10QSB 1 medina10qsb063004.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2004 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File No. 000-49712 Medina Coffee, Inc. (Exact name of Small Business Issuer as Specified in Its Charter) Nevada 88-0442833 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 12890 Hilltop Road, Argyle, Texas 76226 (Address of Principal Executive Offices) 972.233.0300 (Issuer's Telephone Number) P.O. Box 741 Bellevue, Washington 98009. (Former Address, if Changed Since Last Report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for 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 [ ] As of August 12, 2004, 1,152,458 shares of the Issuer's common stock were outstanding. Transitional Small Business Disclosure Format Yes [ ] No [X] PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Balance Sheet as of June 30, 2004 (Unaudited)............................... F-1 Statement of Operations (Unaudited)......................................... F-2 Statement of Stockholders' Equity (Unaudited)............................... F-3 Statement of Cash Flows (Unaudited)......................................... F-4 Notes to Financial Statements............................................... F-5
MEDINA COFFEE, INC. (A Development Stage Company) (Unaudited) Balance Sheet Assets ------ June June December December 30, 2004 30, 2003 31, 2003 31, 2002 ---------- ---------- ---------- ---------- Current Assets Cash $ -- $ 472 $ 108 $ 4,119 ---------- ---------- ---------- ---------- Total Current Assets 0 472 108 4,119 Property & Equipment 0 3,420 3,040 3,420 ---------- ---------- ---------- ---------- TOTAL ASSETS $ -- $ 3,892 $ 3,148 $ 7,539 ========== ========== ========== ========== Liabilities and Stockholders' Equity Current Liabilities Officers Advances (Note #6) $ -- $ 24,143 $ 42,340 $ 3,980 Officers Notes Payable (Note #7) 0 0 0 0 Accounts Payable 0 2,186 0 592 ---------- ---------- ---------- ---------- Total Current Liabilities 0 26,329 42,340 4,572 Stockholder's Equity: Common stock, $.001 par value, authorized 100,000,000 shares; 1,152,458;1,052,600; 1,052,600; and 1,052,600 shares issued and outstanding at June 30, 2004, June 30, 2003, December 31, 2003 and December 31, 2002 respectively 1,150 1,050 1,050 1,050 Additional paid in capital 65,829 16,000 16,000 16,000 Deficit accumulated during the development stage (66,979) (39,487) (56,242) (14,083) ---------- ---------- ---------- ---------- Total Stockholder's Equity (Deficit) 0 (22,437) (39,192) 2,967 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) $ -- $ 3,892 $ 3,148 $ 7,539 ========== ========== ========== ==========
See accompanying notes
MEDINA COFFEE, INC. (A Development Stage Company) (Unaudited) Statement of Operations ----------------------------------- Oct. 4, 1999 Six Months Six Months Year Ended Year Ended (inception) Ended June 30, Ended June 30, Dec 31, Dec 31, to June 30, 2004 2003 2003 2002 2004 -------------- -------------- -------------- -------------- -------------- Revenue $ -- $ 32,251 $ 40,914 $ 4,720 $ 45,634 Cost of Goods Sold 16,725 21,599 3,754 25,353 -------------- -------------- -------------- -------------- -------------- Gross Profit $ -- $ 15,526 $ 19,315 $ 966 $ 20,281 General and Administrative 10,737 40,930 61,474 7,289 87,260 -------------- -------------- -------------- -------------- -------------- Net Loss $ (10,737) $ (25,404) $ (42,159) $ (6,323) $ (66,979) ============== ============== ============== ============== ============== Net Loss per share Basic and diluted ($ 0.0102) ($ 0.0241) (0.0401) (0.0061) (0.0712) Weighted average number of common shares outstanding 1,052,600 1,052,600 1,052,600 1,033,267 941,126 ============== ============== ============== ============== ==============
See accompanying notes
MEDINA COFFEE, INC. (A Development Stage Company) (Unaudited) Statement of Stockholder's Equity Deficit accumulated Common Stock Additional during -------------------------- Paid-in development Shares Amount capital stage ----------- ----------- ----------- ----------- Balance December 31, 2002 1,052,600 $ 1,050 $ 16,000 $ (14,083) ----------- ----------- ----------- ----------- Net loss six months ended June 30, 2003 (25,404) Balance June 30, 2003 1,052,600 $ 1,050 $ 16,000 $ (39,487) =========== =========== =========== =========== Balance December 31, 2003 1,052,600 $ 1,050 $ 16,000 $ (56,242) Net loss six months ended June 30, 2004 (10,737) Exchange Debt for Stock 99,858 100 49,829 Balance June 30, 2004 1,152,458 $ 1,150 $ 65,829 $ (66,979) =========== =========== =========== =========== October 4, 1999 issued for cash 900,100 $ 900 $ 900 $ -- Net loss, October 4, 1999 (inception) to December 31, 2000 (4,485) Balance December 31, 2000 900,100 900 900 (4,485) ----------- ----------- ----------- ----------- Issue for Cash 2,000 0 200 Net loss year ended December 31, 2001 (3,275) Balance December 31, 2001 902,100 $ 900 $ 1,100 $ (7,760) ----------- ----------- ----------- ----------- Issue for Cash 150,500 150 14,900 Net loss year ended December 31, 2002 (6,323) Balance December 31, 2002 1,052,600 $ 1,050 $ 16,000 $ (14,083) ----------- ----------- ----------- ----------- Net loss year ended December 31, 2003 (42,159) Balance December 31, 2003 1,052,600 $ 1,050 $ 16,000 $ (56,242) =========== =========== =========== ===========
