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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY OR TRANSITIONAL REPORT
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-20549
BRAVO! FOODS INTERNATIONAL CORP.
(Exact name of registrant as specified in its amended charter)
formerly
China Premium Food Corporation
Delaware 62-1681831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11300 US Highway 1, North Palm Beach, Florida 33408 USA
(Address of principal executive offices)
(561) 625-1411
Registrant's telephone number
---------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
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 each of the issuer's classes of common
stock, as of the latest practicable date is as follows:
Date Class Shares Outstanding
11/12/02 Common Stock 23,111,950
BRAVO! FOODS INTERNATIONAL CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial statements F-1
Consolidated balance sheets as of F-1
September 30, 2002 (unaudited) and December 31, 2001
Consolidated statements of operations F-3
(unaudited) for the six and nine months ended
September 30, 2002 and 2001
Consolidated statements of cash flows F-4
(unaudited) for the nine months ended
September 30, 2002 and 2001
Notes to consolidated financial statements (unaudited) F-5
Item 2. Management's Discussion and Analysis of Financial 15
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 2. Changes In Securities and Use of Proceeds 24
Item 6. Exhibits and reports on Form 8-K 26
SIGNATURES 26
CERTIFICATIONS 27
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2001 2002
Assets
Current assets:
Cash and cash equivalents $ 232,040 $ 986,615
Accounts receivable 152,682 184,283
Other receivable 17,178 18,182
Advance to vendor 20,998 17,798
Inventories 91,403 90,799
Deferred charges 521 55,837
Prepaid expenses 23,585 41,904
------------ ------------
Total current assets 538,407 1,395,418
Furniture and equipment, net 123,099 92,854
License rights, net of accumulated
amortization of $661,291 and $1,036,684 433,709 291,036
Deposits 10,000 10,000
------------ ------------
Total assets $ 1,105,215 $ 1,789,308
============ ============
Liabilities and Shareholders' Deficit
Current liabilities:
Notes payable $ 350,000 $ 100,000
Note payable to International Paper 187,743 187,743
Note payable to Warner Brothers 473,750 378,674
Accounts payables 780,492 1,225,969
Accrued liabilities 575,019 518,758
------------ ------------
Total current liabilities 2,367,004 2,411,144
Dividends payable 280,370 221,483
------------ ------------
Long-term liabilities 280,370 221,484
------------ ------------
Total liabilities 2,647,374 2,632,627
------------ ------------
F-1
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Commitments and contingencies
Shareholders' Deficit (Note 2):
Series B convertible, 9% cumulative,
and redeemable preferred stock, stated
value $1.00 per share, 1,260,000 shares
authorized, 107,440 and 107,440 shares
issued and outstanding, redeemable
at $107,440 107,440 107,440
Series D convertible, 6% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 87,500 and
0 shares issued and outstanding 853,432 -
Series F convertible and redeemable
preferred stock, stated value $10.00
per share, 174,999 and 174,999 shares
issued and outstanding 1,616,302 1,616,302
Series G convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 93,335 and
75,072 shares issued and outstanding 829,704 667,353
Series H convertible, 7% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 105,500 and
175,500 shares issued and outstanding 465,200 939,686
Series I convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 0 and 30,000
shares issued and outstanding - 72,192
Series J convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 0 and 100,000
shares issued and outstanding - 854,279
Common stock, par value $0.001 per
share, 50,000,000 shares authorized,
14,681,008 and 22,112,838 shares
issued and outstanding 14,681 22,111
Additional paid-in capital 16,028,979 19,535,428
Accumulated deficit (21,457,425) (24,657,638)
Translation adjustment (472) (472)
------------ ------------
Total shareholders' deficit (1,542,159) (843,319)
------------ ------------
Total liabilities and shareholders'
deficit $ 1,105,215 $ 1,789,308
============ ============
See accompanying to consolidated financial statements.
F-2
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2001 2002 2001 2002
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Sales $ 256,971 $ 308,729 $ 587,745 $ 1,053,129
Cost of goods sold 23,444 56,516 166,875 133,003
----------- ----------- ----------- -----------
Gross margin 233,527 252,213 420,870 920,126
Selling expense 25,117 28,503 172,069 46,017
General and administrative expense 665,332 882,555 2,682,476 3,099,066
----------- ----------- ----------- -----------
Loss from operations (456,922) (658,845) (2,433,675) (2,224,957)
Other expense:
Interest expense, net (1,447) 922 (30,219) (20,742)
----------- ----------- ----------- -----------
Net loss (458,369) (657,923) (2,463,894) (2,245,699)
Dividends accrued for Series B
preferred stock (2,417) (2,471) (7,251) (7,332)
Dividends accrued for Series D
preferred stock (16,538) (1,393) (49,614) (18,500)
Dividends accrued for Series G
preferred stock (20,000) (14,205) (60,000) (45,677)
Dividends accrued for Series H
preferred stock - (16,810) - (280,808)
Dividends accrued for Series I
preferred stock - (1,476) - (296,477)
Dividends accrued for Series J
preferred stock - (305,721) - (305,721)
----------- ----------- ----------- -----------
Net loss applicable to common
shareholders $ (497,324) $ (999,999) $(2,580,759) $(3,200,214)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 13,578,551 21,365,343 13,195,048 18,150,932
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.04) $ (0.05) $ (0.20) $ (0.18)
=========== =========== =========== ===========
Comprehensive loss and its components
consist of the following:
Net loss $ (458,369) $ (999,999) $(2,463,894) $(3,200,214)
Foreign currency translation
adjustment 293 - 8,553 (472)
----------- ----------- ----------- -----------
Comprehensive loss $ (458,076) $ (999,999) $(2,455,341) $(3,200,686)
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-3
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
-------------------------------
2001 2002
---- ----
(Unaudited) (Unaudited)
Cash flows from operating activities
Net loss $(2,463,894) $(2,245,699)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 290,779 457,436
Stock compensation 77,320 516,204
Amortization of deferred interest 28,500 -
Increase (decrease) from changes in:
Accounts receivable (121,586) (31,601)
Other receivable 4,985 (1,004)
Prepaid expenses and other deferred charges (1,766) (22,175)
Advance to vendors (2,326) 3,200
Inventories 96,772 604
License rights - (282,721)
Accounts payable and accrued liabilities 530,268 389,216
----------- -----------
Net cash used in operating activities (1,560,948) (1,216,540)
----------- -----------
Cash flows from investing activities
Purchase of equipment and machinery (5,125) (1,797)
Note receivable 716,000 -
----------- -----------
Net cash provided by (used in) investing activities 710,785 (1,797)
----------- -----------
Cash flows from financing activities
Proceeds from stock subscription 970,000 -
Proceeds from issuance of Preferred Series H - 700,000
Proceeds from issuance of Preferred Series I - 287,988
Proceeds from issuance of Preferred Series J - 1,000,000
Proceeds from exercise of stock options - 330,000
Repayments of note payable (148,750) (345,076)
----------- -----------
Net cash provided by financing activities 821,250 1,972,912
----------- -----------
Effect of exchange rate changes on cash 8,553 -
----------- -----------
Net increase (decrease) in cash and cash equivalents (20,270) 754,575
Cash and cash equivalents, beginning of period 35,376 232,040
----------- -----------
Cash and cash equivalents, end of period $ 15,106 $ 986,615
=========== ===========
Cash paid during the period:
Interest $ - $ -
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Interim Periods
The accompanying unaudited consolidated financial statements include the
accounts of Bravo! Foods International, Corp. and its wholly-owned
subsidiary Bravo! Foods, Inc. (the "Company"). The Company is engaged in
the co-production, marketing and distribution of branded dairy food
products in the People's Republic of China and the United States. All
significant intercompany balances and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. All significant inter-company accounts and
transactions have been eliminated in consolidation. The consolidated
financial statements are presented in U.S. dollars. Accordingly, the
accompanying financial statements do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for fair
presentation have been included. Operating results for the nine-month
period ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2002. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report for the year
ended December 31, 2001.
