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 May 31, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______ .
Commission file number: 33-2128-D
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KELLY'S COFFEE GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1062062
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 West 400 South, Salt Lake City, Utah 84101
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(Address of principal executive office) (Zip Code)
(801) 575-8073
--------------------------------
(Issuer's telephone number)
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 XX No
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of July 14, 2000 was 51,966,427.
1
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................4
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................................5
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................5
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................6
SIGNATURES....................................................................7
INDEX TO EXHIBITS.............................................................8
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2
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Kelly's Coffee Group, Inc., a
Colorado corporation and predecessors unless otherwise indicated. Unaudited,
condensed interim financial statements including a balance sheet for the Company
as of the quarter ended May 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 year are attached hereto as
Pages F-1 through F-5 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
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INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheet................................................................F-2
Statement of Operations......................................................F-3
Statement of Cash Flows......................................................F-4
Notes to Unaudited Financial Statements......................................F-5
F-1
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<TABLE>
KELLY'S COFFEE GROUP, INC.
UNAUDITED CONDENSED BALANCE SHEET
May 31, 2000
<CAPTION>
Unaudited
May 31, 2000
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ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 8,963
Accounts Receivable - related party 50,000
Prepaid expenses 219
Marketable securities - available for sale 3,117,403
---------------
Total Current Assets 3,176,585
TOTAL ASSETS $ 3,176,585
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,378
Net liabilities of discontinued operations 1,601,139
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Total Current Liabilities 1,602,517
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TOTAL LIABILITIES 1,602,517
SHAREHOLDERS' EQUITY/ (DEFICIT)
Preferred stock, $0.001 par value, authorized 5,000,000
shares; issued and outstanding -0- shares -
Common stock, $0.001 par value, authorized 100,000,000
shares; issued and outstanding 51,966,427 51,966
Additional paid-in capital 3,233,866
Accumulated unrealized gains/losses on investments 2,600,949
Deficit accumulated prior to the development stage (4,522,886)
Retained earnings accumulated during the development stage 210,173
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Total Stockholders' equity (deficit) 1,574,068
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY/(DEFICIT) $ 3,176,585
===============
</TABLE>
See Notes To Financial Statements.
F-2
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<TABLE>
KELLY'S COFFEE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF OPERATIONS
<CAPTION>
From inception
of Development
Stage on March
For the Three Months Ended 1, 1998 through
May 31 May 31,
2000 1999 2000
---------------- ----------------- -------------------
<S> <C> <C> <C>
Sales $ - $ - $ -
General and Administrative 6,666 - 784,916
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Income (Loss) From Operations (6,666) - (784,916)
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Other Income (Expense)
Interest expense (21,591) - (144,039)
Realized gain on sale of securities - - 328,808
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Total Other Income (Expense) (21,591) - 184,769
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Net Loss Before Extraordinary Gain (28,257) - (600,147)
Extraordinary Gain - Debt Settlement 55,050 810,320
Income taxes - - -
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Net Income (Loss) $ 26,793 $ - $ 210,173
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Other Comprehensive Income, net of tax
Unrealized holding gains/(losses) (1,028,717) 2,600,949
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Comprehensive Income/(Loss) (1,001,924) 2,811,122
Income (Loss) per share $ .01 $ $ .01
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Weighted average shares outstanding 51,966,427 43,555,736 39,064,497
============== =============== ==================
</TABLE>
See Notes to Financial Statements.
F-3
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<TABLE>
KELLY'S COFFEE GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENT OF CASH FLOWS
<CAPTION>
From inception
of Development
Stage on March
1, 1998
For the three months ended Through
May 31, May 31,
2000 1999 2000
---------------- ------------- ----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss $ 26,793 $ - $ 210,173
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and Amortization - -
Decrease (increase) prepaids (219) - (219)
Issued common stock for services - - 745,424
Issued common stock for debt 23,450 23,450
Gain on settlement of debt - - (755,270)
Increase (decrease) in accounts payable 1,000 - 1,378
Increase (decrease) in other liabilities (56,909) - 45,539
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Net Cash Provided (Used in) Operating
Activities (5,885) - 270,475
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Cash flow from Investing Activities:
Advances to related parties - - (50,000)
Net change in marketable securities - - (211,512)
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Net Cash used in Investing Activities - - (261,512)
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Net Cash (Used) by Financing Activities - - -
Net Increase (Decrease) in Cash (5,885) - 8,963
Cash at Beginning of Period 14,848 - -
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Cash at End of Period $ 8,963 $ - $ 8,963
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Supplemental Disclosures
Interest paid $ - $ - $ -
Income taxes paid - - -
</TABLE>
See Notes to Financial Statements.
F-4
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KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
May 31, 2000
NOTE 1 - PRELIMINARY NOTE
The accompanying condensed financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These financial statements reflect all adjustments which, in
the opinion of management, are necessary to a fair statement of the
results for the periods presented. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10KSB for the year ended February 29, 2000.
NOTE 2 - MARKETABLE SECURITIES - available for sale
The company has applied the principles of Statement of Financial
Accounting Standards, No. 115, Accounting for Certain Investments In
Debt and Equity Securities. In accordance with the principle, the
company has classified all investments as available-for-sale, and has
recorded an unrealized gain on marketable securities of $2,600,949, in
excess of the original cost basis. This gain represents the excess
market value over the original cost basis in the securities as of May
31, 2000. The following is a summary of marketable securities at May
31, 2000:
12,500 shares of Liberty Mint (LBMN)
valued at $0.41 per share $ 5,125
Note: the following securities are currently restricted
shares but become free trading within the next 12 months
and are therefore carried at market value
27,000,000 shares of AmeriResource Technologies, Inc. (ARET)
valued at $0.0781 per share 2,108,700
35,526 shares of Oasis Resorts International, Inc.(OAII)
valued at $3.00 per share 106,578
100,000 shares of Eagle Wireless International, Inc. (EAG)
valued at $7.875 per share 787,500
200,000 shares of Twin Faces East Entertainment
Corporation (TFAC) valued at $0.1875 per share 37,500
36,000 shares of Health Watch (HEAL) valued at
$2.00 per share 72,000
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$3,117,403
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All marketable securities represent less than 5% of the outstanding
shares in each Company.