See accompanying notes
MEDINA COFFEE, INC. (FORMERLY MEDINA COPY, INC. (A Development Stage Company) (Unaudited) Statement of Cash Flows Three Months Three Months Year Year Oct. 4, 1999 Ended Ended Ended Ended (inception) June 30, June 30, Dec 31, Dec 31, to June 30, 2004 2003 2003 2002 2004 ----------- ----------- ----------- ----------- ----------- Cash Flows from Operating Activities Net (Loss) $ (10,737) $ (25,404) $ (42,159) $ (6,323) $ (66,979) Depreciation 380 380 760 Adjustments to reconcile net loss to cash (used) in operating activities Changes in assets and liabilities Accounts Payable 0 1,594 (592) (1,408) 0 Officers Notes Payable 0 0 0 0 0 Officers Advances Payable (42,340) 20,163 38,360 200 0 ----------- ----------- ----------- ----------- ----------- Net Cash (used) in operating results (53,077) (3,647) (4,011) (7,151) (66,219) ----------- ----------- ----------- ----------- ----------- Cash flows from Financing Activities Proceeds from issuance of stock 49,929 0 0 15,050 66,979 ----------- ----------- ----------- ----------- ----------- Cash flows from Investing Activities Sale (Purchase) of Property 3,040 (3,800) (760) ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash (108) (3,647) (4,011) 4,099 0 Cash at Beginning of Period 108 4,119 4,119 20 0 ----------- ----------- ----------- ----------- ----------- Cash at End of Period $ -- $ 472 $ 108 $ 4,119 $ -- =========== =========== =========== =========== ===========
See accompanying notes MEDINA COFFEE, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2004 and 2003 Note 1 - History and Organization of the Company The Company was organized October 4, 1999, under the laws of the State of Nevada as Medina Coffee, Inc. The Company commenced operations December 1, 2002 and, in accordance with SFAS # 7, is considered a development stage company. On October 4, 1999, the Company issued 900,100 shares of its $0.001 par value common stock for cash of $ 1,800. On November 30, 2001, the Company issued 2,000 shares of its $0.001 par value common stock for cash of $200. On February 25, 2002, the Company issued 69,000 shares of its $0.001 par value common stock for cash of $6,900. On March 15, 2002, the Company issued 81,500 shares of its $0.001 par value common stock for cash of $8,150. On June 10, 2004, the Company issued 99,858 shares of its $ 0.001 par value common stock in full settlement of debt owed to Harry Miller, the Company's former President and CEO , in the amount of $ 49,929. The price of the transaction was $ .50 per share. On June 14, 2004, Mr. Harry Miller, the Company's sole officer and director, sold 586,224 restricted, common shares (the "Shares") to Halter Financial Group, Inc., a Texas corporation ("Halter") for $115,000. Halter also paid Mr. Miller $1,050 to compensate Mr. Miller for expenses related to the agreement of sale.. The consideration for the Shares was determined as a result of arms-length negotiation between the parties. The Shares sold by Mr. Miller to Halter represented approximately 51% of the issued and outstanding shares of the company. Concurrently with the foregoing transaction, Mr. Miller resigned from the Board of Directors and as an officer of the Company and Mr. Timothy P Halter was appointed the Company's sole officer and director. The Company presently intends to locate and combine with an existing, privately-held company which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged. However, the Company does not intend to combine with a private company which may be deemed to be an investment company subject to the Investment Company Act of 1940. A combination may be structured as a merger, consolidation, exchange of the company's common stock for stock or assets or any other form which will result in the combined enterprise's becoming a publicly-held corporation. Note 2 - Accounting Policies and Procedures The Company has not determined its accounting policies and procedures, except as follows: The company uses the accrual method of accounting. The Company's equipment is depreciated using primarily the straight-line method for financial reporting purposes and amounted to $ 380 during 2003 and $ 380 during 2002. Earnings per share is computed using the weighted average number of shares of common stock outstanding. The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid since inception. In April 1998, the American Institute of Certified Public Accountant's issued Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-up Activities which provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998, with initial adoption reported as the cumulative effect of a change in accounting principle. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Note 3 - Warrants and Options There are no warrants or options outstanding to issue any additional shares of common stock of the Company. Note 4 - Property and Equipment Property and Equipment consists of the following: 2004 2003 Equipment $ $ 3,800 Accumulated Depreciation 380 --------- --------- $ $ 3,420 Note 5 - Going Concern The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred operating losses since inception. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. It is management's plan to seek additional capital through further equity financing's and seeking necessary bank loans. Note 6 - Related Party Transactions The Company neither owns nor leases any real or personal property. Office services are provided without charge by timothy P. Halter, the sole officer and director of the Company. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The sole officer and director of the Company is involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, he may face a conflict in selecting between the Company and his other business interests. The Company has not formulated a policy for the resolution of such conflicts. Note 7 - Officers Advances While the Company is seeking additional capital, an officer of the Company had advanced funds to the Company to pay for any costs incurred by it. These funds are interest free. The balances due Mr. Miller were $-0- and $ 24,143 on June 30, 2004 and June 30, 2003 respectively. Note 8 - Officers Notes Payable Mr. Harry Miller loaned the Company, $ 1,000.00 on October 5, 1999, $ 510 on June 11, 2001, $ 2,000 on June 18, 2001, $140 on September 14, 2001 and $ 1,000 on September 17, 2001 to cover legal costs and filing fees associated with incorporating the company. The loan is evidenced by way of a promissory note, the note carries no interest and is payable in five years. The balances due Mr. Miller were $0 and $0 on June 30, 2004 and 2003, respectively, as Mr. Miller elected to receive 99,858 shares of common stock in satisfaction of these obligations. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS Caution Concerning Forward-Looking Statements --------------------------------------------- The following discussion should be read in conjunction with the company's financial statements and the notes thereto and the other financial information appearing elsewhere in this document. In addition to historical information, the following discussion and other parts of this document contain certain forward-looking information. When used in this discussion, the words "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected due to a number of factors beyond our control. The company does not undertake to publicly update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. You are also urged to carefully review and consider our discussions regarding the various factors, which affect our business, included in this section and elsewhere in this report.. General ------- Since Medina was formed on October 4, 1999, Medina has been involved in research and development of an espresso cart based business. Medina obtained and delivered its first espresso cart to the Bellevue Art Museum on July 30, 2002. This cart subsequently remained in storage awaiting the signing of a written agreement between the parties. During this time Medina obtained all permits necessary to operate the espresso cart at the Bellevue Art Museum. In January 2003, Medina signed a formal agreement with the Bellevue Art Museum and under the terms of this agreement Medina set up an espresso cart outside the Bellevue Art Museum and took over the management of the 510 Cafe located inside the Bellevue Art Museum. In November and December 2002, we operated our espresso cart at the Bellevue Botanical Garden's light festival. Our espresso cart complimented the show of lights and well received by the viewing public. Although the Botanical Gardens requested we return in 2003 we declined their offer as another coffee supplier would also be on the premises at the same time. Plan of Operation On June 14, 2004, Mr. Harry Miller, our principal stockholder, sold 586,224 restricted, common shares (the "Shares") of Medina Coffee, Inc. to Halter Financial Group, Inc., a Texas corporation ("Halter") for $115,000. Halter also paid Mr. Miller $1,050 to compensate Mr. Miller for expenses related to the agreement of sale.. The consideration for the shares was determined as a result of arms-length negotiation between the parties. The Shares sold by Mr. Miller to Halter represented approximately 51% of the issued and outstanding shares of the company. Concurrently with the foregoing transaction, Mr. Miller resigned from the Board of Directors and as an officer of the company and Mr. Timothy P Halter was appointed the company's sole officer and director. The company intends to locate and combine with an existing, privately-held company which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged. However, the company does not intend to combine with a private company which may be deemed to be an investment