Edgar Filing: BRAVO FOODS INTERNATIONAL CORP

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Report For Period January 1, 2002 to December 31, 2002

BRAVO! FOODS INTERNATIONAL CORP.
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(Name of Small Business Issuer in its Amended Charter)

Commission File Number 0-20549

Delaware 62-1681831
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11300 US Highway 1, Suite 202, North Palm Beach, Florida 33408 USA
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(Address of principal executive offices) (Zip Code)

Telephone number: (561) 625-1411
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Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act

Common Stock, $.001 par value
(Title of class)

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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 [ ]

Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were $1,772,970.

The aggregate market value of the voting stock held by non-affiliates of
the issuer on March 24, 2003,based upon the $0.28 per share average bid and
asked prices of such stock on that date, was $5,975,527, based upon 21,341,170
shares held by non-affiliates of the issuer. The total number of issuer's
shares of common stock outstanding held by affiliates and non-affiliates as
of March 24, 2003 was 25,762,854.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]

DOCUMENTS INCORPORATED BY REFERENCE: See Exhibits

FORWARD-LOOKING STATEMENTS

Statements that are not historical facts, including statements about
the Company's prospects and strategies and its 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 Company's present expectations or
beliefs concerning future events. The Company cautions that such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Company's 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
the Company's future profitability; the uncertainty as to whether the
Company's new business model can be implemented successfully; the accuracy
of its performance projections; and the Company's ability to obtain
financing on acceptable terms to finance its operations until
profitability.

PART I

ITEM 1 - DESCRIPTION OF BUSINESS

The Company

The Company is a Delaware corporation, which formerly owned the
majority interest in two Sino-American joint ventures in China, known as
Green Food Peregrine Children's Food Co. Ltd. and Hangzhou Meilijian Dairy
Products Co., Ltd. Presently, the Company wholly owns a so-called "free
trade zone" subsidiary in Shanghai, known as China Premium Food Corp
(Shanghai) Co., Ltd., as well as a U.S. subsidiary, known as Bravo! Foods,
Inc. The U.S. subsidiary has not functioned as an operating company since
the end of 2001. Both Green Food Peregrine and Meilijian Dairy processed
milk products for local consumption in the areas of Shanghai and Hangzhou,
China, respectively

The Company was formed on April 26, 1996 and was formerly known as
Shakespeare Holding, Inc. In February 1997, Shakespeare merged with Manor
Products Corp., a Delaware company established on January 26, 1996 and
changed its name to China Peregrine Food Corporation. Manor was a shell
company with 331 shareholders and no operating history. Similarly, China
Peregrine Food Corporation was a company without substantial assets or
operating activity until it purchased the assets of China Peregrine
Enterprises Limited in March 1997.

The Company's March 5, 1997 purchase of the assets of China Peregrine
Enterprises Limited resulted in the Company becoming an operating entity.
These assets consisted of the equity position and contractual rights, which
China Peregrine Enterprises had in the Green Food Peregrine Chinese joint
venture. In consideration for this purchase, the Company issued 45% of its
outstanding common stock to the limited partnership. Despite various
business strategies, product shifts and attempted management changes, Green
Food Peregrine's pasteurized milk business failed to reach economic
viability, never having penetrated more than 3% of the relevant market.
The business activities of Green Food Peregrine ceased in December of 1999.

On September 3, 1997 and June 28, 1998, respectively, the Company
executed agreements to acquire a 52% interest in Hangzhou Meilijian Dairy
from American Flavors China, Inc., a Delaware corporation, which
acquisition was approved by the Chinese government in 1998. The remaining
48% of Hangzhou Meilijian is owned by Hangzhou Dairy Co., a controlled
entity of the regional Chinese government. The Company encountered
management difficulties with this joint venture around new product issues.
In December 2000, the Chinese government approved the buy out of the
Company's equity interest in this joint venture by the Company's Chinese
partner. That buy out transaction has closed, and the Company has received
approximately $900,000 for its interest in 2000 and 2001.

In December 1999, the Company obtained Chinese government approval
for the registration of a new wholly owned subsidiary in the Wai Gao Qiao
"free trade zone" in Shanghai, China. The Company formed this import-export
company to import, export and distribute food products on a wholesale level
in China. In addition, China Premium (Shanghai) is the Company's legal
presence in China with respect to contractual arrangements for the
development, marketing and distribution of branded food products.

In December of 1999, the Company formed Bravo! Foods, Inc., a wholly
owned Delaware subsidiary, which the Company utilized to advance the
promotion and distribution of branded Looney Tunes(tm) products in the United
States, through production agreements with local dairy processors.

On February 1, 2000, the Company changed its name from China
Peregrine Food Corporation to China Premium Food Corporation, and on March
16, 2001 the Company changed its name to Bravo! Foods International Corp.

The Business

The Company's business includes obtaining license rights for several
Looney Tunes(tm) characters 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 under production contracts. "Kits" sold to
processors consist of flavor ingredients that were developed and refined by
the Company and the grant of production rights to processors to produce the
flavored milks. The consideration paid to the Company under these
production contracts consist of fees charged for the Company's grant of
production rights for the Looney Tunes(tm) flavored milks plus a charge for
flavor ingredients. The fees charged by the Company for the production
rights have been formulated to match the Company's costs for the Warner
Bros. Looney Tunes(tm) intellectual property licenses. In the United States,
the Company also generates revenue from the unit sales of finished Looney
Tunes(tm) flavored milks to retail consumer outlets.

Licenses

In March of 1999, the Company commenced a licensing agreement with
Warner Bros. Consumer Products, permitting the Company to produce and
distribute a line of high quality, flavored milks branded with the Warner
Bros. Looney Tunes(tm) logos, characters and names in the Shanghai and
Hangzhou greater metropolitan areas. To obtain this license, the Company
agreed to pay 3% royalty fees of net invoiced price of each licensed product
with a minimum guaranteed royalty of $300,000. In the summer

of 2000, the Company agreed to pay an additional $100,000 for an expanded
license for all of mainland China and an extension of the expiration date
to June 2003.

On July 27, 2000, the Company executed a licensing agreement with
Warner Bros. to use Looney Tunes(tm) characters and names on milk products in
the entire United States. This licensing agreement grants to the Company
the right to use the cartoon characters of Bugs Bunny, Tweety, Tasmanian
Devil, Road Runner, Wile E. Coyote, Lola Bunny, Marvin the Martian,
Sylvester and Daffy Duck on milk products for sale in specified retail
outlets in the fifty United States, Puerto Rico and the United States
Virgin Islands. The initial term of the agreement was for 3 years, from
January 1, 2000 through December 31, 2002. In early 2002, the parties
agreed to extend the term of this license for an additional year to
December 31, 2003.

On November 7, 2001, the Company executed a licensing agreement with
Warner Bros. to use Looney Tunes(tm) characters and names on milk products in
Mexico. This licensing agreement grants the Company the right to use the
Warner Bros. cartoon characters on milk products for sale in specified
retail outlets throughout Mexico. The initial term of the agreement is for
3 years, from June 1, 2001 through May 31, 2004.

On May 28, 2002, the Company executed a licensing agreement with
Warner Bros. to use Looney Tunes(tm) characters and names on milk products in
Canada. This licensing agreement grants the Company the right to use the
Warner Bros. cartoon characters on milk products for sale in specified
retail outlets throughout Canada. The initial term of the agreement is for
25 months, from March 1, 2002 through March 31, 2004.

All of the Company's licensing agreements recognize that the Company
will use third party production agreements for the processing of flavored
milk products, and that the milk products will be produced and may be sold
directly by those processors. The Company's responsibilities under its
third party production agreements are to design and provide Warner Bros.
approved packaging artwork, to help determine the best tasting flavors for
the particular market and to assist in the administration, promotion and
expansion of the Looney Tunes(tm) branded milk program. Ingredients for the
flavored milks are formulated to the Company's specifications and supplied
on an exclusive basis by Givaudan Roure. In the United States, the Company
assumes the responsibility for sales and marketing of the Looney Tunes(tm)
flavored milks produced by Jasper Products and Shamrock Farms.

Under the Company's United States license, the Company agreed to a
royalty rate of 5% on the amount invoiced to the producer dairies for
"kits". In Mexico, the Company agreed to a sliding scale royalty rate
initially equal to 5% on the amount invoiced, with rate increases to 5% and
7%, respectively for the second and third contract years. The Company
agreed to a 5% royalty rate on the amount invoiced to the producers in
Canada and a 3% royalty rate in China.

Production Contracts

Prior to 2000, the Company's business primarily involved the
production and distribution of milk in China. In the third quarter of
2000, the Company began to refocus the Company's 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. 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.

United States

The initial dairy processors with which the Company had production
contracts were members of Quality Chekd Dairies, Inc., a national
cooperative with over 40 member dairies that process fresh milk on a
regional basis. Bravo! and Quality Chekd entered into a promotion
agreement that governed

the administration, promotion and marketing of this member dairy program.
Under this arrangement, Quality Chek'd was responsible for the
administration and logistics of the kit sales to its member dairies,
including the collection of revenues and the payment of cost of goods sold
and selling expenses for the kits. The Company received net revenue
payments from Quality Chek'd upon its collection of receivables and payment
of expenses. Sales of flavored milk units to retail consumer outlets were
the responsibility of the Quality Chek'd's regional processor dairies. The
business, while viable, proved to have limited sales expansion capabilities
in the US owing to the inherent regional distribution limitations of a
"fresh" milk product with a short shelf life.

The advent of extended shelf life (ESL) and aseptic long life milk
presented the Company with the opportunity to increase dramatically sales
on a national basis. In the third quarter of 2001 and the first quarter of
2002, the Company entered into production contracts with Shamrock Farms,
located in Phoenix, Arizona and Jasper Products, of Joplin, Missouri,
respectively, and began to market Looney Tunes(tm) ESL and aseptic flavored
milks to accounts such as Wal-Mart and Super Target.

Significantly, with ESL and aseptic milks, the Company is no longer
dependent upon regional processor dairies to promote the sale of the
Company's Looney Tunes(tm) flavored milks. Since distribution issues do not
limit ESL and aseptic milk sales to the accounts of regional dairy
processors, the Company has assumed responsibility for promoting sales
either directly or through food brokers who represent the Company with both
national and regional accounts. This refined business model, coupled with
the production capacity of these two ESL dairy processors, allowed the
Company to seek national accounts in an aggressive fashion, resulting in
arrangements to supply flavored milk products to over 11,000 stores
nationally at the end of 2002.

Under the Company's current U.S. business model, the Company's
revenue source derives not only from "kit" sales but also from the
differential between the cost to the Company of producing the ESL and long
life aseptic products and the wholesale price to the Company's accounts for
unit sales of the finished Looney Tunes(tm) flavored milks.

In June 2002, the Company 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(tm) format under the Company's
Slammers Fortified Reduced Fat Milk(tm) logo in the United States. The
Company's agreement with Parmalat gives the Company 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 the Company has retained responsibility for aseptic product sales
in the food service sector, either directly or through food brokers who
will represent the Company with both national and regional accounts.

Mexico

In December 2001, the Company commenced its contractual relationship
with Neolac S.A, a national dairy processor located in central Mexico. The
Company sells kits to Neolac, including production rights for the Looney
Tunes(tm) characters licensed from Warner Bros. for all of Mexico. The
Company's responsibilities are to design and provide Warner Bros. approved
packaging artwork, to help determine the best tasting flavors for the
particular market and to assist in the administration, promotion and
expansion of the Looney Tunes(tm) branded milk program. Ingredients for the
flavored milks are formulated to the Company's specifications and supplied
on an exclusive basis by Givaudan Roure. The Company does not have any
responsibility for or participation in sales or distribution in Mexico.

Canada

In April 2002, the Company commenced its contractual relationship
with Farmers Dairy, a dairy processor located in Halifax, Nova Scotia,
Canada. The Company sells kits to Farmers Dairy, including

production rights for the Looney Tunes(tm) characters licensed from Warner
Bros. The Company's responsibilities are to design and provide Warner
Bros. approved packaging artwork, to help determine the best tasting
flavors for the particular market and to assist in the administration,
promotion and expansion of the Looney Tunes(tm) branded milk program.
Ingredients for the flavored milks are formulated to the Company's
specifications and supplied on an exclusive basis by Givaudan Roure. The
Company does not have any responsibility for or participation in sales or
distribution in Canada.

China

The Company's withdrawal from milk production in China in 2000
resulted in the signing of supply agreements with Hangzhou Meilijian and
Huai Nan Dairy to produce branded Looney Tunes(tm) traditional white and
flavored milks, which the Company sold in Shanghai, Hangzhou, Ningbo,
Nanjing, Fuzhou, Wuxi and Suzhou. Sales of Looney Tunes(tm) flavored milks in
Shanghai commenced in September 2000.

The administration of supply, distribution, marketing and sales of
the Looney Tunes(tm) branded milk products in China was the responsibility of
China Premium Food Corporation (Shanghai), Ltd., the Company's wholly owned
Chinese registered subsidiary. While this business model moved the Company
away from production, it proved to be inefficient from a market penetration
point of view and expensive. Accordingly, the Company commenced
negotiations with several large regional dairies to implement the "kit
sales" business model.

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.

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 Dairy is producing 4 tons
for 20,000 production units per day in 200ml single serve plastic bottles
for school lunch programs in Heilongjiang and 3.5 tons for 5,000 single
serve 220ml production units of drinkable yogurt in Harbin.

Products

Prior to 2000, the Company processed and distributed fresh white milk
in China in gable top paper cartons and in traditional Chinese plastic
"baggie" pouches. This product was unbranded and was not flavored. In
1999, the Company began to process and sell Looney Tunes(tm) flavored milks in
gable top packaging in China. Commencing in September 2000, the Company
implemented the "kit" sales model for the production of Looney Tunes(tm)
flavored milks in pouches and single serve plastic bottles through third
party production agreements. Currently, Looney Tunes(tm) milk products are
sold in 200ml plastic bottle packaging. In the last quarter of 2002, the
Company introduced drinkable flavored yogurt in 220ml single serve plastic
bottles

Commencing in September of 2000, the Company implemented the "kit"
sales program with third party processors in the United States, for the
production and sale of fresh Looney Tunes(tm) flavored milk in single serve
plastic bottles. This product, as with all of the Company's U.S. products
up to September 2000, had a limited shelf life of, generally, 21 days.

In early 2002, the Company developed Looney Tunes(tm) brand extended
shelf life and aseptic long life flavored milk products. The extended
shelf life product is sold in 11.5oz single serve plastic bottles

and must be refrigerated. The shelf life of this product is 90 days. The
Company's aseptic product does not require refrigeration and has a shelf
life of 8 months. This product is packaged in an 11.2oz Tetra Pak Prisma(tm)
sterile paper container. Both of these products were introduced to the
public in the second and third quarters of 2002.

Commencing in May 2002, the Company developed a new branded
fortified flavored milk product under the "Slammers Fortified Reduced Fat
Milk(tm)" brand name. The Company's Slammers brand is used in conjunction
with the Company's licensed Looney Tunes(tm) characters. Slammers is made
from 2 percent fat milk and is fortified with 11 essential vitamins. The
introduction of this new product and the phase out of the Company's
"regular" Looney Tunes(tm) branded milks occurred in the fourth quarter of
2002. The Company's Slammers Looney Tunes(tm) flavored milks are sold in the
United States in single serve extended shelf life 11.5 oz plastic bottles, as
well as the long life 11.2oz aseptic Tetra Pak Prisma(tm) package. The
Company's Slammers Looney Tunes(tm) flavored milks are sold in Mexico and
Canada in single serve extended shelf life 11.5 oz plastic bottles.

In October 2002, Parmalat introduced Looney Tunes(tm) brand fortified
aseptic milk, packaged in an 8oz Tetra-Brik(tm) format under the Company's
Slammers Fortified Reduced Fat Milk(tm) logo pursuant to a production
agreement with the Company executed in June 2002. The 8oz Tetra Brik
Slammers does not require refrigeration and has a shelf life of 6 months.
Currently, this product is available only in the mainland United States.

In November 2002, the Company introduced Slim Slammers Fortified
Milk(tm), a low calorie version of the Company's Looney Tunes(tm) Slammers
Fortified Reduced Fat Milk(tm). Slim Slammers Fortified Milk(tm) has no sugar
added and is sweetened with sucralose, a natural sweetener made from sugar.
Slim Slammers Fortified Milk(tm) is made from 1 percent fat milk, is fortified
with 11 essential vitamins and is available in the same flavors as the
Company's Slammers brand. This product currently is being introduced in the
United States.

Industry trends

The dairy industry in the western world is a very mature industry
with slow growth and to a large extent, commodity like margins. The "got
milk" campaign has helped heighten awareness of the nutritional benefits of
dairy products but, even with this promotion, the US consumption of milk
was basically flat last year.

Flavored milks were the only area of growth in the past two years and,
when promoted aggressively, the sales of flavored milk actually increased
the sales of traditional white milk. The International Dairy Foods
Association reported that flavored milks represent the only category for
price and margin gains. As a result, Nestles, Dean's, Hershey and Borden
all promote their brand of refreshment drinks. Last year's sales of
flavored milks continued to have a 7% gain in product volume and a 12%
increase in sales measured in dollars. Growth of this nature is welcome to
this industry and validates the interest by the trade in products like the
Company's Slammers brand Looney Tunes(tm) milk. The Beverage Marketing Corp.
projects that growth in white milk will be flat to .5%, with growth in
flavored milks from 4% to 8% per year over the next five years. Growth in
the distribution of single serve milk products is projected by this
research group at from 10% to 20%.

Market analysis

The flavored milk business is a relatively new category in the dairy
field. The flavored "refreshment" segment is both the fastest growing and
most profitable category in the industry and is receiving the most
attention in the industry today. Pioneered by Nestle with the NesQuik line
and Dean Foods with the Chug brand, this "good for you" segment is in
demand both in the U.S. and internationally.

The International Dairy Foods Association reports that, although
flavored milk currently amounts to only 5 to 6 percent of milk sales, it
represent over 59% of the growth in milk sales. With the total milk
category exceeding $9.3 billion in 2002, the flavored segment was
approximately $496 million. Statistically, as the flavored segment grows,
the entire category grows as well. Selling more flavored milks has resulted
in more sales of white milk as well.

