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 August 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)
Nevada 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 September 27, 2000 was 52,074,427.
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
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Kelly's Coffee Group, Inc., a
Nevada corporation and predecessors unless otherwise indicated. Unaudited,
condensed consolidated interim financial statements including a balance sheet
for the Company as of the quarter ended August 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.]
3
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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
<PAGE>
<TABLE>
KELLY'S COFFEE GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET
August 31, 2000
<CAPTION>
Unaudited
August 31,
2000
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<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 67,090
Accounts Receivable - related party 50,000
Accounts Receivable - unsettled trades 29,047
Marketable securities - available for sale 1,484,908
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Total Current Assets 1,631,045
Property, Plant & Equipment (net) 540,554
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TOTAL ASSETS $ 2,171,599
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,449
Short Term Notes Payable 360,000
Net liabilities of discontinued operations 910,466
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Total Current Liabilities 1,278,915
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TOTAL LIABILITIES 1,278,915
MINORITY INTEREST 54,088
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 52,074,427 52,074
Additional paid-in capital 3,182,826
Accumulated unrealized gains/losses on investments 1,010,135
Deficit accumulated prior to the development stage (4,522,886)
Retained earnings accumulated during the development stage 1,116,447
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Total Stockholders' equity (deficit) 838,596
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY/(DEFICIT) $ 2,171,599
===============
</TABLE>
*See Notes To Financial Statements.
F-2
<PAGE>
<TABLE>
KELLY'S COFFEE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31 August 31
2000 1999 2000 1999
----------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Sales $ - $ - $ - $ -
General and Administrative 7,998 15,807 14,664 15,807
----------------- -------------- --------------- ---------------
Income (Loss) From Operations (7,998) (15,807) (14,664) (15,807)
----------------- -------------- --------------- ---------------
Other Income (Expense)
Interest expense (12,136) - (33,727) -
Realized gain on sale of securities 223,599 197,240 223,599 197,240
----------------- -------------- --------------- ---------------
Total Other Income (Expense) 211,463 197,240 189,872 197,240
----------------- -------------- --------------- ---------------
Net Gain (Loss) Before Extraordinary Gain 203,465 181,433 175,208 181,433
Extraordinary Gain - Debt Settlement 702,809 755,270 757,859 755,270
Income taxes - - - -
----------------- -------------- --------------- ---------------
Net Income (Loss) $ 906,274 $ 936,703 $ 933,067 $ 936,703
----------------- -------------- --------------- ---------------
Other Comprehensive Income, net of tax
Unrealized holding gains/(losses) (1,590,814) - (1,010,135) -
----------------- -------------- --------------- ---------------
Comprehensive Income/(Loss) (684,540) 936,703 (77,068) 936,703
Income (Loss) per share $ 0.02 $ 0.02 $ 0.02 $ 0.02
Weighted average shares outstanding 52,074,427 43,555,736 52,074,427 43,555,736
================= ============== =============== ================
</TABLE>
*See Notes to Financial Statements.
F-3
<PAGE>
<TABLE>
KELLY'S COFFEE GROUP, INC.
UNAUDITED STATEMENT OF CASH FLOWS
<CAPTION>
For the six months ended For the three months
ended
August 31, August 31,
2000 1999 2000 1999
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Gain (Loss) $ 933,067 $ 936,703 $ 906,274 $ 936,703
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and Amortization - - - -
Increase in accounts receivable (29,047) - (29,047) -
Decrease (increase) prepaid expenses - - 219 -
Gain on settlement of debt (757,859) (775,270) (757,859) (775,270)
Increase (decrease) in accounts payable 8,071 - 7,071 -
Increase (decrease) in notes payable 360,000 - 360,000 -
Increase (decrease) in other liabilities 10,277 - 67,186 -
-------------- ------------- -------------- -------------
Net Cash Provided (Used in) Operating
Activities 524,509 161,433 553,844 161,433
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Cash flow from Investing Activities:
Purchase of subsidiaries (540,554) - (540,554) -
Advances to related parties - - - -
Basis change in marketable securities 41,681 (144,411) 41,681 -
-------------- ------------- -------------- -------------
Net Cash used in Investing Activities (498,873) (144,411) (498,873) (144,411)
-------------- ------------- -------------- -------------
Cash flow from Financing Activities
Additional Paid in Capital 26,606 - 3,156 -
Unrealized gains (losses) on securities - - - -
-------------- ------------- -------------- -------------
Net Cash used in Financing Activities 26,606 - 3,156 -
-------------- ------------- -------------- -------------
Net Increase (Decrease) in Cash 52,242 17,022 58,127 17,022
Cash at Beginning of Period 14,848 - 8,963 -
-------------- ------------- -------------- -------------
Cash at End of Period $ 67,090 $ 17,022 $ 67,090 $ 17,022
-------------- ------------- -------------- -------------
Supplemental Disclosures
Interest paid $ - $ - $ - $ -
Income taxes paid - - - -
</TABLE>
*See Notes to Financial Statements.
