UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31,1999
Commission file number: 0-11734
CHINA FOOD AND BEVERAGE COMPANY
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(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0548148
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(State of Incorporation) (I.R.S. Employer Identification No.)
8 West 38th Street, 9th floor, New York, New York 10018
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(Address of Principal Executive Offices)
(212) 398-7833
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(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF
THE SECURITIES EXCHANGE ACT OF 1934:
Name of Each Stock Exchange on Which
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Title of Each Class Registered
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Common Stock, Par Value $0.001 Per Share None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Indicate by check mark 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), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant at December 31, 1999, was approximately $2,749,164.
The number of shares of Registrant's Common Stock outstanding on
December 31,1999,was 5,546,505.
The Registrant's total revenues for the year ended December 31, 1999,
were $15,122,886.
Total of Sequentially Numbered Pages:
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS..........................................3
ITEM 2. DESCRIPTION OF PROPERTY..........................................5
ITEM 3. LEGAL PROCEEDINGS................................................5
ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS....................................5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.............................................5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................6
ITEM 7. FINANCIAL STATEMENTS.............................................8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS......................................................9
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT................................9
ITEM 10. EXECUTIVE COMPENSATION...........................................9
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS..........................10
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.....................................................10
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.................................10
SIGNATURES....................................................................11
INDEX TO EXHIBITS...............................ATTACHED TO END OF THIS DOCUMENT
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
China Food & Beverage Company, a Nevada corporation (the "Company" or,
"Corporation"), has executive offices at: 8 West 38th Street, 9th floor, New
York, New York 10018. The Company was incorporated in Nevada on November 6, 1981
under the name Logos Scientific Inc. Until 1991, the Company sold and
distributed medical diagnostic equipment through its Volu-Sol division. The
Company sold that division in December 1991. On May 5, 1992, the Company changed
its name to Logos International, Inc.
During 1992 and 1993, the Company's operations involved the acquisition
of small companies with diverse operations. The Company acquired several
subsidiaries including: an automotive body and paint shop, an automobile towing
operation, an art and frame gallery, an office staffing company, and a printing
and publishing concern. The Company primarily acquired small, distressed
companies located in the State of Utah. The Company's intention was to
restructure the operations of these subsidiaries to increase their cash flow and
revenues. Due primarily to undercapitalization, the Company's attempts to
reverse the fortunes of its subsidiaries failed. Throughout 1993 and 1994, the
Company liquidated or otherwise transferred all of its subsidiary corporations
and other assets in an attempt to settle actual and potential liabilities. By
the end of 1994, the Company had disposed of nearly all of its assets. For more
information on these events, see the Company's Form 10-KSB for fiscal year ended
December 31, 1994.
On October 23, 1995, the Company acquired all outstanding shares of
OMAP International Incorporated, a closely-held Nevada corporation ("OII"). As
consideration for the acquisition of OII, the Company issued 433,805 restricted
shares of the Company's common stock to the shareholders of OII.1 OII owned the
right to acquire patents related to a collating device which sorts and assembles
flat sheets of paper. OII also owned all outstanding capital stock of OMAP SA, a
Belgian research and development company which filed for bankruptcy protection
shortly after the Company's acquisition of OII. The Company changed its name to
OMAP Holdings Incorporated to reflect its ownership of OII and moved its
principal offices to Kew Gardens, New York. The three individuals who
collectively owned, directly or indirectly, 100% of OII's outstanding common
stock prior to October 23, 1995 were Aster De Schrijver, James Tilton and Jane
Zheng. Pursuant to the acquisition of OII, the Company underwent a change of
control and these three individuals obtained a majority interest in the Company.
De Schrijver, Tilton and Zheng were also appointed as the Company's directors
and/or officers.
On December 15, 1995, the Company acquired technology and proprietary
information necessary to manufacture and develop collators including drawings,
production know-how, and trade names and information related to distributors.
This information and technology were known as the "Barenthin Technology." In
exchange for the Barenthin Technology, the Company issued 11,112 restricted
shares of Common Stock.
On December 15,1995, the Company also acquired beneficial ownership of
100% of the outstanding shares of Establissements R. Kohl, a French corporation
("Kohl"). Kohl manufactured lighting equipment and heating devices.
(1)In return for Kohl's shares, the Company issued a total of 19,048
shares of restricted Common Stock to the former owners of Kohl. The Company also
paid $1,000,000 in bank drafts and made a $200,000 loan to Kohl. Kohl owned and
operated an approximately 100,000 square foot manufacturing plant in Calais,
France and the machinery and equipment housed in the plant.
The Company made these three acquisitions in 1995 pursuant to a single
business plan. The Company planned to develop the patents owned by OII and the
Barenthin technology to manufacture paper collators in the manufacturing plant
operated by Kohl. Kohl was to manufacture and distribute three different models
of collators varying as to quality and price, each of which would implement the
patents which were obtained through the Company's acquisition of OII. Kohl was
also to continue manufacturing heating equipment and lighting fixtures. Finally,
Kohl was to produce a line of portable food vending machines, including a
vending machine that cooks and dispenses french fries for which Kohl owned
patents.
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During the 1996 fiscal year, Kohl continued to produce and sell heating
and lighting equipment as it had done prior to its acquisition by the Company.
Kohl also produced prototypes for its paper collators and patented french fry
machine. However, Kohl could not obtain the investment capital necessary to
produce and distribute either the collators or the vending machines according to
Kohl's business plan. Kohl's revenues were also insufficient to finance the
production and distribution of these products. Accordingly, neither the
collators nor the vending machines were ever sold by Kohl. The inability to
obtain investment capital, paired with capital expenditures Kohl had made in
connection with the development of collators and vending machine prototypes,
created a working capital deficiency which impaired Kohl's ongoing operations.
