UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
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(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
---------- OF 1934
For the transition period from ____________ to ___________
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Commission File Number: 0-28985
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Millennia Tea Masters, Inc.
(Exact name of small business issuer as specified in its charter)
Texas 75-2785941
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(State of incorporation) (IRS Employer ID Number)
2591 Dallas Parkway, Suite 102, Frisco, TX 75034-8543
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(Address of principal executive offices)
(469) 633-0100
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(Issuer's telephone number)
16910 Dallas Parkway, Suite 100, Dallas, TX 75248
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(Former name, former address and former fiscal year, if changed from last
report)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: August 8, 2000: 1,730,939
Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE>
Millennia Tea Masters, Inc.
Form 10-QSB for the Quarter ended June 30, 2000
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 10
Part II - Other Information
Item 1 Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Defaults Upon Senior Securities 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 11
2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Item 1 - Part 1 - Financial Statements
Accountant's Review Report
--------------------------
Board of Directors and Shareholder
Millennia Tea Masters, Inc.
We have reviewed the accompanying balance sheets of Millennia Tea Masters, Inc.
(a Texas corporation) as of June 30, 2000 and 1999 and the accompanying
statements of operations and comprehensive income for the six and three months
ended June 30, 2000 and 1999 and the statements of cash flows for the six months
ended June 30, 2000 and 1999. These financial statements are prepared in
accordance with the instructions for Form 10-QSB, as issued by the U. S.
Securities and Exchange Commission, and are the sole responsibility of the
company's management.
We conducted our review 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, the objective of which is the
expression on 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 accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
financial statements, the Company has experienced limited sales and incurred
operating losses related to its startup and initial importation of inventory.
The Company has been primarily dependent upon the sale of common stock to
working capital. This situation raises a substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
S. W. HATFIELD, CPA
Dallas, Texas
August 8, 2000
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
3
<PAGE>
<TABLE>
<CAPTION>
Millennia Tea Masters, Inc.
Balance Sheets
June 30, 2000 and 1999
(Unaudited)
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
------
Current assets
Cash on hand and in bank $ 1,032 $ --
Accounts receivable - trade, net of
allowance for doubtful accounts of
$-0- and $-0-, respectively -- 395
Amounts due from affiliates 85,971 --
Inventory 526,459 480,963
--------- ---------
Total current assets 613,462 481,358
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TOTAL ASSETS $ 613,462 $ 481,358
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Cash overdraft $ -- $ 1,856
Accounts payable - trade -- --
Sales taxes payable -- 262
Advances from affiliates -- 179,441
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Total liabilities -- 181,559
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Commitments and contingencies
Stockholders' equity
Common stock - $0.001 par value
25,000,000 shares authorized
1,730,939 and 1,349,665 shares
issued and outstanding, respectively 1,731 1,350
Additional paid-in capital 731,208 349,315
Accumulated deficit (119,477) (50,866)
--------- ---------
Total stockholders' equity 613,462 299,799
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 613,462 $ 481,358
========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
Millennia Tea Masters, Inc.
Statements of Operations and Comprehensive Income
Six and Three months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 354 $ 5,399 $ 92 $ 2,284
Cost of Sales 71 1,123 19 64
----------- ----------- ----------- -----------
Gross Profit 283 4,276 73 2,220
----------- ----------- ----------- -----------
Operating expenses
Wages and related expenses 4,667 103 445 70
Marketing, promotion
and product development -- 5,614 -- --
General and administrative expenses 24,581 33,395 8,301 13,127
----------- ----------- ----------- -----------
Total operating expenses 29,248 39,112 8,746 13,197
----------- ----------- ----------- -----------
Loss from operations (28,965) (34,836) (8,673) (10,977)
Other income (expense) -- -- -- --
----------- ----------- ----------- -----------
Loss before income taxes (28,965) (34,836) (8,673) (10,977)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net Loss (28,965) (34,836) (8,673) (10,977)
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Loss $ (28,965) $ (34,836) $ (8,673) $ (10,977)
=========== =========== =========== ===========
Loss per weighted-average share of
common stock outstanding, computed
on net loss - basic and fully diluted $ (0.02) $ (0.03) $ (0.01) $ (0.01)
=========== =========== =========== ===========
Weighted-average number of
common shares outstanding 1,730,939 1,340,746 1,730,939 1,349,665
=========== =========== =========== ===========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
5
<PAGE>
<TABLE>
<CAPTION>
Millennia Tea Masters, Inc.
Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
Six months Six months
ended ended
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss for the year $ (28,965) $ (34,836)
Adjustments to reconcile net loss to net
cash provided by operating activities
(Increase) Decrease in
Accounts receivable - trade -- (395)
Inventory (527) (203,127)
Increase (Decrease) in
Accounts payable - trade (1,800) --
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Net cash used in operating activities (31,292) (238,358)
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Cash flows from investing activities -- --
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Cash flows from financing activities
Increase (Decrease) in cash overdraft -- 1,856
Advances from/(to) affiliates 31,810 141,716
Proceeds from sale of common stock -- 41,100
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Net cash provided by financing activities 31,810 184,672
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INCREASE (DECREASE) IN CASH 518 (53,686)
Cash at beginning of year 514 53,686
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Cash at end of year $ 1,032 $ --
========= =========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ -- $ --
========= =========
Income taxes paid for the period $ -- $ --
========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants. See Accountant's
Review Report. The accompanying notes are an integral part of these financial
statements.
6
<PAGE>
Millennia Tea Masters, Inc.
Notes to Financial Statements
Note A - Organization and Description of Business
Millennia Tea Masters, Inc. (Company) was incorporated on August 3, 1998 under
the laws of the State of Texas. The Company was formed to engage principally in
the marketing and sale of imported teas.
