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 March 31, 2000.
[ ] 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.)
8 West 38th St, 9th floor, New York, N.Y. 10018
-----------------------------------------------
(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 March 31, 2000 was 37,014, 165.
Total of Sequentially Numbered Pages: 21
--
1
<PAGE>
TABLE OF CONTENTS
PART 1
Page
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 ..............................................5
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................5
SIGNATURES..........................................................6
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, 1998. 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 31,1999. Accordingly, consolidated audited
interim financial statements, including a balance sheet for the Company as of
the fiscal quarter ended March 31, 2000, 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-4 through F-9 and are incorporated herein by this reference.
CHINA FOOD AND BEVERAGE COMPANY
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalent $ 456,491 $ 995,846
Accounts receivable (net) -- 1,868,994
Note receivable -- 66,728
Inventory -- 626,262
Other receivables -- 67,894
------------ ------------
Total Current Assets 456,491 3,625,724
------------ ------------
PROPERTY AND FIXED ASSETS
Buildings -- 3,339,090
Machinery and equipment 2,149 8,575,984
Land -- 277,817
Accumulated depreciation (394) (3,196,571)
------------ ------------
Total Fixed Assets 1,755 8,996,320
------------ ------------
OTHER ASSETS
Construction in progress -- 218,921
Deferred and prepaid expenses 14,546 2,746,958
------------ ------------
Total Other Assets 14,546 2,965,879
------------ ------------
TOTAL ASSETS $ 472,792 $ 15,587,923
============ ============
F-1
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 66,668 $ 1,308,760
Related party payable 169,854 127,001
Accrued expenses 510,167 1,177,287
Taxes payable -- 4,032,426
Customer prepayments -- 43,864
Notes payable -- 5,971,797
----------- -----------
Total Current Liabilities 746,689 12,661,135
----------- -----------
LONG-TERM LIABILITIES
Other liabilities -- 180,448
----------- -----------
Total Long-Term Liabilities -- 180,448
----------- -----------
Total Liabilities 746,689 12,841,583
----------- -----------
MINORITY INTEREST -- 1,638,740
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 100,000,000 shares
authorized of $0.001 par value,
5,596,505 and 5,546,505 shares issued
and 5,300,086 and 5,250,086 shares
outstanding, respectively 5,597 5,547
Additional paid-in capital 922,021 872,070
Related party receivable -- (412,043)
Other comprehensive income -- 8,421
Retained earnings (deficit) (1,201,515) 633,605
----------- ------------
Total Stockholders' Equity (Deficit) (273,897) 1,107,600
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 472,792 $ 15,587,923
=========== ============
</TABLE>
F-2
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
-------------------------- -----------
2000 1999 2000
----------- ----------- -----------
NET SALES $ -- $ 1,757,884 $ --
COST OF SALES -- 798,799 --
----------- ----------- -----------
GROSS MARGIN -- 959,085 --
----------- ----------- -----------
COSTS AND EXPENSES
Selling expenses -- 55,343 --
General and administrative 69,417 567,758 69,417
----------- ----------- -----------
Total Costs and Expenses 69,417 623,101 69,417
----------- ----------- -----------
INCOME (LOSS) BEFORE OTHER
EXPENSE (69,417) 335,984 (69,417)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (31,200) (55,927) (31,200)
Interest income 171 -- 171
----------- ----------- -----------
Total Other Income (Expense) (31,029) (55,927) (31,029)
----------- ----------- -----------
INCOME (LOSS) BEFORE TAX,
EXTRAORDINARY ITEM, MINORITY
INTEREST AND DISCONTINUED
OPERATIONS (100,446) 280,057 100,446
INCOME TAX EXPENSE -- 352,729 --
----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (100,446) (72,672) (100,446)
GAIN FROM FORGIVENESS OF DEBT 255,640 -- 255,640
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST AND DISCONTINUED
OPERATIONS 155,194 (72,672) 155,194
MINORITY INTEREST -- (41,876) --
----------- ----------- -----------
LOSS ON DISCONTINUED
OPERATIONS (1,990,314) -- (1,990,314)
----------- ----------- -----------
NET INCOME (LOSS) $(1,835,120) $ (114,548) $(1,835,120)
=========== =========== ===========
F-3
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations (Continued)
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended 2000 Through
March 31, March 31,
------------------------- ------------
2000 1999 2000
----------- ----------- -----------
OTHER COMPREHENSIVE INCOME
Currency translation adjustment $ -- $ 14,356 $ --
----------- ----------- -----------
Total Other Comprehensive Income -- 14,356 --
----------- ----------- -----------
NET COMPREHENSIVE INCOME
(LOSS) $(1,835,120) $ (100,192) $(1,835,120)
=========== =========== ===========
BASIC INCOME (LOSS) PER SHARE $ (0.33) $ (0.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,571,505 5,341,601
=========== ===========
F-4
<PAGE>