Kohl became delinquent with several of its trade creditors and in November 1996,
Kohl applied for protection under the bankruptcy laws of France. On April
28,1997, the French Tribunal administering the bankruptcy of Kohl sold all of
Kohl's assets except the french fry vending machines and inventory and spare
parts related thereto, vendor patents and the Company's license. The Company may
appeal this sale and is currently investigating its rights under applicable law.
For more information on Kohl, see "Item 6 Management's Discussion and Analysis
of Financial Condition and Results of Operations."
After the bankruptcy proceedings of Kohl, the Company discontinued its
involvement in the manufacture of collators, heaters, lighting equipment and
other products designed, manufactured and/or produced by Kohl. The Company was
left with few assets, most of which were related to the manufacture of
collators.
On March 15, 1997, the Company entered into an agreement to acquire all
of the capital stock of American China Development Corporation, a Bahamian
corporation("ACDC"). ACDC owns a 60% interest in a joint venture in the People's
Republic of China ("PRC") which operates a beer brewery in the city of Qidong in
the Jiangsu province of the PRC. The joint venture's brewery, known as the
Nantong Aitesi Beer Company, Ltd., produces and distributes beer in the city of
Qidong and to surrounding areas within a 50 mile radius. The Company was to
purchase ACDC from Dizon Investments Limited, an investment company organized
under the laws of the British Virgin Islands. The Agreement called for the
Company to acquire ACDC in exchange for issuing 6,667 restricted shares of
Common Stock to Dizon. On November 8, 1998, the Company and Dizon rescinded the
Agreement because verifiable financials were never delivered and the 6,667
shares, which were being held in escrow, were returned to the Company
The Company's development has remained focused in pursuit of acquiring
breweries in the People's Republic of China of which progress is set forth in
detail in Item 6 - "Management's Discussion and Analysis of Operations of
Financial Condition and Results of Operations."
Business of Issuer
Since the disposition of Kohl, the Company's business has focused on
seeking to invest in business opportunities primarily related to the food and
beverage industry. The Company will continue to seek to acquire, similar
businesses both in China and other countries. To a lesser extent, the Company
will also seek to invest in domestic food and beverage concerns and in entities
with operations outside of the food and beverage industry.
The Company intends to locate its target investment opportunities
through contacts which management has in the food and beverage industry. The
Company has no full or part time employees, aside from its officers and
directors. If the Company requires additional personnel to carry out its
business objectives, it will retain outside consultants. In the past, the
Company has been successful in retaining consultants through the issuance of its
Common Stock and the Company intends to continue this practice in an attempt to
avoid expending valuable cash flows.
Since the Company does not have significant liquid assets, the Company
intends to acquire business opportunities through the issuance of its equity
securities. This will likely result in future dilution of the ownership interest
enjoyed by the Company's current shareholders. The Company has had some past
experience in acquiring subsidiaries in this manner. However, the Company can
provide no assurance that it will be able to continue such acquisitions in the
future. It is also likely that any future acquisitions by the Company will
require the Company to make capital contributions to the acquired businesses.
Though three of seven board members of Anhui Haodun Brewery Co., Ltd.,
sit on the board of China Food and Beverage Development, the Company does not
intend to participate in the day to day management of any business which the
Company may acquire. The Company's objective is to find business entities which
the Company feels are greatly undervalued, acquire such entities through the
issuance of Common Stock, make required investments in such entities, and
receive a return on its investment in the form of dividends or appreciation in
the value of the subsidiary.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company presently owns a complex of approximately 14 buildings of
various dimensions and square footage, situated at: #28 Juichang Rd., Luan,
Anhui province, People's Republic of China.
ITEM 3. LEGAL PROCEEDINGS
In December 1998, Canton Financial Services Corporation, Salt Lake
City, Utah, filed suit against the Company in the Third Judicial District Court,
Salt Lake City, Utah, for the amount of $45,253.48 for non-payment of services.
The lawsuit settled for $40,500 and dismissed on March 1, 1999.
Oasis International Hotel & Casino, Inc. v. China Food and Beverage
Company - On June 14,1999 suit was filed in the Supreme Court of the State of
New York, Case Number 114222/99. In April 1996, the Company received a cash
advance in the amount of $160,000 from Pienne Chow ("Chow"). On or about October
8,1997,the Company executed a Promissory Note in favor of Chow for the
aforementioned $160,000 together with interest. On or about December 3, 1998,
Chow assigned her right, title and interest in said Note to Oasis International
Hotel & Casino, Inc. ("Oasis") and Oasis sued the Company on the same. The
Company is still in settlement negotiations with Oasis.
As of the date of this filing, the parties have informally settled
their differences and are awaiting a formal order of dismissal from the court.
Securities and Exchange Commission v. China Food & Beverage, James C.
Tilton, et al. - On July 14, 1999, the Securities and Exchange Commission
("SEC") in the United States District Court, Southern District of Florida, Civil
Action No. 99-1968-CIV-GOLD, filed a Complaint for Injunctive and Other
Equitable Relief, as well as a Temporary Restraining Order against, et al, the
Company and James C. Tilton ("Tilton")individually who is the Company's chief
executive officer. On April 15, 1999, the Company entered into a Consulting
Agreement with The Globus Group, Inc. ("Globus"), a Nevada corporation, whereby
Globus was to act as a "...marketing consultant/promoter..." of the Company. The
complaint alleges that the Company, knowingly or unknowingly disseminated
material to the public based on Globus' false representations to the Company.