F-4
<PAGE>
KELLY'S COFFEE GROUP, INC. AND SUBSIDIARY
Notes to the Unaudited Consolidated Financial Statements
August 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 a cumulative unrealized gain on marketable securities of
$1,010,135 in excess of the original cost basis. This gain represents
the excess market value over the original cost basis in the securities
as of August 31, 2000. The following is a summary of marketable
securities at August 31, 2000:
<TABLE>
<CAPTION>
<S> <C>
60,000 shares of Liberty Mint (LBMT)
valued at $0.35 per share $ 21,000
19,044,475 shares of AmeriResource Technologies, Inc. (ARET)
valued at $0.035 per share 666,557
Note: the following securities are currently restricted shares but
become free trading within the next 12 months and are therefore
carried at market value
433,725 shares of AmeriResource Technologies, Inc. (ARET)
valued at $0.035 per share 15,180
35,526 shares of Oasis Resorts International, Inc. (OAII)
valued at $.99 per share 35,171
100,000 shares of Eagle Wireless International, Inc. (EAG)
valued at $6.31 per share 631,000
200,000 shares of Twin Faces East Entertainment
Corporation (TFAC) valued at $0.22 per share 44,000
36,000 shares of Health Watch (HEAL) valued at
$2.00 per share 72,000
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$ 1,484,908
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</TABLE>
All marketable securities represent less than 5% of the outstanding shares in
each Company.
F-5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
As used herein the term "Company" refers to Kelly's Coffee Group, Inc., a Nevada
corporation and its predecessors, unless the context indicates otherwise. The
Company discontinued its operations on February 28, 1998. The Company is a
holding company whose subsidiary operates commercial real estate in downtown
Witchita, Kansas.
On August 29, 2000, the Company acquired from Cyberbotanical, Inc., 18,400,000
newly issued shares of the common stock of Cyberbotanical in exchange for a cash
payment in the sum of $540,554. This number of shares results in the Company's
acquiring not less than 90% of the issued and outstanding shares of
Cyberbotanical. Cyberbotanical used the proceeds of this sale to acquire title
to an office building known as the Board of Trade Building, located at 120
Market, Wichita, Kansas on August 30, 2000. The Company used cash from sales of
securities and borrowed $360,000 from CyberAmerica Corporation and its
subsidiaries at an interest rate of 18% per annum on a short term basis to fund
the acquisition. The loan from CyberAmerica was repaid in full on September 21,
2000, including the payment of all accrued interest.
The Company's board of directors and management had determined that it was in
the best of the Company to use its cash resources to purchase this interest in
Cyberbotanical and to acquire the improved property for Cyberbotanical to
generate positive cash flows. The building is a 48,800 square foot, eight story
office building located in the central business district of Wichita, Kansas.
Occupancy rates at the building currently exceed 85% and the prior management of
the building has been retained to continue operation of the building. The
building is rented at an average of approximately $6.00 a square foot by the
current tenants, including the prior owners of the building who remain as
tenants (For more information on this transaction, please see Form 8-K filed on
September 12, 2000).
Prior to signing the agreement for the transaction set forth above the board of
directors approved the transaction with a board resolution. The Company does not
intend to abandon its search for a merger or acquisition opportunity through
which it can acquire or be acquired by an operating entity. Cyberbotanical will
be maintained as a separate operation and independent with regard to its
management and financial operations with the option to spin off or divest the
Company of its interest in Cyberbotanical at some point in the future or to
facilitate potential merger candidates of the Company.
The Company settled $702,809 in liabilities (including accrued interest) during
the quarter at a cost of $5,000. The Company intends to sign an agreement with
Cyberbotanical (CB) whereby all assets of the Company (excepting the 90%
interest in CB held by the Company) are transferred to CB in exchange for CB
assuming all known liabilities of the Company. The Company believes such a
transaction will help facilitate the Company's ability to find a merger or
acquisition candidate.
