 $ 545,000
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE>
LA JOLLA FRESH SQUEEZED COFFEE CO., INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization
La Jolla Fresh Squeezed Coffee Company, Inc., formerly North West Farms, Inc.
("LJFSC"), incorporated in the state of Washington, and its subsidiaries
(collectively the "Company") intends to manufacture, market and distribute
quality cold-brewed coffee liquid extract and gourmet non-alcoholic cold coffee
drinks.
Stephen's Coffee Co., Inc. ("SCC") was incorporated in the state of California
on August 13, 1993 ("Inception"). SCC is the operating company responsible for
the development of manufacturing methods and products for distribution.
Effective November 1, 1998, SCC was acquired for 1,142,500 shares of common
stock representing approximately 9% of the outstanding voting stock of LJFSC in
exchange for the common stock of SCC. LJFSC has had no significant operations.
For accounting purposes, the combination is treated as a recapitalization of
SCC.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All inter-company accounts have been eliminated in
consolidation.
Basis of Presentation
The accompanying consolidated financial statements reflect the historical assets
and liabilities, and the related historical operations of SCC for all periods
presented.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred
losses from operations since its inception and requires substantial funds for
its operational activities and sales efforts. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management is
seeking financing through private placements of its common stock. There are no
assurances that funds will be available to or, if available, that the Company
will achieve revenues sufficient to meets its cost structure. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Interim financial statements
In the opinion of management, the unaudited financial statements include all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Company's results of operation for the Three and Nine months Ended
September 30, 1999 and 2000 and cash flows for the Nine months Ended September
30, 1999 and 2000. These results are not necessarily indicative of the results
expected for the year ending December 31, 2000
F-5
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Note 3 - Property and Equipment
Property and equipment consists of the following at September 30, 2000
(unaudited),
Equipment $ 91,283
Furniture and fixtures 3,572
Leasehold improvements 64,605
---------
159,460
Less accumulated depreciation (42,610)
---------
$ 116,850
=========
Note 4 - Commitments and Contingencies
Lessee
The Company is the lessee of office equipment under operating leases typically
for periods of three years. The Company leases its office space under a
non-cancelable operating lease in which the terms are for a period of three
years.
Litigation
In November 1999, a former director of SCC made a claim against the Company
alleging that certain corporate formalities were not complied with during the
transfer of the assets of SCC entitling the plaintiff to unwind the transfer,
$150,000 in damages and additional shares in the Company. In November 1998, the
Company believed it had settled the matter by the payment of $15,000, the
issuance of 150,000 shares and the director's resignation. The outcome of the
case is uncertain since the case is in the discovery stage. As such, no
provision for loss has been made in the accompanying consolidated statements of
operations.
In November 1999, a shareholder of the Company filed a claim against the Company
alleging similar claims as above, specifically that the transfer of the assets
of SCC was fraudulent and is seeking declaratory relief to unwind the transfer,
and other damages. The Company is depending the action. The outcome of the case
is uncertain since the case is in the discovery stage. As such, no provision for
loss has been made in the accompanying consolidated statements of operations.
Note 5 - Stockholders' Deficit
Common Stock Issuances
An executive purchased 2,850,000 shares in February 2000 in exchange for a
promissory note bearing interest at six percent per annum due in 2010 totaling
$534,375. No payments have been made on the note during 2000.
On February 22, 2000, the Company acquired all the outstanding shares of common
stock of Sorisole Acquisition Corp. ("Sorisole"), a Delaware corporation, from
the shareholders thereof in exchange for 3,500,000 shares of common stock.
Sorisole is a reporting shell corporation and has no assets or
F-6
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liabilities and no significant operations. This acquisition is accounted for as
a recapitalization of the Company.
In the second quarter 2000, the Company issued 2,229,647 shares of common stock
at between $0.04 and $0.17 per share for total proceeds of $124,400. The price
per share of such sales of common stock were negotiated based on market
conditions. All such sales were made to unrelated parties.
In the second quarter 2000, the Company issued 175,000 shares of common stock in
return for consulting services. The Company valued the services at $0.20 per
share for a change to expense of $35,000.
In the second quarter 2000, the Company issued 1,062,500 shares of common stock
to two consultants, formerly employees of the Company, for $0.01. The shares are
fully vested upon payment for such securities, totaling $10,625. At the time of
the issuance, management determined the fair value to be approximately $0.10 per
share, based on similar transactions near that time. Accordingly, the Company
charged operations totaling $95,625.
In the third quarter 2000, the Company issued 102,997 shares of common stock in
return for consulting services. The Company valued these services at $0.15 per
share for a charge to operations of $15,450.
In the third quarter 2000, the Company issued 855,000 shares of common stock for
$0.15 per share to $0.20 per share for a total of $160,000. In addition, the
Company sold 1,300,000 shares of common stock for $0.04 per share for a total of
$52,000.
F-7
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Item 2. Management's Discussion and Analysis or Plan of Operation
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.
