UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) for the transition period from
_____________ to _______________.
Commission file number: 0-11734
CHINA FOOD AND BEVERAGE COMPANY
-------------------------------
(Name of Small Business Issuer in Its Charter)
Nevada 87-0548148
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
82-66 Austin Street, Kew Gardens, New York 11415
------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 398-7833
--------------
(Issuer's Telephone Number, Including Area Code)
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
-------- --------
The number of shares outstanding of Registrant's common stock ($0.001 par value)
as of July 31, 1998 was 7,204,261.
Total of Sequentially Numbered Pages: 12
----
Exhibit Index on Page: 8
----
1
<PAGE>
TABLE OF CONTENTS
PART 1
ITEM 1. FINANCIAL STATEMENTS...................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............3
ITEM 3. EVENTS SUBSEQUENT TO THE SECOND QUARTER ...............................4
ITEM 4. RESULTS OF OPERATIONS .................................................4
ITEM 5. CAPITAL RESOURCES AND LIQUIDITY........................................5
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................5
SIGNATURES.............................................................6
INDEX TO EXHIBITS......................................................7
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
Unless otherwise indicated, the term "Company" refers to China Food and
Beverage Company and its subsidiaries and predecessors. The accompanying
consolidated unaudited condensed financial statements have been prepared by
management in accordance with the instructions in Form 10-QSB and, therefore, so
not include all information and footnotes required by generally accepted
accounting principals and should, therefore, be read in conjunction with
Company's Annual Report to Shareholders on Form 10-KSB for the fiscal year ended
December 31, 1997. These statements do include all the normal recurring
adjustments which the Company believes is necessary and affords a fair
presentation. The interim results are not necessarily indicative of the results
for the full year ending December 31,1998. Accordingly, consolidated audited
interim financial statements, including a balance sheet for the Company as of
the fiscal quarter ended June 30, 1998, and, statements of operations and
statements of cash flows for the interim period up to the date of such balance
sheet and the comparable period of the preceding fiscal year are attached hereto
as Pages F-1 through F-12 and are incorporated herein by this reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
On January 30, 1998, the Company, ("Buyer"), and Calder Investments Limited
("Calder"), a British Virgin Islands corporation, and Li Lin Hu ("Mr. Li"), an
individual citizen of the People's Republic of China, (Calder and Mr. Li
collectively to be known as the ("Sellers"),who, between them, own100% of the
stock in the Victoria Beverage Company, Ltd. ("Victoria"), an Isle of Man
Corporation, entered into a formal agreement pursuant to which the Company would
purchase from the Sellers 100% of the stock of Victoria, Exhibit B(1). The
Sellers represented that Victoria owns a 60% interest in the Sui Ning Beer
Factory, located in Szechuan Province, Peoples' Republic of China. The purchase
price was a $15,000,000 debenture issued in favor of the shareholders of
Victoria, payable interest only at 6.25% per annum, semi-annually, commencing 18
months from the date of the Agreement; with the principal payable 5 years from
such date. The debenture is convertible18 months from the date of the Agreement
at $5.00 per share of the Company's Common Stock. If the debenture is converted
into the Company's Common Stock, Victoria's former shareholders would become the
Company's largest shareholders and may be capable of influencing the future
business policy. The Company filed a Form 8-K with respect to this transaction
on or about February 13,1998.
On April 20,1998, the Company rescinded this agreement because Victoria
rescinded their agreement with the Sui Ning Beer Factory ("Sui Ning"), because
Victoria was unable to obtain certified financial information from Sui Ning.
Since the Company's agreement with the Sellers was predicated upon Victoria's
majority ownership in Sui Ning, the Company and Sellers decided that the
agreement was no longer viable. On April 27,1998, the Company filed the
appropriate Form 8-K.
3
<PAGE>
Though the Company and the Sellers rescinded their January 30, 1998
agreement to purchase Victoria, based upon the fact that Victoria had recently
acquired a majority interest in the Anhui Haodun Brewery, Ltd. ("Anhui"), a
brewery located in the People's Republic of China, the Sellers and the Company
entered into an agreement on April 27, 1998, (Exhibit B(2)), pursuant to which
the Company would purchase from the Sellers, 100% of Victoria's stock in Anhui
in return for a debenture in the face amount of US$21,000,000, which shall be
for a term of five (5) years bearing an interest rate of eight percent (8%) per
annum. At the Company's option, the debenture may be converted into shares of
the Company's common stock at a conversion price of five dollars ($5.00) per
share. The Sellers were able to provide the Company with appropriate
documentation and accounting verifying that Victoria owned a fifty-five percent
(55%) ownership of Anhui. If the debenture is converted into the Company's
Common Stock, Victoria's former shareholders would become the Company's largest
shareholders and may be capable of influencing the Company's future business
policies. The Company filed a Form 8-K with respect to this transaction on May
6, 1998. To date, this transaction has not been formerly completed as the
Company is still waiting for the necessary verifiable financial information from
Victoria.