The complaint further alleges that when informed that Globus was engaging in
this and other improper activities that might result in creating false
impressions with the public, Tilton did not take appropriate corrective action
quickly enough.
As soon as the Company became aware of the SEC's complaint, the Company
took immediate steps to investigate the allegations against Globus. After
numerous attempts to contact Globus, without success, the Company's Officers and
Board of Directors felt it was in the Company's best interest to formally
terminated the aforementioned Consulting Agreement with Globus.
An offer was made by the Company and if accepted by the SEC, will have the
Company subject to a limited Consent Decree.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the 1999 fiscal year, there were no
matters submitted to a vote of the Company's shareholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The following table sets forth the prices of the Common Stock on the
OTC Bulletin Board for each quarter during fiscal years 1998 and 1999. These
over-the-counter market quotations are based on inter-dealer bid prices, without
markup, markdown, or commission, and may not necessarily represent actual
transactions.
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QUARTER HIGH LOW
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Quarter Ending December 31, 1999 $2.25 $1.94
Quarter Ending September 30, 1999 $2.63 $2.38
Quarter Ended June 30, 1999 $3.50 $3.50
Quarter Ended March 31, 1999 $4.75 $4.75
Quarter Ended December 31, 1998 $5.00 $5.00
Quarter Ended September 30, 1998 $0.07 $0.07
Quarter Ended June 30, 1998 $0.56 $0.56
Quarter Ended March 31, 1998 $0.66 $0.65
Shareholders
There were approximately 1549 record holders of Common Stock as of
December 31, 1999, holding a total of 5,546,505 outstanding shares of Common
Stock.
Reverse Split
On December 21, 1998, the Company effected a 1-for-100 reverse split of
its Common Stock. The reverse split affected only the issued and outstanding
Common Stock and did not affect the number of shares of Common Stock authorized
for issuance by the Company. All fractional shares resulting from the reverse
split were rounded up to the nearest whole share.
Dividends
The Company has never declared a cash dividend on its Common Stock and
does not anticipate doing so in the near future. The future payment of
dividends, if any, on the Common Stock is within the discretion of the board of
directors and will depend on the Company's earnings, capital requirements,
financial condition, and other relevant factors.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's analysis of its financial condition and results of its
operations was addressed in the Company's 10-KSB, filed, on or about, April
14,1998. Several significant events have occurred since that filing to date that
are set forth below, and may be considered material changes affecting the
Company's position.
On October 7, 1997, the Company executed a $160,000 promissory note to
settle any and all potential claims against the Company stemming from an April
1996 overseas offering of the Company's Common Stock which had since been
rescinded. The promissory note bears interest a rate of 19.5% and matures
October 19, 1998. The Company issued 7,677 pre-December 21,1998,1 to 100 reverse
split shares of Common Stock to an escrow agent to secure payment of principal
and interest due on the note. The 7,677 shares are listed as issued but not
outstanding. In the event the Company defaults on the note payable, the shares
of stock will be used to pay the note. At December 31,1997, the accrued interest
was $53,000. The Company canceled the 3,500,000 pre-split or the 116,667
post-spilt shares which were issued in 1996. In anticipation of the December 21,
1998, reverse split and the employee option program adopted on January 8,1999,
James Tilton, Jane Zheng relinquished their above-referenced options on December
9, 1998.
After entering into a Letter of Intent on December 19, 1997, the
Company and Victoria Beverage Company Limited("Victoria"), an Isle of Man
corporation, entered into a formal Agreement on January 30, 1998, pursuant to
which the Company acquired 100% of Victoria Beverage Company Limited
("Victoria"). 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; and the principal is payable 5 years from such date. The
debenture is convertible 18 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 February 13, 1998. Closing of this transaction was pending upon the
submission of verifiable financials from Victoria.
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On April 20,1998, the Company rescinded the aforementioned 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.
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, 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.
The Company, as Buyers, and Calder Investments, Ltd. and Li Lin Hu, as
Sellers, entered into an Agreement on January 30,1998,whereby the Company would
purchase 100% of the stock in the Victoria Beverage Company, Ltd. 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 decided that the Agreement was no longer
viable, and the Sellers agreed. On April 27, 1998, the Company filed the
appropriate Form 8-K.
On December 30, 1998, the Company closed on the April 27,1998,Agreement
with Calder Investments Limited and Li, Lin Hu by issuing its 5 year and one day
8% Debenture in the amount of $10,500,000 to each of Calder Investments Limited
and Li, Lin Hu. This issuance consummated the transactions described in the
Company 8-K dated May 6, 1998. On the same day, December 30, 1998, the Company
caused the conversion of the Debentures above described in the terms
incorporated therein by issuing to each of Li, Lin Hu and Calder Investments
Limited thereupon caused 1,050,000 of their shares to be issued to Anhui Lui An
Beer Company Ltd., to redeem their note to Anhui Lui An Beer Company Ltd. On
December 31, 1998, the Company issued a total of 4,200,000 shares of its common
stock to the following persons and entities in the following amounts pursuant to
Debentures which were converted on December 30, 1998; Calder Investments Limited
=1,050,000 shares of common stock; Li, Lin Hu =1,050,000 shares of common stock
Anhui Liu An Beer Company Ltd. = 2,100,000 shares of common stock. This issuance
caused the three individuals and entities above set forth to become the control
persons of the Registrant.