The Company is developing a niche in the single serve flavored milk
business by utilizing the Company's license with the well-known Looney
Tunes(tm) characters in the U.S., China, Mexico and Canada as part of the
promotion of the Company's Slammers and Slim Slammers products. This niche
has as its focus the increased demand for a single serve, children's
oriented healthy and refreshing drinks.

Market segment strategy

The Bravo! model addresses a very clear and concise target market.
The Company knows from experience that the largest retailers of milk
products are demanding new and more diverse refreshment drinks,
specifically in the dairy area in response to consumer interest and
demand. To that end, the Company has and will continue to differentiate
the Company's products from those of the Company's competitors through
innovative product formulations and packaging designs, such as those
implemented in the Company's Slammers fortified milk product line and the
Company's Slim Slammers low calorie, no sugar added products.

The Company's Slammers Looney Tunes(tm) milk products have had great
results penetrating this arena as consumers continue to look for healthy
alternatives to carbonated beverages. The positioning of the Company's
products as a healthy, fun and great tasting alternative refreshment drink at
competitive prices to more traditional beverages creates value for the
producer and the retailer alike. This "profit orientation" for the trade
puts old-fashioned milk products in a whole new light. The consumer is
happy, the retailer is happy and the producer is able to take advantage of
the value added by the brand and the resulting overall increase in milk
sales.

In October 2002, the Company announced that 55 schools servicing
35,000 students in Missouri, Nebraska, Pennsylvania and Tennessee will be
the first to add Looney Tunes(tm) brand flavored milk to their school lunch
programs. The Company has been and continues to pursue a strategic goal of
placing the Company's Slammers Looney Tunes(tm) milks in elementary, middle
and high schools through ala carte lunch programs and vending facilities
in school cafeterias, and is promoting the Company's Slim Slammers milks as
low calorie, non-sugar added alternative to traditional soft drinks

Competition

There are definite differences in the various competitors approach to
this new segment. The differences address packaging, processing, marketing
and distribution. Bravo! has taken the course of least resistance while
producing a product that is positioned to reward all involved economically.

Dean Foods based their market entrance four years ago on a new
package called the Chug. This was an innovative new way to market milk in a
format that made it convenient to drink milk "on the fly". The "chug"
bottle was introduced in 8 oz and 16 oz plastic milk bottles. These bottles
have a wide mouth opening and a very attractive screw top for convenience of
sealing. The graphic label on the bottle was a full wrap and was introduced
in both white and chocolate flavors. Currently, Dean is producing a
flavored milk line under a license from Hershey's.

Nestle launched their new line of flavored milks approximately four
years ago with a shaped bottle, the Nestle "bunny" and a broad line of
flavors. Nestle, branding Nesquick as a new name distinct from Nestle
Quick, produces a sterile aseptic product, which has long-life
characteristics enabling fast national penetration. This long shelf life
configuration offers considerable economic advantages in terms of shipping,
storage, returns and production economies but significantly impacts
product quality and taste.

The Company has settled on the kit approach in an effort to develop
and promote a taste tested ultra quality fresh product, while enjoying the
instant recognition of an international brand. Looney Tunes(tm) is the most
recognized family of intellectual properties in the world today, and Looney
Tunes(tm) licensed products generate over $5 billion sales worldwide. The
Company has been able to enter into production contracts with several
national and international dairies and has moved from fresh milk to ESL and
aseptic long shelf life products to expand the market for the Company's
branded products.

The Company's resources for promotions have been limited, and the
Company runs significantly less promotional activities in comparison to the
Company's competitors. Where the Company is in direct competition with
Nestles and Hershey's, however, the Company has been able to maintain a
competitive sales rate of 26% against 48% for Nestles and 26% for Hershey's.

Employees

The Company has seven full time employees located at its North Palm
Beach corporate offices. China Premium (Shanghai) has four employees in
management with two clerical staff.

China Premium (Shanghai) import/export company.

In December 1999, the Company moved further away from production by
positioning the Company's Chinese subsidiary in the business of food
distribution in China. The Company obtained government approval for the
registration of China Premium Food Corp (Shanghai) Co., Ltd., the Company's
wholly owned subsidiary in the Wai Gao Qiao Free Trade Zone in Shanghai,
China. This subsidiary offers foreign companies the entire infrastructure
necessary to facilitate import/export transactions in or with China,
including tax and legal compliance, customs and foreign currency exchange.
Pursuant to Wai Gao Qiao rules, this subsidiary can distribute products
that it imports into China, while maintaining reasonable price/profit
margins owing to its status as a direct importer. At present, the Company
has focused its resources on building the Looney Tunes(tm) business in China.
With anticipated increased revenues from the China, US and other overseas
operations, the Company hopes to revisit the import/export company concept
before the end of 2003 in order to explore the business opportunities
attendant to China accession to the WTO.

The Role of Government; Doing Business in China

Doing business in China involves several risks including internal and
international political risks, evolving national economic policies as well
as financial and accounting standards, expropriation and the potential for
a reversal in economic conditions.

The revenues of the Company and its subsidiaries in China will be in
Chinese renminbi (RMB). In order to pay the Company fees and dividends, a
conversion of RMB into US dollars is required. Under current Chinese law,
the conversion of RMB into foreign currency requires government consent.
Government authorities may impose restrictions that could have a negative
impact on the conversion process.

With respect to the conditions and activities of Chinese companies,
including the Company's Chinese subsidiary, the operations of such entities
must be viewed in the context of the Chinese business environment existing
in the People's Republic of China. There can be no assurance that the
sources from which information is provided concerning the day-to-day
activities of such companies, including their respective relationships to
local governmental and regulatory authorities, are wholly reliable.

Official statistics also may be produced on a basis different to that used
in western countries. Any of the statements as to operations contained in
this document must be subject to some degree of uncertainty due to doubts
about the reliability of available information from and with regard to the
respective joint ventures.

ITEM 2 - DESCRIPTION OF PROPERTY

Neither the Company nor its subsidiaries currently own any real
property. As of February 1, 1999, the Company moved its corporate offices
from West Palm Beach to 11300 US Highway 1, Suite 202, North, Palm Beach,
Florida, pursuant to a lease with HCF Realty, Inc., having a term of five
years. The initial aggregate monthly rent amounts to approximately $6,107.

China Premium (Shanghai) leases office space at 2052 Zhongshan Road
North, Zhengyuan Building, Shanghai, China, at the gross rate of US $1,000
per month.

The Company does not have a policy to acquire property for possible
capital gains or income generation. In addition, the Company does not
invest in securities of real estate entities or developed or underdeveloped
properties.

ITEM 3. LEGAL PROCEEDINGS

There currently are no claims or lawsuits against the Company for
which a report is required.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On October 9, 2002, the Company held an annual meeting of its
shareholders, at which the re-election of five of its directors and the
appointment of an auditor were submitted to a vote of the security holders,
entitled to vote. The matters presented for a shareholder vote were
uncontested. The results are as follows:

Director Votes For Percentage Votes Against Votes Abstained
-------- --------- ---------- ------------- ---------------

Robert J. Cummings 13,960,591 64% 3,365,029 0
George Holdsworth 14,035,734 64% 3,289,886 0
Stanley Hirschman 13,631,634 62% 3,693,986 0
Michael Lucci 13,960,591 64% 3,365,029 0
Phillip Pearce 14,090,734 65% 3,234,886 0
Auditor 16,890,600 77% 394,400 40,620

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common stock market price

Of the 25,732,854 shares of common stock issued and outstanding
as of December 31, 2002, all but 100,000 shares can be traded on the over-
the-counter trading on the OTC Electronic Bulletin Board, which trading
commenced October 24, 1997. Of this amount, 2,092,710 shares are held by
affiliates. The following quarterly quotations for common stock
transactions on the OTC Bulletin Board reflect inter-dealer prices, without
retail mark-up, markdown or commissions and may not represent actual
transactions.

QUARTER HIGH BID PRICE LOW BID PRICE
------- -------------- -------------

2001
Q1 (1/3 - 3/31) $0.59 $0.27
Q2 (4/1 - 6/29) $0.51 $0.32

Q3 (7/1 - 9/28) $0.51 $0.20
Q4 (10/1 - 12/31) $0.50 $0.31

2002
Q1 (1/3 - 3/29) $0.52 $0.37
Q2 (4/1 - 6/28) $0.39 $0.21
Q3 (7/1 - 9/30) $0.38 $0.22
Q4 (10/1 - 12/31) $0.40 $0.24

Equity holders at March 24, 2003
--------------------------------

Common stock 25,762,854 shares 1,900 holders (approximate)
Series B preferred stock 107,440 shares 1 holder
Series F preferred stock 130,515 shares 3 holders
Series G preferred stock 69,786 shares 4 holders
Series H preferred stock 175,500 shares 9 holders
Series I preferred stock 30,000 shares 2 holders
Series J preferred stock 150,000 shares 1 holder

Dividends

The Company has not paid dividends on its common stock and does not
anticipate paying dividends. Management intends to retain future earnings,
if any, to finance working capital, to expand its operations and to pursue
its acquisition strategy.

The holders of common stock are entitled to receive, pro rata, such
dividends and other distributions as and when declared by the Company's
board of directors out of the assets and funds legally available therefor.
The availability of funds is dependent upon dividends or distribution of
profits from the Company's subsidiaries and may be subject to regulatory
control and approval by the appropriate government authorities on either a
regional or national level in the People's Republic of China.

The Company has accrued dividends for the Company's convertible
preferred stock for 2001 in the amount of $255,725 and accrued $1,011,159 for
the period ended December 31, 2002.

Securities authorized for issuance under equity compensation plans

The equity compensation reported in this section has been and will be
issued pursuant to individual compensation contracts and arrangements with
employees, directors, consultants, advisors, vendors, suppliers, lenders
and service providers. The equity is reported on an aggregate basis as of
December 31, 2002. The Company's security holders have not approved the
compensation contracts and arrangements underlying the equity reported.

Plan Category Number of securities to be Weighted average price Number of securities
issued upon exercise of of outstanding options, remaining for future
outstanding options, warrants and rights issuance under equity
warrants and rights compensation plans
------------- ----------------------- ----------------------- ----------------------

Directors 1,175,000 $0.71 None,
Employees 725,000 $0.57 individual
Consultants/advisors 1,710,000 $0.46 plans
Consultants/service 312,714 $0.50 providers
Lender 25,000 $0.40
Total 2,964,714 $0.55

Compensation Plans

* Directors

On March 27, 2001, the Company issued options to the Company's
directors to purchase the aggregate of 925,000 shares of the Company's
common stock. The options have an exercise price of $0.75 and expire March
26, 2002. Directors received options for 35,000 shares for each full year
of service and an additional 40,000 shares for service on a board committee.
On August 14, 2001, the Company issued 250,000 options to the Board of
Directors for services rendered as directors. Each director received options
for 25,000 shares of common stock at an exercise price of $0.60. The options
can be exercised for five years.

* John McCormack, President and Chief Operating Officer

The Company had a two-year contract with Mr. McCormack commencing
December 1, 2000, at an annual base salary of $180,000. Mr. McCormack
received 100,000 shares of common stock and options for 400,000 shares at
$0.75 per share as a signing bonus. The options for 400,000 shares vest 25%
on January 1, 2001, 25% on July 1, 2001, 25% on January 1, 2002, and 25%
vested on July 1, 2002, respectively and expire five years from vesting.
During his employment, he also will receive five-year incentive options for
an additional 500,000 shares in tranches of 100,000 as the public trading
price for the Company's stock attains certain pre-determined levels. The
exercise price for these options will track the market price for the
Company's common stock when granted.

* Michael Edwards, the Company's Vice President for Sales

The Company has a three-year contract with Mr. Edwards commencing
June 1, 2000, at an annual base salary of $110,000 plus a $65,000 one-year
bonus, payable quarterly. Mr. Edwards received five-year options for
50,000 shares of common stock at an exercise price of $0.69 per share as a
signing bonus, plus options for an additional 100,000 shares. These
additional options have an exercise price that tracks the market price for
the Company's common stock when granted. In 2001, Mr. Edwards' contract was
renegotiated to provide for 400,000 additional options that will be issued
in 2003.

* Nancy Yuan, Treasurer

Ms. Yuan has a five-year contract dated December 1, 1999 and
effective September 13, 1999, at a base annual salary of $40,000, with an
annual bonus of $5,000 in the first year. Ms. Yuan's employment agreement
calls for her receipt of one time five-year stock options for 25,000 shares
at an exercise price of $1.12 per share.

* Jeffrey Tarmy, General Manager of China Premium (Shanghai), wholly
owned Chinese subsidiary

Mr. Tarmy has a two-year contract effective January 1, 2001, at a
base annual salary of $100,000, with quarterly bonuses of $5,000 in the
first year. In addition, Mr. Tarmy receives an $18,000 annual housing
allowance and local transportation expenses. Mr. Tarmy's employment
agreement calls for his receipt of five-year stock options in four equal
tranches of 50,000 shares each at an exercise price of $1.12 per share.
The tranches are to be issued January 1, 2001, 2002, 2003 and 2004,
respectively, with each tranche vesting one year after issue.

* Consultants/advisors

Options to purchase 1,710,000 shares of common stock, pursuant to
three consulting agreements, having an expiration date of May 21, 2003.
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.
Options for 1,000,000 shares at $0.33 per share were exercised in 2002.

* Consultants/service providers

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 for
services rendered. These shares were issued pursuant to a 1933 Act Form S-
8 registration statement. The Company received no cash for these options

Recipient Common Nature of Services Exercise Price Expiration
Stock Options

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 $0.35 per share June 30, 2006
services

(1) For services rendered by Mr. Guiliano pursuant to his employment
contract with the Company's subsidiary Bravo! Foods, Inc.

* Lender

Warrants exercisable to purchase an aggregate of 25,000 shares of
common stock at an exercise of $0.40 per share, having an expiration date
of 2/28/07. These warrants were issued to the lender in connection with a
December 27, 2001 loan of $250,000 to the Company, in lieu of interest.

Sale of unregistered securities

Quarter Ended December 31, 2002

The common stock issued by the Company in the fourth quarter 2002
resulted from conversions by the holders of Series F and G convertible
preferred stock. The common stock and the preferred converted were issued
to sophisticated and accredited investors, who had appropriate access to
information concerning the Company's operations and financial condition in
a rule 506 private offering. Holders of the Series F and G preferred can
convert such equity into common shares at 75% of the average of the three
lowest bid trading prices of the Company's common shares measured during a
20 day lookback period.

On November 8, 2002, the Company issued 160,112 shares of common
stock to Austinvest Anstalt Balzers, upon the conversion of 2,642 shares of
Series F Convertible Preferred, at a conversion price of $0.165. The
Series F preferred does not include dividends.

On November 8, 2002, the Company issued 160,112 shares of common
stock to Esquire Trade & Finance, Inc., upon the conversion of 2,642 shares
of Series F Convertible Preferred, at a conversion price of $0.165. The
Series F preferred does not include dividends.

On November 18, 2002, the Company issued 26,000 shares of common
stock to Nesher, Ltd., upon the conversion of 377 shares of Series G
Convertible Preferred, at a conversion price of $0.1963. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $1,333.92.

On November 18, 2002, the Company issued 11,240 shares of common
stock to Talbiya B. Investments, Ltd., upon the conversion of 163 shares of
Series G Convertible Preferred, at a conversion price of $0.1963. The
conversion included accrued and unpaid dividends on the preferred converted
in the amount of $577.16.

On November 18, 2002, the Company issued 10,000 shares of common
stock to Nesher, Ltd., upon the conversion of 145 shares of Series G
Convertible Preferred, at a conversion price of $0.1963. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $515.68.

On November 18, 2002, the Company issued 6,000 shares of common stock
to Talbiya B. Investments, Ltd., upon the conversion of 87 shares of Series
G Convertible Preferred, at a conversion price of $0.1963. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $309.67.

On November 18, 2002, the Company issued 8,000 shares of common stock
to The Keshet Fund LP, upon the conversion of 116 shares of Series G
Convertible Preferred, at a conversion price of $0.1963. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $413.25.

On November 18, 2002, the Company issued 14,440 shares of common
stock to Keshet, LP, upon the conversion of 208 shares of Series G
Convertible Preferred, at a conversion price of $0.1960. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $747.92.

On November 18, 2002, the Company issued 6,000 shares of common stock
to Keshet, LP, upon the conversion of 93 shares of Series G Convertible
Preferred, at a conversion price of $0.2093. The conversion included
accrued and unpaid dividends on the preferred converted in the amount of
$332.70.

On November 20, 2002, the Company issued 2,000,000 shares of common
stock to Amro International, SA, upon the conversion of 39,200 shares of
Series F Convertible Preferred, at a conversion price of $0.1960. The
Series F preferred does not include dividends.

On November 27, 2002, the Company issued 16,000 shares of common
stock to Keshet, LP, upon the conversion of 257 shares of Series G
Convertible Preferred, at a conversion price of $0.2093. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $931.69.

On November 27, 2002, the Company issued 15,000 shares of common
stock to Keshet, LP, upon the conversion of 273 shares of Series G
Convertible Preferred, at a conversion price of $0.2480. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $994.59.

On December 24, 2002, the Company issued 8,000 shares of common stock
to The Keshet Fund LP, upon the conversion of 144 shares of Series G
Convertible Preferred, at a conversion price of $0.2467. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $534.17.

On December 24, 2002, the Company issued 45,000 shares of common
stock to Nesher, LP, upon the conversion of 750 shares of Series G
Convertible Preferred, at a conversion price of $0.2293. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $2,815.26.

On December 24, 2002, the Company issued 90,000 shares of common
stock to Keshet, LP, upon the conversion of 1,501 shares of Series G
Convertible Preferred, at a conversion price of $0.2293. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $5,630.52.

On December 24, 2002, the Company issued 45,000 shares of common
stock to Talbiya B. Investments, Ltd, upon the conversion of 750 shares of
Series G Convertible Preferred, at a conversion price of $0.2293. The
conversion included accrued and unpaid dividends on the preferred converted
in the amount of $2,815.26.