<TABLE>
<CAPTION>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
Additional Stock Other Retained
Common Stock Paid-In Subscription Comprehensive Earnings
Shares Amount Capital Receivable Income (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
<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>
F-5
<PAGE>
<TABLE>
<CAPTION>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Continued)
Additional Stock Other Retained
Common Stock Paid-In Subscription Comprehensive Earnings
Shares Amount Capital Receivable Income (Deficit)
----------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 5,546,505 $ 5,547 $ 872,070 $ -- $ 8,421 $ 633,605
Common stock issued for cash
at $1.00 per share (unaudited) 50,000 50 49,951 -- -- --
Change in currency translation
(unaudited) -- -- -- -- (8,421) --
Net loss for the three months
ended March 31, 2000
(unaudited) -- -- -- -- -- (1,835,120)
----------- ----------- ----------- --------- ----------- -----------
Balance, March 31, 2000
(unaudited) 5,596,505 $ 5,597 $ 922,021 $ -- $ -- $(1,201,515)
=========== =========== =========== ========= =========== ===========
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended Through
March 31, March 31,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (1,835,120) $ (114,618) $(1,835,120)
Adjustments to reconcile net
income (loss) to net cash
used by operating activities:
Depreciation and amortization 394 243,698 394
Common stock issued for services -- 6,000 --
Discontinued operations 1,990,314 -- 1,990,314
Gain on settlement of debt (255,640) -- (255,640)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable -- (636,789) --
(Increase) decrease in note receivable -- (384,496) --
(Increase) decrease in other receivables -- (388,622) --
(Increase) decrease in inventory -- (418,699) --
(Increase) in deferred and prepaid assets (14,546) 73,593 (14,546)
(Increase) decrease in construction in progress -- (27,191) --
Increase in accounts payable and accrued expenses -- 214,705 --
Increase (decrease) in customer prepayments -- (239,491) --
Increase (decrease) in taxes payable -- -- --
Increase in minority interest -- 41,878 --
----------- ----------- -----------
Net Cash (Used) Provided by Operating Activities (114,598) (1,630,032) (114,598)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets -- (4,047) --
----------- ----------- -----------
Net Cash (Used) by Investing activities -- (4,047) --
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loss of cash from discontinued operations (424,757) -- (424,757)
Common stock issued for cash 50,000 250,000 50,000
Proceeds from notes payable -- 2,156,457 --
Payments on notes payable (50,000) (372,277) (50,000)
----------- ----------- -----------
Net Cash Provided (Used) by Financing Activities (424,757) 2,034,180 (424,757)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (539,355) 400,101 (539,355)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 995,846 425,681 (995,846)
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 456,491 $ 825,782 $ 456,491
=========== =========== ===========
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception of
Development
Stage on
January 1,
For the Three Months Ended Through
March 31, March 31,
2000 1999 2000
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITY
<S> <C> <C> <C>
Cash Paid For:
Interest $ -- $ 55,927 $ --
Income taxes $ -- $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Contribution of capital by shareholder $ -- $3,733,517 $ --
</TABLE>
F-8
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
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 an cash flows at March 31, 2000 and for all
periods resented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally 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, 1998 audited consolidated financial statements. The results of
operations for periods ended March 31, 2000 and 1999 are not
necessarily indicative of the operating results for the full
years.
NOTE 2 - LOSS OF SUBSIDIARY
The loss in the first quarter of 2000 from discontinued operatons
results from a dispute with the Anhui Liu An Beer Company Ltd.
("sellers") who represent a minority interest in the entity that
operates the Company's brewery in the Peoples' Republic of China.
In December 1998, the Company acquired a 55% interest in a Chinese
brewery for which it issued 8% convertible debentures in the total
principal amount of $21 million. The debentures had a $5.00
conversion price. Pursuant to the terms of the debentures, the
Company had the right to require conversion of the debentures. The
Company required said conversion and issued 4.2 million shares of
its common stock, also in December 1998. The sellers, from whom
the Company purchased its interest in the brewery, hold a 45%
equity interest in the brewery and agreed to maintain
responsibility for the day-to-day operations of the brewery.
The Company's Chinese asset, which is the brewery, is subject to
liens which resulted in the borrowing of approximately $6 million,
and the brewery had tax liabilities to the People's Republic of
china in excess of $4 million.