Through a reverse merger recapitalization by which the Company acquired
100% of Victoria Beverage Company, Ltd., for 4,200,000 shares of the Company's
common stock, resulted in the Company owning 55% of Anhui Hao Dun Brewery Co.,
Ltd., situated in the People's Republic of China. As opposed to the year ending
1998, when the Company's total assets year were valued at $15,998,864 of which,
the total assets year ending 1999 were $15,587,923, as set forth on page F-4 of
the Financials attached hereto. Total "Current Assets" are $3,625,724. The
"Fixed Assets" ($8,996,320) include a complex of buildings and equipment for
making beer. The "construction in progress "as listed under "Other Assets"
refers to a nitrogen separating machine being developed in conjunction with the
brewing processes.
On December 10, 1998, the Company authorized a reverse split of its
common stock on the basis of 1 new share for every 100 shares owned by
shareholders of record. Fractional shares were rounded up to the next whole
share. The effective date of the reverse split was December 21, 1998. The total
number of shares issued and outstanding before the reverse was 7,364,349. The
total number of shares issued and outstanding after the reverse was
approximately 73,644. The Company filed the appropriate 8-K reflecting 1 to 100
reverse split on December 18, 1998.
On January 6, 1999, a majority of the shareholders of the Company
voting their shares in lieu of a formal shareholders meeting adopted the
Company's 1999 Stock Option Plan reserving for issuance 1,000,000 shares of the
Company's common stock which plan is to be administered by the Company's Board
of Directors. At the same time, the shareholders voted in favor of James A.
Tilton, Jane Zheng, Kitty Chow, Stanley Merdinger and Li, Lin Hu to be directors
of the Company until the next shareholders meeting. (The shares were issued by
the Company's auditors on December 31, 1998.)
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The Company enacted the 1999 Stock Option Plan (the "Plan")on January
8, 1999, which is intended to provide incentives: (a)to the officers, directors,
counsels and other employees of China Food & Beverage Company, a Nevada
corporation (the "Company"), and any present or future subsidiaries of the
Company (individually a "Related Corporation" and collectively "Related
Corporations") by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder that qualify as "incentive stock
options" under Section 422A(b) of the Internal Revenue Code of 1986,as amended
(the "Code")(individually an "ISO" and collectively "ISOs");(b)to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder that do not qualify as ISOs (individually a
"Non-Qualified Option"and collectively "Non-Qualified Options"); (c)to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company ("Awards");
and (d) to director, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company("Purchases"). Both ISOs and Non-Qualified
Options are referred to hereinafter individually as an "Option"and collectively
as "Options." Options, Awards and authorizations to make Purchases are referred
to hereinafter collectively as "Stock Rights". As used herein the terms "parent"
and "subsidiary" mean "parent corporation" and subsidiary corporation,
respectively, as those terms are defined in Section 425 of the Code. The
specifics of the Plan were filed on January 8,1999 pursuant to a S-8
Registration and may be viewed in their entirety via the Edgar filing system.
Li, Lin Hu was appointed as a Director of the Company on January 6,
1999, a former 50% owner of Victoria Beverage Company and currently a senior
executive with Tiancheng.
The fact that the Company conducts business and owns the majority of
its assets in the People's Republic of China could expose the Company to
material and possible economic risks. These risks may include, but are not
limited to, military repression, expropriation, changing fiscal regimes,
fluctuations in currency exchange rates, high rates of inflation, worker unrest,
and the absence of industrial and economic infrastructure. Operations may be
affected by government regulations with respect to productions restrictions,
price controls, export controls, embargoes, income and other taxes,
environmental legislation, labor, welfare benefit policies, land use, etc. The
effect of these factors cannot be accurately assessed or predicted.
Events That Took Place Subsequent to Fiscal Year Ending December 31, 1999
Kitty Chow resigned on January 31, 2000 from the Board of Directors to
pursue other interests.
Stanley Merdinger resigned February 8, 2000 from Board of Director to
pursue other interests.
Results of Operations
As a result of the aforementioned acquisition of Victoria Beverage
Company, Ltd., and its subsidiary, Anhui Hao Dun Brewery Co.,Ltd.("Anhui"),the
Company's "Total Liabilities and Stockholder's Equity" for year ending 1999 was
$15,587,923 of which, as set forth on Page F-5 of the attached Financials. The
"Consolidated Statement of Operations" set forth on Page F-6 of the attached
Financial Statements, the Net Sales decreased in 1999 by 5%. Cost of Sales also
decreased in 1999 by 7%. This decrease can attributed to less sales, and as a
consequence, the Gross Margin increased approximately 1.6% from 33.2% year
ending 1998 to 34.8% year ending 1999. A light decrease in costs of raw
materials. It should be noted that "Selling Expenses" in 1999 increased nearly
75%. This difference can be attributed to more commission salesman.
Administrative cost increases were due to an increase in operational expenses.
In year ending 1998, the brewery had comprehensive income of $763,320 before the
minority interest valued at $343.494. The "Net Comprehensive Income" for 1999
was more than 108% less than in 1998 as a result of increased operating expenses
and an increase in interest expenses. Additionally, the company incurred an
increase in income tax expenses. The "income per share" was down as well, from
$0.09 in 1998 to a minus $0.13 for the year ending 1999.