Subsequent Events

On January 2, 2003 the Company granted options for 100,000 shares of
common stock to Mr. Toulan pursuant to an employment contract. These
options vested immediately, expire on December 30, 2007 and have an
exercise price of $0.40 per share.

On January 2, 2003 the Company granted options for 100,000 shares of
common stock to Mr. Toulan pursuant to an employment contract. These
options vest on December 31, 2003, expire on December 30, 2008 and have an
exercise price of $0.40 per share.

On January 2, 2003 the Company granted options for 100,000 shares of
common stock to Mr. Toulan pursuant to an employment contract. These
options vest on December 31, 2004, expire on December 30, 2009 and have an
exercise price of $0.40 per share.

On February 21, 2002, the Company issued 50,000 shares of non-voting
Series J 8% 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 $500,000. 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 2,000,000 shares of common stock
underlying the preferred. The issued warrants entitle the holder to purchase
33.33 shares of common stock for each share of Series J Convertible Preferred
stock issued at an exercise price of $0.30 per common stock share, representing
1,666,667 shares of common stock underlying the warrants. The warrants are
exercisable for a five-year period. The February 21, 2003 closing market
trading price was $0.23 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.

On February 24, 2003, the Company issued 30,000 shares of common
stock to Keshet, LP, upon the conversion of 422 shares of Series G
Convertible Preferred, at a conversion price of $0.1960. The conversion
included accrued and unpaid dividends on the preferred converted in the
amount of $1,662.25.

ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Statements that are not historical facts, including statements about
the Company's prospects and strategies and the Company's 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. The Company cautions that such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
Company's 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 the Company's future profitability; the
uncertainty as to whether the Company's new business model can be implemented
successfully; the accuracy of the Company's performance projections; and the
Company's ability to obtain financing on acceptable terms to finance the
Company's operations until profitability.

OVERVIEW

The Company's business model includes obtaining license rights from
Warner Brothers, Inc., granting production and marketing rights to regional
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.
In the United States, the Company also generates revenue from the unit sales
of finished Looney Tunes(tm) flavored milks to retail consumer outlets.

For the year ended December 31, 2002, the Company's annual sales
revenue increased with the implementation of the aforementioned business
model and reached approximately $1,773,000 from approximately $869,000 in
2001. Notwithstanding a 104% increase in revenue, the Company's new product
introduction and growth expansion have been expensive and, in 2002, the
Company reported a net loss of approximately $3,160,000. At December 31,
2002, the Company had total assets of approximately $740,000, cash on hand of
approximately $225,000, working capital deficit of approximately $1.46
million, accumulated deficit of approximately $25.6 million, and negative
total shareholders' equity of approximately $1.5 million.

As shown in the accompanying financial statements, the Company has
suffered operating losses and negative cash flows from operations since
inception and at December 31, 2002 has an accumulated deficit, negative
equity, is delinquent on certain debts and negative working capital. These
conditions give rise to substantial doubt about the Company's ability to
continue as a going concern. As discussed herein, the Company plans to work
toward profitability in the Company's U.S. and China operations in 2003 and
obtain additional financing. While there is no assurance that funding will be
available or that the Company will be able to improve the Company's operating
results, the Company is continuing to seek equity and/or debt financing. No
assurances can be given, however, that the Company will be successful in
carrying out the Company's plans.

CORPORATE GOVERNANCE

The Board of Directors

The Company's board has positions for nine directors that are elected
as Class A or Class B directors at alternate annual meetings of the Company's
shareholders. Seven directors of the Company's board are independent. The
Company's 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 the Company's 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 the Company's chief executive officer and chief financial officer.
Directors are elected by the Company's shareholders after nomination by the
board or are appointed by the board when a vacancy arises prior to an
election. The Company presently has one mid-term vacancy on the board. This
year the Company has 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

The Company's audit committee is composed of three independent
directors and functions to assist the board in overseeing the Company's
accounting and reporting practices. The Company's financial information is
booked in house by the Company's treasurer's office, from which the Company
prepares financial reports. These financial reports are audited or reviewed
by BDO Seidman, LLP, independent certified accountants and auditors. The
Company's chief financial officer reviews the preliminary financial and non-
financial information prepared in house, by the Company's securities counsel
and the reports of the auditors. The committee reviews the preparation of the
Company's audited and unaudited periodic financial reporting and internal
control reports prepared by the Company's chief financial officer. The
committee reviews significant changes in accounting policies and addresses
issues and recommendations presented by the Company's internal and external
certified accountants as well as the Company's auditors.

Compensation Committee

The Company's 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 the Company's other members of management and the recommendations of the
chief executive officer with respect to the compensation of those
individuals. Given the size of the Company, all such employment contracts are
periodically reviewed by the board. The board must approve all compensation
packages that involve the issuance of the Company's 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.

CRITICAL ACCOUNTING POLICIES

Estimates

This discussion and analysis of the Company's consolidated financial
condition and results of operations are based on the Company's 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 the Company 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, the Company evaluates the
Company's estimates, including those related to reserves for bad debts and
valuation allowance for deferred tax assets. The Company bases its estimates
on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the result of which forms 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
materially from these estimates under different assumptions or conditions.
The Company's use of estimates, however, is quite limited as the Company has
adequate time to process and record actual results from operations.

Revenue recognition

Pre 2002
--------

Prior to 2002, the Company recognized revenue on a net basis, when it
received net kit revenues from Quality Chek'd. The Company did not record
cost of sales under this model because it benefited only by the net amount
received, and the Company did not have the discretion unilaterally to
determine the price of kits sold. This model has been in existence from the
third quarter of 2000 up to 2002 and was phased out during the third quarter
of 2002. As of the fourth quarter of 2002, this business model no longer
exists.

United States - Production Agreements with Jasper Products and Shamrock Farms
-----------------------------------------------------------------------------

In the fourth quarter of 2001, the Company recognized revenue on a
gross basis for the kits sold in Mexico because the Company purchased the
inventory for the customer. This was the only instance in which case the
Company reported the revenue at gross in 2001. The Company, however, has
always reported revenue generated in China at gross as it has ownership of
inventory.

Commencing in the second quarter 2002, the Company recognizes revenue
in the United States at the gross amount of its invoices for the sale of kits
at the shipment of flavor ingredients to processor dairies with whom the
Company has production contacts for extended shelf life and aseptic long life
milk. This recognition is based upon the Company's role as the principal in
these transactions, its discretion in establishing kit prices (including the
price of flavor ingredients and production right fees), its development and
refinement of flavors and flavor modifications, its discretion in supplier
selection and its credit risk to pay for ingredients if processors do not pay
ingredient suppliers. The revenue generated by the production contracts under
this model is allocated as follows: 95% of the revenue is for the processors'
purchase of flavor ingredients; the balance of 5% represents fees charged by
the Company to the processors for production rights. The price of production
rights is formulated to cover the Company's cost of the Warner Bros. Looney
Tunes(tm) intellectual property licenses, which in the U.S. is 5% of the
total cost of a kit sold to the processor dairy under the production
agreement. The Company recognizes revenue on the gross amount of "kit"
invoices to the dairy processors and simultaneously records as cost of good
sold the cost of flavor ingredients paid by the processor dairies to
ingredients supplier. The recognition of revenue generated from the sale of
production rights associated with the flavor ingredients is complete upon
shipment of the ingredients to the processor, given the short utilization
cycle of the ingredients shipped.

Jasper Products and Shamrock Farms, the processor dairies, charge the
Company with the cost of producing Looney Tunes(tm) flavored milk. The
Company is responsible for freight charges from processor dairies to retail
destinations, promotion costs and product returns of product owing to defects
and out of date products. In addition, the Company pays the fee charged by
food brokers retained by the Company to generate sales of the Looney
Tunes(tm) flavored milk products to retail outlets. In return, the Company is
entitled to keep the difference between the cost charged by processor dairies
and the wholesale price determined by the Company and charged to retail
outlets. The Company treats this second earning event as revenue when the
revenue is realized or realizable and accrue any estimated expenses which
are related to the Company's revenue at the end of each reporting period.
Because the Company benefits only from the price difference and does not own
the inventory, it recognizes the revenue generated through this model at net.

International Sales and U.S. Sales to Parmalat
----------------------------------------------

The Company sells "kits" to processors in Mexico, Canada, China and to
Parmalat in the United States, which kits include the cost of flavor
ingredients and rights to produce, market, distribute and sell the Looney
Tunes(tm) flavored milk to retail outlets. As a matter of convenience,
processors purchase the flavor ingredients for the kits directly from a
designated ingredients supplier and are invoiced by the Company for the full
price of the "kits" with a credit for the cost of flavor ingredients
purchased by the processors. The Company is directly responsible for the
administration of this model, including the collection of kit receivables.
Under this model, dairy processors are responsible for production, marketing,
distribution and sales of the Looney Tunes(tm) flavored milk to retail
outlets. The normal production cycle for processors' utilization of purchased
flavor ingredients has ranged from 6 weeks in Mexico, 4 weeks for Parmalat
(U.S.) and 3 weeks for Canada. This model was initiated at the end of 2001
with Mexico; Parmalat and Canada were added in the third quarter of 2002.

The Company recognizes revenue at the gross amount of kit invoices
after shipment of flavor ingredients based upon the Company's role as the
principal in these transactions, its discretion in establishing kit prices
(including the price of flavor ingredients and production right fees), its
development and refinement of flavors and flavor modifications, its
discretion in supplier selection and the Company's credit risk to pay for
ingredients if processors do not pay ingredient suppliers. The Company
attributes the majority of the kit price to the sale of flavor ingredients
(95% in the U.S., for example) and the balance (5% in the U.S.) to the
Company's grant of production rights to processor dairies. In this regard,
the price of production rights is formulated to cover the Company's costs of
the Warner Bros. Looney Tunes(tm) intellectual property licenses, which
currently amount to 5% of the total cost of kits sold to the processor
dairies under the production agreements for the U.S., 7% for Mexico, 5% for
Canada and 3% for China. The Company's recognition of revenue generated from
the sale of production rights associated with the flavor ingredients is upon
shipment of the ingredients to the processor, given the short utilization
cycle of the ingredients shipped.

RESULTS OF OPERATIONS

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Consolidated Revenue

The Company had annual revenues in 2002 of approximately $1,773,000,
with a cost of goods sold of approximately $279,000, resulting in a gross
profit of $1,494,000. Of the $1,773,000, approximately $1,718,000 was
generated by in the U.S. and approximately $55,000 from sales recognized by
the Company's wholly owned subsidiary, China Premium Food Corp. (Shanghai)
Co., Ltd in China. The Company's revenue in 2002 increased by approximately
$904,000, a 104% increase compared to revenue of approximately $869,000 in
2001, which consisted of approximately $729,000 in the U.S. and $140,000 in

China. This increase is the result of greater market penetration and
distribution of Looney Tunes(tm) flavored milk products, as well as the
introduction of new branded products in the United States and Mexico during
2002. In addition, the Company expanded its sales territories to include
Canada, which accounted for approximately $113,000 of sales in 2002.

In 2002, the Company's combined gross margin of approximately
$1,494,000 increased by $818,617, or 121%, from approximately $675,000 in
2001.

Consolidated Cost of Goods Sold

The Company incurred cost of goods sold of approximately $279,000 in
2002, consisting of approximately $53,000 in China and $226,000 in its North
America Bravo! operations, consisting of the U.S., Mexico and Canada. The
Company's cost of goods sold in 2002 increased by approximately $85,000, a
44% increase compared to approximately $194,000 in 2001, of which
approximately $178,000 incurred in China and $16,000 incurred in the North
America Bravo! operations. The increase in the Company's cost of good sold
resulted from increased sales for 2002 over 2001.

In Mexico, Canada, China and the United States, the Company's revenue
is generated in part by the sale of kits to dairy processors. Each kit
consists of flavor ingredients for the Company's Slammers Looney Tunes(tm)
flavored milks and production rights to manufacture and sell the milks. In
line with the Company's revenue recognition policies, the Company recognizes
the full invoiced kit price as revenue and credits the processor dairies with
the cost of the raw flavor ingredients, which the Company records as cost of
goods sold. In addition to kit sales revenue, in the United States the
Company is responsible for the sale of finished Slammers Looney Tunes(tm)
flavored milk (referred to as "units sales") to retail outlets. For these
unit sales, the Company also recognizes as revenue the difference between the
prices charged by the processor dairies to produce the milks and the price
that the Company charges to the retail outlets that purchase the milks
directly from the processor dairies. Since the Company benefits from only the
difference between two prices, it does not record any costs of goods sold
against this revenue event.

Segmented revenues and costs of goods sold (2002 and 2001)

The following table presents revenue by source and type against costs
of goods sold, as well as combined gross revenues and gross margins. China
sales are attributed to the Company's wholly owned Chinese subsidiary, China
Premium Food Corp. (Shanghai) Co., Ltd.; the remaining revenue was generated
by the Company's North America Bravo! operations. Revenues from Canada are
generated by kit sales to Farmers Dairy, a Halifax dairy processor. Revenues
from Mexico are generated from kit sales to Neolac, a dairy processor in
central Mexico. In the United States, revenues are generated by kit sales to
Parmalat, which is responsible for marketing and sales, and kit sales to two
dairy processors that produce extended shelf life and aseptic long life
Slammers Looney Tunes(tm) product. Revenues from these sales are recorded
under "US Kit Sales" on the accompanying table.

Kit sales revenues have two components: flavored ingredients and
production rights. The Company reports and presents these components
separately for revenue recognition purposes as "Kit Sales Revenue
(Ingredients)" and "Kit Sales Revenue (Production Rights)" in the table.

The Company's sale of ESL and aseptic product generates revenue
recorded as "US Unit Sales" on the following table. Finally, the table
designation "US QC Sales" represents net revenues that the Company recognizes
from the Company's association with Quality Chek'd, a national dairy
cooperative that administered the initial Looney Tunes(tm) flavored milk
program for the Company.

2002 Bravo! Foods International Corp China Premium
------------------------------------------------------ -----------------------------------------
US Kit US Unit US QC Total Bravo! Total Combined
Canada Mexico Sales Sales Sales Sales China Sales Revenue
----------------------------------------------------------------------------------------------------

Kit Sales Revenue
(Ingredients) $107,065 $85,524 $806,934 $ - $ - $ 999,523 $ 53,474 $1,052,997

Kit Sales Revenue
(Production rights) 5,635 4,501 42,470 - 21,656 74,262 1,654 75,916

Unit sales & QC
Revenue (net sales) - - - 232,595 411,462 644,057 - 644,057
----------------------------------------------------------------------------------------------------

Gross sales
revenue (total) 112,700 90,025 849,404 232,595 433,118 1,717,842 55,128 1,772,970

Cost of goods sold 23,511 18,780 184,022 - - 226,313 53,042 279,355
----------------------------------------------------------------------------------------------------
Gross margin $ 89,189 $71,245 $665,382 $232,595 $433,118 $1,491,529 $ 2,086 $1,493,615

2001 Bravo! Foods International Corp China Premium
------------------------------------------------------ ---------------------------------------
US Kit US Unit US QC Total Bravo! Total Combined
Canada Mexico Sales Sales Sales Sales China Sales Revenue
--------------------------------------------------------------------------------------------------

Kit Sales Revenue
(Ingredients) $ - $55,385 $ - $ - $ - $ 55,385 $135,729 $191,114

Kit Sales Revenue
(Production rights) - 2,915 - - 33,550 36,465 4,198 40,663

Unit sales & QC
Revenue (net sales) - - - - 637,450 637,450 - 637,450
--------------------------------------------------------------------------------------------------

Gross sales
revenue (total) - 58,300 - - 671,000 729,300 139,927 869,227

Cost of goods sold - 15,980 - - - 15,980 178,249 194,229
--------------------------------------------------------------------------------------------------
Gross margin $ - $42,320 $ - $ - $671,000 $713,320 $(38,322) $674,998

United States (Jasper, Shamrock and Parmalat Sales)
---------------------------------------------------

Revenues in 2002 from kit sales in the United States in which the
Company was directly involved increased from $0 in 2001 to approximately
$849,000 in 2002. Prior to 2002, the Company sold kits through Quality Chek'd
Diaries and did not recognize gross revenues from kit sales. In 2001, the
Company recognized $671,000 from net sales through Quality Chek'd. In 2002,
the Company recognized revenue of approximately $411,000 from sales through
Quality Chek'd, a 39% decrease compared to revenue of $671,000 generated in
2001. In addition to kit sales, in 2002 the Company had revenues of
approximately $233,000 from selling finished product unit sales to retail
outlets. There were no comparable unit sales in 2001. Revenues from direct
kit sales and unit sales in 2002 were the result of the implementation of a
refined

business plan under which the Company took control of all sales on a kit
level and, in the United States, on a unit sales level. The decrease in
revenues from kit sales through Quality Chek'd was the result of the phasing
out of the Company's relationship with Quality Chek'd and the implementation
of a refined business plan.

The Company incurred cost of goods sold of approximately $184,000
attributable to kit sales in 2002. Since the Company did not have direct kit
sales in 2001, it did not report any costs of goods sold associated with that
revenue category in 2001. While the Company did have revenue from kit sales
through Quality Chek'd, there are no costs of goods sold associated with that
net revenue. Similarly, revenues from unit sales to retail outlets are on a
net basis and do not have an associated cost of goods sold.

In 2002, the Company's gross profit for U.S. sales of approximately
$1,331,000, increased by $660,000, or by 98%, from $671,000 in 2001. The
increase in gross profit was the result of the increase in the Company's kit
sale revenue and the increase of unit sales revenue. Ultimately the increase
in gross profit is due to the Company's implementation of a new business plan
that gave the Company greater control over the sales, marketing and promotion
of the flavored milks.

Mexico and Canada
-----------------

Revenues in 2002 from kit sales in Mexico increased 54% from
approximately $58,000 in 2001 to approximately $90,000 in 2002. The increase
was the result of greater market penetration and brand awareness in Mexico.
Canada sales commenced in 2002 and generated revenue of approximately
$113,000.