In May 2000, the sellers claimed that the Company was in default
of its obligations to repurchase or cause to be repurchased from
the sellers, a significant majority of the shares of the common
stock issued upon conversion of the debentures or, to provide
additional capital. As a result of the alleged default, they
refused to provide the Company with any financial information
concerning the operations of the brewery and assumed control of
the brewery.
The Company believes that the claims made by the sellers are
without merit. However, as the assets of the brewery are in the
Peoples' Republic of China and the Company has no effective
control over the business or the financial concerns of the
brewery, the Company has fully reserved against all of its assets
allocated in China. All operations have been classified as
discontinued as they relate to the brewery.
It is possible that, in addition to taking control of the assets,
the sellers may commence an action against the Company alleging,
among other claims, breach of contract. Conversely, the Company is
exploring its options, including but not limited to, initiating
legal action of its own to recover what it believes to be a
wrongful conversion of its assets by the sellers.
F-9
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 2 - LOSS OF SUBSIDIARY (Continued)
Unless the Company is able to resolve this dispute and because it
does not presently have the financial ability to continue in
operation, it may be obligated to secure additional debt or equity
financing to enable it to continue as an on-going entity.
NOTE 3 - LITIGATION
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 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 terminate 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.
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.
On January 10, 2000, Oasis received a check in the amount of
$50,000 from the Company. On April 24, 2000, the Supreme Court of
the State of New York in the above-referenced matter, entered an
order of Satisfaction of Judgment thereby effectively dismissing
the case against the Company.
F-10
<PAGE>
CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 4 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to seek a merger with an existing,
operating company. Until that time, the stockholders have
committed to covering the operating costs of the Company.
F-11
<PAGE>
- ----------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
- ----------------------------------------------
For the three month ended March 31,2000, the Company sustained a loss
of $ 1,835,120 or $0.33 per share (basic and diluted.) The net loss resulted
from the reserve of $1,490,314 which was set up against the net of the Chinese
assets, including cash and accounts receivables over the liabilities.
Additionally, the Company recorded a gain of $255, 640 on the settlement of the
Oasis note payable. These assets represented essentially all of the Company's
assets as of December 31, 1999. For the comparable period of 1999, the Company
sustained a net loss of $114,548, or $0.02 per share on revenue of $1,752,884.
As a result of the reserve the Company had a deficiency of stockholder's equity
of $273,897 at March 31, 2000.
The reserve in the first quarter of 2000 results from a dispute with
the Anhui Liu An Beer Company Ltd. ("sellers") who represent a minority interest
in the entity that operates the Company's brewery in the Peoples' Republic of
China. In December 1998, the Company acquired a 55% interest in a Chinese
brewery for which it issued 8% convertible debentures in the total principal
amount of $21 million. The debentures had a $5.00 conversion price. Pursuant to
the terms of the debentures, the Company had the right to require conversion of
the debentures. The Company required said conversion and issued 4.2 million
shares of its common stock, also in December 1998. The sellers, from whom the
Company purchased its interest in the brewery, hold a 45% equity interest in the
brewery and agreed to maintain responsibility for the day-to-day operations of
the brewery.
The Company's Chinese asset, which is the brewery, is subject to liens
which resulted in the borrowing of approximately $6 million, and the brewery had
tax liabilities to the Peoples' Republic of China in excess of $4 million.
In May 2000, the sellers claimed that the Company was in default of its
obligations to repurchase or cause to be repurchased from the sellers, a
significant majority of the shares of the common stock issued upon conversion of
the debentures or, to provide additional capital. As a result of the alleged
default, they refused to provide the Company with any financial information
concerning the operations of the brewery and assumed control of the brewery.
The Company believes that the claims made by the sellers are without
merit. However, as the assets of the brewery are in the Peoples' Republic of
China and the Company has no effective control over the business or the
financial concerns of the brewery, the Company has fully reserved against all of
its assets located in China.
It is possible that, in addition to taking control of the assets, the
sellers may commence an action against the Company alleging, among other claims,
breach of contract. Conversely, the Company is exploring its options, including
but not limited to, initiating legal action of its own to recover what it
believes to be a wrongful conversion of its assets by the sellers.
3
<PAGE>
Unless the Company is able to resolve this dispute and because it does
not presently have the financial ability to continue in operation, it may be
obligated to secure additional debt or equity financing to enable it to continue
as an on-going entity.
LITIGATION
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.
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.
On January 10, 2000, Oasis received a check in the amount of $50,000
from the Company. On April 24, 2000, the Supreme Court of the State of New York
in the above-referenced matter, entered an order of Satisfaction of Judgement
thereby effectively dismissing the case against the Company.