On September 7, 1993, V.K. Holdings, Inc. ("VK"), sued the Company (Case
Number 93- 05193-00-0-G), in the 319TH Judicial District Court of Nueces County,
Corpus Christi, Texas. VK alleged fraud, violation of securities laws, and other
related causes of action. Also named as defendants in the suit were: Chad
Burnett, Richard Surber and Kenneth R. O'Neal, in their capacities as officers
and directors of the Company in November 1992, the time when the alleged
fraudulent acts took place. On April 9, 1998, Judge Max Bennett, of the 319th
District Court, entered an Order dismissing the action against the Company and
all the Defendants for, "Want of Prosecution."
ITEM 3. EVENTS SUBSEQUENT TO THE SECOND QUARTER
On or about July 29, 1998, the Company passed a resolution for the issuance
of 50,000 shares of its Common Stock to each of the following entities: Mr.
Stanley Merdinger, Ms. Kitty Chow, Ms. Jane Zheng, and Mr. James Tilton, as an
inducement to remain as officers, directors of the Company. The Company also
issued 50,000 shares of its Common Stock to Ms. Deanna Ofsink, to remain as
counsel for the Company. Each of the aforementioned individual's stock issuance
was issued pursuant to a Form S-8 registration.
ITEM 4. RESULTS OF OPERATIONS
There were no gross revenues for the three month period ending June 30,
1998. Similarly, there were no gross revenues for the period ending June 30,
1997. Costs of revenues was $0 for the three month period ending June 30, 1998
and the three month period ending June30, 1997.
General, and administrative expenses were $96,248 for the second quarter of
1998, of which the Company incurred approximately, $80,600 in consulting and
accounting expenses. Interest expenses amounted to $7,800 for the second quarter
of 1998. Net loss was $191,545 during the second quarter of 1998, compared to
4
<PAGE>
$270,982 for the same period in 1997. The net loss per share was $0.05 for the
three month period ending June 30,1998, compared to a net loss per share of
$0.15 for the same period in 1997.
ITEM 5. CAPITAL RESOURCES AND LIQUIDITY
During the second quarter of 1998, the Company issued 666,668 unregistered
shares for $421,000.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page 8 of
this Form 10-QSB. The Index to Exhibits is incorporated herein by this
reference.
(b) Reports on Form 8-K:
1.) On April 27, 1998, the Company filed a Form 8-K, incorporated herein by
this reference, with respect to the Company's decision to rescind its
January 30,1998 Agreement with Calder Investments, Ltd. and Li Lin Hu,
concerning the Company's acquisition of Victoria Beverage Company, Ltd.
2.) On May 6, 1998, the Company filed a Form 8-K, incorporated herein by
this reference, with respect to an Agreement entered into on April
27,1998,between the Company, as, "Buyer", Calder Investments, Ltd. and Li
Lin Hu, collectively known as, "Sellers", for the purchase of 100% stock
ownership of Victoria Beverage Company, Ltd.
5
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized this __ day of August,1998.
CHINA FOOD AND BEVERAGE
/s/ James Tilton
-------------------
James Tilton, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
/s/James Tilton Chief Executive Officer, President, August ___, 1998
Treasurer and Director
- ---------------
James Tilton
- -------------------------------------------------------------------
/s/Stanley Merdinger Director August ___, 1998
- ------------------
Stanley Merdinger
- -------------------------------------------------------------------
/s/ Kitty Chow Director August ___, 1998
- -------------------
Kitty Chow
- -------------------------------------------------------------------
/s/ Jane Zheng Secretary and Director August ___, 1998
- -----------------
Jane Zheng
6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
10.1 An Agreement entered into on January 30,
1998, between the Company, as, "Buyer"and,
Calder Investments, Ltd. ("Calder"), and Li
Lin Hu ("LI"), collectively known as,
"Sellers." Company was to purchase100% stock
ownership from Sellers in Victoria Beverage
Company, Ltd. ("Victoria"), which
purportedly owned a majority percentage in a
brewery situated in the People's Republic of
China ("PRC").