The accompanying unaudited consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
previously reported, the Company has suffered recurring losses from
operations and has negative working capital and a stockholders' deficit.
These factors raise substantial doubt about the Company's ability to
continue as a going concern.
Note 2 - Transactions in Shareholders' Equity
On January 2, 2002, the Company issued options for 3,714 shares of common
stock having an exercise price of $0.35 and exercisable for five years,
pursuant to an employment agreement.
On January 18, 2002, the Company issued 238,334 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 5,000 shares of Series D
Convertible Preferred.
On January 18, 2002, the Company issued 238,334 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 5,000 shares of
Series D Convertible Preferred.
On January 28, 2002, the Company issued 40,000 shares of common stock to
The Keshet Fund LP, upon the conversion of 883 shares of Series G
Convertible Preferred.
On January 28, 2002, the Company issued 136,038 shares of common stock to
AMRO International, S.A., upon the conversion of 2,840 shares of Series D
Convertible Preferred.
F-5
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity (Continued)
On January 30, 2002, the Company issued 15,000 shares of its Series H
convertible preferred stock, having a conversion price of $0.40 per share
of common stock, and warrants for 375,000 shares at $0.50 per share. The
Series H convertible preferred stock and warrants were priced at $10.00 per
unit, and resulted in proceeds of $150,000 in cash. In accordance with
EITF 00-27, the Company recorded a deemed dividend of $65,357 related to a
beneficial conversion feature.
On February 4, 2002, the Company issued 206,700 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 4,375 shares of Series D
Convertible Preferred.
On February 4, 2002, the Company issued 206,700 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 4,375 shares of
Series D Convertible Preferred.
On February 5, 2002, the Company issued 20,000 shares of common stock to
The Keshet Fund LP, upon the conversion of 492 shares of Series G
Convertible Preferred.
On February 15, 2002, the Company issued 5,000 shares of its Series H
convertible preferred stock, having a conversion price of $0.40 per share
of common stock, and warrants for 125,000 shares at $0.50 per share to a
sophisticated and accredited investor. The Series H convertible preferred
stock and warrants were priced at $10.00 per unit, and resulted in proceeds
of $50,000 in cash. In accordance with EITF 00-27, the Company recorded a
deemed dividend of $15,582 related to a beneficial conversion feature.
On February 20, 2002, the Company issued 35,000 shares of common stock to
The Keshet Fund LP, upon the conversion of 832 shares of Series G
Convertible Preferred.
On February 29, 2002, the Company issued 279,795 shares of common stock to
AMRO International, S.A, upon the conversion of 7,160 shares of Series D
Convertible Preferred.
On March 1, 2002, the Company issued 20,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 536 shares of Series G Convertible
Preferred.
On March 1, 2002, the Company issued warrants for 25,000 shares of common
stock, having an exercise price of $0.40 per share. The warrants are
immediately exercisable and have an expiration date of February 28, 2007.
These warrants were issued to the lender in connection with a December 27,
2001 loan of $250,000 to the Company.
On March 15, 2002, the Company issued 20,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 532 shares of Series G Convertible
Preferred.
F-6
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity (Continued)
On March 18, 2002, the Company issued 50,000 shares of its Series H
convertible preferred stock, having a conversion price of $0.40 per share
of common stock, and warrants for 1,250,000 shares at $0.50 per share to a
sophisticated and accredited investor. The Series H convertible preferred
stock and warrants were priced at $10.00 per unit, and resulted in proceeds
of $500,000 in cash. In accordance with EITF 00-27, the Company recorded a
deemed dividend of $155,824 related to a beneficial conversion feature.
On April 19, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 252 shares of Series G Convertible
Preferred.
On April 19, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 234 shares of Series G Convertible
Preferred.
On April 24, 2002 the Company's Board of Directors voted to extend options
for 1,383,705 shares of common stock issued on April 29 and April 30, 1997
to Tamarind Management, Ltd. (an affiliate of Mr. Paul Downes, a founder of
the Company) and options for 700,000 shares of common stock issued on April
30, 1997 to Mr. Dale Reese (a founder of the Company), for services
rendered to the Company. These extended options, which had original
expiration dates of April 29 and April 30, 2002, respectively, retain an
exercise price of $1.00 and are exercisable upon the following conditions:
The expiration dates for these options are extended for a two year period,
commencing upon the effective date of a registration statement for the
resale of the common stock underlying the options; the options will not be
exercised during a one year lockup period commencing on the 1st day after
the Company's common stock trades during a 90 day period at a moving
average of at least $1.00; the Company has the option to call the options
commencing on the 1st day after the Company's common stock trades during a
90 day period at a moving average of at least $2.00. As a result, the
Company recorded a deferred charge of $47,409, which will be amortized for
a two-year period commencing on the effective date of a registration
statement.
On May 3, 2002, the Company issued 52,730 shares of common stock to Amro
International, S.A, upon the conversion of 1,000 shares of Series D
Convertible Preferred.
On May 7, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 215 shares of Series G Convertible
Preferred.
On May 13, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 158 shares of Series G Convertible
Preferred.
On May 13, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 158 shares of Series G Convertible
Preferred.
On May 13, 2002, the Company issued 20,000 shares of common stock to Keshet
LP, upon the conversion of 316 shares of Series G Convertible Preferred.
F-7
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On May 13, 2002, the Company issued 15,000 shares of common stock to Keshet
LP, upon the conversion of 237 shares of Series G Convertible Preferred.
On May 17, 2002, the Company issued 131,239 shares of common stock to Amro
International, S.A, upon the conversion of 2,000 shares of Series D
Convertible Preferred.
On May 17, 2002, the Company issued 278,498 shares of common stock to Amro
International, S.A, upon the conversion of 4,000 shares of Series D
Convertible Preferred.
On May 20, 2002, the Company issued 10,000 shares of common stock to Keshet
LP, upon the conversion of 158 shares of Series G Convertible Preferred.
On May 20, 2002, the Company issued 10,000 shares of common stock to Keshet
LP, upon the conversion of 131 shares of Series G Convertible Preferred.
On May 22, 2002, the Company issued options for 1,710,000, in the
aggregate, as compensation to three consultants to assist us in management
and strategic planning issues, pursuant to consulting agreements of the
same date. These options were issued pursuant to a Form S-8 registration
statement filed June 6, 2002 and are exercisable for a one-year period. Of
the 1,710,000 options, 1,150,000 options have an exercise price of $0.33
per share and 560,000 options have an exercise price of $0.50 per share.
We have the ability to compel the exercise of these options if the trading
price of our common stock equals or exceeds $1.00 for thirty consecutive
trading days. As a result of issuing these options, the Company recorded
consulting expense of $124,859.
On May 23, 2002, the Company issued 63,454 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 1,000 shares of Series D
Convertible Preferred.
On May 23, 2002, the Company issued 63,454 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 1,000 shares of
Series D Convertible Preferred.
On May 24, 2002, the Company issued 15,000 shares of common stock to Keshet
LP, upon the conversion of 237 shares of Series G Convertible Preferred.
On May 24, 2002, the Company issued 15,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 157 shares of Series G Convertible
Preferred.
On May 29, 2002, the Company issued 652,178 shares of common stock to Amro
International, S.A, upon the conversion of 9,642 shares of Series D
Convertible Preferred.
On May 29, 2002, the Company issued 652,178 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 9,642 shares of
Series D Convertible Preferred.
F-8
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity (Continued)
On May 30, 2002, the Company issued 652,178 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 9,642 shares of Series D
Convertible Preferred.
On June 10, 2002, the Company issued 425,000 shares of common stock to a
consultant, upon the exercise of options issued pursuant to a consulting
agreement, as compensation for management consulting and strategic planning
services provided to the Company. These shares were issued pursuant to a
Form S-8 registration statement filed on June 6, 2002.
On June 10, 2002, the Company issued 425,000 shares of common stock to a
consultant, upon the exercise of options issued pursuant to a consulting
agreement, as compensation for management consulting and strategic planning
services provided to the Company. These shares were issued pursuant to a
Form S-8 registration statement filed on June 6, 2002.