F-5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
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As used herein the term "Company" refers to Kelly's Coffee Group, Inc., a
Colorado corporation and its predecessors, unless the context indicates
otherwise. The Company discontinued its operations on February 28, 1998. The
Company is currently a shell company whose purpose will be to acquire operations
through an acquisition, merger or begin its own start-up business.
The Company is in the process of attempting to identify and acquire a favorable
business opportunity. The Company has reviewed and evaluated a number of
business ventures for possible acquisition or participation by the Company. The
Company has not entered into any agreement, nor does it have any commitment or
understanding to enter into or become engaged in a transaction as of the date of
this filing. The Company continues to investigate, review, and evaluate business
opportunities as they become available and will seek to acquire or become
engaged in business opportunities at such time as specific opportunities
warrant.
The Company will continue in its attempts to settle its remaining liabilities at
a discount.
The Company has no plans for the purchase or sale of any plant or equipment.
The Company is a development stage company and currently has no employees. The
Company has no current plans to make any changes in the number of employees.
Results of Operations
---------------------
The Company had no sales revenues for the three months ended May 31, 2000 and
1999. The Company had no sales in for the three months ended May 31, 2000
because it ceased operations as of February 28, 1998 as a result of reoccurring
losses.
The Company had no costs of sales revenues for the three months ended May 31,
2000 or 1999 because it ceased operations as of February 28, 1998.
General and administrative expenses were $6,666 for the three months ended May
31, 2000, compared to $0 for the same period in 1999. The general and
administrative expenses increased for the same periods in 2000 because of
activities related to resolving debt and searching for an appropriate candidate
for a reverse merger.
The Company recorded net income of $26,793 for the three months ended May 31,
2000 compared to net income of $0 for the same period in 1999. The net income
recorded for the three months ended May 31, 2000 was attributable to $21,591 in
accrued interest on the debt from discontinued operations, which the company is
attempting to clear off the books, $6,666 in general administrative expenses,
and a gain of $50,050 from the settlement of debt with Robert Pallota, a former
director of the Company, and Mick Schumacher and Terry Seipert. For more
information on the settlement of claims, please see Part II, Item 2 "Changes in
Securities and Use of Proceeds."
4
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Capital Resources and Liquidity
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At May 31, 2000, the Company had current assets of $3,176,585 and total assets
of $3,176,585. The Company had a net working capital surplus of $2,074,068 at
May 31, 2000.
Net stockholders' equity in the Company was $2,050,818 as of May 31, 2000.
The Company's working capital and stockholder's equity significantly improved as
a result of a change in the value of securities held for investment as well as
the elimination of $56,909 in liabilities. Previously the securities were held
at the lower of cost or market due to the nature of the investments and the lack
of a readily determinable fair value. Since the securities now meet the 1 year
guidelines for becoming readily tradable, they have been marked to current
market values as of May 31,2000.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
All the legal proceedings mentioned in the Company's 10KSB filed for the period
ended February 29, 2000, were settled as mentioned in that filing. The Company
is not aware of any other pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 6, 2000, the Company issued 5,000 shares of common stock to Robert
Pallotta as part of a settlement of all outstanding claims asserted by Mr.
Pallotta against the Company, pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering. The Company made this offering based on the following factors:
(1) The issuance was an isolated private transaction by the Company which did
not involve a public offering; (2) there was only one offeree who was issued
stock for cancellation of debt; (3); there were no subsequent or contemporaneous
public offerings of the stock; (4) the stock was not broken down into smaller
denominations; and (5) the negotiations for the sale of the stock took place
directly between the offeree and the Company.
On March 6, 2000, the Company issued 20,204 shares of common stock to Mick
Schumacher and 20,204 shares of common stock to Terry Seipert as part of a
settlement of all outstanding claims asserted by Mr. Schumacher and Mr. Seipert
against the Company for monies owed to them for services to the Company. The
shares were issued pursuant to an S-8 Registration Statement filed by the
Company on January 27, 2000.
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5
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits on page 7 of
this Form 10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the period covered by this Form 10QSB. On June 22, 2000,
the Company filed Form 8-K to disclose that the Company's
auditors, HJ and Associates, LLC f/k/a/Jones, Jensen and Company,
LLC had resigned as auditors for the Company. On July 17, 2000,
the Company filed Form 8-K to disclose that the firm of Mantyla
and McReynolds had been engaged to serve as the Company's
auditors.
6
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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 19th day of July, 2000.
Kelly's Coffee Group, Inc.
/S/ Richard Surber
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Richard Surber, President and Director
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/Richard Surber
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Richard Surber President and Director July 19, 2000
/s/David M. Wolfson
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David M. Wolfson Director July 19, 2000
/s/Kevin J. Schillo
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Kevin J. Schillo Director July 19, 2000
7
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INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company (incorporated
herein by reference from Exhibit No. 3(i) to the Company's
Form S-18 as filed with the Securities and Exchange
Commission on September 16, 1988 ).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form S-18 as
filed with the Securities and Exchange Commission on
September 16, 1988).
4(a) * Form of certificate evidencing shares of "Common Stock" in
the Company (incorporated from Exhibit 4(a) to the Company's
Form S-18 as filed with the Securities and Exchange
Commission on September 16, 1988 ).
27 9 Financial Data Schedule "CE"
8