Our Business. We are a manufacturer and distributor of gourmet cold-brewed
coffee liquid extract, gourmet non-alcoholic cold coffee beverages and flavorant
products. We believe our proprietary cold extraction process and delivery system
provides the institutional and food industry with a convenient gourmet coffee
alternative that reduces labor, waste disposal costs, and production costs.
We believe that our cold-brewed coffee has the advantages of great taste, lower
acidity and oil content, and the convenience of instant liquid coffee. Our
liquid coffee delivery system eliminates the substantial amount of coffee wasted
every year by traditional coffee delivery systems that pre-brew the coffee often
making the coffee burnt, or bitter. Our coffee can also be prepared by simply
adding hot water. We also use a delivery system that requires no brewing; the
coffee is prepared only as needed, which, we believe, lowers labor costs, waste
disposal costs for coffee grains and filters, and costs of wasted coffee
disposed of because it is burnt or bitter. We are currently marketing the
following products:
Javalixir: Food Service & Hospitality. Javalixer will be marketed through trade
shows, Internet, direct sales to opinion leading customers, industry trade
publications and in conjunction with dispensing equipment manufacturers who are
used for turn key solutions for high volume coffee service. We believe that we
can convert existing customers of our competitors because of our convenient
dispensing format. These customers in turn will demand supply of our product
through their existing distribution channels, which, we believe, will force the
distributors to carry our product line.
Javanectar 32-oz. Tetrapak. We intend to market this product through major food
distributing companies such as Starbucks, which supplies the food service
industry. We believe that forming alliances with reputable food brokers will be
key to success in this sector of the market and will allow us to minimize
overhead for sales staff in the initial phases of our sales effort.
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10-oz Javanectar / "Frappuccino" style bottled beverage. Because introducing a
product in this category on a national scale is extremely costly, we intend to
initially direct our efforts within the Southern California region through
convenience stores, upscale grocery chains, and deli style restaurants chains.
As we build brand identity throughout Southern California, we anticipate that we
will expand to the east.
Retail Javalixir. We intend to compete with our retail competitors by placing
our products in supermarket in geographic regions that have already accepted the
concept of liquid coffee. We believe that the combination of our high end
packaging, competitive pricing and on-site sampling programs will result in
increased sales. We believe that profitable marketing campaigns we will
undertake. However, we believe this effort will benefit the company in terms of
building brand identity. We believe that brokers of specialty gourmet products
will be instrumental to our success.
Results Of Operations
Three Months Ended September 30, 2000 Compared To Three Months Ended September
30, 1999
We realized revenues of $10,117 from operations for the three months ended
September 30, 2000, compared to $0.00 in three months ended September 30, 1999.
We expect to experience significant revenue growth in the foreseeable future.
Operating expenses increased to $250,311 for the three months ended September
30, 2000, compared to $92,949 in three months ended September 30, 1999.
Liquidity and Capital Resources. As of September 30, 2000, we had cash of $6,876
and current assets of $15,376. Our current liabilities are $253,276, the
majority of which was represented by accrued expenses of $149,797.
Management believes that the existing cash and cash expected to be provided by
operating activities will not be sufficient to fund the short term capital and
liquidity needs of our operations. We are currently seeking to raise substantial
equity capital.
Our Plan of Operations for Next 12 Months. We are continuing to review our
business plan and evaluate various opportunities. In order to fund our
operations and adhere to our development, production and marketing schedule, we
anticipate that we will require approximately $2,000,000 in working capital over
the next 12 months. No assurance can be given, however, that we will have access
to additional cash in the future, or that funds will be available on acceptable
terms to satisfy our cash requirements.
Our success is materially dependent upon our ability to satisfy additional
financing requirements. We are reviewing our options to raise substantial equity
capital. We cannot presently estimate when we will begin to realize positive
gross revenue. In order to satisfy our requisite budget, management has held and
continues to conduct negotiations with various investors. We anticipate that
these negotiations will result in additional investment income for us. To
develop, promote and conduct our operations and achieve and maintain
competitiveness, we anticipate that we will need to raise significant capital.
Such capital may be raised through public or private financing as well as
borrowing and other sources. There can be no assurance that funding for our
operations will be available under favorable terms, if at all. If adequate funds
are not available, we may be required to curtail operations significantly or to
obtain funds by entering into arrangements with collaborative partners or others
that may require us to relinquish rights to certain products and services that
we would not otherwise relinquish.
3
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
In or about November 1999, Michael Gilbert, a former director of the Stephen's
Coffee, Inc. and Stephen's Coffee Holding, Inc. and our current shareholder,
filed an action in the United States District Court, Central District of
California, alleging that the transfer of the assets of Stephen's Coffee, Inc.
to us was fraudulent and seeking declaratory relief to unwind the transaction.
We believe that w have settled this matter by agreeing to repurchase Mr.
Gilbert's 150,000 shares of our common stock at $.20 per share.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
4
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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.
La Jolla Fresh Squeezed Coffee Co., Inc.,
a Washington corporation
November 20, 2000 By: /s/ Kurt B. Toneys
-----------------------------------
Kurt B. Toneys
Its: President, Chief Executive Officer
5