company subject to the Investment Company Act of 1940. A combination may be structured as a merger, consolidation, exchange of the company's common stock for stock or assets or any other form which will result in the combined enterprise's becoming a publicly-held corporation. Pending negotiation and consummation of a combination, the company anticipates that it will have, aside from carrying on its search for a combination partner, no business activities, and, thus, will have no source of revenue. Should the company incur any significant liabilities prior to a combination with a private company, it may not be able to satisfy such liabilities as are incurred. If the company's management pursues one or more combination opportunities beyond the preliminary negotiations stage and those negotiations are subsequently terminated, it is foreseeable that such efforts will exhaust the company's ability to continue to seek such combination opportunities before any successful combination can be consummated. In that event, the company's common stock will become worthless and holders of the company's common stock will receive a nominal distribution, if any, upon the Company's liquidation and dissolution. Combination Suitability Standards In its pursuit for a combination partner, the company's management intends to consider only combination candidates which are profitable or, in management's view, have growth potential. The company's management does not intend to pursue any combination proposal beyond the preliminary negotiation stage with any combination candidate which does not furnish the company with audited financial statements for at least its most recent fiscal year and unaudited financial statements for interim periods subsequent to the date of such audited financial statements, or is in a position to provide such financial statements in a timely manner. The company will, if necessary funds are available, engage attorneys and/or accountants in its efforts to investigate a combination candidate and to consummate a business combination. The company may require payment of fees by such combination candidate to fund the investigation of such candidate. In the event such a combination candidate is engaged in a high technology business, the company may also obtain reports from independent organizations of recognized standing covering the technology being developed and/or used by the candidate. The company's limited financial resources may make the acquisition of such reports difficult or even impossible to obtain and, thus, there can be no assurance that the company will have sufficient funds to obtain such reports when considering combination proposals or candidates. To the extent the company is unable to obtain the advice or reports from experts, the risks of any combined enterprise's being unsuccessful will be enhanced. Furthermore, to the knowledge of the company's officers and directors, neither the candidate nor any of its directors, executive officers, principal shareholders or general partners: (1) will have been convicted of securities fraud, mail fraud, tax fraud, embezzlement, bribery, or a similar criminal offense involving misappropriation or theft of funds, or be the subject of a pending investigation or indictment involving any of those offenses; (2) will have been subject to a temporary or permanent injunction or restraining order arising from unlawful transactions in securities, whether as issuer, underwriter, broker, dealer, or investment advisor, may be the subject of any pending investigation or a defendant in a pending lawsuit arising from or based upon allegations of unlawful transactions in securities; or (3) will have been a defendant in a civil action which resulted in a final judgment against it or him awarding damages or rescission based upon unlawful practices or sales of securities. The company's officers and directors will make these determinations by asking pertinent questions of the management of prospective combination candidates. Such persons will also ask pertinent questions of others who may be involved in the combination proceedings. However, the officers and directors of the company will not generally take other steps to verify independently information obtained in this manner which is favorable. Unless something comes to their attention which puts them on notice of a possible disqualification which is being concealed from them, such persons will rely on information received from the management of the prospective combination candidate and from others who may be involved in the combination Results of Operations Revenue. Total revenue for the six month period ended June 30, 2004 was $0 compared to revenues of $32,251 for the six month period ended June 30, 2003. We had no revenue in 2002. The majority of our revenues in 2003 were generated from our operations at the Bellevue Art Museum which were subsequently closed in September of 2003 as the museum decided to close its facilities as part of a cost savings measure. Expenses. Our expenses are directly