The Company incurred cost of goods sold of approximately $19,000 in
2002 in connection with its Mexico sales, a 17% increase from $16,000 in
2001. The increase was consistent with the increase in sales volume.

In 2002, the Company's gross profit of approximately $71,000 for sales
in Mexico increased by $29,000, or 68%, from approximately $42,000 in 2001.
The increase in gross profit was consistent with the increase in sales
volume.

China
-----

Revenues in 2002 from kit sales in China decreased 60% from
approximately $140,000 in 2001 to approximately $55,000 in 2002. The decrease
was the result of the lack of sales in the retail area and the refocus of the
business to a school based program.

The Company incurred costs of goods sold of approximately $53,000 in
2002 in connection with its China sales, a 70% decrease form approximately
$178,000 in 2001.

In 2002, the Company's gross profit of approximately $2,000 for sales
in China increased by approximately $40,000, or 105.4%, from a negative gross
profit of approximately $38,000 in 2001. The increase in gross profit was the
result of writing down of the carrying value of inventory in the prior
yearend and the effects of implemented cost cutting measures.

Consolidated Operating Expense

The Company incurred selling expenses in 2002 of approximately
$776,000, of which approximately $688,000 was incurred in the Company's North
America Bravo! operations and approximately $88,000 was incurred in China.
The Company's selling expense increased in 2002 by approximately $582,000, a
300% increase compared to selling expense of approximately $194,000 in 2001,
of which approximately $41,000

was incurred in the Company's North America Bravo! operations and
approximately $153,000 was incurred in China. The increase in selling
expenses in 2002 was due mainly to the fact that the Company adopted the
refined business plan in the U.S. For the Company's U.S. operations, the net
increase in selling expenses was approximately $647,000 compared to $41,000
in 2001. Of the increase of $647,000, approximately $273,000 was incurred for
freight and delivery expense, approximately $143,000 was related to food
brokerage fees, approximately $64,000 was related to marketing, approximately
$60,000 for sample expenses, $65,000 for various promotion programs and
$42,000 for advertising expense due to the ramp-up of the national United
States sales program. For the China operations, the Company's selling
expenses in 2002 decreased by approximately $66,000, a 43% decrease,
resulting from the change in the focus of the Company's business strategy
from China back to North America. As a percentage of total revenue, the
Company's selling expense increased from approximately 22% of total revenue
in 2001 to approximately 44% of total revenue in 2002.

The Company incurred product development costs in 2002 of approximately
$239,000 in the Company's North America Bravo! operations and $0 in its China
operations. Product development expenses in 2002 increased by approximately
$161,000, a 206% compared to approximately $78,000 in 2001, which was incurred
also in the U.S. The increase was mainly the result of developing two new
products, as discussed in business section, and corresponding new packaging
designs, which had been launched in 2002.

The Company incurred general and administrative expenses in 2002 of
approximately $3,616,000 consisting of $3,424,000 in its North America Bravo!
operations and $192,000 in its China operations. The Company's general and
administrative expenses in 2002 increased by approximately $295,000, a 9%
increase compared to approximately $3,320,000 in 2001, of which $3,146,000
was incurred in the Company's North America Bravo! operations and
approximately $174,000 was incurred in China. The increase of approximately
$278,000 in general and administrative expenses in the Company's North
America Bravo! operations in 2002 is the result mainly from an increase in
the license amortization of approximately $258,000 (including approximately
$39,000 of impairment of the Warner Bros. licence rights in China) in
connection with the execution of a Warner Bros. license for Canada,
approximately $113,000 in compensation expenses, approximately $20,000 in
postage and mailing expenses offset by the decrease of approximately
$81,000 in legal expenses and approximately $32,000 in other expenses. In
the Company's China operation, the total general and administrative expenses
increased by approximately $26,000, due mainly to the office rent expense and
telephone, postage and other office supplies. As a percentage of total
revenue, the Company's general and administrative expenses decreased from
382% in 2001 to 204% in 2002 due to the fact that revenue increased
significantly in 2002. The Company anticipates a reduction of these expenses
through cost cutting efforts and the refinement of business operations.

Interest Expense

The Company incurred net interest expense in 2002 of approximately
$23,000, consisting of approximately $23,000 in its U.S. operations and
almost $0 in its China operations. The Company's interest expense decreased
by approximately $11,000, a 32% decrease, compared to approximately $34,000,
of which approximately $28,000 was incurred in the U.S and $6,000 was
incurred in 2001. The decrease of $11,000 was due to the fact that Company
paid off a bank loan from Fujian Bank in China in 2001, and the Company paid
a loan of $250,000 in the US in 2002.

Loss Per Share

The Company accrued dividends payable of approximately $1,011,000,
including deemed dividends, to various series of preferred stock during 2002.
Comparing to the total accrued dividends on a consistent basis, the Company's
accrued dividends increased by approximately $745,000 due to the amount of
deemed dividends of approximately $837,000 that are related to the issuance
of Series H, I, and J preferred stock in 2002. With the increase in net loss
before accrued dividends of approximately $1,011,159, the Company's current
year loss per share was $0.23 per share. Compared to loss per share of $0.24
in 2001, the loss per

share in 2002 decreased by $0.01, a 4% decrease, mainly due to the increase
of common stock by 4,968,120 shares in the weighted average number of common
shares outstanding.

Liquidity and Capital Resources

As of December 31, 2002, the Company reported that net cash used in
operating activities was approximately $1,605,000, net cash provided by
financing activities was approximately $1,606,000 and net cash used in
investing activities was $9,422. The Company had a negative working capital
of approximately $ 1,460,000 as of December 31, 2002.

Compared to approximately $1,622,000 of net cash used in operating
activities in 2001, the Company's current year net cash used in operating
activities decreased by approximately $17,000 due mainly to the fact that the
Company used its equity to pay service providers in lieu of cash payment in
2002, having a value of approximately $225,000. Included in the net loss in
2002 were depreciation and amortization and stock compensation of
approximately $1,244,000, compared to approximately $610,000 in 2001. This
increase was due to the increase of approximately $222,000 in the
amortization of Warner Bros. license rights and $431,000 in stock
compensation, offset by a decrease in depreciation expense of approximately
$43,000. Changes in accounts receivable in 2002 resulted in a cash decrease
of approximately $83,000, compared to a cash decrease in receivables of
approximately $123,000 in 2001; the net result was an increase of
approximately $40,000. The changes in accounts payable and accrued
liabilities in 2001, however, contributed to a cash increase of approximately
$564,000, whereas the changes in accounts payable and accrued liabilities in
2002 amounted to approximately $294,000. This was due to the fact that the
Company paid off certain accounts payable and accrued liabilities by issuing
stock in 2002. The Company has adopted and will keep implementing cost
cutting measures to lower the Company's cost and expense and to pay the
Company's accounts payable and accrued liabilities by using cash and equity
instruments. The Company's cash flow generated through operating activities
was inadequate to cover all of the Company's cash disbursement needs in 2002,
and the Company had to rely on equity financing to cover expenses.

In 2000, the Company disposed its investment in Meilijian, a joint
venture in China, for which the Company received $716,000 in 2001. The
Company did not receive investment proceeds in 2002. The Company's cash used
in investing activities for furniture and equipment was approximately $9,000
for computer equipment in the U.S. Compared to disbursements of approximately
$5,000 in 2001, the increase of $4,000 was insignificant.

The Company's net cash provided by financing activities in 2002 was
approximately $1,606,000. New cash provided by financing activities in 2001
was approximately $1,109,000 for a net increase of approximately $497,000.
The increase was due mainly to issuing Series H preferred stock with total
proceeds of approximately $700,000, issuing Series I preferred stock with net
proceeds of approximately $288,000, issuing Series J preferred stock with
total proceeds of $1 million and issuing 1 million shares of common stock due
to the exercise of 1 million options with an exercise price at $0.33 per
share in 2002, resulting in gross proceeds of $330,000. The Company paid off
a $250,000 note payable to an individual lender and paid approximately
$461,000 for Warner Bros.' guaranteed royalty payments.

The remaining proceeds were used for working capital purposes.
Notwithstanding total cash proceeds of approximately $2.3 million in 2002,
however, the Company owed approximately $270,000 as of December 31, 2002 for
Warner Bros. license guaranteed royalty payments. The Company has proposed a
concession on the remaining guaranteed royalty payments to Warner Bros. for
the Company's China license owing, in part, to the lack of success in
introducing Looney Tunes(tm) characters through cartoons and movies to
consumers in mainland China. In addition, the Company has arranged for the
payment of the outstanding balance due on the Mexico license by April 15,
2003. From December 31, 2002 through March 31, 2003, the Company reduced its
indebtedness to Warner Bros. by approximately $98,700.

Going forward, the Company's primary requirements for cash consist of
(1) the continued development of the Company's business model in 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 Warner Bros. under existing licensing
agreements. The Company estimates that the Company's need for financing to
meet the Company's cash needs for operations will continue to the fourth
quarter of 2003, when cash supplied by operating activities will enable us to
meet the anticipated cash requirements for operation expenses. The Company
anticipates the need for additional financing in 2003 to reduce the Company's
liabilities and to improve shareholders' equity status. No assurances can be
given that the Company will be able to obtain additional financing or that
operating cash flows will be sufficient to fund the Company's operations.

The Company currently has monthly working capital needs of
approximately $240,000. In the third quarter 2002, the Company anticipated
that the Company's total revenues would reach $1,750,000 through the year
ended December 31, 2002. While the Company realized that goal, it incurred
significant selling and other expenses in 2002 in order to derive more
revenue in retail markets. Certain of these expenses, such as slotting fees
and freight charges, will be reduced as a function of unit sales costs as the
Company expands its sales markets and increases its sales within established
markets. Freight charges will be reduced as the Company is able to ship more
full truck-loads of product given the reduced per unit cost associated with
full truck loads verses less than full truck loads. Similarly, slotting fees,
which are paid to warehouses or chain stores as initial set up or shelf space
fees, are essentially one-time charges per new customer. Slotting fees
reduced the Company's unit sales revenue by $65,000 and the Company's kit
sales revenue from Parmalat by approximately $50,000 in 2002. A continued
increase in sales to existing customers increases the Company's gross margins
on those sales. The Company believes that along with the increase in the
Company's unit sales volume, the average unit selling expense and associated
costs will decrease, resulting in gross margins sufficient to mitigate the
Company's cash needs. In addition, the Company is actively seeking additional
financing to support its operational needs and to develop an expanded
promotional program for the Company's products.

The Company is 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, the Company is
aggressively pursuing this market through trade/industry shows and individual
direct contacts. The implementation of such a school base program, if viable,
could have an impact on the level of the Company's revenue during 2003.
Similarly, the Company expects that the greater control over sales resulting
from its refined business model and the cost-wholesale price differential
source of revenue will continue to have a positive impact on revenues.

At the beginning of 2002, the Company 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. The Company has 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, the Company developed a new branded fortified
flavored milk product under the "Slammers Fortified Reduced Fat Milk(TM)"
brand name. The Company's Slammers brand is being used in conjunction with
its 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 the Company's 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 the Company's Slammers brand products national exposure
and is expected to have a continued positive impact on product sales.

In June 2000, the Company executed an exclusive aseptic tetra-brik
production agreement with a division of Parmalat USA Corp. for Looney
Tunes(tm) flavored milk, as well as the Company's new Slammers Fortified
Reduced Fat Milk(TM). The Company launched this new aseptic tetra-brik
product in September 2002. The Company expects this product to have a
continued positive impact upon the Company's revenues in 2003.

DEBT STRUCTURE

The Company holds 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. The Company accounts for these
guaranteed payments as debt and licensing rights as assets. The following is
a summary of the balances owed as of December 31, 2002 and the license
expiration dates:

License Guaranty Balance Due Amount Past Due Expiration Date
-----------------------------------------------------------------------------

U.S. License $500,000 $ - $ - 12/31/03
U.S. TAZ $250,000 $ - $ 83,334 N/A
China $400,000 $147,115 $ 98,076 06/30/03
Mexico $145,000 $ 36,250 $ 36,250 05/31/04
Canada $ 32,720 $ - $ - 03/31/04

The following is a summary of guaranteed royalty payments due to Warner
Bros. as of March 31, 2003.

License Guaranty Balance Due Amount Past Due Expiration Date
-----------------------------------------------------------------------------

U.S. License $500,000 $ - $ - 12/31/03
U.S. TAZ $250,000 $ - $ - N/A
China $400,000 $147,115 $147,115 06/30/03
Mexico $145,000 $ 21,250 $ 21,250 05/31/04
Canada $ 32,720 $ - $ - 03/31/04

International Paper
-------------------

During the process of acquiring from American Flavors China, Inc. the
52% of equity interest in Hangzhou Meilijian, the Company 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 an interest
rate of 10.5% per annum, without collateral. 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. 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. 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.

Individual Loans
----------------

secured by a general security interest in all the Company's 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, 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 partial consideration for the
maturity date extension. The holders of these notes have agreed to extend the
maturity dates to July 1, 2003.

EFFECTS OF INFLATION

The Company believes that inflation has not had any material effect on
its net sales and results of operations.

EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES

The Company's Shanghai subsidiary is located in China. It buys and
sells products in China using Chinese renminbi as the 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.

NEW ACCOUNTING ANNOUNCEMENTS NOT ADOPTED YET

In June 2001, Financial Accounting Standards Board (FASB) issued
Statement No. 143 (SFAS No. 143), "Accounting for Asset Retirement
Obligations," effective for fiscal years beginning after June 15, 2002. The
Statement requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The adoption of SFAS No. 143 is not
expected to have a material effect on the Company's financial position or
results of operations.

In June 2002, FASB issued Statement No. 146 (SFAS No. 146), "Accounting
for Costs Associated with Exit or Disposal Activities," effective for
activities that are initiated after December 31, 2002, with early application
encouraged. This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." The adoption of SFAS No. 146 is
not expected to have a material effect on the Company's financial position or
results of operations.

In November 2002, the FASB issued Interpretation No. 45 ("FIN No. 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 expands on the
accounting guidance of Statements No. 5, 57, and 107 and incorporates without
change the provisions of FASB Interpretation No. 34, which is being
superseded. FIN No. 45 will affect leasing transactions involving residual
guarantees, vendor and manufacturer guarantees, and tax and environmental
indemnities. All such guarantees will need to be disclosed in the notes to
the financial statements starting with the period ending after December 15,
2002. For guarantees issued after December 31, 2002, the fair value of the
obligation must be reported on the balance sheet. Existing guarantees will be
grandfathered and will not be recognized on the balance sheet. The Company
has

determined that there has been no impact due to the application of FIN No. 45
on our financial position and results of operations.

In January 2003, FASB issued FASB Interpretation No. 46 (FIN No. 46),
"Consolidation of Variable Interest Entities," an interpretation of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN
No. 46 explains how to identify variable interest entities and how an
enterprise assesses its interest in a variable entity to decide whether to
consolidate that entity. FIN No. 46 requires existing unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risks among parties involved. FIN No. 46
is effective immediately for variable interest entities after January 31,
2003, and to variable interest entities in which an enterprise obtained an
interest after that date. FIN No. 46 applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest entities
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. The adoption of FIN No. 46 is not expected to have a
material effect on the Company's financial position and result of operations.

ITEM 7. FINANCIAL STATEMENTS

BRAVO! FOODS INTERNATIONAL CORPORATION

AND SUBSIDIARY

_____________________________

FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001 and 2002

_____________________________

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants F-3

Consolidated Financial Statements
Consolidated Balance Sheets F-4
Consolidated Statements of Operations and Comprehensive Loss F-6
Consolidated Statements of Shareholders' Deficit F-7
Consolidated Statements of Cash Flows F-8
Consolidated Summary of Accounting Policies F-9
Notes to Consolidated Financial Statements F-14

F-2

Report of Independent Certified Public Accountants

To the Board of Directors
Bravo! Foods International Corporation

We have audited the accompanying consolidated balance sheets of Bravo! Foods
International Corporation and subsidiary as of December 31, 2001 and 2002,
and the related consolidated statements of operations and comprehensive loss,
shareholders' deficit and cash flows for each of the two years in the period
ended December 31, 2002. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bravo!
Foods International Corporation and subsidiary as of December 31, 2001 and
2002, and the results of their operations and their cash flows for each of
the two years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
the summary of accounting policies in the consolidated financial statements,
the Company has a limited operating history, has incurred substantial losses
since its inception, and at December 31, 2002, has a working capital
deficiency, is delinquent on certain of its debts and has negative net
assets, all of which raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are also described in the same section. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

Los Angeles, California
March 14, 2003

F-3

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31,
----------------------
2001 2002
----------------------

Assets

Current assets:
Cash and cash equivalents $ 232,040 $224,579

Accounts receivable 152,682 236,149

Other receivables 17,178 14,662

Advance to vendor 20,998 8,719

Inventories 91,403 55,062

Prepaid expenses 24,106 7,605
----------------------

Total current assets 538,407 546,776

Furniture and equipment, net 123,099 89,602

License rights, net (Note 1) 433,709 88,104

Deposits 10,000 15,000
----------------------

Total assets $1,105,215 $739,482
======================

See accompanying summary of accounting policies
and notes to financial statements.

F-4

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31,
-----------------------------
2001 2002
-----------------------------

Liabilities and Shareholders' Deficit

Current liabilities:
Note payable to International Paper (Note 2) $ 187,743 $ 187,743
Notes payable to individual lenders (Note 3) 350,000 100,000
License fee payable to Warner Brothers (Note 1) 473,750 270,053
Accounts payables 780,492 1,039,313
Accrued liabilities 575,019 409,615
-----------------------------

Total current liabilities 2,367,004 2,006,724

Dividends payable 280,370 266,666
-----------------------------

Total liabilities 2,647,374 2,273,390
-----------------------------

Commitments and contingencies (Note 5)

Shareholders' Deficit (Notes 6 and 7):
Series B convertible, 9% cumulative, and redeemable preferred
stock, stated value $1.00 per share, 1,260,000 shares authorized,
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 130,515 shares issued and outstanding 1,616,302 1,205,444
Series G convertible, 8% cumulative and redeemable preferred stock,
stated value $10.00 per share, 93,335 and 70,208 shares issued and
outstanding 829,704 624,115
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, 20,000,000 shares
authorized in 2001 and 50,000,000 shares authorized in 2002,
14,681,008 and 25,732,854 shares issued and outstanding 14,681 25,730
Additional paid-in capital 16,028,979 20,266,463
Accumulated deficit (21,457,425) (25,629,016)
Accumulated other comprehensive loss - translation adjustment (472) (241)
-----------------------------

Total shareholders' deficit (1,542,159) (1,533,908)
-----------------------------

Total liabilities and shareholders' deficit $ 1,105,215 $ 739,482
=============================

See accompanying summary of accounting policies
and notes to financial statements.