On June 10, 2002, the Company issued 150,000 shares of common stock to a
consultant, upon the exercise of options issued pursuant to a consulting
agreement, as compensation for management consulting and strategic planning
services provided to the Company. These shares were issued pursuant to a
Form S-8 registration statement filed on June 6, 2002.
On June 13, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 126 shares of Series G Convertible
Preferred.
On June 13, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 130 shares of Series G Convertible
Preferred.
On June 17, 2002, the Company issued 30,000 shares of its Series I
convertible preferred stock and warrants for 2,000,000 shares at $0.50 per
share, exercisable three years from issue, to two sophisticated and
accredited investors, pursuant to Rule 506, Regulation D and Section 4(2)
of the Securities Act of 1933. The conversion of the preferred into common
stock shall be at a per common share conversion price of either $0.40 or
75% of the average of the three lowest closing bid prices for the thirty
day period immediately preceding conversion, at the option of the holder.
The conversion price is subject to a maximum of $0.50 per share and a
minimum of $0.30 per share, which minimum conversion price shall govern for
the 270 days immediately following the issue date of the Series I preferred
shares. The minimum conversion price shall be extended indefinitely upon
the occurrence of certain defined events, including the effectiveness of a
registration statement for the resale of the common stock underlying the
preferred and a trading price of the Company's common stock at $0.50 or
higher for fifteen consecutive days. The Series I convertible preferred
stock and warrants were priced at $10.00 per unit, and resulted in gross
cash proceeds of $300,000, less expenses of $12,012. According to GAAP,
the Company allocated $215,796 to the 2 million warrants and $72,192 to the
underlying preferred stock Series I and deemed dividends of $294,793.
On June 18, 2002, the Company agreed to extend the expiration dates of
warrants issued in connection with the Company's Series D and F preferred
until June 17, 2005 and to reduce the exercise price of certain of those
warrants to $1.00. In consideration for this warrant modification, the
holders of two promissory notes executed by the Company aggregating
$100,000, dated November 6 and 7, 2001,
F-9
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity (Continued)
respectively, agreed to extend the maturity dates of the notes to December
31, 2002. In addition, the holders of the Company's Series D and F
preferred stock agreed to waive all potential penalties associated with the
Series D and F preferred, including the abandonment of a certain SB-2
registration statement filed in connection with the resale of the common
stock underlying the Series D and F preferred. Below is a table containing
the warrant modifications.
COMMON SHARES UNMODIFIED
WARRANT PURCHASABLE PURCHASE
WARRANTHOLDER (Series) ISSUE DATE UPON EXERCISE PRICE
------------- -------- ---------- ------------- ----------
Austinvest Anstalt Balzers (D) 03-09-99 16,250 $2.96
Austinvest Anstalt Balzers (D) 04-23-99 8,125 $2.96
Austinvest Anstalt Balzers (D) 02-01-00 422,500 $0.625*
Austinvest Anstalt Balzers (F) 04-07-00 1,000,000 $1.00
Austinvest Anstalt Balzers (F) 10-13-00 38,259 $0.9825*
Esquire Trade & Finance, Inc. (D) 03-09-99 16,250 $2.96
Esquire Trade & Finance, Inc. (D) 04-23-99 8,125 $2.96
Esquire Trade & Finance, Inc. (D) 02-01-00 422,500 $0.625*
Esquire Trade & Finance, Inc. (F) 04-07-00 1,000,000 $1.00
Esquire Trade & Finance, Inc. (F) 10-13-00 38,259 $0.9625*
Libra Finance, S.A . (F) 04-07-00 1,600,000 $0.84*
Amro International, S.A. (D) 02-01-00 455,000 $0.625*
Amro International, S.A. (F) 04-07-00 1,000,000 $1.00
Amro International, S.A. (F) 10-13-00 38,259 $0.9625*
Amro International, S.A. (D) 03-09-99 17,500 $2.96
Amro International, S.A. (D) 04-23-99 8,750 $2.96
* Exercise price not reduced to $1.00
As a result of extending life of these warrants and reducing exercise
prices, the Company recorded stock compensation of $391,345 as non-cash
expense.
On June 19, 2002, the Company issued 33,333 shares of restricted common
stock to Tradersbloom Limited, as a finder fee in connection with the
issuance of the Company's Series I preferred stock. Tradersbloom Limited
is a sophisticated and accredited investor.
On June 19, 2002, the Company issued 66,667 shares of restricted common
stock to Libra Finance, S.A., as a finder fee in connection with the
issuance of the Company's Series I preferred stock. Libra Finance, S.A. is
a sophisticated and accredited investor.
On June 21, 2002, the Company issued 10,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 135 shares of Series G Convertible
Preferred.
F-10
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Transactions in Shareholders' Equity (Continued)
On July 1, 2002, the Company issued 339,898 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 5,608 shares of
Series D Convertible Preferred, at a conversion price of $0.165. The
conversion did not include accrued and unpaid dividends on the preferred
converted.
On July 1, 2002, the Company issued 339,898 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 5,608 shares of Series D
Convertible Preferred, at a conversion price of $0.165. The conversion
did not include accrued and unpaid dividends on the preferred converted.
On July 23, 2002, the Company issued 475,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 6,172 shares of Series G Convertible
Preferred, at a conversion price of $0.1680. The conversion included
accrued and unpaid dividends on the preferred converted in the amount of
$18,083.72.
On July 23, 2002, the Company issued 475,000 shares of common stock to
Keshet LP, upon the conversion of 6,172 shares of Series G Convertible
Preferred, at a conversion price of $0.1680. The conversion included
accrued and unpaid dividends on the preferred converted in the amount of
$18,083.72.
On September 26, 2002, the Company issued 154,171 shares of common stock to
Amro International, SA, upon the conversion of 2,500 shares of Series D
Convertible Preferred, at a conversion price of $0.187. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $3,830.
On September 26, 2002, the Company issued 396,053 shares of common stock to
Amro International, SA, upon the conversion of 7,108 shares of Series D
Convertible Preferred, at a conversion price of $0.208. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $11,299.
On September 30, 2002, the Company issued 100,000 shares of non-voting
Series J Convertible Preferred stock, having a stated value of $10.00 per
Preferred J share, and common stock warrants to Mid-Am Capital, L.L.C.
("Mid-Am") for the aggregate purchase price of $1,000,000. Each preferred
share is convertible to 40 shares of the Company's common stock of at a per
common share conversion price of $0.25, representing 4,000,000 shares of
common stock underlying the preferred. The issued warrants entitle the
holder to purchase 25 shares of common stock for each share of Series J
Convertible Preferred stock issued at an exercise price of $0.40 per common
stock share, representing 2,500,000 shares of common stock underlying the
warrants. The warrants are exercisable for a five-year period. The blended
per share price for the common stock underlying the preferred and the
warrants is $0.307; the September 30, 2002 closing market trading price was
$0.29 per share. This private offering was made to Mid-Am, an accredited
investor, pursuant to Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933. The Company recognized $854,279 in preferred stock
and $145,721 for 2,500,000 warrants issued in accordance with EITF 00-27,
"Application of Issue No. 98-5 to Certain Convertible Instruments." No
issuing cost was incurred.
F-11
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 - Adoption of New Accounting Standards
In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, "Business Combinations" ("SFAS No. 141"), and No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142").
SFAS No. 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling-of-interests method of accounting for
business combinations initiated after June 30, 2001. SFAS No. 141 also
requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS No.
141 applies to all business combinations initiated after June 30, 2001 and
for purchase business combinations completed on or after July 1, 2001. It
also requires, upon adoption of SFAS No. 142, companies to reclassify the
carrying amounts of intangible assets and goodwill based on the criteria in
SFAS No. 141.
SFAS No. 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least
annually. In addition, SFAS No. 142 requires that the Company identify
reporting units for the purposes of assessing potential future impairments
of goodwill, reassess the useful lives of other existing recognized
intangible assets, and cease amortization of intangible assets with an
indefinite useful life. An intangible asset with an indefinite useful life
should be tested for impairment in accordance with the guidance in SFAS No.