The Company is in the process of attempting to identify and acquire additional
favorable business opportunities. 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 an agreement, nor does it have any
commitment or understanding to enter into or become engaged in any additional
transactions 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 further business
opportunities at such time as specific opportunities warrant.
4
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Results of Operations
The Company had no sales revenues for the three months ended August 31, 2000 and
1999. The Company had no sales in the three months ended August 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 August 31,
2000 or 1999 because it ceased operations as of February 28, 1998.
General and administrative expenses were $7,998 for the three months ended
August 31, 2000, compared to $15,807 for the same period in 1999. The general
and administrative expenses decreased for the three months ended August 31, 2000
compared to the same period in 1999 due to limiting activities to attempting to
resolve debts and searching for an appropriate candidate for a reverse merger.
The Company recorded net income of $906,274 for the three months ended August
31, 2000 compared to net income of $936,703 for the same period in 1999. The net
income recorded for the three months ended August 31, 2000 was attributable to
$12,136 in accrued interest on the debt from discontinued operations, which the
company is attempting to clear off the books, $7,998 in general administrative
expenses, a gain of $702,809 from the settlement of debt, and a realized gain of
$223,599 from the sale of securities.
Capital Resources and Liquidity
At August 31, 2000, the Company had current assets of $1,631,045 and total
assets of $2,171,599. The Company had a net working capital surplus of $352,130
at August 31, 2000.
Net stockholders' equity in the Company was $892,684 as of August 31, 2000.
The Company's working capital was reduced as a result of a conversion of assets
from marketable securities to fixed assets. Stockholder's equity reduced
significantly as a result of a change in the value of securities held for
investment of $1,590,814. The securities have been marked to current market
values as of August 31, 2000. Since the value of the securities held for
investment fluctuate according to changes in the market, shareholder equity also
fluctuates accordingly.
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 5. OTHER INFORMATION
At a Special Shareholder's Meeting held at the offices of the Company on
September 20, 2000, a majority of the shareholders of the Company approved a
Resolution calling for the Company to change its state of domicile from the
State of Colorado to the State of Nevada. The holders of 28,247,903 of the
51,966,427 issued and outstanding shares of the Company were present at the
meeting in person or by proxy. Of the 28,247,903 shares present at the meeting,
27,301,649 shares or ninety seven percent (97%) voted in favor
5
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or the change of domicile; 837,794 shares or three percent (3%) voted against
the resolution to change the Company's domicile; and 108,460 shares or less than
one percent (<1%) abstained from the voting.
The 27,301,649 shares voting in favor of the change of domicile represent fifty
three percent (53%) of the total issued and outstanding shares of the
corporation.
Pursuant to the Resolution adopted by the Shareholders on September 20, 2000,
Articles of Merger, merging Kelly's Coffee Group, Inc., a Colorado Corporation
into Kelly's Coffee Group, Inc., a Nevada Corporation have been filed with the
Secretary of State of Nevada and with the Secretary of State of the State of
Colorado.
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.
-------------------
On June 22, 2000, the Company filed Form 8-K reporting that:
On June 15, 2000, the Company was notified by HJ & Associates, L.L.C.
f/k/a Jones, Jensen, and Company, L.L.C. ("HJ") of their resignation as
the principal accountant engaged to audit the Company's financial
statements. As of the date of the June 22, 2000 filing, the Company had
not retained an accounting firm to replace HJ. explanatory paragraph
for a going concern uncertainty.
On July 17, 2000, the Company filed Form 8-K reporting that:
On July 5, 2000, the Company retained Mantyla McReynolds ("Mantyla"),
to be the principal accountant engaged to audit the Company's financial
statements. The Company's board of directors approved the engagement of
Mantyla as the Company's principal accountant.
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 3rd day of October, 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 October 3 , 2000
/s/ David M. Wolfson
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David M. Wolfson Director October 3 , 2000
/s/ Kevin J. Schillo
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Kevin J. Schillo Director October 3 , 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 ).
10(a) * Stock Purchase Agreement dated September 12, 2000 for the
purchase of 18,400,000 shares of Cyberbotanical, Inc.
(incorporated by reference in Form 8-K filed with the SEC on
September 12, 2000.)
10(b) 9 Warranty Deed regarding the purchase of a 48,800 square foot
office building in Wichita, Kansas for $540,554.
27 10 Financial Data Schedule "CE"
8