Capital Resources and Liquidity
During 1999, the Company issued 234,500 shares of Common Stock for cash
valued at $1.86 per share; 44,203 shares were issued for services rendered
valued at $1.99 per share; and, 8,850 shares valued at $2.00 per share were
issued for debt conversion. The increase of positive cash flow reflected on the
"Consolidated Statements of Cash Flow" Page F-8 of the attached Financials, is a
result of money spent by the beverage company purchasing and repairing fixed
assets.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the audited financial statements attached hereto and numbered F-1
through F-15.
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CHINA FOOD AND BEVERAGE COMPANY
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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<TABLE>
<CAPTION>
C O N T E N T S
<S> <C>
Independent Auditors' Report..................................................................... F - 3
Consolidated Balance Sheet....................................................................... F - 4
Consolidated Statements of Operations............................................................ F - 6
Consolidated Statements of Stockholders' Equity.................................................. F - 7
Consolidated Statements of Cash Flows............................................................ F - 8
Notes to the Consolidated Financial Statements................................................... F - 10
</TABLE>
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INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
China Food and Beverage Company and Subsidiaries
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of China Food and
Beverage and Subsidiaries as of December 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1999 and 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of China
Food and Beverage Company and Subsidiaries as of December 31, 1999, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
/s/Jones, Jensen & Company
- --------------------------
Jones, Jensen & Company
Salt Lake City, Utah
April 10, 2000
F-3
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
------
December 31,
1999
CURRENT ASSETS
Cash and cash equivalent $ 995,846
Accounts receivable (net) (Note 1) 1,868,994
Note receivable 66,728
Inventory (Note 5) 626,262
Other receivables 67,894
-----------------
Total Current Assets 3,625,724
-----------------
PROPERTY AND FIXED ASSETS (Note 4)
Buildings 3,339,090
Machinery and equipment 8,575,984
Land 277,817
Accumulated depreciation (3,196,571)
-----------------
Total Fixed Assets 8,996,320
-----------------
OTHER ASSETS
Construction in progress 218,921
Deferred and prepaid expenses (Note 6) 2,746,958
-----------------
Total Other Assets 2,965,879
-----------------
TOTAL ASSETS $ 15,587,923
=================
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
December 31,
1999
-----------------
CURRENT LIABILITIES
Accounts payable $ 1,308,760
Related party payable 127,001
Accrued expenses 1,177,287
Taxes payable (Note 3) 4,032,426
Customer prepayments 43,864
Notes payable (Note 2) 5,971,797
-----------------
Total Current Liabilities 12,661,135
-----------------
LONG-TERM LIABILITIES
Other liabilities 180,448
-----------------
Total Long-Term Liabilities 180,448
-----------------
Total Liabilities 12,841,583
-----------------
MINORITY INTEREST 1,638,740
-----------------
STOCKHOLDERS' EQUITY
Common stock; 100,000,000 shares
authorized of $0.001
par value, 5,546,505 shares
issued and 5,250,086 outstanding 5,547
Additional paid-in capital 872,070
Related party receivable (412,043)
Other comprehensive income 8,421
Retained earnings 633,605
-----------------
Total Stockholders' Equity 1,107,600
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,587,923
=================
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended
December 31,
-----------------------------
1999 1998
------------ ------------
NET SALES $ 15,122,886 $ 15,957,499
COST OF SALES 9,858,731 10,647,010
------------ ------------
GROSS MARGIN 5,264,155 5,310,489
------------ ------------
COSTS AND EXPENSES
Selling expenses 323,089 184,672
General and administrative 2,046,149 1,522,012
------------ ------------
Total Costs and Expenses 2,369,238 1,706,684
------------ ------------
INCOME BEFORE OTHER EXPENSE 2,894,917 3,603,805
------------ ------------
OTHER EXPENSE
Interest expense 770,607 664,259
------------ ------------
Total Other Expense 770,607 664,259
------------ ------------
INCOME (LOSS) BEFORE TAX 2,124,310 2,939,546
INCOME TAX EXPENSE (Note 3) 2,715,508 2,176,226
------------ ------------
INCOME (LOSS) BEFORE MINORITY INTEREST (591,198) 763,320
MINORITY INTEREST (68,010) (343,494)
------------ ------------
NET INCOME (LOSS) (659,208) 419,826
OTHER COMPREHENSIVE INCOME
Currency translation adjustment 729 3,578
------------ ------------
Total Other Comprehensive Income 729 3,578
------------ ------------
NET COMPREHENSIVE INCOME (LOSS) $ (658,479) $ 423,404
============ ============
BASIC INCOME (LOSS) PER SHARE $ (0.12) $ 0.09
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,415,809 4,633,921
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
<TABLE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
<CAPTION>
Common Stock Additional Stock Other
----------------------------- Paid-In Subscription Comprehensive Retained
Shares Amount Capital Receivable Income Earnings
------------- -------------- ------------ -------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 4,200,000 $ 4,200 $ 1,300,497 $ -- $ 4,114 $ 872,987
Common stock issued for
the acquisition of Victoria 37,346 37 (1,991, 612) -- -- --
Common stock issued for
cash at $54.11 per share 9,902 10 535,875 -- -- --
Common stock issued for
debt conversion at $62.24
per share 241 -- 15,000 -- -- --
Common stock issued for
services rendered at $0.46
per share 1,016,942 1,017 469,883 (23,083) -- --
Cancellation of common
stock (6,667) (6) 6 -- -- --
Currency translation
adjustment -- -- -- -- 3,578 --
Net income for the year ended
December 31, 1998 -- -- -- -- -- 419,826
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 5,257,764 5,258 329,649 (23,083) 7,692 1,292,813