142. SFAS No. 142 is required to be applied in fiscal years beginning
after December 15, 2001 to all goodwill and other intangible assets
recognized at that date, regardless of when those assets were initially
recognized. SFAS No. 142 requires companies to reassess the useful lives
of other intangible assets within the first interim quarter after adoption
of SFAS No. 142.
In August 2001, Financial Accounting Standard Board issued Statement of
Financial Accounting Standards, No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," ("SFAS No. 144"). SFAS No. 144 provides a
single, comprehensive accounting model for impairment and disposal of long-
lived assets and discontinued operations. The Company adopted SFAS No. 144
effective January 1, 2002. The adoption did not have a material effect on
the consolidated financial statements.
The Company adopted SFAS No. 141 and SFAS No. 142 effective January 1,
2002. Previous business combinations were accounted for using the purchase
method. The Company has no goodwill or other intangibles recorded as a
result of these business combinations and as a result adoption of SFAS No.
141 and 142 had no effect on net income or earnings per share.
As of September 30, 2002, the Company has license rights with a net book
value of $291,036. Future amortization is as follows for subsequent years
ending September 30:
Years ending September 30, Amount
-------------------------- ------
2003 $256,193
2004 34,843
--------
$291,036
========
F-12
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 - Adoption of New Accounting Standards (Continued)
In June 2001, Financial Accounting Standard Board issued Statement of
Financial Accounting Standards, No. 143, "Accounting for Asset Retirement
Obligations," ("SFAS No. 143"). SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. SFAS No. 143 requires that any legal
obligation related to the retirement of long-lived assets be quantified and
recorded as a liability with the associated asset retirement cost
capitalized on the balance sheet in the period it is incurred when a
reasonable estimate of the fair value of the liability can be made. The
Company does not expect that the adoption of SFAS No. 143 will have a
material impact on the consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the current requirement that gains
and losses on debt extinguishment must be classified as extraordinary items
in the income statement. Instead, such gains and losses will be classified
as extraordinary items only if they are deemed to be unusual and
infrequent, in accordance with the current GAAP criteria for extraordinary
classification. In addition, SFAS 145 eliminates an inconsistency in lease
accounting by requiring that modifications of capital leases that result in
reclassification as operating leases be accounted for consistent with sale-
leaseback accounting rules. The statement also contains other
nonsubstantive corrections to authoritative accounting literature. The
changes related to debt extinguishment will be effective for fiscal years
beginning after May 15, 2002, and the changes related to lease accounting
will be effective for transactions occurring after May 15, 2002. Adoption
of this standard will not have any immediate effect on the Company's
consolidated financial statements. The Company will apply this guidance
prospectively.
On June 20, 2002, the FASBs Emerging Issues Task Force (EITF) reached a
partial consensus on Issue No. 02-03, "Recognition and Reporting of Gains
and Losses on Energy Trading Contracts" under EITF Issues No. 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities," and No. 00-17, "Measuring the Fair Value of Energy-Related
Contracts in Applying Issue No. 98-10". The EITF concluded that, effective
for periods ending after July 15, 2002, mark-to-market gains and losses on
energy trading contracts (includes those to be physically settled) must be
retroactively presented on a net basis in earnings. Also, companies must
disclose volumes of physically-settled energy trading contracts.
Management believes that the consensus will have no impact on the Company's
consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting
for restructuring and similar costs. SFAS No. 146 supersedes previous
accounting guidance, principally Emerging Issues Task Force (EITF) Issue
No. 94-3. SFAS No. 146 requires that the liability for costs associated
with an exit or disposal activity be recognized when the liability is
incurred. Under EITF No. 94-3, a liability for an exit cost was recognized
at the date of a companys commitment to an exit plan. SFAS No. 146 also
establishes that the liability should initially be measured and recorded at
fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing
future restructuring costs as well as the amount recognized. The
provisions of SFAS 146 are to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. Management believes that the
adoption of this standard will not have any immediate effect on the
Company's consolidated financial statements.
F-13
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4 - Subsequent Events
On October 7, 2002, the Company issued 999,112 shares of its common stock
to employees, consultants and third party professional service providers
pursuant to written agreements with the Company. Shares issued under these
agreements are valued at $0.40 per share, except where noted below. These
shares were issued pursuant to a 1933 Act Form S-8 registration statement.
The Company received no cash for these shares.
Recipient Common Stock Nature of Services Agreed Value
--------- ------------ ------------------ ------------
Seymour Borislow 32,000 accounting services $0.40 per share
Jeffrey Factor 22,000 accounting services $0.40 per share
Kenneth Borislow 6,000 accounting services $0.40 per share
Anthony P. Guiliano 45,000 consultant services (1)
Tim Ransom 175,000 design services $0.40 per share
Steven Nollau 69,112 consulting services $0.40 per share
Michael Edwards 175,000 employment services (2)
Anthony P. Guiliano 150,000 severance compensation $0.40 per share
Stanley Hirschman 250,000 accrued consulting $0.40 per share
Roy D. Toulan, Jr., Esq. 75,000 legal services $0.40 per share
For services rendered by Mr. Guiliano during his pre-employment
consulting contract with the Company
Represents quarterly incentive bonus payments under Mr. Edwards
original employment contract with the Company at quarterly market
average
On October 7, 2002, the Company issued options for 310,714 shares of its
common stock to employees, consultants and third party professional service
providers pursuant to written agreements with the Company. These shares
were issued pursuant to a 1933 Act Form S-8 registration statement. The
Company received no cash for these options
Common Stock
Recipient Options Nature of Services Exercise Price Expiration
--------- ------------ ------------------ -------------- ----------
Robert F. Eggleston, Jr 25,000 software services $1.00 per share January 25, 2007
Larry A. Slavik 25,000 software services $1.00 per share January 25, 2007
James D. Van de Vuurt 25,000 software services $1.00 per share January 25, 2007
Anthony P. Guiliano 235,714(1) consultant services $0.35 per share June 30, 2006
For services rendered by Mr. Guiliano pursuant to his employment
contract with the Company's subsidiary Bravo! Foods, Inc. The
Company replaced the options for equity in its subsidiary with
options for its shares pursuant to a resolution of the Company's
Board of Directors
F-14
BRAVO! FOODS INTERNATIONAL, CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS
ON FINANCIAL CONDITION AND OPERATION RESULTS
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about the
our prospects and strategies and our expectations about growth contained in
this report are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements represent the present expectations or beliefs concerning future
events. We caution that such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to our future profitability; the uncertainty as to whether
our new business model can be implemented successfully; the accuracy of our
performance projections; and our ability to obtain financing on acceptable
terms to finance our operations until profitability.
OVERVIEW
Our business model includes obtaining license rights from Warner Bros.
Consumer Products, granting production and marketing rights to processor
dairies to produce Looney Tunes(TM) flavored milk and generating revenue
primarily through the sale of "kits" to these dairies. The price of the
"kits" consists of an invoiced price for a fixed amount of flavor
ingredients per kit used to produce the flavored milk and a fee charged to
the diaries for the production, promotion and sales rights for the branded
flavored milk.
Prior to 2001, our business primarily involved the production and
distribution of milk in China. In the third quarter of 2000, we began to
refocus our business away from the production - distribution aspect of the
value chain by implementing a business model that involved the branding,
marketing, packaging design and promotion of flavored fresh milk in the
United States, branded with Looney Tunes(TM) characters. The processing,
local promotion and sales of this branded flavored milk were the
responsibility of regional dairy processors, to whom we sold "kits"
pursuant to written production agreements. During the middle of 2001, this
refocused business was implemented in China, in December 2001 in Mexico,
and in the third quarter of 2002 in Canada.