The Company began operations in October 1998 with its initial order of imported
teas from Sri Lanka.
The Company has elected a year-end of December 31 and uses the accrual method of
accounting.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-SB filed with the U. S. Securities and Exchange Commission on
January 19, 2000. The information presented herein may not include all
disclosures required by generally accepted accounting principles and the users
of financial information provided for interim periods should refer to the annual
financial information and footnotes contained in its Annual Report Pursuant to
Section 13 or 15(d) of The Securities Exchange Act of 1934 on Form 10-SB when
reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
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 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.
The Company's principal product, imported teas from Sri Lanka, is processed by a
single unrelated Sri Lankan entity. In the event of any disruption in the
availability of imported teas from Sri Lanka, if any, the Company may experience
a negative economic impact. The Company believes that other processors of
imported teas of comparable quality and price are available from the same region
and that no interruption of product availability will occur.
Note B - Going Concern Uncertainty
The Company commenced operations during the fourth quarter of 1998 and focused
significant resources during 1998 and 1999 in procuring and importing inventory
and developing sales and distribution channels. Accordingly, the Company has
generated only minimal revenues and experienced cumulative losses of
approximately $120,000.
7
<PAGE>
Millennia Tea Masters, Inc.
Notes to Financial Statements - Continued
Note B - Going Concern Uncertainty - Continued
During this start-up phase, the Company has been dependent upon the sale of
common stock to provide working capital. The Company's continued existence is
dependent upon its ability to generate sufficient cash flows from operations to
support its daily operations as well as provide sufficient resources to retire
existing liabilities and obligations on a timely basis.
Management has taken actions directly related to the generation of product sales
during Calendar 2000 and anticipates that these efforts will be sufficient to
provide sufficient resources to sustain its operations. Further, management
believes that its efforts to raise additional capital through the sale of equity
securities and/or new debt financing will provide additional cash flows.
However, there can be no assurance that the Company will be able to obtain
additional funding or, that such funding, if available, will be obtained on
terms favorable to or affordable by the Company.
Note C - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Inventory
---------
Inventory consists of imported tea products from Sri Lanka and are valued
at the lower of cost or market using the first-in, first-out method. The
product life of imported teas is approximately three (3) years and,
accordingly, the Company anticipates no obsolescence or deterioration in
its products' quality.
3. Organization costs
------------------
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organization
and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
4. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At June 30, 2000 and 1999, the deferred tax asset and deferred tax
liability accounts, as recorded when material to the financial statements,
are entirely the result of temporary differences. Temporary differences
represent differences in the recognition of assets and liabilities for tax
and financial reporting purposes, primarily accumulated depreciation and
amortization, allowance for doubtful accounts and vacation accruals.
As of June 30, 2000 and 1999, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. If these
carryforwards are not utilized, they will begin to expire in 2018.
8
<PAGE>
Millennia Tea Masters, Inc.
Notes to Financial Statements - Continued
Note C - Summary of Significant Accounting Policies - Continued
5. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of June 30, 2000 and 1999, the Company had
no warrants and/or options outstanding.
Note D - Related Party Transactions
As of June 30, 2000 and 1999, respectively, the Company has amounts receivable
(payable) from an affiliated entity and/or officers of approximately $85,971 and
$(179,441). These advances are unsecured, due upon demand and are non-interest
bearing.
Note E - Equity Transactions
In August 1998, the Company issued an aggregate 1,000,000 shares of restricted,
common stock to its founders at par value for the initial capitalization of the
Company.
In the fourth quarter of 1998, the Company sold an aggregate 308,565 shares of
restricted, unregistered common stock to various unrelated investors at a price
of $1.00 per share for aggregate proceeds of approximately $308,565.
In the first quarter of 1999, the Company sold an aggregate 422,374 shares of
restricted, unregistered common stock to affiliates and other unrelated parties
at a price of $1.00 per share for aggregate proceeds of approximately $422,374.
9
<PAGE>
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
The Company is considered a development stage company and as such has generated
no significant operating revenues and has incurred cumulative operating losses
of approximately $120,000.
For the respective six month periods ended June 30, 2000 and 1999, the Company
experienced net sales of approximately $354 and $5,399. The Company's expenses
during these corresponding periods relate principally to the start-up of
operations and the development of a marketing plan for the Company's tea
products.
Total net losses for the respective six month periods ended June 30, 2000 and
1999 were $(28,965) and $(34,836). Net loss per share was approximately $(0.02)
and $(0.03) for each respective six month period.
(3) Liquidity and Capital Resources
Liquidity for the period from inception through June 30, 2000 has been provided
by the proceeds from the sale of common stock and/or advances from affiliates.
In the fourth quarter of 1998, the Company sold an aggregate 308,565 shares of
restricted, unregistered common stock to various unrelated investors at a price
of $1.00 per share for aggregate proceeds of approximately $308,565.
In the first quarter of 1999, the Company sold an aggregate 422,374 shares of
restricted, unregistered common stock to affiliates and other unrelated parties
at a price of $1.00 per share for aggregate proceeds of approximately $422,374.
The Company has identified no significant capital requirements for the current
annual period. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management. Additionally, management is of the opinion that there is additional
potential opportunity for the sale of additional common stock through either
private placements or secondary offerings.
10
<PAGE>
(4) Year 2000 Considerations
The Year 2000 (Y2K) date change was believed to affect virtually all computers
and organizations. The Company undertook a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. The Company has not experienced
any detrimental effects related to any Y2K issues or date changes through the
date of this filing. However, there can be no assurance that all of the
Company's systems, and the systems of its suppliers, shippers, customers or
other external business partners will continue to function appropriately.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
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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.
MILLENNIA TEA MASTERS, INC.
August 8 , 2000 /s/ Kevin B. Halter
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Kevin B. Halter
President and Director
11