F-5

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS

Years ended December 31,
---------------------------
2001 2002
---------------------------

Revenue-unit sales $ - $ 232,595

Revenue-net kit sales 671,000 433,118

Revenue-gross kit sales 198,227 1,107,257
---------------------------

Total revenue 869,227 1,772,970

Cost of sales (194,229) (279,355)
---------------------------

Gross margin 674,998 1,493,615

Selling expense 193,980 776,090

Product development 78,416 239,298

General and administrative expense 3,320,494 3,615,674
---------------------------

Loss from operations (2,917,892) (3,137,447)

Interest expense, net 33,952 22,984
---------------------------

Operating loss (2,951,844) (3,160,431)

Income taxes provision (Note 4) - -
---------------------------

Net loss (2,951,844 ) (3,160,431 )

Dividends accrued for Series B preferred stock 9,722 9,803
Dividends accrued for Series D preferred stock 65,352 18,499
Dividends accrued for Series G preferred stock 77,085 60,279
Dividends accrued for Series H preferred stock 103,566 312,203
Dividends accrued for Series I preferred stock - 302,610
Dividends accrued for Series J preferred stock - 307,765
---------------------------

Net loss applicable to common shares $(3,207,569) $(4,171,590)
===========================

Basic and diluted loss per share $ (0.24) $ (0.23)
===========================

Weighted average number of common shares outstanding 13,535,729 18,503,849
===========================

Comprehensive loss and its components consist of the following:

Net loss $(2,951,844) $(3,160,431)
Foreign currency translation adjustment (472) 231
---------------------------

Comprehensive loss $(2,952,316) $(3,160,200)
===========================

See accompanying summary of accounting policies
and notes to financial statements

F-6

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2001 and 2002

Accumulated
Preferred Stock Common Stock Other
--------------------- -------------------- Additional Accumulated Comprehensive
Shares Amount Shares Amount Capital Deficit Loss Total
------------------------------------------------------------------------------------------------------

Balance, January 1, 2001 491,439 $3,672,873 13,095,414 $13,095 $14,870,754 $(18,249,856) $ - $ 306,866

Issuance of common stock
to a consultant - - 50,000 50 37,450 - - 37,500
Conversion of preferred
stock (28,165) (265,995) 1,265,594 1,266 296,399 - - 31,670
Compensation expense on
options granted - - - - 2,320 - - 2,320
Issuance of Series H
Preferred stock 105,500 465,200 - - 584,800 - - 1,050,000
Beneficial conversion
feature of Series H
preferred stock - - - - 98,027 (98,027) - -
Issuance of common stock
to employees - - 270,000 270 139,230 - - 139,500
Accrued dividends
for Series B - - - - - (9,722) - (9,722)
Accrued dividends
for Series D - - - - - (65,352) - (65,352)
Accrued dividends
for Series G - - - - - (77,085) - (77,085)
Accrued dividends
for Series H - - - - - (5,539) - (5,539)
Net loss - - - - - (2,951,844) - (2,951,844)
Translation adjustment - - - - - - (472) (472)
------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 568,774 3,872,078 14,681,008 14,681 16,028,980 (21,457,425) (472) (1,542,158)

Issuance of common stock
for service - - 999,112 999 278,652 - - 279,751
Stock Issued for options
exercised - - 1,000,000 1,000 329,000 - - 330,000
Conversion of preferred
stock (155,111) (1,469,880) 8,952,734 8,950 1,648,516 - - 187,586
Issuance of Series H
preferred stock 70,000 474,487 100,000 100 225,513 - - 700,000
Issuance of Series I
preferred stock 30,000 72,192 - - 215,796 - - 287,988
Issuance of Series J
preferred stock 100,000 854,279 - - 145,721 - - 1,000,000
Issuance of options
to consultants - - - - 161,612 - - 161,612
Extension of option terms - - - - 391,345 - - 391,345
Issuance of warrants
to a lender - - - - 4,051 - - 4,051
Beneficial conversion
feature of Series H
preferred stock - - - - 236,764 (236,764) - -
Beneficial conversion
feature of Series I
preferred stock - - - - 294,793 (294,793) - -
Beneficial conversion of
Series J preferred stock - - - - 305,721 (305,721) - -
Accrued Dividends -
Series B - - - - - (9,803) - (9,803)
Accrued Dividends -
Series D - - - - - (18,499) - (18,499)
Accrued Dividends -
Series G - - - - - (60,279) - (60,279)
Accrued Dividends -
Series H - - - - - (75,439) - (75,439)
Accrued Dividends -
Series I - - - - - (7,817) - (7,817)
Accrued Dividends -
Series J - - - - - (2,044) - (2,044)
Net Loss for 2002 - - - - - (3,160,431) - (3,160,431)
Translation Adjustment - - - - - - 231 231
------------------------------------------------------------------------------------------------------
613,663 $3,803,156 25,732,854 $25,730 $20,266,464 $(25,629,015) $(241) $(1,533,906)
======================================================================================================

See accompanying summary of accounting policies
and notes to financial statements.

F-7

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents

Years ended December 31,
----------------------------
2001 2002
----------------------------

Cash flows from operating activities:
Net loss $(2,951,844) $(3,160,431)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 440,156 671,243
Stock compensation 37,500 54,600
Options issued for compensation 141,820 557,008
Changes in operating assets and liabilities:
Restricted cash 161,000 -
Accounts receivable (122,621) (83,467)
Other receivable 11,511 (2,484)
Advance to vendors (7,295) 12,279
Inventories 101,171 36,341
Prepaid expenses and deferred charges 2,568 16,501
Accounts payable and accrued liabilities 563,603 293,652
---------------------------
Net cash used in operating activities (1,622,431) (1,604,758)
---------------------------

Cash flows from investing activities
Proceeds from disposal of investment in Meilijian 716,000 -
Purchase of equipment and machinery (5,126) (9,422)
---------------------------
Net cash provided by (used in) investing activities 710,874 (9,422)
---------------------------

Cash flows from financing activities:
Repayment of bank loan (142,557) -
Borrowing (repayment) from notes payable from individual lenders 350,000 (250,000)
Repayment of notes payable from Warner Bros. (148,750) (461,500)
Proceeds from issuance of Series H preferred stock 1,050,000 700,000
Proceeds from issuance of Series I preferred stock - 287,988
Proceeds from issuance of Series J preferred stock - 1,000,000
Proceeds from options exercised - 330,000
---------------------------
Net cash provided by financing activities 1,108,693 1,606,488
---------------------------
Effect of changes in exchange rate on cash (472) 231
---------------------------
Net increase (decrease) in cash and cash equivalents 196,664 (7,461)
Cash and cash equivalents, beginning of year 35,376 232,040
---------------------------
Cash and cash equivalents, end of year $ 232,040 $ 224,579
===========================

Supplemental cash flow information
Cash paid during the year for interest $ 5,687 $ 7,988
===========================
Non-cash investing and financing activities:
Stock granted in exchange of debt and payables $ 37,500 $ 225,151
Preferred stock and accrued dividends converted to common stock $ 297,665 $ 1,657,466
Beneficial conversion feature $ 98,027 $ 837,278
===========================

F-8

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

SUMMARY OF ACCOUNTING POLICIES

Organization, Businesses and Going Concern Uncertainty

Bravo! Foods International Corporation (the Company), formerly known as
China Premium Food Corporation, was incorporated under the laws of the
State of Delaware on April 26, 1996. The Company's business is focusing on
selling flavored milk products and flavor ingredients.

In December 1999, the Company obtained Chinese government approval for the
registration of Bravo! Foods International (Shanghai) Co. Ltd., a wholly
owned subsidiary, in the Wai Gao Qiao free trade zone in Shanghai, China.
This subsidiary was formed to import, export and distribute food products
and flavored milk ingredients on a wholesale level in China.

Going Concern Uncertainty

As shown in the accompanying consolidated financial statements, the Company
has suffered operating losses and negative cash flow from operations since
inception and has an accumulated deficit of $25,629,016, negative equity of
$1,533,908, negative working capital of $1,459,948 and is delinquent on
certain of its debts at December 31, 2002. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management plans to improve gross profit margins in its U.S. and
China operations and obtain additional financing. While there is no
assurance that funding will be available or that the Company will be able
to improve its profit margins, the Company is continuing to actively seek
equity and/or debt financing. No assurances can be given that the Company
will be successful in carrying out its plans. See Subsequent Events for
fund raising details at Note 10. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

Principles of Consolidation

The consolidated financial statements include the accounts of Bravo! Foods
International Corporation and its wholly owned subsidiary China Premium
Food (Shanghai) Co. Ltd. (the "Company"). All significant intercompany
transactions have been eliminated.

Foreign Currency Transactions and Translations

Transaction gains and losses result from a change in exchange rates between
the functional currency and the currency in which a foreign currency
transaction is denominated. They represent an increase or decrease in (a)
the actual functional current cash flows realized upon settlement of
foreign currency transactions and (b) the expected functional currency cash
flows on unsettled foreign currency transactions. All transaction gains
and losses are included in other income or expense.

Assets and liabilities of China Premium Food (Shanghai) Co., Ltd. are
translated into the US dollar at the prevailing exchange rate in effect at
each period end. Revenue and expenses are translated into the US dollar at
the average exchange rate during the reporting period. Contributed capital
is translated into the US dollar at the historical exchange rate when
capital was injected. Any difference resulting from using the current
rate, historical rate and average rate in determination of retained
earnings is accounted for as a translation adjustment and reported as part
of comprehensive income or loss in the equity section.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenue and expenses during the reporting period. Among the more
significant estimates included in these financial statements are the
estimated allowance for doubtful

F-9

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

SUMMARY OF ACCOUNTING POLICIES

accounts receivable and the deferred income tax asset allowance. Actual
results could differ materially from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Inventory

Inventory, which consists primarily of packing materials and other flavor
ingredients, is stated at the lower of cost or market on the first-in,
first-out method.

Furniture and Fixtures

Furniture and fixtures are stated at cost. Depreciation is computed
primarily utilizing the straight-line method over a period of five years.

Maintenance, repairs and minor renewals are charged directly to expenses as
incurred. Additions and betterment to property and equipment are
capitalized. When assets are disposed of, the related cost and accumulated
depreciation thereon are removed from the accounts, and any resulting gain
or loss is included in the statement of income.

Revenue Recognition

The Company sells flavor ingredients and production rights (collectively
referred to as "kits") to processor dairies in the U.S., China, Canada and
Mexico and also sells flavored milk products in the U.S.. Revenue is
recognized when the goods are shipped and title and the risk and reward of
ownership have been passed to the customer and possible return of goods can
be reasonably estimated. The criteria to meet this guideline are: 1)
persuasive evidence of an arrangement exists, 2) delivery has occurred or
services have been rendered, 3) the price to the buyer is fixed or
determinable and 4) collectibility is reasonably assured.

The Company follows the final consensus reached by the Emerging Issues Task
Force (EITF) 99-19, "Reporting Revenue Gross as a Principal versus Net as
an Agent". Pursuant to EITF 99-19, sales of kits made directly to
customers by the Company are reflected in the statement of operations on a
gross basis, whereby the total amount billed to the customer is recognized
as revenue. Sales of kits made through intermediaries, in which the
Company's role is similar to that of an agent, are reflected on a net
basis, which represents the amount earned by the Company in the
transaction.

In September 2002, the Company entered into a program with two processor
dairies pursuant to which the Company sells flavored milk products to retail
stores (referred to as "unit sales"). The Company benefits from the
difference between the prices charged by processor dairies to produce the
product or the Company and the price paid by retail stores to purchase the
product. The Company bears the responsibility for paying food brokers fees,
transportation and delivery expenses and sample expense, etc. The Company
recognizes revenue on the net basis and recognizes the aforementioned
expenses as selling expenses.

F-10

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

SUMMARY OF ACCOUNTING POLICIES

Accounts Receivable and Concentration of Credit Risk

The Company's financial instruments that are exposed to concentrations of
credit risk primarily consist of cash and accounts receivable.

During the normal course of business, the Company extends unsecured credit
to its customers who are located in various geographical areas. Typically
credit terms require payments to be made by the thirtieth day following the
sale. The Company regularly evaluates and monitors the creditworthiness of
each customer on a case-by-case basis. The Company provides an allowance
for doubtful accounts based on its continuing evaluation of its customers'
credit risk. The Company maintains its cash accounts with high credit
quality financial institutions. The total cash balances are insured by the
FDIC up to $100,000 per bank. Cash balances in excess of this limit at
December 31, 2002 totaled approximately $27,000.

Impairment of Long-Lived Assets

Effective January 1, 2002, the Company began applying the provisions of
Statement of Financial Accounting Standard No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No.
144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable through the estimated undiscounted cash flows
expected to result from the use and eventual disposition of the assets.
Whenever any such impairment exists, an impairment loss will be recognized
for the amount by which the carrying value exceeds the fair value. During
2002, the Company determined that license rights in China having a net
book value of $39,286, were impaired.

Fair Value of Financial Instruments

The carrying amount of cash, receivables, accrued liabilities and notes
payable are reasonable estimates of their fair value because of the short
maturity of these items.

Income Taxes

The Company accounts for income taxes using the liability method, which
requires an entity to recognize deferred tax liabilities and assets.
Deferred income taxes are recognized based on the differences between the
tax bases of assets and liabilities and their reported amounts in the
financial statements which will result in taxable or deductible amounts in
future years. Further, the effects of enacted tax laws or rate changes are
included as part of deferred tax expenses or benefits in the period that
covers the enactment date. A valuation allowance is recognized if it is
more likely than not that some portion, or all of, a deferred tax asset
will not be realized.

Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing loss
applicable to common stockholders by the weighted average number of common
shares outstanding for the period.

For the years ended December 31, 2001 and 2002, potential common shares
arising from the Company's stock options, stock warrants and convertible
preferred stock of 15,154,917 and 19,074,098, respectively, were not
included in the computation of diluted earnings per share because their
effect was antidilutive.

F-11

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

SUMMARY OF ACCOUNTING POLICIES

Stock-based Compensation

The Company has adopted the intrinsic value method of accounting for
employee stock options as permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-based Compensation" (SFAS No. 123)
and discloses the pro forma effect on net loss and loss per share as if the
fair value based method had been applied. For equity instruments,
including stock options, issued to non-employees, the fair value of the
equity instruments or the fair value of the consideration received,
whichever is more readily determinable, is used to determine the value of
services or goods received and the corresponding charge to operations.

The following table illustrates the effect on net loss and loss per share
as if the Company had applied the fair value recognition provision of SFAS
No. 123 to stock-based employee compensation.

Year ending December 31,
----------------------------
2001 2002
----------------------------

Net loss: as reported $(3,207,569) $(4,171,590)
Add: total stock based employee compensation expense
determined under fair value method for all awards (266,951) -
---------------------------
Pro forma net loss $(3,474,520) $(4,171,590)
===========================

Loss per share:
As reported $ (0.24) $ (0.23)
Pro forma $ (0.26) $ (0.23)

Adoption of SFAS No. 145

In April 2002, FASB issued Statement No. 145 (SFAS No. 145), "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" effective on or after May 15, 2002. This Statement
rescinds SFAS No. 4 and an amendment of that Statement, and SFAS No. 64.
This Statement also rescinds SFAS No. 44. This Statement amends SFAS No.
13, to eliminate an inconsistency between the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings or describe their applicability under changed conditions. The
adoption of SFAS No. 145 did not have a material effect on the Company's
financial position or results of operations.

Adoption of SFAS No. 148

In December 2002, FASB issued Statement No. 148 (SFAS No. 148),
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No.
148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect
of the method used on reported results. SFAS No 148 is effective for the
Company's financial statements for the year ending after December 15, 2002.
As permitted by SFAS No. 148, the Company has elected to retain the
intrinsic value method of accounting for stock-based awards granted to
employees. Accordingly, the adoption of SFAS No. 148 did not have a
material effect on the Company's financial position or results of
operations.

F-12

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

SUMMARY OF ACCOUNTING POLICIES

New Accounting Announcements Not Adopted Yet

In June 2001, Financial Accounting Standards Board (FASB) issued Statement
No. 143 (SFAS No. 143), "Accounting for Asset Retirement Obligations,"
effective for fiscal years beginning after June 15, 2002. The Statement
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by
increasing the carrying amount of the related long-lived asset. Over time,
the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss upon settlement. The
adoption of SFAS No. 143 is not expected to have a material effect on the
Company's financial position or results of operations.

In June 2002, FASB issued Statement No. 146 (SFAS No. 146), "Accounting for
Costs Associated with Exit or Disposal Activities," effective for
activities that are initiated after December 31, 2002, with early
application encouraged. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)."
The adoption of SFAS No. 146 is not expected to have a material effect on
the Company's financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45 ("FIN No. 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN No. 45
expands on the accounting guidance of Statements No. 5, 57, and 107 and
incorporates without change the provisions of FASB Interpretation No. 34,
which is being superseded. FIN No. 45 will affect leasing transactions
involving residual guarantees, vendor and manufacturer guarantees, and tax
and environmental indemnities. All such guarantees will need to be
disclosed in the notes to the financial statements starting with the period
ending after December 15, 2002. For guarantees issued after December 31,
2002, the fair value of the obligation must be reported on the balance
sheet. Existing guarantees will be grandfathered and will not be recognized
on the balance sheet. The Company believes that there will be no impact on
our financial position and results of operations due to the application of
FIN No. 45.