The business model that relied on production agreements with regional dairy
processors for branded fresh milk, while viable, proved to have limited
sales expansion capabilities in the US owing to the inherent distribution
limitations of a product with a short shelf life. Under this business
model, we achieved market penetration in approximately 3,700 stores, which
included approximately 11% of the supermarkets on a national basis. The
advent of extended shelf life (ESL) milk presented us with the opportunity
to dramatically increase sales on a national basis. In the third quarter
of 2001 and the first quarter of 2002, we entered into production contracts
with Shamrock Farms, located in Phoenix, and Jasper Products, of Joplin,
Missouri, respectively, and entered into arrangements to supply 400 Wal-
Mart stores and all 86 Super Target stores with Looney Tunes(TM) ESL
flavored milks. While our ESL business promises greater market
penetration, we intend to maintain our existing short shelf life milk
business with regional dairy processors currently under contract.
In the first quarter of 2002, we further refined our business model by
assuming greater control over the sales and promotion of our ESL branded
flavored milk and by the addition of a new source of revenue.
15
We are no longer dependent upon processor dairies to promote the sale of
our ESL product. Since ESL milk sales are not limited to the accounts of
regional dairy processors by distribution issues, we have assumed
responsibility for promoting sales either directly or through food brokers
who represent us with both national and regional accounts. This refined
business model, coupled with the production capacity of these two ESL dairy
processors, allowed us to seek national accounts in an aggressive fashion,
resulting in arrangements to supply over, for example, 1,174 Winn Dixie
locations, 700 Publix supermarkets, 335 Albertsons stores, 330 BILO
locations, 200 Krasdale stores, 100 A&Ps, 42 Gristedes supermarkets and
5,300 7-Eleven Convenience Stores. Currently, we have arrangements for the
distribution and sale of our branded ESL flavored milk in over 8,200
supermarkets, representing 33% penetration of the national market, as well
as an additional 1000 discount, club and convenience stores. Our expansion
from 3,700 stores into over 13,000 stores nationally in nine months is a
testament to the efficacy of this new sales and promotion strategy.
Under our refined U.S. business model, our revenue source derives not only
from "kit" sales but also from a share of the differential between the cost
to us of producing the ESL product and the wholesale price to our accounts.
In addition, commencing at the end of the third quarter of 2002, our
flavored milks became available in the non-dairy section of supermarkets in
the Northeast United States under a production and distribution agreement
with Parmalat North America
Commencing in May 2002, we developed a new branded fortified flavored milk
product under the "Slammers Fortified Reduced Fat Milk(TM)" brand name.
Our Slammers brand is being used in conjunction with our licensed Looney
Tunes(TM) characters on vitamin fortified flavored milk. We anticipate that
all of our Looney Tunes(TM) flavored milk products will be sold under our
Slammers brand by the end of calendar year 2002.
In June 2002, we entered into a production contract with a division of
Parmalat USA Corp. to produce, market and sell the Looney Tunes(TM) brand
flavored milks. Under this agreement, Parmalat is the exclusive producer
and distributor of Bravo! Foods' new Looney Tunes(TM) brand fortified
aseptic milk, packaged in tetra-brik format under our Slammers Fortified
Reduced Fat Milk(TM) logo. Our agreement with Parmalat gives us an
expanded presence in supermarkets through the use of shelf stable aseptic
milk that is processed, sold and distributed by Parmalat. In addition,
under this agreement we have retained responsibility for aseptic product
sales in the food service sector, either directly or through food brokers
who will represent us with both national and regional accounts. Our
revenue sources from retail sales and food service sales under this
agreement are similar to our sources of revenue from the sale of kits to
regional dairies, in the case of retail sales, and our dual sources of
revenue from ESL milk products, in the case of food service sales.
In October 2001, China Premium (Shanghai) began to implement the Bravo!
"kit sales" model with the execution of a production contract with Kunming
Xuelan Dairy, located in Kunming City in Southwest China. Since October
2001, Kunming Dairy has been producing all five flavored milks in 250ml
single serve gable top packaging. The dairy is averaging a half-ton of
product for 2,000 production units per day. Kumgmin Dairy has committed to
a $75,000 print advertising campaign to increase sales.
In January 2002, Heilongjiang Wan Shan Dairy (Wonder Sun Dairy) began
producing the vanilla Looney Tunes(TM) flavored milk. This dairy is
located in Harbin City in Northeast China and has distribution rights to
Heilongjiang, Jilin, Liaoning and Hebei provinces as well as Beijing and
Tianjin municipalities. Currently, Wonder Sun has stopped production of
Looney Tunes(TM) vanilla flavored milk to develop products for public
school systems. In the second quarter 2002, the Shanghai government
approved China Premium (Shanghai) and Wonder Sun Dairy to supply Looney
Tunes(TM) flavored milks in aseptic packaging to the Shanghai public
schools, which have a student body of 1.5 million. The parties to this
agreement anticipate that the initial sales of this school product will be
30,000 units per day, at a gross
16
profit of US $0.010 per unit. Commencing in September 2002, the Shanghai
Education Commission temporarily stopped the supply of school milk from all
dairies pending the completion of the Communist Party 16th National
Congress, which started November 8, 2002, for political reasons.
CORPORATE GOVERNANCE
The Board of Directors
Our board has positions for ten directors that are elected as Class A or
Class B directors at alternate annual meetings of our shareholders. Seven
directors of our board are independent. Our chairman and chief executive
officer are separate. The board meets regularly, at least four times a
year, and all directors have access to the information necessary to enable
them to discharge their duties. The board, as a whole, reviews our
financial condition, performance on an estimated vs. actual basis and
financial projections as a regular agenda item at scheduled periodic board
meetings, based upon separate reports submitted by our chief executive
officer and chief financial officer. Directors are elected by our
shareholders after nomination by the board or are appointed by the board
when a vacancy arises prior to an election. We presently have one mid-term
vacancy on the board. This year we have adopted a nomination procedure
based upon a rotating nomination committee made up of those members of the
director Class not up for election. The board presently is examining
whether this procedure, as well as the make up of the audit and
compensation committees, should be the subject of an amendment to the by-
laws.
Audit Committee
Our audit committee is composed of three independent directors and
functions to assist the board in overseeing our accounting and reporting
practices. Our financial information is booked in house by our treasurer's
office, from which independent third party accountants prepare financial
reports. These financial reports are audited or reviewed by BDO Seidman,
LLP, independent accountants and auditors. Our chief financial officer
reviews the preliminary financial and non-financial information prepared in
house, by our securities counsel and by our third party accountants, and
the reports of the auditors. The committee reviews the preparation of our
audited and unaudited periodic financial reporting and internal control
reports prepared by our chief financial officer. The committee is
available to review significant changes in accounting policies and to
address issues and recommendations presented by our internal and external
accountants as well as our auditors.
Compensation Committee
Our compensation committee is composed of three independent directors and
reviews the compensation structure and policies concerning executive
compensation. The committee develops proposals and recommendations for
executive compensation and presents those recommendations to the full board
for consideration. The committee periodically reviews the performance of
our other members of management and the recommendations of the chief
executive officer with respect to the compensation of those individuals.
Given the size of our company, all such employment contracts are
periodically reviewed by the board. The board must approve all
compensation packages that involve the issuance of our stock or stock
options.
Nominating Committee
The nominating committee was established in the second quarter 2002 and
consists of those members of the director Class not up for election. The
committee is charged with determining those individuals who will be
presented to the shareholders for election at the next scheduled annual
meeting. The full board fills any mid term vacancies by appointment.
17
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our consolidated financial condition and
results of operations are based on our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these
financial statements requires us to make estimates 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. On an on-going basis, we evaluate our estimates, including those
related to reserves for bad debts and valuation allowance for deferred tax
assets. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances, the result of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Our use of estimates,
however, is quite limited, as we have adequate time to process and record
actual results from operations.
RESULTS OF OPERATIONS
Financial Condition September 30, 2002
--------------------------------------
As of September 30, 2002, we had an accumulated deficit of $24,657,638,
cash on hand of $986,615 and reported total shareholders' deficit of
$843,319.