related to the costs of goods sold was $0 for the six month period ended June 30, 2004 compared to $16,725 for the six month period ended June 30, 2003. Our general and administrative costs for the six month period ended June 30, 2004 was $10, 737, compared to general and administrative costs of $40,930 for the six month period ended June 30, 2003. A large portion of these costs are related to professional and other costs associated with maintaining our status as a reporting issuer with the Securities and Exchange Commission. Loss Per Period Medina's net loss for the six months ended June 30, 2004 was $10,737 or approximately $8,197 less than recorded for the same period in 2003, the net losses in the same period in 2003 being $25,404. The majority of these costs and expenses have been covered by the funds received from a former director. -11- Liquidity and Capital Resources As of June 30, 2004, Medina had $0 in cash, and $0 in liabilities. This is in comparison to $472 in cash and $26,329 in liabilities for the quarter ended June 30, 2003. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activity," which was subsequently amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities: Deferral of Effective Date of FASB 133" and Statement No.138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities: an amendment of FASB Statement No. 133." SFAS 137 requires adoption of SFAS 133 in years beginning after June 15, 2000. SFAS 138 establishes accounting and reporting standards for derivative instruments and addresses a limited number of issues causing implementation difficulties for numerous entities. The Statement requires us to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be recorded at fair value through earnings. If the derivative qualifies as a hedge, depending on the nature of the exposure being hedged, changes in the fair value of derivatives are either offset against the change in fair value of hedged assets, liabilities, or firm commitments through earnings or are recognized in other comprehensive income until the hedged cash flow is recognized in earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings. The Statement permits early adoption as of the beginning of any fiscal quarter. SFAS 133 will become effective for our first fiscal quarter of fiscal year 2002 and we do not expect adoption to have a material effect on our financial statements. In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial Statements." SAB 101 summarizes certain aspects of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. On March 24, 2000 and June 26, 2000, the SEC issued Staff Accounting Bulletin No. 101A and No. 101B, respectively, which extend the transition provisions of SAB 101 until no later than the fourth quarter of fiscal years beginning after December 15, 1999, which would be December 31, 2000 for us. In March 2000, the FASB issued FIN 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB No. 25, Accounting for Stock Issued to Employees". This Interpretation clarifies (a) the definition of employee for purposes of applying Opinion 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequences of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. This Interpretation is effective July 1, 2000, but certain conclusions in this Interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. To the extent that this Interpretation covers events occurring during the period after December 15, 1998, or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying this Interpretation are recognized on a prospective basis from July 1, 2000. ITEM 3. CONTROLS AND PROCEDURES The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive Officer/Chief Financial Officer of the Company concluded that the Company's disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely manner. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive Officer/Chief Financial Officer, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES On June 8th, 2004, Mr. Miller agreed to subscribe for, and the Corporation agreed to issue and allot, to Mr. Miller, 99,858 common shares in the capital of the Corporation (the "Shares") in full satisfaction of a debt, in the amount of $49,929, owed by the Corporation to Mr. Miller. The Shares are issued subject to an exemption from registration and are therefore, restricted shares as that term is defined in the Securities Act of 1933. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1 Chief Executive Officer/Chief Financial Officer Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Chief Executive Officer/Chief Financial Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K A Current Report on Form 8-K was filed on June 10, 2004 to report matters under Item 5. A Current Report on Form 8-K was filed on June 15, 2004 to report matters under Items 1 and 6. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Medina Coffee, Inc. Date: August 13, 2004 /s/ Timothy P. Halter -------------------------------- Timothy P. Halter, President and Chief Financial Officer