- --------------------------------------------------------------------------------
10.2 An Agreement entered into on April 27, 1998,
between the Company ("Buyer"), and Calder
and Li ("Sellers"), whereby the Company
would acquire a 100% stock ownership from
Sellers in Victoria Beverage Company, Ltd.,
which recently acquired a majority interest
in a different brewery in the PRC.
7
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
A Development Stage Company
Consolidated Financial Statements
June 30, 1998 and 1997
<PAGE>
CONTENTS
Accountants' Report................................................ F-3
Consolidated Balance Sheets........................................ F-4
Consolidated Statements of Operations.............................. F-5
Consolidated Statements of Stockholders' Equity (Deficit).......... F-6
Consolidated Statements of Cash Flows.............................. F-7
Notes to the Consolidated Financial Statements..................... F-8
<PAGE>
Board of Directors
China Food and Beverage Company
A Development Stage Company
Las Vegas, Nevada
The accompanying financial statements as of June 30, 1998 and 1997 were not
audited by us and accordingly, we do not express an opinion on them. The
accompanying balance sheet as of December 31, 1997 was audited by us and we
expressed an unqualified opinion thereon dated April 7, 1998.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
August 4, 1998
F-3
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
A Development Stage Company
Consolidated Balance Sheets
ASSETS
------
June 30, December 31,
1998 1997
----------------- -----------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 390,031 $ 947
----------------- -----------------
Total Current Assets 390,031 947
----------------- -----------------
TOTAL ASSETS $ 390,031 $ 947
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 77,803 $ 77,682
Accounts payable - related party 77,382 47,382
Payroll taxes payable 158,364 158,364
Note payable 160,000 160,000
Accrued interest 68,600 53,000
------ ------
Total Current Liabilities 542,149 496,428
------- -------
TOTAL LIABILITIES 542,149 496,428
------- -------
<TABLE>
<CAPTION>
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000 shares authorized
of $0.001 par value, 5,477,458 and 3,699,288
shares issued and 4,709,716 and 2,931,546
<S> <C> <C>
outstanding, respectively 4,709 2,930
Additional paid-in capital 16,710,870 15,997,741
Accumulated deficit (16,867,697) (16,496,152)
----------- -----------
Total Stockholders' Equity (Deficit) (152,118) (495,481)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 390,031 $ 947
= ======= = ===
</TABLE>
F-4
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From the
Beginning of
Development
Stage on
For the Six Months For the Three Months January 1,
Ended June 30, Ended June 30, 1997 through
------------------------ -------------------------- June 30,
1998 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES $ - $ - $ - $ - $ -
COST OF SALES - - - - -
---------- ---------- ---------- ---------- ----------
GROSS MARGIN - - - - -
COSTS AND EXPENSES
Salaries and wages 243,750 - 87,500 - 374,450
General and administrative 112,195 166,929 96,248 270,982 670,710
---------- ---------- ---------- ---------- ----------
LOSS FROM CONTINUING
OPERATIONS 355,945 166,929 183,748 270,982 1,045,160
---------- ---------- ---------- ---------- ----------
OTHER (EXPENSE)
Interest expense (15,600) - (7,800) - (71,562)
---------- ---------- ---------- ---------- ----------
Total Other (Expense) (15,600) - (7,800) - (71,562)
---------- ---------- ---------- ---------- ----------
NET LOSS FROM
CONTINUING OPERATIONS
BEFORE LOSS ON
INVESTMENT AND LOSS
FROM DISCONTINUED
OPERATIONS (371,545) (166,929) (191,548) (270,982) (1,116,722)
LOSS ON INVESTMENT - - - - (1,600,000)
LOSS FROM DISCONTINUED
OPERATIONS - - - - -
---------- ---------- ---------- ---------- ----------
NET (LOSS) $ (371,545) $ (166,929) $ (191,548) $ (270,982) $ (2,716,722)
========== ========== ========== ========== ==========
NET (LOSS) PER SHARE $ (0.10) $ (0.09) $ (0.05) $ (0.15)
========== ========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF SHARES 3,820,631 1,846,808 3,820,631 1,846,808
========== ========== ========== ==========
</TABLE>
F-5
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
A Development Stage Company
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 1,298,192 $ 1,298 $ 13,941,726 $ (14,150,975)
Common Stock issued for services
valued at approximately $0.85 per
share 869,667 870 735,030 -
Common Stock issued for cash at
approximately $0.24 per share 628,958 629 153,268 -
Common Stock issued for the
acquisition of subsidiary 666,667 667 1,599,333 -
Cancellation of Common Stock
issued for services (416,669) (417) (271,733) -
Cancellation of Common Stock
issued for cash (Note 7) (116,667) (117) (159,883) -
Fractional shares issued 1,398 - - -