In January 2003, FASB issued FASB Interpretation No. 46 (FIN No. 46),
"Consolidation of Variable Interest Entities," an interpretation of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements."
FIN No. 46 explains how to identify variable interest entities and how an
enterprise assesses its interest in a variable entity to decide whether to
consolidate that entity. FIN No. 46 requires existing unconsolidated
variable interest entities to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among
parties involved. FIN No. 46 is effective immediately for variable
interest entities after January 31, 2003, and to variable interest entities
in which an enterprise obtained an interest after that date. FIN No. 46
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of FIN No.
46 is not expected to have a material effect on the Company's financial
position and result of operations.

Reclassifications

Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the 2002 presentation.

F-13

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 1 - Licensing Agreements with Warner Brothers Consumer Products Co.

Licensing Agreement in China

On January 1, 1999, the Company entered into a licensing agreement (the
Original Agreement) with Warner Brothers Consumer Products Co. (Warner) for
the right to utilize Looney Tunes(tm) images and names, as defined in the
Agreement, on its products in Shanghai and Hangzhou, China. The Company
agreed to pay a 3% royalty fee on the net invoiced price of each licensed
article with a minimum guaranteed consideration of $300,000 of which
$45,000 was paid at inception of the Agreement, and the balance is to be
paid in ten quarterly installments of $21,250 starting on September 30,
1999 and a final payment of $42,500 on or before March 31, 2002. The
Company recorded license rights of $300,000 and amortized the rights over a
period of three years.

The Original Agreement noted above only allowed the licensed material to be
used on beverages. The Company desired to expand this licensing to allow
the Looney Tunes(tm) images and names to be put onto cracker packages. In
June 2000, the Company entered into a license agreement (the New Agreement)
with Warner for the right to print cartoon characters on certain cracker
packages as defined in the New Agreement. The Company agreed to pay a 5%
royalty fee of the price of each licensed article with a minimum guaranteed
consideration of $50,000 paid at the inception of the Agreement. The
Company recorded license rights of $50,000, which were fully amortized as
of December 31, 2001. This New Agreement has not been renewed.

On November 21, 2000, the Company entered into an amendment of the above
Original Agreement with Warner. Per the amendment, the term of the
agreement was extended to June 30, 2003 with the guaranteed consideration
being increased to $400,000. The amended agreement extended the territory
in which the Company can market the beverage containers to the People's
Republic of China. From September 30, 1999 to September 30, 2000, the
installment payment of $21,250 did not change. As of January 31, 2001, the
installment payment increased to $33,750 until September 30, 2002. The
last installment payment at December 31, 2002 is $21,250. The Company
recorded additional license rights of $100,000 and amortized the rights,
with the remaining balance, over a period of 25 months. As of December 31,
2002, the outstanding obligation under this agreement was $147,116, of
which $98,077 was delinquent after rescheduling payments with Warner Bros.
in 2002. The amortization of this license agreement for the years ended
December 31, 2001 and 2002 was $94,286 and $94,286, respectively.

Since the Company was in default status on the obligation of $147,116 owed
to Warner Bros. and the license rights will expire on June 30, 2003, the
Company determined that the remaining unamortized license rights of $39,286
was impaired in accordance with SFAS No. 144 and, accordingly, wrote of this
amount to expense in 2002.

The guaranteed royalty payments under the license agreement in China are
secured by a letter of credit in the amount of $170,000. This letter of
credit was issued by the Republic Bank, Philadelphia, PA, and is guaranteed
by Mr. Dale Reese, one of the founders of the Company. The Company has
proposed to Warner Bros. a renegotiation of the amounts owed for payment in
2003.

F-14

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 1 - Licensing Agreements with Warner Brothers Consumer Products Co.
(Continued)

Licensing Agreement in the United States

On July 26, 2000, the Company entered into a license agreement with Warner
and obtained rights to utilize Warner Bros.' Looney Tunes(tm) character
images and names in the U.S. in connection with specified categories of
products sold by Bravo!. The license agreement was originally effective
from January 1, 2002 to December 31, 2002. In April 2002, the Company and
Warner Bros. reached an agreement to extend this license agreement until
December 31, 2003.

The Company recorded the gross amount of $500,000 as licensing costs and an
obligation for the licensing agreement of $500,000 simultaneously. An
amount of $250,000 was due upon the signing of this agreement, and the
balance was due: $100,000 on or before June 1, 2001, $100,000 on or before
December 1, 2001, and $50,000 on or before June 1, 2002. As of December
31, 2002, accrued interest of $3,353 under this obligation remains
outstanding. The amortization expense for the year ended December 31, 2001
and 2002 was $216,668 and $183,332, respectively.

In May 2002 the Company entered into a licensing agreement with Warner to
utilize licensed property in connection with the 2002 Taz Atti-Tour events
for the period March 13, 2002 to December 31, 2002. The Company recorded a
non-refundable minimum guaranteed payment of $250,000, $83,333 of which was
due upon execution of the agreement, $83,333 payable on or before August
31, 2002 and $83,333 payable on or before November 30, 2002. The guaranteed
payment is amortized over the term of the license agreement. The Company
recorded amortization expense of $250,000 for the year ended December 31,
2002. At December 31, 2002, $83,333 was due for payment under the terms of
the agreement; this amount was paid on February 26, 2003.

Licensing Agreement in Mexico

In September 2001, the Company entered into a licensing agreement with
Warner for the right to utilize Looney Tunes(tm) character images and
names, as defined in the agreement, on its products sold in Mexico. The
Company agreed to pay royalties of 5% on net sales, defined as the gross
invoice price billed to the dairy producing, distributing and selling the
licensed products, from June 1, 2001 through May 31, 2002; 7% on net sales
from June 1, 2002 through May 31, 2003; and 10% on net sales from June 1,
2003 through May 31, 2004; with a minimum total guaranteed consideration of
$145,000. The minimum guaranteed consideration was payable $36,250 upon
execution of the agreement, $36,250 on or before December 31, 2001, $36,250
on or before June 30, 2002, and $36,250 on or before December 1, 2002.

The licensing agreement is effective through May 31, 2004. The Company
recorded license rights of $145,000 to be amortized over a period of three
years. Amortization expense for the year ended December 31, 2001 and 2002
was $28,194 and $48,333, respectively. As of December 31, 2002, the
outstanding obligation remaining under this agreement was $36,250, of which
$15,000 was paid in March 2003.

F-15

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 1 - Licensing Agreements with Warner Brothers Consumer Products Co.
(Continued)

Licensing Agreement in Canada

In May 2002 the Company entered into a licensing agreement with Warner to
utilize Looney Tunes(tm) characters and names on milk products sold in
specified retail outlets throughout Canada, for the period March 1, 2002 to
March 31, 2004. The Company recorded a license right of $32,720 upon
execution of the agreement. The guaranteed payment is amortized over the
term of the license agreement. The Company recorded amortization expense of
$13,088 for the year ended December 31, 2002.

Note 2 - Default of Note Payable to International Paper

In 1999, the Company issued a promissory note to assume existing debt owed
by its then Chinese joint venture subsidiary to a supplier, International
Paper. The face value of that unsecured note was $282,637 at an interest
rate of 10.5% per annum. The note originally required 23 monthly payments
of $7,250 and a balloon payment of $159,862 due on July 15, 2000. During
2000, the Company negotiated an extension of this note to July 1, 2001.
International Paper imposed a charge of $57,000 to renegotiate the note,
which amount represents interest due through the extension date. The
current balance due on this note was $187,743 at December 31, 2002, all of
which was delinquent. The Company has not had communication with
International Paper during the last two years. Although International
Paper has not pursued collection of the note, it is possible that they
could do so in the future and, if they do, such collection effort may have a
significant adverse impact on the liquidity of the Company.

Note 3 - Notes Payable to Individual Lenders

On November 6 and 7, 2001, respectively, the Company 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
on February 1, 2002 with interest at the annual rate of 8%. These loans
are secured by a general security interest in all the assets of the
Company. As of March 27, 2003, the Company received a verbal agreement
from these lenders to extend the notes payable through July 1, 2003.

On December 27, 2001, the Company received $250,000 in loan proceeds from
an individual who also is a holder of the Company's Series H Convertible
Preferred Stock. The $250,000 was payable on February 28, 2002 with
interest at the annual rate of 12%. In lieu of interest, the Company
issued five-year warrants to purchase 25,000 shares of the Company's common
stock at an exercise price of $0.40 per share with an expiration date on
February 27, 2007. The promissory note was repaid in March 2002.

Note 4 - Income Taxes

The Company is subject to Federal income taxes. As the Company has
experienced operating losses for the years of 2001 and 2002, no income tax
has been provided for.

The Company has gross deferred tax assets of approximately $4 million and
$5.4 million at December 31, 2001 and 2002, respectively, relating
principally to tax effects of net operating loss carryforwards. In
assessing the recoverability of deferred tax assets, management considers
whether it is more likely than not that the assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers projected
future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable loss and
projections for future taxable income

F-16

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 4 - Income Taxes (Continued)

over the periods in which the deferred tax items are recognizable for tax
reporting purposes, it is more likely than not that the Company will not
realize the benefits of these differences at December 31, 2001 and 2002.
As such, management has recorded a valuation allowance for the full amount
of deferred tax assets at December 31, 2001 and 2002.

At December 31, 2002, the Company has available net operating losses of
approximately $16 million for federal income tax purpose, to offset future
taxable income, if any, which will expire at various dates through the year
2022 for federal income tax purposes. The utilization of net operating
losses, however, will be subject to certain limitations as prescribed by
Section 382 of the Internal Revenue Code.

Note 5 - Commitments and Contingencies

Commitments

The Company leases office space at its corporate office in Florida under an
operating lease expiring in April 2004.

Future minimum rental payments required under the operating lease as of
December 31, 2002 are as follows:

Years ending December 31, Amount
-------------------------------------

2003 $ 74,566
2004 26,098
--------
$100,664
========

Rental expense for the years ended December 31, 2001 and 2002 was
approximately $83,000 and $88,000, respectively.

Note 6 - Shareholders' Equity

2001

On January 2, 2001, the Company hired a new President and Chief Operating
Officer and entered into an employment agreement with him pursuant to which
the Company granted the individual 100,000 shares of its common stock and
options to purchase an additional 400,000 shares of common stock at a per
share price of $0.75. The Company recognized non-cash compensation expense
of $75,000.

On January 1, 2001, the Company issued 50,000 shares of common stock in
lieu of payment regarding the amount due to an external consultant at the
price of $0.75 per share. The total value was deducted from the amount
payable to this consultant.

On November 1, 2001, the Company issued 65,000 shares of common stock to
one employee for services rendered at a price of $0.39 per share.

F-17

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 6 - Shareholders' Equity (Continued)

On November 29, 2001, the Company issued 75,000 shares of common stock to
three employees and one consultant for services rendered at a price of
$0.37 per share.

On December 12, 2001, the Company issued 30,000 shares of common stock to
one employee for services rendered at a price of $0.38 per share.

During 2001, the Company issued a total of 979,559 shares of common stock
upon the conversion of 21,500 shares of Series D preferred stock.

During 2001, the Company issued a total of 286,035 shares of common stock
upon the conversion of 6,665 shares of Series G preferred stock.

In connection with the aforementioned conversion of preferred stock,
$31,670 of accrued dividends payable was also converted into the Company's
common stock.

Series H Convertible Preferred: Commencing March 7, 2001, a director and
shareholder of Bravo! began to contribute monies toward an anticipated
$1,325,000 investment in Bravo!, pursuant to a Series H Convertible
Preferred offering. The Series H convertible preferred stock was priced at
$10.00 per unit and resulted in net proceeds of $1,050,000 in cash, net of
legal and issuance expenses of $5,000. Each share of Series H convertible
preferred stock (1) has a stated value of $10.00 per share; (2) accrues
dividends at 7% simple interest per annum, payable in cash or, at the
option of the holder, added to the stated value of the preferred for
conversion computation purposes; (3) has no voting rights; (4) has a
conversion price of $0.40 per share of common stock, subject to a
contractually limited maximum conversion into no greater than 9.99% of the
Company's issued and outstanding common stock at conversion; (5) is
redeemable at the option of the Company after two years from issuance at
135% of the stated value, plus accrued dividends; and (6) has a mandatory
conversion feature exercisable by the Company five years from issue at the
stated conversion price, subject to a minimum daily trading volume of
100,000 shares during a lookback period and closing bid prices not less
that 300% of the conversion price. Each share of Series H preferred stock
has detachable warrants for 25 shares of common stock with an exercise
price of $0.50 per share and an exercise period of five years. The Series
H convertible preferred stock were issued pursuant to an exemption to
registration provided by Regulation D, Rule 506 and Section 4(2) of the
1933 Act.

As of December 31, 2001, this director and shareholder, through his
Explorer Fund Management, L.L.C., and three accredited and sophisticated
investors have contributed a total of $1,055,000 to Bravo! in exchange for
105,500 of Series H preferred stock and 2,637,500 detachable warrants. The
$1,055,000 of proceeds were accounted for as $465,200 for the estimated
fair value of the preferred shares, $584,800 for the estimated fair value
of detachable warrants, and $5,000 for issuance costs. In addition, the
Company recorded a deemed dividend of $98,027 arising from the beneficial
conversion feature. The value of the warrants was determined using the
Black Scholes Option Pricing Model with the following inputs: Expected
Volatility of 44%, Risk Free Rate of Return of 4.24%, No Dividends and an
Expected Life of 3.75 years.

F-18

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 6 - Shareholders' Equity (Continued)

2002

During 2002, the Company issued 70,000 shares of its Series H convertible
preferred stock, having a conversion price of $0.40 per share of common
stock, and warrants for 1,750,000 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 $700,000 in cash. In accordance with EITF 00-
27, the Company allocated $225,513 to the warrants, $474,487 to the
underlying preferred stock and recorded deemed dividends of $236,764
related to the beneficial conversion features.

In connection with the above private placement of Series H Preferred stock,
the Company issued 100,000 shares of common stock as finder fees.

On June 17, 2002, the Company issued 30,000 shares of its Series I
convertible and 8% cumulative and redeemable preferred stock and warrants
for 2,000,000 shares of common stock 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 EITF 00-27, the Company
allocated $215,796 to the 2 million warrants and $72,192 to the underlying
preferred stock and recorded deemed dividends of $294,793 arising from a
beneficial conversion feature.

On September 30, 2002, the Company issued 100,000 shares of non-voting
Series J Convertible and 8% cumulative and redeemable Preferred stock,
having a stated value of $10.00 per 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 conversion price of $0.25 per share,
representing 4,000,000 shares of common stock underlying the preferred
stock. 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. 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. In accordance with EITF 00-27,
the Company allocated $145,721 to the warrants, $854,279 to preferred stock
and recorded deemed dividends of $305,721 arising from a beneficial
conversion feature. The value of the warrants was determined using the
Black Scholes Option Pricing Model with the following inputs: Expected
Volatility of 34.11%, Risk Free Rate of Return of 4.24%, No Dividends and
an Expected Life of 3.75 years.

During 2002, the Company issued a total of 5,081,830 shares of common stock
upon the conversion of 87,500 shares of Series D preferred stock.

During 2002, the Company issued a total of 2,320,224 shares of common stock
upon the conversion of 44,484 shares of Series F preferred stock.

F-19

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 6 - Shareholders' Equity (Continued)

During 2002, the Company issued a total of 1,550,680 shares of common stock
upon the conversion of 23,127 shares of Series G preferred stock.

In connection with the aforementioned conversion of preferred stock, a
total of $187,586 of accrued dividends payable was also converted into the
Company's common stock, of which $146,670 related to Series D and $40,916
related to Series G.

On June 10, 2002, the Company issued 1,000,000 shares of common stock in
exchange for cash of $330,000 due to exercise of the options.

On October 17, 2002, the Company issued a total of 999,112 shares of common
stock at the market price of $0.28 per share in lieu of cash payment of
$225,151 and recorded non-cash expense of $54,600.

Note 7 - Stock Warrants and Options

2001

In March 2001, the Company issued an aggregate of 925,000 options to
members of the Board of Directors for their services on the Board. These
options have an exercise price of $0.75 per share and expire on March 2006.

In August 2001, the Company agreed to extend warrants for 165,000 shares of
common stock priced at $3.00 per share held by the Series E convertible
preferred investors for two years commencing from August 2001 and to reduce
the exercise price from $3.00 per share to $1.50. Accordingly, the Company
recognized deemed dividends of $2,320 on the remeasurement date.

In August 2001 the Company granted to four employees, a total of 110,000
options to purchase common stock of the Company at the market price on that
date.

In August 2001 the Company granted to members of the Board of Directors for
their services provided as a director, a total of 250,000 options to
purchase common stock of the Company at the price of $0.60 per share, which
was $0.24 higher than the market price on that date.

2002

In March 2002, the Company issued to a lender, warrants to purchase 25,000
shares of common stock with an exercise price of $0.40 per share. The
warrants are immediately exercisable and have an expiration date of
February 28, 2007. Based on a Black-Scholes option pricing model, the
Company recorded interest expense of $4,051. The value of the warrants was
determined using the Black Scholes Option Pricing Model with the following
inputs: Expected Volatility of 44%, Risk Free Rate of Return of 4.24%, No
Dividends and an Expected Life of 3.75 years.

F-20

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 7 - Stock Warrants and Options (Continued)

In May 2002, the Company issued stock options to purchase 1,710,000 shares
of common stock, in the aggregate, as compensation to three consultants.
These options 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. Based on a
Black-Scholes option pricing model, the Company recorded a non-cash expense
of $124,859. In June 2002, 1 million of the 1.15 million options were
exercised with an exercise price of $0.33 per share. In June 2002, 1
million options with an exercise price of $0.33 per share were exercised.
The value of the warrants was determined using the Black Scholes Option
Pricing Model with the following inputs: Expected Volatility of 64%, Risk
Free Rate of Return of 4.24%, No Dividends and an Expected Life of 1 year.

In April 2002 the Company extended 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 1997 to Mr. Dale Reese (a
founder of the Company). These extended options 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 its common stock trades during a 90 day period at a moving average of
at least $2.00.