Common stock issued for
services at $1.99 per share 44,203 44 88,002 -- -- --
Common stock issued for
cash at $1.86 per share 234,500 235 436,729 -- -- --
Fractional shares issued 1,188 1 (1) -- -- --
Receipt of stock subscription -- -- -- 23,083 -- --
Currency translation adjustment -- -- -- -- 729 --
Common stock issued for
cancellation of debt at $2.00
per share 8,850 9 17,691 -- -- --
Net loss for the year ended
December 31, 1999 -- -- -- -- -- (659,208)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 5,546,505 $ 5,547 $ 872,070 $ -- $ 8,421 $ 633,605
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
<TABLE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended
December 31,
--------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (659,208) $ 419,826
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 990,493 947,924
Common stock issued for services 88,046 447,817
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (316,445) 997,610
(Increase) decrease in note receivable 35,952 (66,446)
(Increase) decrease in other receivables (27,765) 656,229
(Increase) decrease in inventory 812,706 (465,773)
(Increase) in deferred and prepaid assets (701,842) (1,989,846)
(Increase) in deposits 215,000 (215,000)
Increase in accounts payable and accrued expenses 204,101 870,796
Increase (decrease) in customer prepayments (381,288) (89,166)
Increase (decrease) in taxes payable (833,008) 671,973
Increase in minority interest 68,010 --
----------- -----------
Net Cash (Used) Provided by Operating Activities (505,248) 2,185,944
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (449,243) (1,268,585)
----------- -----------
Net Cash (Used) by Investing activities (449,243) (1,268,585)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds to related party (412,043) --
Common stock issued for cash 436,964 535,885
Proceeds from notes payable 4,055,078 4,797,109
Payments on notes payable (2,555,343) (6,067,780)
----------- -----------
Net Cash Provided (Used) by Financing Activities 1,524,656 (734,786)
----------- -----------
NET INCREASE (DECREASE) IN CASH 570,165 182,573
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 425,681 243,108
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 995,846 $ 425,681
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
-----------------------
1999 1998
-------- --------
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITY
Cash Paid For:
Interest $648,780 $664,259
Income taxes $426,402 $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Common stock issued for debt $ 17,700 $ 15,000
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
China Food and Beverage Company (the Company) was incorporated on
November 6, 1987 under the laws of the State of Nevada. The
Company subsequently ceased its original business activity in 1997
and thereafter primarily investigated and sought new business
opportunities.
The Company has a 100% owned subsidiary, Victoria Beverage Company
Limited (Victoria), which has a 55% owned subsidiary (Anhui Hao
Dun Brewery Co. Ltd.) (Anhui) which was incorporated in the nation
of China in 1986, for the purpose of operating a beer brewery.
Victoria was incorporated in the Isle of Man of May 9, 1993 for
the purpose of acquiring foreign companies.
The Company acquired 100% of the shares of Victoria which owns 55%
of Anhui for 4,200,000 shares of the Company's common stock. The
acquisition was accounted for as a recapitalization of Victoria
because the shareholders of Victoria controlled the Company after
the acquisition. Therefore, Victoria is treated as the acquiring
entity. There was no adjustment to the carrying value of the
assets or liabilities of Victoria in the exchange. The Company is
the acquiring entity for legal purposes and Victoria is the
surviving entity for accounting purposes. On December 18, 1998,
the shareholders of the Company authorized a 1-for-100 reverse
stock split. All references to common stock have been
retroactively restated to reflect the reverse stock split.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
d. Basic Income (Loss) Per Share
The computations of basic income (loss) per share of common stock
are based on the weighted average number of shares outstanding.
For the Year Ended
December 31, 1999
-------------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
Net Loss $ (659,208) 5,415,809 $ (0.12)
================== ================= =================
F-10
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
d. Basic Income (Loss) Per Share (Continued)
For the Year Ended
December 31, 1998
-------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Net Income $ 419,826 4,633,921 $ 0.09
================== ================= =================
e. Principles of Consolidation
The consolidated financial statements include those of China Food
and Beverage Company, Victoria Beverage Company Limited and Anhui
Hao Dun Brewery Co. Ltd. All significant intercompany accounts and
transactions have been eliminated.
f. 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 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.
g. Accounts Receivable
The Company's accounts receivable are shown net of an allowance
for bad debt of $207,666 and $107,150 at December 31, 1999 and
1998.
h. Advertising
The Company has capitalized the costs of acquiring the rights to
advertise on the streets of its home city, Luan, Peoples Republic
of China, for 20 years and is amortizing those costs over the life
of the agreement.
i. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies
are translated into United States dollars at the period and
exchange rate. Non-monetary assets are translated at the
historical exchange rate and all income and expenses are
translated at the exchange rates prevailing during the period.
Foreign exchange currency translation adjustments are included in
the stockholders' equity section as other comprehensive income.
j. Fair Value of Financial Instruments
As at December 31, 1999, the fair value of cash, accounts
receivable and accounts and advances payable including amounts due
to and from related parties, approximate carrying values because
of the short-term maturity of these instruments.