For this same period of time, we had revenue of $1,053,129 and general and
administrative expenses of $3,099,066. General and administrative expenses
consisted of $2,125,426 in operating expenses, depreciation and
amortization expenses of $457,436 and non-cash one time charges of $391,345
pertaining to the issuance of compensation options, the extension and re-
pricing of warrants to restructure debt and waive cash penalties, and
finders fees and non-cash consulting expense of $124,859.
After net interest expenses of $20,742, cost of goods sold of $133,033 and
selling expenses of $46,017 incurred primarily in the operations of our
Chinese wholly owned subsidiary, we had a net loss of $2,245,699.
Nine Months Ended September 30, 2002 Compared to the Nine Months Ended
----------------------------------------------------------------------
September 30, 2001
------------------
Revenue
We had revenues for the nine months ended September 30, 2002 of $1,053,129,
with a cost of sales of $133,033, resulting in a gross profit of $920,126,
or 87% of sales. Of the $1,053,129, $899,618 was from sales in the U.S.
operation, $21,436 from sales in China, $47,150 from sales in Canada and
$84,925 from sales in Mexico. Our revenue for the nine months ended
September 30, 2002 increased by $465,384, a 79% increase compared to
revenue of $587,745 for the same period in 2001. This increase is the
result of:
* moving from a production-distribution oriented business model
with limited, capabilities, to the "licensing/branding"
business model;
* adding five additional processor dairies in the US during 2001;
* the opening of the Mexico and Canada markets to Looney
Tunes(TM) flavored milks
18
* the continued expansion of sales of extended shelf life
product, which provides greater distribution flexibility; and
* greater market penetration and distribution of Looney Tunes(TM)
flavored milks.
Cost of Goods Sold
We incurred cost of goods sold of $133,033 for the nine months ended
September 30, 2002, most of which was incurred in our U.S. operation. Our
cost of goods sold in 2002 decreased by $33,842, a 20% decrease compared to
$166,875 for the same period in 2001.
Under the current licensing/branding U.S. business model, we do not bear
direct financial responsibility for the cost of the flavor ingredients used
to produce the Looney Tunes(TM) flavored milk, which are purchased directly
from approved suppliers by the processor dairies. Our revenue from kits
sold through our promotion agreement with Quality Chek'd is based upon the
net revenue that we receive from Quality Chek'd, which invoices its member
processor dairies and retains the balance of the kit price to cover the
cost of the kit flavor ingredients. We record revenue on a net basis and
do not book or attribute a cost of goods sold to these sales. Under our
production agreements with Neolac (Mexico), Farmers Dairy (Canada) and
Jasper (US - extended shelf life milk), we invoice the full kit price and
credit these processors with their cost of purchasing the flavor
ingredients directly from our approved suppliers. We record as revenue the
full kit price and book the corresponding debit as a cost of goods sold for
these sales.
Operating Expense
We incurred selling expenses for the nine months ended September 30, 2002
of $46,017, consisting of $43,017 incurred in China and $3,000 in our US
operation. Our selling expense decreased for the nine months ended
September 30, 2002 by $126,052, a 73% decrease compared to the selling
expense of $172,069 for the same period in 2001, which was incurred only in
China. The decrease in selling expense was due to the strategic refocusing
of our effort to implement our kit-sale business model to certain qualified
dairies in major cities of China. We entered the China market more than
five years ago and anticipated significant time for consumers in China to
accept a branded premium Western style flavored milk. We expect that
selling expense in China will remain at current levels as we expand our
business in China.
We incurred general and administrative expenses for the nine months ended
September 30, 2002 of $3,099,066, consisting of $3,026,211 in our U.S.
operation and $72,885 in China. Our general and administrative expenses in
2002 increased by $416,590, a 16% increase compared to $2,682,476 for the
same period in 2001. The increase was due to non-cash one time charges of
approximately $516,000 related to the issuance of options (as consulting
expense) and extending warrants and reducing exercise prices, and an
increase in marketing and promotional expenses in 2002, offset by a
decrease in overhead expense in China
Interest Expense
We incurred interest expense for the nine months ended September 30, 2002
of $20,742 consisting of $20,593 in our U.S. operation and $149 in our
China operation. Our interest expense in 2002 decreased by $9,477 a 31%
decrease compared to $30,219 for the same period in 2001. The decrease
came from our China operation related to a bank loan from Fujian Bank,
which was paid off in 2001, coupled with a
19
increase in interest attributed to the restructuring of the payment
schedule in one of our Warner Bros. licenses.
Net Loss
We had a net loss for the nine months ended September 30, 2002 of
$2,245,699 compared with a net loss of $2,463,894 for the same period in
2001. The net loss consisted of $103,433 in China and $2,164,691 from our
US operation. The net loss decrease in 2002 amounted to $218,195 or 9%
compared to the same period in 2001. The decrease in net loss in 2002
resulted from a reduction in general and administrative expenses in China
coupled with a 79% increase in gross revenues in 2002.
Loss Per Share
We reported a loss of $0.18 per share for the nine months ended September
30, 2002, compared to a loss of $0.20 per share for the same period in
2001, representing a 10% decrease.
Three Months Ended June 30, 2002 Compared to the Three Months Ended
-------------------------------------------------------------------
March 31, 2002
--------------
Revenue
We had revenues for the three months ended September 30, 2002 of $308,729,
with a cost of sales of $56,516, resulting in a gross profit of $252,213,
or 82% of sales. Of the $308,729, $258,914 was from sales in the U.S.,
$12,620 from sales in China and $37,195 from sales in Mexico. Our revenue
for the three months ended September 30, 2002 increased by $51,758 a 20%
increase compared to revenue of $256,971 for the same period in 2001. The
increase was the result of our increased customer sales base accomplished
through expanded sales and promotion efforts. We had anticipated revenues
in the area of $750,000 for the three months ended September 30, 2002.
This revenue level was not attained owing to our customers awaiting the
availability of our new Slammers Fortified Reduced Fat Milk(TM) line of
products, rather than submitting orders for our existing non-fortified
flavored milk products.
Cost of Goods Sold
We incurred cost of goods sold of $56,516 for the three months ended
September 30, 2002, most of which was incurred in our U.S. operation in the
third quarter. Our cost of goods sold for this period increased by
$33,072, a 141% increase compared to $23,444 for the same period in 2001.
Under our production agreements with Neolac (Mexico), Farmers Dairy
(Canada) and Jasper (US - extended shelf life milk), we invoice the full
kit price and credit these processors with their cost of purchasing the
flavor ingredients directly from our approved suppliers. We record as
revenue the full kit price and book the corresponding credit as a cost of
goods sold for these sales. ,
Operating Expense
We incurred selling expenses for the three months ended September 30, 2002
of $28,503, all of which were incurred in China. Our selling expenses
increased for the three months ended September 30, 2002 by $3,386, a 13%
increase compared to the selling expense of $25,117 for the same period in
2001, with China accounting for 100% of this amount. We expect that
selling expense in China will remain at current levels as we expand our
business in China.
We incurred general and administrative expenses for the three months ended
September 30, 2002 of $882,555, consisting of $854,987 in our U.S.
operations and $27,567 in China. Our general and administrative expenses
for the three months ended September 30, 2002 increased by $217,223, a 25%
20
increase compared to $665,332 for the same period in 2001. This increase
was due to an increase in marketing and promotional expenses for our new
Slammers Fortified Reduced Fat Milk(TM) product line.
Interest Expense, Net
We incurred interest income for the three months ended September 30, 2002
of $922 consisting of $917 in our U.S. operation and $5 in our China
operation. Our interest income for the three months ended September 30,
2002 increased by $2,369, a 164% decrease compared to interest expense of
$1,447 for the same period in 2001, due to the receipt of $1,000,000 in
proceeds for the issuance of Series J preferred stock.