- ----------------------------------------------
ITEM 3. EVENTS SUBSEQUENT TO THE FIRST QUARTER
- ----------------------------------------------
As set forth in Item 2. "Management's Analysis and Discussion" above
herein, 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.
On January 10, 2000, Oasis received a check in the amount of $50,000
from the Company. On April 24, 2000, the Supreme Court of the State of New York
in the above-referenced matter, entered an order of Satisfaction of Judgement
thereby effectively dismissing the case against the Company.
Again, as set forth in detail in Item 2., "Management's Discussion and
Analysis", in May 2000, Anhui Liu An Beer Company Ltd. ("sellers") who represent
4
<PAGE>
a minority interest in the entity that operates the Company's brewery in the
Peoples' Republic of China, claimed that the Company was in default of its
obligations to repurchase or cause to be repurchased from the sellers, a
significant majority of the shares of the common stock issued upon conversion of
the debentures or provide additional capital. As a result of the alleged
default, they refused to provide the Company with any financial information
concerning the operations of the brewery and assumed control of the brewery.
- -------------------------------
ITEM 4. RESULTS OF OPERATIONS
- -------------------------------
As set forth in Item 2., "Management's Discussion and Analysis" above
herein, for the three month ended March 31,2000, the Company sustained a loss of
$ 1,835,120 or $0.33 per share (basic and diluted.) The net loss resulted from
the reserve of $1,490,314 which was set up against the net of the Chinese
assets, including cash and accounts receivables over the liabilities.
Additionally, the Company recorded a gain of $255, 640 on the settlement of the
Oasis note payable. These assets represented essentially all of the Company's
assets as of December 31, 1999. For the comparable period of 1999, the Company
sustained a net loss of $114,548, or $0.02 per share on revenue of $1,752,884.
As a result of the reserve the Company had a deficiency of stockholder's equity
of $273,897at March 31, 2000.
The reserve in the first quarter of 2000 results from a dispute with
Anhui Liu An Beer Company Ltd. ("sellers") who represent a minority interest in
the entity that operates the Company's brewery in the Peoples' Republic of China
holders of a minority interest in the entity that operates the Company's brewery
in the Peoples' Republic of China. In December 1998, the Company acquired a 55%
interest in a Chinese brewery for which it issued 8% convertible debentures in
the total principal amount of $21 million. The debentures had a $5.00 conversion
price. Pursuant to the terms of the debentures, the Company had the, right to
require conversion of the debentures. The Company required said conversion and
issued 4.2 million shares of common stock. The sellers, from whom the Company
purchased it interest in the brewery, hold a 45% equity interest in the brewery
and agreed to maintain responsibility for the day-to-day operations of the
brewery.
The Company's Chinese asset, which is the brewery, is subject to liens
which resulted in the borrowing of approximately $6 million, and the brewery had
tax liabilities to the Peoples' Republic of China in excess of $4 million.
- ----------------------------------------
ITEM 5. CAPITAL RESOURCES AND LIQUIDITY
- ----------------------------------------
During the first quarter of 2000, the Company issued 50,000
unregistered shares for $50,000.
PART II
- ------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
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 22nd day of May, 2000.
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, May 22, 2000
- --------------- Treasurer and Director
James Tilton
/s/ Jane Zheng Secretary and Director May 22, 2000
- --------------
Jane Zheng
Li, Lin Hu Director
- ----------
Li, Lin Hu
6
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 456491
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 456491
<PP&E> 2149
<DEPRECIATION> (394)
<TOTAL-ASSETS> 472792
<CURRENT-LIABILITIES> 746689
<BONDS> 0
0
0
<COMMON> 5597
<OTHER-SE> (279494)
<TOTAL-LIABILITY-AND-EQUITY> 472792
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 69417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31200)
<INCOME-PRETAX> (100446)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (1990314)
<EXTRAORDINARY> 255640
<CHANGES> 0
<NET-INCOME> (1835120)
<EPS-BASIC> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
A NOTICE OF BREACH OF CONTRACT
US Victoria Beer Company
The investment capital your company should have invested in An Hui Hao Dun Beer
Corporation has not come for a long time, and this has already violated some
articles in Joint venture Management and Enterprise Law of the People's Republic
of China and Investment Capital Management Regulations of the People's Republic
of China for foreign Investors. Based upon the request of the government
executive branches, we shall terminate the joint venture agreement with you and
terminate your right to the joint venture. At the same time we should not
provide financial report to your company.
By: /s/ AN HUI HAO DUN Beer Corporation
---------------------------------------
AN HUI HAO DUN Beer Corporation
(SEAL OMITTED)
May 16, 2000