Net loss for the year ended
December 31, 1997 - - - (2,345,177)
----------- ----------- ----------- -----------
Balance, December 31, 1997 2,931,546 2,930 15,997,741 (16,496,152)
Common stock issued for services
(unaudited) 1,117,502 1,118 292,769 -
Common stock issued for cash
(unaudited) 660,668 661 420,360 -
Net loss for the six months ended
June 30, 1998 (unaudited) - - - (371,545)
----------- ----------- ----------- -----------
Balance, June 30, 1998 (unaudited) 4,709,716 $ 4,709 $ 16,710,870 $ (16,867,697)
=========== =========== =========== ============
</TABLE>
F-6
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From the
Beginning of
Development
Stage on
For the Six Months For the Three Months January 1,
Ended June 30, Ended June 30, 1997 through
------------------------ -------------------------- June 30,
1998 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net (Loss) $ (371,545) $ (166,929) $ (191,548) $ (270,982) $ (2,716,722)
Adjustments to reconcile net (loss) to
net cash used by operating activities:
Loss of investment value - - - - 1,600,000
Common stock issued for services -
net of cancellations 293,887 115,350 138,237 89,748 913,887
Bad debt expense - 17,462 - 17,462 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 121 409,240 121 221,598 253,022
Increase (decrease) in accounts payable
and accrued expenses 15,600 (226) (7,800) - 67,055
Increase (decrease) in accounts payable -
related parties - (375,045) - (57,828) (333,077)
---------- ---------- ---------- ----------- ----------
Net Cash (Used) by Operating Activities (61,937) (148) (60,990) (2) (215,835)
---------- ---------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES - - - - -
---------- ---------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 30,000 - 30,000 - 30,000
Common stock issued for cash 421,021 - 421,021 - 574,919
---------- ---------- ---------- ----------- ----------
Net Cash Provided by Financing Activities 451,021 - 451,021 - 604,919
---------- ---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH 389,084 (148) 390,031 (2) 389,084
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 947 146 - 947
---------- ---------- ---------- ----------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 390,031 $ (2) $ 390,031 $ (2) $ 390,031
========== ========== ========== =========== ==========
SUPPLEMENTAL SCHEDULE OF CASH
FLOW ACTIVITIES
CASH PAID FOR:
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for acquisition
of subsidiary $ - $ - $ - $ - $ -
</TABLE>
F-7
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY
A Development Stage Company
Notes to the Consolidated Financial Statements
June 30, 1998 and 1997
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at June 30, 1998 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
general accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December
31, 1997 audited consolidated financial statements. The results of
operations for the periods ended June 30, 1998 and 1997 are not
necessarily indicative of the operating results for the full year.
F-8
<PAGE>
AGREEMENT made this 27th day of April, 1998, by and between CHINA FOOD &
BEVERAGE COMPANY, a Nevada corporation ("China"), CALDER INVESTMENTS LIMITED, a
British Virgin Islands corporation ("Calder") and LI LIN HU, an individual
citizen of the People' Republic of or China ("Mr. LI") (collectively
the"Sellers");
WHEREAS, the Sellers are the owners of a certain number of shares of stock
representing the ownership of one hundred percent (100%) in the percentages set
forth beside those names below of Victoria Beverage Company Limited, an Isle of
Man Corporation (the "Victoria Stock"); and
WHEREAS, the Sellers wish to sell to China and China wishes to purchase
from Sellers' the Victoria Stock on the terms and conditions set forth herein
below;
NOW, THEREFORE, in consideration of the premises and promises contained
herein the signatory parties agree hereto as follows:
1. The Sellers hereby and herewith sell to China the Victoria Stock and China
herewith and hereby purchase the Victoria Stock from the Sellers.
2. The purchase price for the Victoria Stock is and shall be a debenture
issued by China in face amount of US' $21,000,000 which debenture shall be for a
term of five years bearing interest at eight percent (8%) per annum payable on
the yearly anniversary of the issuance by China of the debenture (the
"Debenture"). The Debenture may be converted at any time during its term, at the
option of China only, into shares of common stock of China at a conversion price
of five dollars ($5.00) per share. China may cause such conversion at any time
during the term that the shares of stock of China trade at the close of ten (10)
consecutive business days at a high bid price of $5.00 per share. China agrees
to register all shares so converted pursuant to appropriate registration
statement as soon as practicable after such conversion.