Net Loss
We had a net loss for the three months ended September 30, 2002 of $657,923
compared with a net loss of $458,369 for the same period in 2001. The net
loss consisted of $45,855 in China and $612,068 from our US operation. The
net loss increase amounted to $199,554 or 44% compared to the same period
in 2001. The increase in net loss resulted from an increase general and
administrative expenses in our U.S. operation.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2002, we reported that net cash used in operating
activities was $1,216,540, net cash provided by financing activities was
$1,972,912, and net cash used in investing activities was $1,797.
As of September 30, 2001, we reported that net cash used in operating
activities was $1,560,948, net cash provided by investing activities was
$710,785, and net cash provided by financing activities was $821,250.
Net cash used in operating activities decreased by $344,408 to $1,216,540
for the nine months ended September 30, 2002, representing approximately
22% decrease, compared to $1,560,948 of net cash used in operating
activities for the same period of 2001. The decrease was due to a large
increase in non-cash expenses from amortization of license rights and stock
compensation. These items were added back to operating cash flows.
Net cash used in investing activities decreased by $712,582 to $1,797 for
the nine months ended September 30, 2002, compared to cash provided of
$710,785 for the same period of 2001. The decrease was caused by the
receipt of cash on a note receivable in 2001, for $716,000.
Net cash provided by financing activities for the period ended September
30, 2002 increased 140% to $1,972,912 from $821,250 for the same period in
2001. In the nine months ended September 30, 2002, we received $700,000 in
net proceeds from the issuance of Series H preferred stock, $330,000 from
the exercise of stock options, $287,988 from the issue of Series I
preferred stock, $1,000,000 from the issue of Series J preferred stock, and
repaid loans totaling approximately $345,076.
For the period ended September 30, 2002, we had total liabilities of
$2,362,627, representing a 1% decrease from $2,647,374 at December 31,
2001. The decrease relates primarily to the payoff of notes payable and
other liabilities.
Going forward, our primary requirements for cash consist of (1) the
continued development of our business model in China, the United States and
on an international basis; (2) general overhead expenses for personnel to
support the new business activities; and (3) payments of guaranteed royalty
payments to
21
Warner Bros. under existing licensing agreements. We estimate that our
need for financing to meet our cash needs for operations will continue to
the fourth quarter of 2002, when cash supplied by operating activities will
enable us to meet the anticipated cash requirements for operation expenses.
We anticipate the need for additional financing in 2003 to reduce our
liabilities and return shareholders' equity to a positive status.
As of December 31, 2001, we received $1,055,000 of a $2.35 million private
offering of our Series H convertible preferred stock and, during the first
quarter of 2002, we received an additional $700,000. On June 6, 2002, we
received net proceeds of $330,000 from the exercise of stock options for
1,000,000 shares issued to three consultants for services rendered. On
June 17, 2002, we received net proceeds of $288,000 in a private offering
of our Series I convertible preferred stock for working capital.
On September 30, 2002, we received $1 million from a private placement with
Mid-Am Capital, L.L.C. a finance affiliate of Dairy Farmers of America,
Inc., Mid-Am purchased non-registered, non-voting convertible preferred
shares and warrants. The blended per share price for the common stock
underlying the preferred and the warrants is $0.307; the September 30, 2002
closing market trading price was $0.29 per share. The proceeds have been
used to promote marketing initiatives for our new Slammers products, for
general working capital and to improve our balance sheet.
We currently have monthly working capital needs of approximately $240,000.
We anticipate monthly revenues to exceed $250,000 per month by the end of
the fourth quarter of 2002. Total revenues are projected at $1,750,000
through the year ended December 31, 2002.
We are continuing to explore new points of sale for Looney Tunes(TM)
flavored milk. In the first and second quarters, Looney Tunes(TM) milk
products were placed in vending machines in select secondary schools in the
greater Chicago area to determine whether a school-vending program is an
appropriate point of sale for these products. Presently, we are
aggressively pursuing this market through trade/industry shows and
individual direct contracts. The implementation of such a school base
program, if viable, could have an impact on the level of our revenue during
the fourth quarter of 2002. Similarly, we expect that commencement of
extended shelf life ("ESL") milk production agreements with strategically
placed ESL dairy processors, the greater control over sales with our
refined business model and the cost-wholesale price differential source of
revenue will continue have a positive impact on revenues, with the
distribution of Looney Tunes(TM) flavored milk in national chains such as
Super Target, as well as large regional supermarkets such as Publix,
Krasdale, Albertsons, Foodline, A&P, BI-LO, Walbaum's and Winn Dixie.
At the beginning of 2002, we began negotiations with Warner Bros. to extend
the US license agreement for an additional year on the same terms before
renewal of the license was necessary. The parties have agreed to such an
extension. In addition, a Warner Bros. Looney Tunes(TM) license for Canada
has been approved. We have executed an agreement with Farmers Dairy in
Canada to produce Looney Tunes(TM) flavored milk for distribution in
Eastern Canada, beginning in August 2002.
Commencing in May 2002, we developed a new branded fortified flavored milk
product under the "Slammers Fortified Reduced Fat Milk(TM)" brand name.
Our Slammers brand is being used in conjunction with our licensed Looney
Tunes(TM) characters on vitamin fortified flavored milk. The introduction
of the Slammers Fortified Reduced Fat Milk(TM) brand was made in
conjunction with our co-sponsoring the nationwide Taz Atti-Tour, a Looney
Tunes(TM) action sports tour sponsored by Warner Bros. Consumer Products,
Warner Bros. Theatrical, Wal-Mart, Acclaim Entertainment, AOL and ASA
Events. This extreme sports tour featured professional international
inline skating, skateboard and bike sport stars, who performed
demonstrations and lead interactive clinics. The 2002 Taz Atti-Tour
occurred at Wal-Mart stores in 19 US cities through September 20, 2002.
This promotional tour gave our Slammers brand products, which are now
available in the Northeast United States, national exposure and is expected
to have a positive impact on product sales.
22
In June 2000, we executed an exclusive aseptic tetra-brik production
agreement with a division of Parmalat USA Corp. for Looney Tunes(TM)
flavored milk, as well as our new Slammers Fortified Reduced Fat Milk(TM).
We launched this new aseptic tetra-brik product in September 2002. We
expect this product to have a positive impact upon our revenues, commencing
with the fourth quarter of 2002.
DEBT STRUCTURE
Warner Bros.
------------
We hold five licenses for Looney Tunes(TM) characters and names from Warner
Bros. Each license is structured to provide for the payment of guaranteed
royalty payments to Warner Bros. We account for these guaranteed payments
as debt and licensing rights as assets. The following is a summary of the
balances owed as of September 30, 2002 and the license expiration dates:
Amount Expiration
License Guaranty Balance Due Past Due Date
------- -------- ----------- -------- ----------
U.S. License $500,000 $ - $ - 12/31/03
U.S. TAZ $250,000 $166,667 $83,334* N/A
China $400,000 $ - $33,750 06/30/03
Mexico $145,000 $ 36,250 $ - 05/31/04
Canada $ 32,720 $ - $ - 03/31/04
* This payment was made to Warner Bros. October 4, 2002.
International Paper
-------------------
During the process of acquiring from American Flavors China, Inc. the 52%
of equity interest in and to Hangzhou Meilijian, we issued an unsecured
promissory note to assume the American Flavors' debt owed to a supplier,
International Paper. The face value of that note was $282,637 at interest
rate of 10.5% per annum without any collateral attached. The note has 23
monthly installment payments of $7,250 with a balloon payment of $159,862
at the maturity date of July 15, 2000. We negotiated with International
paper for the extension of this note. On July 6, 2000, International Paper
agreed to extend the note to July 1, 2001, and the principal amount was
adjusted due to different interest calculation approach. International
Paper imposed a charge of $57,000 to renegotiate the note owing the failure
of Hangzhou Meilijian to pay for certain packing material, worth more than
$57,000 made to order in 1999. The current outstanding balance on this
note is $187,743. The Company is delinquent in its payments under this
note and anticipates discharging this obligation in 2002.