F-11
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
k. Foreign Operations
The Company currently conducts activities in The Peoples Republic
of China (PRC). The Company may be materially adversely affected
by possible political or economic instability in PRC. The risks
include, but are not limited to, military repression,
expropriation, changing fiscal regimes, extreme fluctuations in
currency exchange rates, high rates of inflation and the absence
of industrial and economic infrastructure. Operations may be
affected in varying degrees by government regulations with respect
to production restrictions, price controls, export controls,
income and other taxes, expropriation of property, maintenance of
claims, environmental legislation, labor, welfare benefit
policies, land use, land claims of local residents, water use and
safety. The effect of these factors cannot be accurately
predicted.
l. Capital Assets and Amortization
Capital assets are recorded at cost and amortization is provided
over the estimated economic life on a straight-line basis at the
following rates:
Machinery 14 years
Buildings 25 years
m. Income Taxes
Income tax expense consist of Consumption Tax (CT) which is
calculated by multiplying $26.58 by each ton of beer which is
sold, and the City Construction Tax (CCT) which is calculated by
multiplying 7% of the total VAT and CT, Education Tax which is
calculated by multiplying 2% of the total VAT and CT as well as
Income Tax which is calculated by multiplying net income before
taxes by 33%. Total income taxes for the years ended December 31,
1999 and 1998 were $2,715,508 and $2,176,226. At December 31,
1999, the Company had prepaid Income Taxes and City Construction
Taxes of $426,402 which are netted with the taxes payable.
n. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or loses resulting from changes in the
values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The adoption of this statement had no material
impact on the Company's financial statements.
F-12
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
o. Revenue Recognition
The Company recognizes revenue at the time the product is
delivered to the customer and expenses are recognized as incurred.
NOTE 2 - NOTES PAYABLE
The Company has taken out several loans from the Industrial &
Commercial Bank and the Agriculture Bank. These loans bear
interest at 10% to 12%, are due in 2000,
and are secured by the fixed assets of the Company. $ 5,450,131
The Company has received advances from its employees of the
Company which are interest bearing at rates between 6% and 12%
per annum and due on demand. These funds are to be used for staff
welfare and other
employee expenses. 521,666
-----------------
Total Notes Payable 5,971,797
Less: Current Portion (5,971,797)
-----------------
Long-Term Portion $ -
=================
NOTE 3 - TAXES PAYABLE
Taxes payable consisted of the following at December 31, 1999:
Gross revenue tax $ 155,658
Consumption tax 4,124,916
Education tax 178,438
City construction tax (156,059)
Income tax (270,527)
-----------------
Total $ 4,032,426
=================
The Company had value added and income tax expense of $2,715,508
and $2,176,226 for the years ended December 31, 1999 and 1998.
These amounts are computed based on the income of the Company in
the Peoples Republic of China.
F-13
<PAGE>
<TABLE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
<CAPTION>
NOTE 4 - PROPERTY AND FIXED ASSETS
1999
Accumulated Net Book
Cost Depreciation Value
------------------ ------------------- -----------------
<S> <C> <C> <C>
Machinery and equipment $ 8,575,984 $ 2,441,028 $ 6,134,956
Building 3,339,090 755,543 2,583,547
Land 277,817 - 277,817
------------------ ------------------- -----------------
$ 12,192,891 $ 3,196,571 $ 8,996,320
================== =================== =================
</TABLE>
During the years ended December 31, 1999 and 1998, the Company
expensed $805,729 and $763,267 in depreciation, respectively.
NOTE 5 - INVENTORY
Inventory
Inventories for the year ended December 31, 1999 consisted of the
following:
1999
-----------------
Finished goods $ 36,778
Work-in-process 81,809
Raw materials and supplies 507,675
-----------------
Total $ 626,262
=================
Inventories consist of bottled beer, beer in process and raw
materials and are stated at the lower of cost or market using the
average cost method.
NOTE 6 - DEFERRED AND PREPAID EXPENSES
Deferred and prepaid expenses consist of the following:
Prepaid advertising $ 424,475
Trademark 2,322,483
-----------------
$ 2,746,958
=================
The prepaid advertising is being amortized over a period of 20
years, the trademark is being amortized over a period of 15 years.
Amortization expense for the years ended December 31, 1999 and
1998 was $184,764 and $184,657, respectively.
F-14
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 7 - CONCENTRATIONS OF RISK
a. Cash and Cash Equivalents
The Company had cash of $578,727 in banks located in The Peoples
Republic of China. These accounts are not insured by the Federal
Deposit Insurance Corporation. Additionally, the Company has
$452,403 of cash equivalents held with ITEX Corporation. This
balance is not insured by the Federal Deposit Insurance
Corporation.
b. Accounts Receivable
The Company provides for accounts receivable as part of
operations. Management does not believe that the Company is
subject to credit risks outside the normal course of business.
NOTE 8 - CUSTOMERS AND EXPORT SALES
During 1999 and 1998, the Company operated one industry segment
which is the manufacturing and marketing of alcoholic products.
The Company's financial instruments subject to credit risk are
primarily trade accounts receivable from its customers.
For the Years Ended
December 31,
---------------------------------------
1999 1998
------------------- -----------------
Foreign sales $ 15,122,886 $ 15,957,499
=================== =================
F-15
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position(s) and Office(s)
---- --- -------------------------
James Tilton 38 President, Chief Executive Officer,
Treasurer, Director
Jane Zheng 37 Secretary, Director
Li Lin Hu 55 Director
James Tilton was appointed the Company's president, chief executive
officer, treasurer and one of its directors on October 23, 1995. Mr. Tilton has
extensive business and marketing experience in the Far East and has worked with
his wife, Jane Zheng, in partnership with the Metallic Building Company("MBC"),
a subsidiary of NCI Building Systems, to market its pre-engineered building
materials in the People's Republic of China ("PRC") since 1992. For the last
five years and again with Jane Zheng, he has assisted Star Brite, a division of
Oceans Bio-Tech, in establishing a sales distribution system in PRC for its
chemical products. Mr. Tilton is also a director of Tianrong Building Material
Holdings, Ltd., a Utah corporation.