3. The Sellers Represent and warrant that Victoria is the owner of fifty five
percent (55% )of Anhui Haodun Brewery CO., Ltd. (the "Brewery"). The Sellers
further represent and warrant that the Brewery has total assets of approximately
US$14,200,000 and total gross liabilities not exceeding US$8,700,000 and the
total net shareholders equity is approximately US$5,500,000 and that the Brewery
has, in the last twelve (12) months passed, had total gross revenues of
approximately US$15,500,000 and its net profit therefrom was approximately
US$1,750,000.
4. The Sellers represent and warrant that they are authorized to enter into
this Agreement and that they are the owners of the Victoria Stock, the
transference of which pursuant to this Agreement is not violative of any law or
governmental edict.
5. China represents and warrants that it has full power to enter into this
Agreement.
6. All representations preceding herewith shall survive the Closing.
7. This Agreement may be signed in one or more counterparts.
8
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seal the first
day, month and year above written.
CHINA FOOD & BEVERAGE COMPANY
By: /s/James Tilton
---------------------------
James Tilton, President
/s/LI LIN HU
------------------------------
LI, LIN HU 50%
CALDER INVESTMENTS LIMITED - 5O%
By:/s/Joanna Redmayne
---------------------------
Joanna Redmayne, Director
9
AGREEMENT made this 3Oth day of January, 1998, by and between CHINA
FOOD & BEVERAGE COMPANY, a Nevada Corporation ("China"), CALDER INVESTMENTS
LIMITED, a British Virgin Islands corporation ("Calder") and LI, LIN HU, an
individual citizen of the People's Republic of China ("Mr. Li"). Collectively
known as the ("Sellers");
WHEREAS, the Sellers are the owners of a certain number of shares of stock
representing the ownership of one hundred percent (100%) in the percentages set
forth beside those names below of Victoria Beverage Company Limited, an Isle of
Man corporation (the "Victoria Stock'); and
WHEREAS, the Sellers wish to sell to China and China wishes to purchase
from Sellers' the Victoria Stock on the terms and conditions set forth herein
below;
NOW, THEREFORE, in consideration of the premises and promises contained
herein the signatory parties agree hereto as follows:
1. The Sellers hereby and herewith sell to China the Victoria Stock and China
herewith and hereby purchases the Victoria Stock from the Sellers.
2. The purchase price for the Victoria Stock is and shall be a debenture
issued by China in face amount of US$15,000,000 which debenture shall be for a
term of five years bearing interest at six and one quarter percent (6.25%) per
annum payable semi-annually commencing 18 months from the date of this agreement
and the principal payable 5 years from such date of the Issuance by China of the
debenture (the "Debenture"). The Debenture may be converted eighteen (18) months
from the date of this agreement at $5.00 per share of the Companies' common
stock. China agrees to register all shares so converted pursuant to appropriate
registration statement as soon as practicable after such conversion.
3. The Sellers represent and warrant that Victoria is the owner of sixty
percent (60%) of Sui Ning Beer Factory (the "Brewery"). The Sellers further
represent and warrant that the Brewery has total assets of approximately
US$25,000,000 and total gross liabilities not exceeding US$15,000,000 and the
total net shareholders equity is approximately US$10,000,000 and that the
Brewery has, in the last twelve (12) months passed, the total gross revenues of
approximately US$12,000,000 and its net profit therefrom was approximately
US$2,500,000.
4. The Sellers represent and warrant that they are authorized to enter into
this Agreement and that they are the owners of the Victoria Stock, the
transference of which pursuant to this Agreement is not violative of any law or
governmental edict.
5. China represents and warrants that it has full power to enter into this
Agreement.
6. All representations preceding herewith shall survive the Closing.
7. This Agreement may be signed in one or more counterparts.
10
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seal the first
day, month and year above written.
CHINA FOOD & BEVERAGE COMPANY
By:/s/James Tilton
--------------------------
James Tilton , President
/s/Li Lin Hun
-----------------------------
LI, LIN HU 50%
CALDER INVESTMENTS LIMITED -- 50%
By /s/Joanna Redmayne
--------------------------
Joanna Redmayne, Director
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 390031
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 390031
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 390031
<CURRENT-LIABILITIES> 542149
<BONDS> 0
0
0
<COMMON> 4709
<OTHER-SE> (156827)
<TOTAL-LIABILITY-AND-EQUITY> 390031
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 355945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15600
<INCOME-PRETAX> (371545)
<INCOME-TAX> 0
<INCOME-CONTINUING> (371545)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (371545)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