In June 2002, the Company agreed to extend the expiration dates of
warrants, aggregating 6,089,777 shares of common stock, issued in
connection with the Company's Series D and F preferred stock until June 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, 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 stock,
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 stock. As a result of extending the life and reducing the
exercise prices of these warrants, the Company remeasured the value of the
warrants and recorded $391,345 as non-cash expense.

In October 2002, the Company issued options to purchase 310,714 shares of
common stock to consultants and third party professional service providers
pursuant to written agreements with the Company. Of the options issued,
75,000 options have an exercise price of $1.00 per share and the remaining
235,714 options have an exercise price of $0.35 per share. The Company
recorded stock compensation of $36,753. The value of the warrants was
determined using the Black Scholes Option Pricing Model with the following
inputs: Expected Volatility of 70%, Risk Free Rate of Return of 3.8%, No
Dividends and an Expected Life of 3.75 years.

The assumptions used in the Black Scholes option pricing model in 2001 and
2002 were as follows:

December 31,
-------------------------------------
2001 2002
-------------------------------------

Discount rate - bond yield rate 3.74 - 80% 3.80 - 4.13%
Volatility 85 - 94% 34 - 70%
Expected life 2.25 - 3.75 years 1 - 3.75 years
Expected dividend yield - -

F-21

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 8 - Stock Warrants and Options (Continued)

A summary of the status of the Company's stock options and warrants as of
December 31, 2001 and 2002 with changes during the years then ended are
presented below:

Weighted
Average
Exercise
Shares Price
-----------------------

Total warrants and options outstanding at December 31, 2000 10,787,417 $ 0.80
Warrants and options granted 4,422,500 0.58
Warrants and options exercised - -
Warrants and options expired (55,000) (0.65)
----------------------

Total warrants and options outstanding at December 31, 2001 15,154,917 0.74

Warrants and options granted 8,297,714 0.28
Warrants and options exercised (1,000,000) (0.33)
Warrants and options expired (1,294,828) (1.15)
----------------------

Total warrants and options outstanding at December 31, 2002 21,157,803 $ 0.70
======================

The following table summarizes information about stock options and warrants
outstanding at December 31, 2002:

Warrants/Options Outstanding Options/Warrants Exercisable
--------------------------------------- ----------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life (Years) Price Exercisable Price
-----------------------------------------------------------------------------------------

$0 to $0.75 12,995,214 3.42 $0.52 12,995,214 $0.52
$0.75 to $1.00 7,889,589 2.27 $0.96 5,805,884 $0.95
$2.00 to $3.00 273,000 1.25 $2.05 273,000 $2.05
--------------------------------------------------------------------
21,157,803 2.96 $0.70 19,074,098 $0.67
====================================================================

F-22

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 9 - Business Segment and Geographic Information

The Company operates principally in one industry segment. The following
sales information was based on customer location rather than subsidiary
location.

The allocation of the cost of equipment and the current year investment in
new equipment and depreciation expense have been made on the basis of the
primary purpose for which the equipment was acquired. The following
furniture and equipment information was based on where the furniture and
equipment was used.

Geographic Area Information:

United Total
2002 States Canada Mexico China Company
-----------------------------------------------------------------

Revenue - unit sales $ 232,595 $ - $ - $ - $ 232,595
Revenue - net kit sales 433,118 - - - 433,118
Revenue - gross kit sales 849,404 112,700 90,025 55,128 1,107,257
Total revenue 1,515,117 112,700 90,025 55,128 1,772,970
Cost of goods sold (184,022) (23,511) (18,780) (53,042) (279,355)
-----------------------------------------------------------------

Gross margin $1,331,095 $ 89,189 $ 71,245 $ 2,086 $1,493,615
=================================================================

Furniture and equipment, net $ 63,405 $ - $ - $ 26,197 $ 89,602
=================================================================

United Total
2001 States Canada Mexico China Company
-----------------------------------------------------------------

Revenue - net kit sales $ 671,000 $ - $ - $ - $ 671,000
Revenue - gross kit sales - - 58,300 139,927 198,227
Total revenue 671,000 - 58,300 139,927 869,227
Cost of goods sold - - (15,980) (178,249) (194,229)
-----------------------------------------------------------------

Gross margin $ 671,000 $ - $ 42,320 $ (38,322) $ 674,998
=================================================================

Furniture and equipment, net $ 88,867 $ - $ - $ 34,232 $ 123,099
=================================================================

F-23

BRAVO! FOODS INTERNATIONAL CORPORATION AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

Note 10 - Subsequent Events

On January 2, 2003, the Company entered into an employment agreement with
Mr. Roy Toulan, who was appointed as the Company's vice-president and
general counsel. Pursuant to this employment agreement, the Company
granted Mr. Toulan 100,000 shares of common stock with the approval of the
Board of Directors. The Company recorded $28,000 of stock compensation in
January 2003. Also, the Company granted Mr. Toulan 300,000 options to
purchase the Company's common stock at an exercise price of $0.40 per
share. Of the 300,000 options, 100,000 options are vested immediately,
100,000 options will vest on December 31, 2003 and the remaining 100,000
options will be vested on December 31, 2004. All options have a five-year
life commencing on the vesting dates. The Company did not record any stock
compensation expense because the exercise price was higher than the market
price of the common stock on the grant date.

On February 21, 2003, the Company issued 50,000 shares of non-voting Series
J Convertible and 8% cumulative 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 $500,000. Each
preferred share is convertible to 40 shares of the Company's common stock
at a per common share conversion price of $0.25, representing 2,000,000
shares of common stock underlying the preferred. The issued warrants
entitle the holder to purchase 33.33 shares of common stock for each share
of Series J Convertible Preferred stock issued at an exercise price of
$0.30 per common stock share, representing 1,666,667 shares of common stock
underlying the warrants. The warrants are exercisable for a five-year
period. The February 21, 2003 closing market trading price was $0.23 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.

On February 24, 2003, the Company issued 30,000 shares of common stock upon
the conversion of 422 shares of Series G Convertible Preferred.

F-24

ITEM 8. CHANGES IN AND DISSAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
FINANCIAL DISCLOSURE

None

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The directors, executive officers and significant employees/advisors
are as of December 31, 2003, as follows. The Company's directors serve for
staggered terms of two years or until their successors are elected.

* Robert Holz, a director appointed in 2000, resigned in July 2002
for personal reasons

* Nancy Yuan, the Company's Treasurer, resigned in March 2003 to
return to China with her family

* John McCormack, the Company's President & COO resigned in March
2003 for personal reasons

* Michael Lucci, a director appointed in 1998, resigned in March 2003
for personal reasons

On March 6, 2003, the Board voted to reduce the board positions by
one to nine.

Year
Name of Officer and Age Position with the Company Appointed
----------------------- ------------------------- ---------

Bravo! Foods International Corp.

Stanley A. Hirschman 57 Chairman and Director 2000
Roy G. Warren 47 Director, Chief Executive Officer & Secretary 1997/1999
John McCormack 44 Director, President & Chief Operating Officer 1997/2000
Michael Edwards 45 Vice President Sales 2000
Michael L. Davis 69 Chief Financial Officer 1997
Nancy Yuan 32 Treasurer 2001
Benjamin Patipa 47 Director of Schools/Vending 2002
Arthur W. Blanding 75 Director 1999
Robert Cummings 60 Director 1997
Paul Downes 41 Director 1997
George Holdsworth 62 Director 1997
Robert L. Holz 41 Director 2000
Michael Lucci 62 Director 1998
Phillip Pearce 73 Director 1997

Bravo! Foods, Inc. - US subsidiary
Arthur W. Blanding 75 Chairman and Director 2000
Roy G. Warren 47 Director and Treasurer 1999
Stanley A. Hirschman 57 Director 2000
John McCormack 44 Director and Chief Executive Officer 2000/2001
Phillip Pearce 73 Director 2000

China Premium Food Corp (Shanghai) Co., Ltd. - Chinese subsidiary
Jeffrey Tarmy 33 Director and General Manager 2001
Roy G. Warren 47 Director , Chairman 1999

In January 2003, the management structure of Bravo Foods
International Corp. was reorganized to divide responsibility for sales and
operations among three executives: Mr. McCormack was named Managing
Director for Account Maintenance; Mr. Edwards was named Managing Director
for Account Acquisition and Dr. Benjamin Patipa was named as Director of
School/ Vending accounts.

The experience and background of the Company's executive officers
follows:

Mr. Stanley A. Hirschman - Chairman and Director since September 2000

Mr. Hirschman is president of CPointe Associates, Inc., an executive
management and consulting firm specializing in solutions for emerging
companies with technology-based products. CPointe was formed in 1996. In
addition, he is a director of Longview International Equity Fund LP, Global
Marketing Partners, Inc. and AiirNet Wireless, LLC. Prior to establishing
CPointe Associates, Mr. Hirschman was vice president of operations of Software,
Etc., Inc., a retail software chain, from 1989 until 1996. Mr. Hirschman
has also held senior management positions with retailers T.J. Maxx, Gap
Stores and Banana Republic. Mr. Hirschman currently serves on the
Audit Committee of the Company's board of directors.

Mr. Roy G. Warren - Chief Executive Officer since May 1999; Director since
1997

Mr. Warren serves as the Company's Chief Executive Officer and as a
director. Mr. Warren was in charge of the Company's day-to-day operations
from 1997 until the appointment of John McCormack as President and Chief
Operating Officer in December 2000. As Chief Executive Officer, Mr. Warren
continues to develop strategy for the Company's growth and external
financial matters.

For 15 years from 1981 through 1996, Mr. Warren was in the securities
brokerage industry. During those years, Mr. Warren acted as executive
officer, principal, securities broker and partner with brokerage firms in
Florida, most notably Kemper Financial Companies, Alex Brown & Sons and
Laffer Warren & Company. Mr. Warren currently serves on the Executive
Committee of the Company's board of directors.

Mr. Warren also serves as a director of the Company's U.S.
subsidiary, Bravo! Foods, Inc. and the Company's wholly owned Chinese
subsidiary, China Premium Food Corp (Shanghai) Co., Ltd.

Mr. John McCormack - President, Chief Operating Officer since December
2000; Director since 1997
(resigned as President and COO in March 2003
for personal reasons)

Prior to his appointment as the Company's President and Chief
Operating Officer, Mr. McCormack served as an executive with Dean Foods Co.
for over 15 years. Dean Foods is a US national processor and distributor of
a full line of branded and private label products, including fluid milk,
cottage cheese and ice cream. Prior to a 1999 move to the Chicago area for
Dean Foods, Mr. McCormack managed McArthur Dairy in Miami, Florida, a
wholly- owned subsidiary of Dean Foods Co. As a Vice President of Dean
Foods, he was in charge of Dean Food's mid-western division out of Chicago,
Illinois. Mr. McCormack currently is a director of the Company.

Mr. Michael L. Davis - Chief Financial Officer since October 1997

Mr. Davis has been associated with the securities industry for over
35 years, as a securities and special situations analyst with ValueLine and

as a tactical planner, general portfolio manager and

short sale portfolio manager with a number of hedge funds. In 1972, he was
a member of the Investment Committee at Anchor Corp., which supervised its
$2.5 billion family of funds, as well as serving as Anchor's chief market
analyst. From 1978 through 1989, Mr. Davis was the portfolio manager of
Merrill Lynch's Special Value Fund. In addition to his position with the
Company, for the past eight years, Mr. Davis has operated a private
consulting firm, M.L. Davis Financial Services. Mr. Davis advises clients
on stock selection and general market timing considerations. He researches
and writes investment reports on selected small and mid-cap growth
companies. In addition. Mr. Davis supervises an investment portfolio for a
group of United Arab Emirates investors.

Mr. Michael Edwards - Vice President Sales

Mr. Edwards has been with the Company in a sales and marketing
capacity since 2000. Prior to that time, he worked for 5 years in beverage
marketing research for Message Factors, Inc., a Memphis Tennessee marketing
research firm. Mr. Edwards has a BS degree from Florida State University in
Management and Marketing and spent 13 years in the banking industry,
leaving CitiBank to join Message Factors in 1995.

Ms. Nancy Yuan - Treasurer since 2000 (resigned March 2003 to return to
China with her family)

Ms. Yuan is a Shanghai native and is fluent in English, Mandarin, and
the Shanghai dialect, with a working knowledge of Cantonese. Ms. Yuan has a
Master of Science degree in accounting from Kent State University with
successful completion of the USA CPA exam. Prior to her position with
Bravo! Foods International, Ms. Yuan served for over a year as the financial
officer for the Company's subsidiary in Shanghai, China. Prior to joining
the Company's China operation, Ms. Yuan was employed at Moen Incorporated,
where she was responsible for manufacturing quality, auditing and data
analysis for Moen faucets. Ms. Yuan has worked for Coopers and Lybrand in
Hong Kong, where she was responsible for assessing corporate internal
control, corporate accounting policy and procedures, defining risk areas,
auditing financial statements, and also performed the flotation of a PRC
company for listing on the HK Stock Exchange.

Dr. Benjamin Patipa - Director, Schools/Vending since 2002

Dr. Patipa is a pediatrician with over fifteen years of experience in
directing operations, marketing, sales and facilitating growth in both
public and private companies. In 1987, Dr. Patipa founded and served as
the chairman and CEO of Weight For Me, Inc., a company that developed a
proprietary program which pioneered the delivery of weight control and
nutrition services to the over 12 million obese children and adolescents in
America. Weight For Me earned national and international recognition as the
premier program for the control of obesity in children and adolescents. Dr.
Patipa also served at HEARx Ltd. as a member of the Executive Operating
Committee, Sonus USA, Inc., where he lead the company's franchise licensing
and buying group business in the Southeast United States. Most recently,
Dr. Patipa served as Senior Vice President and Operational Head of
eHDL/HealthNet Data Link, Inc., a national electronic healthcare
information company.

Mr. Arthur W. Blanding - Director Since November 1999

Mr. Blanding is president of The Omega Company, an international
dairy industry consulting company. Mr. Blanding has over 50 years
experience in management of dairy processing, sales and strategic planning
consulting. He graduated from Michigan State University in 1956, with a
degree in food science, and in 1964 from Oregon State University with a
degree in Food Microbiology and attended Harvard Business School.

As President of The Omega Company for the past 20 years, Mr. Blanding
has completed over 200 projects successfully, both in the U.S. and abroad.

Clients of The Omega Company include Abbott International, Cumberland Farms,
Dairy Gold, Farm Fresh, Inc., Haagen Dazs, Labatt, Ross Laboratories and Stop
& Shop Company, among others. Mr. Blanding was a consultant for the design and
construction of the dairy processing facility built in Shanghai by Green Food
Peregrine. The Omega Company is a party to a consulting contract with the
Company concerning technical and production issues. Mr. Blanding also serves
as a director and Chairman of the Company's U.S. subsidiary, Bravo! Foods,
Inc. Mr. Robert J. Cummings - Director Since 1997

Mr. Cummings' work experience includes ten years in purchasing at
Ford Motor Company. In 1975, he founded and currently operates J & J
Production Service, Inc., a manufacturing representative business, which is
currently responsible for over $300 million in annual sales. Mr. Cummings
currently serves on the executive committee of the Company's board of
directors.

Mr. Paul Downes - Director Since 1997

Mr. Downes is a director and, from August of 1997 to April of 1998,
served as the Company's Chairman. For the past 12 years, Mr. Downes has
managed his personal diverse portfolio of international investments with
concentration in the United Kingdom, Eastern Europe, North Africa and Asia.
In 1985, he founded a group of nursing homes for the elderly in Great
Britain, which he sold in 1990. Prior to that time, Mr. Downes spent
several years organizing golf tournaments and international golf matches in
Malaysia, Singapore, Thailand, Philippines, Indonesia and Hong Kong,
spending two years living in Southeast Asia. Mr. Downes is one of the
Company's "founders" and played a leading role in the Company's initial
raising efforts. Since 2001, Mr. Downes has served as the Chairman of a
start up software company located in Delray Beach Florida.

Mr. George Holdsworth - Director Since 1997

From March of 1997 until May 1998, Mr. Holdsworth was responsible for
the operational aspects of the Company's China operations. Since 1998, Mr.
Holdsworth has managed his personal investment portfolio and has served as
a director and consultant to U.S. Stone Corporation, a start up marble
quarry company located in Alabama.

Mr. Holdsworth is a graduate of the University of London with a B.S.
in Mathematics and an Associate of the London College of Music. He started
in business as a manufacturing manager in Earlsdon Components, Ltd., where
he became Director of Operations, then owner and Managing Director. In
1993, Mr. Holdsworth became owner of Earlsdon Technology, Ltd., a JV
Partner of Shanghai Earlsdon Valve Company, Ltd., and lived in Shanghai for
four years, until May 1998. Mr. Holdsworth sold his interest in Shanghai
Earlsdon and commenced his duties for the Company in March 1997.
Mr. Robert L. Holz - Director since 2000 (resigned in July 2002 for
personal reasons)

For the past eight years, Mr. Holz has managed a portfolio of private
investments in start up companies under the aegis of Explorer Fund
Management, L.L.C., an entity that he founded in 1994. Prior to 1994, Mr.
Holz held senior management positions in securities related firms such as
Nomura Securities International, Inc., National Investment Services of
America and was a partner in Kidder, Peabody & Co., Inc. Mr. Holz
specializes in identifying and analyzing new business opportunities and
managing resources for goal realization. Mr. Holz currently serves on the
Company's audit committee.

Michael G. Lucci - Director Since 1998 (resigned in March 2003 for personal
reasons)

Mr. Lucci is a former All Pro linebacker who played for the Detroit
Lions of the National Football League from 1964 through his retirement from
professional football in 1973. Mr. Lucci became associated with Bally's
Total Fitness Corporation in 1971 and rose through the ranks to become that
corporation's Vice President of club operations in the mid-west, Senior
Vice-President, and President and Chief Operating Officer in 1993. Mr.
Lucci retired in 1996 and, since that time, has managed a diverse
investment portfolio for himself and directed the business of his
construction company in the Detroit MI area.