Jane Zheng was appointed as secretary and a director of the Company on
October 23, 1995. Ms. Zheng has extensive business and marketing experience in
the Far East and has worked with her husband, James Tilton, in partnership with
the Metallic Building Company ("MBC"), a subsidiary of NCI Building Systems, to
market its pre-engineered building materials in the PRC since 1992. For the last
five years and again with James Tilton, Ms. Zheng has assisted Star Brite, a
division of Oceans Bio-Tech, in establishing a sales distribution system in
China for its chemical products. She received her engineering degree from
Shanghai University, in Shanghai, China. Ms. Zheng also has an MBA degree in
Finance from Adelphi University, New York, and serves as a director of Tianrong
Building Material Holdings, Ltd., a Utah corporation.
Li, Lin Hu, who has Master in Business Administration from China Economy
and Management College is a senior economist and was appointed as a director of
the Company on or about January 6, 1999. Li is also executive Vice-President of
Tiancheng Group, as referenced to throughout herein.
Compliance With Section 16(a)of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company,
the Company is not aware of any person who, at any time during the fiscal year
ended December 31,1998,was a director, officer, or beneficial owner of more than
ten percent of the Common Stock of the Company, and who failed to file on a
timely basis reports required by Section 16(a)of the Securities Exchange Act of
1934 during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes certain information concerning executive
compensation paid to or accrued by the Company's chief executive officer during
the Company's last three fiscal years. During this time no executive officer,
excluding James Tilton, the current chief executive officer, earned or received
annual compensation exceeding $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Long Term Compensation
Name and Principal Position Year Salary($) Bonus($) Other Restricted Options/ LTI Other
Annual Stock SARs (#) Payout
Comp. Awards
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Tilton, 1998 34,500 -0- -0- -0- -0- -0- -0-
President 1997 68,500 -0- -0- -0- -0- -0- -0-
1999 50,000 -0- -0- -0- -0- -0- -0-
</TABLE>
9
<PAGE>
The Company has compensated its directors by issuing them shares of Common
Stock registered pursuant to a Form S-8 registration statement. The number of
shares issued to directors as compensation for services is based on the time and
effort expended by the directors during the year, as determined from time to
time by the Company's board of directors, and is not evidenced by any written
compensation plan.
The Company has an Employment Agreement, effective October 23, 1995, with
James Tilton, its president and chief executive officer. Pursuant to the
Agreement, Mr. Tilton received an initial salary of $60,000, subject to periodic
review and adjustment by the board of directors. The Company also pays the
health insurance premiums of Mr. Tilton and his dependents.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information concerning the stock
ownership as of December 31, 1999, with respect to: (i) each person who is known
to the Company to beneficially own more than 5% of the Company's Common Stock;
(ii) all directors; and (iii) directors and executive officers as a group (the
notes below are necessary for a complete understanding of the figures). The
Company calculated the owners of 5% of the Common Stock using the 5,546,505
shares of Common Stock issued on December 31, 1999.
<TABLE>
<CAPTION>
Name and Address
Title of Class Amount and Nature of
of Beneficial Owner Beneficial Ownership Percentage of Class
------------------- -------------------- -------------------
<S> <C> <C>
Common Stock Par Value $0.001 Anhui Liu An Beer Company 38%
2,100,000
Common Stock Par Value $0.001 Tiancheng China Corp, Ltd.(a) 10%
530,000
Common Stock Par Value $0.001 Jane Zheng, Director & 5%
Secretary (c)
82-66 Austin Street
Kew Gardens, NY 11415
284,752
Common Stock Par Value $0.001 James Tilton, Director, 1%
President & Treasurer(b)
82-66 Austin Street
Kew Gardens, NY 11415
57,251
Common Stock Par Value $0.001 Calder Investments, Ltd. 19%
1,050,000
Common Stock Par Value $0.001 Li Lin Hu, Director (a) 0%
</TABLE>
(a) Tiancheng is an operating entity incorporated in the People's Republic of
China of which Li Lin Hu is an officer and director. (b) Includes 211 shares of
common stock owned by ATJ, Incorporated, a Delaware holding company, of which
James A. Tilton is sole officer, director and shareholder.
(c) Includes 185 shares of common stock owned by ZJ, Incorporated a Delaware
holding company, of which Jane Zheng is sole officer, director and shareholder.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
N/A
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
None.
10
<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 14th day of April, 2000.
China Food and Beverage Company
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
- ------------------------ President, April 14,2000
James Tilton Chief Executive Officer,
Treasurer and Director
/s/ Jane Zheng
- ------------------------ Secretary and Director April 14,2000
Jane Zheng
/s/ Lin Hu Li
- ------------------------ Director April 14,2000
Lin Hu Li
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 995846
<SECURITIES> 0
<RECEIVABLES> 1868994
<ALLOWANCES> 207666
<INVENTORY> 626262
<CURRENT-ASSETS> 3625724
<PP&E> 12192891
<DEPRECIATION> 3196571
<TOTAL-ASSETS> 15587923
<CURRENT-LIABILITIES> 12661135
<BONDS> 0
0
0
<COMMON> 5547
<OTHER-SE> 1101693
<TOTAL-LIABILITY-AND-EQUITY> 15587923
<SALES> 15122886
<TOTAL-REVENUES> 15122886
<CGS> 9858731
<TOTAL-COSTS> 12227969
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 770607
<INCOME-PRETAX> 2124310
<INCOME-TAX> 2715508
<INCOME-CONTINUING> (591198)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 659208
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