Individual Loans
----------------
On November 6 and 7, 2001, respectively, we received the proceeds of two
loans aggregating $100,000 from two offshore lenders. The two promissory
notes, one for $34,000 and the other for $66,000, were payable February 1,
2002 and bear interest at the annual rate of 8%. These loans are secured
by a general security interest in all our assets. On February 1, 2000, the
parties agreed to extend the maturity dates until the completion of the
anticipated Series H financing. On June 18, 2002, the respective
promissory note maturity dates were extended by agreement of the parties to
December 31, 2002. On June 18, 2002, we agreed to extend the expiration
dates of warrants issued in connection with our Series D and F preferred
until June 17, 2005 and to reduce the exercise price of certain of those
warrants to $1.00, in partial consideration for the maturity date
extension.
23
EFFECTS OF INFLATION
We believe that inflation has not had material effect on its net sales and
results of operations.
EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES
Our Shanghai subsidiary is located in China. It buys and sells products in
China using Chinese renminbi as functional currency. Based on Chinese
government regulation, all foreign currencies under the category of current
account are allowed to freely exchange with hard currencies. During the
past two years of operation, there were no significant changes in exchange
rates. However, there is no assurance that there will be no significant
change in exchange rates in the near future.
ITEM 4. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and its principal financial officer, after
evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-
14(c) and 15d-14(c) as of a date within 90 days of the filing date of this
quarterly report on Form 10-Q (September 30, 2002), have concluded that as
of the Evaluation Date, the Company's disclosure controls and procedures
were adequate and effective to ensure that material information relating to
the Company and its consolidated subsidiaries would be made known to them
by others within those entities, particularly during the period in which
this quarterly report on Form 10-Q was being prepared.
b) Changes in Internal Controls. There were no significant changes in
the Company's internal controls or in other factors that could
significantly affect the Company's disclosure controls and procedures
subsequent to the Evaluation Date, nor any significant deficiencies or
material weaknesses in such disclosure controls and procedures requiring
corrective actions. As a result, no corrective actions were taken.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Quarter Ended September 30, 2002
On July 1, 2002, the Company issued 500,000 shares of common stock to
Esquire Trade & Finance, Inc., upon the conversion of 8,250 shares of
Series D Convertible Preferred, at a conversion price of $0.165. The
conversion did not include accrued and unpaid dividends on the preferred
converted.
On July 1, 2002, the Company issued 500,000 shares of common stock to
Austinvest Anstalt Balzers, upon the conversion of 8,250 shares of Series D
Convertible Preferred, at a conversion price of $0.165. The conversion
did not include accrued and unpaid dividends on the preferred converted.
On July 23, 2002, the Company issued 475,000 shares of common stock to The
Keshet Fund LP, upon the conversion of 6,172 shares of Series G Convertible
Preferred, at a conversion price of $0.1680. The conversion included
accrued and unpaid dividends on the preferred converted in the amount of
$18,083.72.
24
On July 23, 2002, the Company issued 475,000 shares of common stock to
Keshet LP, upon the conversion of 6,172 shares of Series G Convertible
Preferred, at a conversion price of $0.1680. The conversion included
accrued and unpaid dividends on the preferred converted in the amount of
$18,083.72.
On September 26, 2002, the Company issued 154,171 shares of common stock to
Amro International, SA, upon the conversion of 2,500 shares of Series D
Convertible Preferred, at a conversion price of $0.187. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $3,830.
On September 26, 2002, the Company issued 396,053 shares of common stock to
Amro International, SA, upon the conversion of 7,108 shares of Series D
Convertible Preferred, at a conversion price of $0.208. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $11,299.
On September 30, 2002, the Company issued 100,000 shares of non-voting
Series J Convertible Preferred stock, having a stated value of $10.00 per
Preferred J share, and common stock warrants to Mid-Am Capital, L.L.C.
("Mid-Am") for the aggregate purchase price of $1,000,000. Each preferred
share is convertible to 40 shares of the Company's common stock of at a per
common share conversion price of $0.25, representing 4,000,000 shares of
common stock underlying the preferred. The issued warrants entitle the
holder to purchase 25 shares of common stock for each share of Series J
Convertible Preferred stock issued at an exercise price of $0.40 per common
stock share, representing 2,500,000 shares of common stock underlying the
warrants. The warrants are exercisable for a five-year period . The blended
per share price for the common stock underlying the preferred and the
warrants is $0.307; the September 30, 2002 closing market trading price was
$0.29 per share. This private offering was made to Mid-Am, an accredited
investor, pursuant to Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933.
Subsequent Events
On October 7, 2002, the Company issued 999,112 shares of its common stock
to employees, consultants and third party professional service providers
pursuant to written agreements with the Company. Shares issued under these
agreements are valued at $0.40 per share, except where noted below. These
shares were issued pursuant to a 1933 Act Form S-8 registration statement.
The Company received no cash for these shares.
Recipient Common Stock Nature of Services Agreed Value
--------- ------------ ------------------ ------------
Seymour Borislow 32,000 accounting services $0.40 per share
Jeffrey Factor 22,000 accounting services $0.40 per share
Kenneth Borislow 6,000 accounting services $0.40 per share
Anthony P. Guiliano 45,000 consultant services (1)
Tim Ransom 175,000 design services $0.40 per share
Steven Nollau 69,112 consulting services $0.40 per share
Michael Edwards 175,000 employment services (2)
Anthony P. Guiliano 150,000 severance compensation $0.40 per share
Stanley Hirschman 250,000 accrued consulting $0.40 per share
Roy D. Toulan, Jr .,Esq. 75,000 legal services $0.40 per share
25
(1) For services rendered by Mr. Guiliano during his pre-employment
consulting contract with the Company
(2) Represents quarterly incentive bonus payments under Mr. Edwards
original employment contract with the Company at quarterly market
average
On October 7, 2002, the Company issued options for 310,714 shares of its
common stock to employees, consultants and third party professional service
providers pursuant to written agreements with the Company. These shares
were issued pursuant to a 1933 Act Form S-8 registration statement. The
Company received no cash for these options
Common Stock
Recipient Options Nature of Services Exercise Price Expiration
--------- ------------ ------------------ -------------- ----------
Robert F. Eggleston, Jr 25,000 software services $1.00 per share January 25, 2007
Larry A. Slavik 25,000 software services $1.00 per share January 25, 2007
James D. Van de Vuurt 25,000 software services $1.00 per share January 25, 2007
Anthony P. Guiliano 235,714(1) consultant services $0.35 per share June 30, 2006
For services rendered by Mr. Guiliano pursuant to his employment
contract with the Company's subsidiary Bravo! Foods, Inc. The
Company replaced the options for equity in its subsidiary with
options for its shares pursuant to a resolution of the Company's
Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
Exhibits - Required by Item 601 of Regulation S-B.
20.1 Proxy Solicitation for Annual Meeting, Definitive 14A, filed ***,
2002
99.1 Chief Executive Officer and Principal Financial Officer
Certifications pursuant to 18 U.S.C. Section 1350, under Sections
302 and 906, Sarbanes-Oxley Act of 2002, filed with this report
(b) Reports on Form 8-K
Filed : Re: Investment if Series J Convertible Preferred Form 8-K as
filed October **, 2002
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf of the
undersigned, duly authorized.
BRAVO! FOODS INTERNATIONAL CORP.
(Registrant)
Date: November 12, 2002
/s/Roy G. Warren
-----------------------------------
Roy G. Warren, Chief Executive Officer
26
CERTIFICATION
I, Roy G. Warren, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Bravo!
Foods International Corp.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
27
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
November 12, 2002 By: /s/ Roy G. Warren
-------------------------------
Roy G. Warren
Chief Executive Officer
CERTIFICATION
I, Michael L. Davis, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Bravo!
Foods International Corp.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
28
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
November 12, 2002 By: /s/ Michael L. Davis
-------------------------------
Michael L. Davis
Chief Financial Officer
CERTIFICATION
I, Nancy Yuan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Bravo!
Foods International Corp.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
29
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
November 12, 2002 By: /s/ Nancy Yuan
-------------------------------
Nancy Yuan
Treasurer (Principal Accounting
Officer)
30