Mr. Phillip Pearce - Director Since 1997

Mr. Pearce is a "retired" member of the securities industry. Mr.
Pearce served as Chairman of the NASD during which time he was instrumental
in the founding of NASDAQ. Additionally, Mr. Pearce was a former Director
of E.F. Hutton and has served as Governor of the New York Stock Exchange.
Since his retirement in 1988, Mr. Pearce has remained active in the
securities industry as a corporate financial consultant. Mr. Pearce serves
on the compensation committee of the Company's board of directors. Mr.
Pearce also serves on the Company's audit committee and is a director of
the Company's U.S. subsidiary, Bravo! Foods, Inc. Mr. Pearce serves as a
director of Xybernaut Corporation, a reporting company.

Mr. Jeffrey Tarmy - Director and General Manager of the Company's wholly
owned Chinese subsidiary, China Premium Food Corp
(Shanghai) Co., Ltd., since January 2001

Mr. Tarmy holds a Batchelor of Arts degree in Political Science from
University of Maine, Orono, and a Masters of Science in Public
Relations/Public Affairs from Golden Gate University, San Francisco. In
1996, Mr. Tarmy worked for Ketchum Newscan Public Relations Ltd. in San
Francisco, where he worked with multinational clients to develop and
implement nationwide communication programs.

In 1997, Mr. Tarmy relocated to Ketchum's Shanghai, PRC office. He
became responsible for Ketchum's Beijing, Guangzhou and Shanghai
operations, overseeing a staff of 50 professionals in six practice areas,
including brand marketing, corporate relations, food & nutrition,
technology, workplace communication and healthcare. By January 2000, Mr.
Tarmy held the position of Vice President, China, with Ketchum and had
responsibility for business development, client servicing, quality control
and agency management.

ITEM 9. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT WILL BE FILED
PURSUANT TO A DEFINITIVE PROXY STATEMENT OR AN AMENDMENT TO THIS
FORM 10-KSB.

ITEM 10. EXECUTIVE COMPENSATION

Compensation of directors

Directors were compensated for their travel expenses to and from
board of directors' meetings in 2000, 2001 and 2002. There were three in
person meetings and five telephonic meetings of the board in 2000 and two
in person meetings and three telephonic meetings in 2001. In 2002, there
were four in person meetings and three telephonic board meetings. Directors
received options for 35,000 shares of common stock for each year as a
director through 2001. Each member of the executive committee has received
options for an additional 40,00 shares of common stock for their services
from 1998 through 2001. In addition, each Director received options for
25,000 shares for services in 2002.

Compensation of executive officers

The following table sets forth the compensation paid during the last
three fiscal years to the Company's Chief Executive Officer, and the four
other most highly compensated executive officers whose total 2002 salary
and bonus exceeded $100,000:

-Annual Compensation- -Long-Term Compensation-
-------------------------------------------- Restricted Stock
Name & Position Year Salary Bonus Other Awards and Options
--------------- ---- ------ ----- ----- ------------------------

Roy G. Warren 2000 $180,000
President & 2001 $180,000
Chief Executive Officer 2002 $180,000 170,000(1)

John McCormack 2001 $180,000 100,000 shares(2) $ 7,355(2) 530,000(3)
President & COO 2002 $180,000

Michael Edwards 2000 $ 55,000 $65,000(4) 150,000(5)
Sales VP 2001 $110,000
2002 $150,000 $50,000(6) 100,000 c/s(7)

Jeffrey Tarmy 2001 100,000 50,000(8)
General Manager 2002 100,000
China subsidiary

(1) Directors' options. These options have not yet been issued. Also
includes directors options for 170,000 shares.

(2) One time signing bonus in common stock issued pursuant to an S-8
registration statement; other compensation reflects expenses of automobile.

(3) Signing bonus of 400,000 options at $0.75 per share vested over 18
months, with 25% vested on January 1, 2001, 25% vested on July 1, 2001 25%
vested on January 1, 2002 and 25% vested on July 1, 2002, respectively,
with expiration dates five years from vesting. Also includes options for
130,000 shares for services as a director.

(4) $65,000 bonus paid in quarterly installments for one year with review
thereafter.

(5) Options for shares of common stock. All options have an exercise price
at market, when issued. Options for 50,000 issued as signing bonus on
June 1, 2000 and bonus options for 50,000 issued on 3-27-01; also
includes options issued for 50,000 on 5-31-01; and unissued options for
to be issued 50,000 on 5-31-03, all in accordance with employment agreement.
Options have a five-year term from issuance.

(6) $50,000 bonus paid in quarterly installments for two years, pursuant
to renegotiated employment contract.

(7) One time signing bonus in common stock issued pursuant to an S-8
registration statement, pursuant to renegotiated employment contract.

(8) Options vest 12-31-01 at exercise price equal to market at 8-14-01
($0.36); options expire 12-30-05

Option grant table 2000 through 2002

Underlying Percentage Per Share Expiration
Name & Position Common of Total Exercise $ Date
--------------- ---------- ---------- ---------- ----------

2000
----

Michael Edwards 50,000 100% market at
Sales VP 6-1-00($0.69) 5-31-05

2002
----

John McCormack 400,000(1) 44% $0.75 5 years
President & COO from
vesting

John McCormack 105,000 14% $0.75 3-26-06
Director 25,000 $0.60 6-30-06

Roy Warren 145,000 14% $0.75 3-26-06
Director/Executive Committee 25,000 $0.60 6-30-06

Michael Edwards 50,000 5.5% market at
Sales VP 3-27-01($0.75) 11-26-05

Michael Edwards 50,000 5.5% market at
Sales VP 5-31-01($0.44) 5-30-06

Jeffrey Tarmy 50,000(2) 5.5% market at
General Manager 8-14-01 ($0.36) 12-31-05
China subsidiary

(1) Signing bonus of 400,000 options at $0.75 per share vested over an
eighteen-month period, with 25% vested on January 1, 2001, 25% vested
on July 1, 2001 25% vested on January 1, 2002 and 25% vested on July
1, 2002
(2) Vests 12-31-01

Aggregated option exercises in fiscal 2000 through 2002

None of the named executive officers exercised any stock options
during fiscal 2000, 2001 or 2002.The following table provides information
on the value of such officers' unexercised options at December 31, 2001.
Aggregated 2001 and 2002 Fiscal Year End Option Value Table

Securities Underlying Value of "In The Money"
Name & Position Unexercised Options Unexercised Options (1)
--------------- --------------------- -----------------------

Roy G. Warren 170,000(2) $-0-
Stephen Langley 100,000 $-0-
Michael Edwards 150,000 $-0-
John McCormack 530,000(3) $-0-
Jeffrey Tarmy 50,000 $-0-

(1) On December 31, 2002, the Company's unrestricted common stock was quoted
on the NASD Over The Counter Electronic Bulletin Board at a closing price
of $0.31 and $0.28, respectively; the reported dollar values represent
the "in-the money" value of the options listed as of each year-end.
(2) Directors' options.
(3) Includes options for 130,000 shares received as a director of the
Company.

Employment contracts

* John McCormack, President and Chief Operating Officer

The Company has a two-year contract with Mr. McCormack commencing
December 1, 2000, at an annual base salary of $180,000. Mr. McCormack will
receive100,000 shares of common stock and options for 400,000 shares at
$0.75 per share as a signing bonus. The options for 400,000 shares vest
25% on January 1, 2001, 25% on July 1, 2001, 25% on January 1, 2002 and 25%
vested on July 1, 2002, respectively and expire five years from vesting.
During his employment, he also will receive five-year incentive options for
an additional 500,000 shares in tranches of 100,000 as the public trading
price for the Company's stock attains certain pre-determined levels. The
exercise price for these options will track the market price for the
Company's common stock when granted.

* Michael Edwards, the Company's Vice President for Sales

The Company has a three-year contract with Mr. Edwards commencing
June 1, 2000, at an annual base salary of $110,000 plus a $65,000 one-year
bonus, payable quarterly. Mr. Edwards received five-year options for
50,000 shares of common stock at an exercise price of $0.69 per share as a
signing bonus. He also received five-year options for an additional
100,000 shares. These additional options have an exercise prices that track
the market price for the Company's common stock. In 2001, Mr. Edwards'
contract was renegotiated to provide for 400,000 additional options to be
issued in 2003.

* Nancy Yuan, Treasurer

* Stephen Langley, Chief Operating Officer (General Manager) of
China Premium (Shanghai), wholly owned Chinese subsidiary

Mr. Langley had a five-year contract with the Company, which
contained a notice based termination provision. Mr. Langley left the
employ of the Company on March 16, 2001.

* Jeffrey Tarmy, General Manager of China Premium (Shanghai), wholly
owned Chinese subsidiary

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of the
Company's common stock as of March 24, 2003, as to

* each person known to beneficially own more than 5% of the Company's
common stock
* each of the Company's directors
* each executive officer
* all directors and officers as a group

The following conditions apply to all of the following tables:

* except as otherwise noted, the named beneficial owners have direct
ownership of the stock and have sole voting and investment power with
respect to the shares shown

* the class listed as "common" includes the shares of common stock
underlying the Company's issued convertible preferred stock, options and
warrants

Holders of 5% or more of the Company's common stock follows:

Name & Address of Amount & Nature of Percent
Title of Class Beneficial owner Beneficial Ownership of Class
-------------- ---------------- -------------------- --------

Common Amro International, S.A. 2,573,709(1) 9.99%
Grossmuenster Platz 26
P.O. Box 4401
Zurich, Switzerland CH 8022
Austinvest Anstalt Balzers
Landstrasse 938
9494 Furstentums
Balzers, Liechtenstein
Esquire Trade & Finance Inc.
Trident Chambers
P.O. Box 146
Road Town, Tortola, B.V.I.
Common The Keshet Fund L.P. 2,573,709 (2) 9.99%
Keshet L.P.
Nesher Ltd
Talbiya B. Investments Ltd.
Ragnall House, 18 Peel Road
Douglas, Isle of Man
1M1 4L2, United Kingdom
Common Mr. Dale Reese 3,305,985 12.83%
125 Kingston Road
Media, PA
Common Explorer Fund Management, LLC 2,573,709 (3) 9.99%
(Robert Holz)
444 N. Michigan Ave.
Chicago, IL 60611
Common Mr. Larry Frisman 1,770,000 6.86%
7533 Isle Verde Way
Delray Beach, FL 33446

(1) Amro International, S.A., Austinvest Anstalt Balzers and Esquire
Trade & Finance Inc. share a common investment representative, attorney and
subscription agreements for the Series D and Series F convertible preferred
stock and are treated as a group for beneficial ownership purposes. This
group is contractually limited to a beneficial ownership of the Company's
equity not to exceed 9.99%.

(2) The Keshet Fund L.P., Keshet L.P., Nesher Ltd. and Talbiya B.
Investments Ltd share a common investment representative, attorney and
subscription

agreements for the Series G convertible preferred stock and are treated as
a group for beneficial ownership purposes. This group is contractually
limited to a beneficial ownership of the Company's equity not to exceed
9.99%.

(3) This owner is contractually limited to a beneficial ownership of the
Company's equity not to exceed 9.99%.
Common stock beneficially owned by the Company's directors follows:

Name & Address of Amount & Nature of Percent
Title of Class Beneficial owner Beneficial Ownership of Class
-------------- ---------------- -------------------- --------

Common Paul Downes 278,442(1) 0.98%
Tamarind Management Ltd.
20579 S. Charlestown
Boca Raton, FL 33434
Common Roy G. Warren 975,482(2) 3.37%
1128 Country Club Road
N. Palm Beach, FL 33408
Common Robert Cummings 480,000(3) 1.61%
2829 N.E. 44th Street
Lighthouse Point, FL 33064
Common Michael G. Lucci 480,000(4) 1.61%
49 Spanish River Drive
Ocean Ridge, FL 33435
Common John McCormack 737,500(5) 2.53%
8750 South Grant
Burridge, IL 60521
Common Mr. Arthur W. Blanding 127,889(6) 0.36%
Janesville, WI 53545
Common Phillip Pearce 181,000(7) 0.55%
6624 Glenleaf Court
Charlotte, NC 28270
Common Stanley Hirschman 294,670(8) 0.95%
2600 Rutgers Court
Plano, Texas 75093
Common George Holdsworth 130,000(9) 0.37%
11806 Watercrest Lane
Boca Raton, FL 33498

(1) Includes director's options for 130,000 common shares
(2) Includes director's options for 170,000 common shares.
(3) Includes director's options for 170,000 common shares.
(4) Includes director's options for 170,000 common shares.

(5) Includes vested options for 300,000 common shares and director's
options for 130,000 common shares.
(6) Includes director's options for 95,000 common shares.
(7) Includes director's options for 130,000 common shares.
(8) Includes director's options for 25,000 common shares.
(9) Includes director's options for 130,000 common shares.

Common stock owned by the Company's executive officers not listed above
follows:

Name & Address of Amount & Nature of Percent
Title of Class Beneficial Owner Beneficial Owner of Class
-------------- ---------------- ---------------- --------

Common Michael Edwards 805,143 3.57%
Vice President
Common Michael L. Davis 75,000(1) 0.26%
Chief Financial Officer
Common Nancy Yuan 55,000(1) 0.19%
Treasurer
Common Jeffrey Tarmy 50,000(1) 0.19%
GM China operation

(1) Vested options

Common stock owned by the
Company's directors and

executive officers as a group 4,391,684 15.4%

There currently are no arrangements that may result in a change of
ownership or control of the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not Applicable

ITEM 13. EXHIBITS AND REPORTS ON FORM 8K

(a) Exhibits
--------

SEC
Exhibit Reference
No. No. Title of Document
------- --------- ----------------------

1a 2 Asset Purchase Agreement China Peregrine Enterprises, Limited (1)

1b 2 Interim Agreement to Operate China Peregrine Project (1)

2a 3(i) Articles of Incorporation (1)

2b 3(i) Amended Articles (name change) (1)

3 3(ii) Restated Bylaws China Peregrine Food Corporation (1)

4a 4 Rights of Equity Holders Common see Articles of Incorporation (1)

4b 4 Preferred, Series A and B Designation (1)

4c 4 Preferred, Series C Designation (1)

4d 4 Preferred, Series D Designation (2)

4e 4 Preferred, Series D Amended (4)

4f 4 Preferred, Series E Designation (3)

4g 4 Preferred, Series F Designation (4)

4h 4 Preferred, Series G Designation (5)

4i 4 Preferred, Series H Designation (8)

7a 10 Material Contracts Asset Purchase Agreement (1)
American Flavors China, Inc

7b 10 First Amendment (1-28-98) (1)

7b 10 Second Amendment (6-19-98 (1)

7i 10 Bravo! - Quality Chekd Promotion Agreement (6)

7j 10 Bravo! - Dairy Production Agreement (6)

7k 10 Warner Bros./China Premium License Agreement (China) (7)

7l 10 Warner Bros./China Premium License Agreement (modified) (7)

7m 10 Warner Bros./Bravo! Foods License Agreement (US) (7)

7o 10 Employment Contracts (7)

7p 10 Omega Consulting Contract (7)

7q 10 Lane Cracker Contract (7)

7r 10 Lease: US corporate offices, N.Palm Beach, FL (7)

7t 10 Warner Bros./Bravo! Foods International License Agreement (Mexico) (8)

9a 21 Subsidiaries Certificate of Incorporation Bravo! Foods, Inc. (6)

9b 21 Subsidiaries Articles of Association (6)
China Premium Food Corporation (Shanghai) Co., Inc.

11 99 Hangzhou Meilijian Audited Financial (4)
Statements, Years Ending December 31,1998 and 1999

(1) Filed with Form 10SB/A First Amendment
(2) Filed with Form 10QSB for 3-31-99
(3) Filed with Form 10QSB for 6-30-99
(4) Filed with Form 10K-SB for 12-31-99
(5) Filed with Form 10QSB for 6-30-00
(6) Filed with Form SB-2/A Second Amendment
(7) Filed with Form SB-2/A Third Amendment
(8) Filed with Form 10K-SB 2001

(b) Reports on Form 8-k During the Last Quarter of 2000:

Form 8-K concerning Series J Convertible Preferred financing and certificate
of Designation filed October 2, 2002.

ITEM 14. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and the Company's 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
report on Form 10-KSB (December31, 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 the Company's 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.

In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, China Premium Food Corporation has caused this report to be signed on
its behalf by the undersigned, thereunder duly authorized, this April 14,
2003.

BRAVO! FOODS INTERNATIONAL CORP.
(Formerly China Premium Food Corporation)
By: /S/ Roy G. Warren,
Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, China Peregrine
Food Corporation has caused this amended report to be signed on its behalf
by the undersigned in the capacities and on the dates stated.

Signature Title Date
------------ ----- ------

/S/ Roy G. Warren Chief Executive Officer April 14, 2003
and Director

/S/ Michael L. Davis Chief Financial Officer April 14, 2003

CERTIFICATION

I, Roy G. Warren, certify that:

1. I have reviewed this report on Form 10-KSB of Bravo! Foods
International Corp.

2. Based on my knowledge, this 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 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 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
the Company 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 report (the "Evaluation Date");
and

c) presented in this report the Company's conclusions about
the effectiveness of the disclosure controls and procedures
based on the Company's evaluation as of the Evaluation
Date;

5. The registrant's other certifying officers and I have disclosed,
based on the Company's 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 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 the Company's
most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

April 14, 2003 By /S/_______________________
Roy G. Warren
Chief Executive Officer

CERTIFICATION

I, Michael L. Davis, certify that:

1. I have reviewed this report on Form 10-KSB of Bravo! Foods
International Corp.

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 report (the "Evaluation Date");
and

c) presented in this report the Company's conclusions about
the effectiveness of the disclosure controls and procedures
based on the Company's evaluation as of the Evaluation
Date;

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

April 14, 2003 By /S/_________________________
Michael L. Davis

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of Bravo! Foods International, Inc. (the
"Company") on Form 10-KSB for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Roy G. Warren, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

/S/______________________________
Roy G. Warren
Chief Executive Officer

April 14, 2003

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of Bravo! Foods International, Inc. (the
"Company") on Form 10-KSB for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Michael L. Davis, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

By: /S/_________________________
Michael L. Davis
Chief Financial Officer

April 14, 2003