Medina Form 10-QSB for Period Ended June 30, 2003

10QSB 1 medina10qsbjune2003.htm FORM 10QSB MEDINA COFFEE, INC. PERIOD ENDED JUNE 30, 2003 Medina Form 10-QSB for Period Ended June 30, 2003

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UNITED STATES
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 six month period ended: June 30, 2003

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________

Commission file number: 000-49712

MEDINA COFFEE, INC. (Exact name of small business issuer as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	88-0442833 (IRS Employer Identification No.)

P.O. Box 741, Bellevue, Washington, 98009 (Address of principal executive offices)

(425) 453-0355 (Issuer's telephone number)

N/A (Former name, former address and former fiscal year, if changed since last report)

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

Not Applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

1,052,600 common shares issued and outstanding as of August 14, 2003

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

Table of Contents
			Page No.

PART I - FINANCIAL INFORMATION			1
	ITEM 1. FINANCIAL INFORMATION		1
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		10
		General	10
		Overview	10
		Plan of Operations	10
		Results of Operations	11
		Revenue	11
		Expenses	11
		Loss Per Period/General and Administrative Expenses	11
		Liquidity and Capital Resources	11
		Recent Accounting Pronouncements	11
		"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995	12
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		12
	ITEM 4. CONTROLS AND PROCEDURES		13

PART II - OTHER INFORMATION			13
	ITEM 1. LEGAL PROCEEDINGS		13
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS		13
		Changes in Securities	13
		Recent Sales of Unregistered Securities	13
		Recent Sales of Registered Securities	13
		Use of Proceeds	13
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES		13
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		13
	ITEM 5. OTHER INFORMATION		14
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K		14

SIGNATURES

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The information in this report for the six months ended June 30, 2003 is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise indicated) which Medina Coffee, Inc., ("Medina" or the "Company") considers necessary for a fair presentation of the financial position, results of operations, changes in stockholders' equity and cash flows for those periods.

The condensed consolidated financial statements should be read in conjunction with Medina's financial statements and the notes thereto contained in Medina's Annual Report on Form 10-KSB for the year ended December 31, 2002.

Interim results are not necessarily indicative of results for the full fiscal year.

MEDINA COFFEE, INC

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

JUNE 30, 2003 AND 2002

MEDINA COFFEE, INC

TABLE OF CONTENTS	PAGE #
Financial Statements
Balance Sheet	4
Statement of Operations	5
Statement of Stockholders' Equity	6
Statement of Cash Flows	7
Notes of Financial Statements	8-9

MEDINA COFFEE, INC.
(A Development Stage Company)

(Unaudited) Balance Sheet

Assets	June 30, 2003		June 30, 2002		December31, 2002		December 31, 2001

Cash	$	991	$	9,580	$	4,119	$	20

Total Current Assets		991		9,580		4,119		20
Property & Equipment		3,420		0		3,420		0

TOTAL ASSETS	$	4,411	$	9,580	$	7,539	$	20

Liabilities and Stockholders' Equity
Current Liabilities
Officers Advances (Note #6)	$	8,145	$	3,980	$	3,980	$	3,780
Officers Notes Payable (Note #7)		0		0		0		0
Accounts Payable	$	2,091	$	2,000		592		2,000

Total Current Liabilities		10,236		5,980		4,572		5,780

Stockholders' Equity: Common Stock, $.001 par value, authorized 100,000,000 shares; shares issued and outstanding 1,052,600 at 6/30/03; at 6/30/02; 902,100 at 12/31/02 and 902,100 at 12/31/01 Additional paid in capital Deficit accumulated during the development stage		1,050 16,000 (22,875)		1,050 16,000 (13,450)		1,050 16,000 (14,083)		900 1,100 (7,760)

Total Stockholders' Equity (Deficit)		(5,825)		(13,450)		(2,967)		(5,760)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	4,411	$	9,580	$	7,539	$	20

See accompanying notes

MEDINA COFFEE, INC.
(A Development Stage Company)

(Unaudited) Statement of Operations

	Six months Ended June 30, 2003		Six months Ended June 30, 2002		Year Ended Dec 31, 2002			Year Ended Dec 31, 2001

Income
Revenue	$	25,027	$	-	$		4,720	$	-
Cost of Goods Sold		18,742		-			3,754		-

Gross Profit		6,555		-			966		-

Expenses
General and Administrative		10,436		(5,690)			(7,289)		(3,275)

Total Expenses		10,436		(5,690)		(7,289)			(3,275)
Net Loss	$	(3,881)	$	(5,690)	$	(6,323)		$	(3,275)

Net Loss Per Share Basic and Diluted		($0.0039)		($0.0056)		($0.0061)			($0.0036)

Weighted average number of common shares outstanding		1,013,933		1,013,937		900,267			900,267

See accompanying notes

MEDINA COFFEE, INC.
(A Development Stage Company)

(Unaudited) Statement of Stockholders' Equity

	Common Stock				Additional Paid-In Capital			Deficit accumulated during development s tage
	Shares		Amount		Additional Paid-In Capital			Deficit accumulated during development s tage

Balance December 31, 2001	902,100	$		900	$	1,100	$	(7,760)
Net loss six months ended June 30, 2002								(5,970)
Balance June 30, 2002,	1,052,600			1,050		16,000		(13,450)

Balance December 31, 2002	1,052,600			1,050		16,000		(14,083)
Issue for Cash	0			0		0		0
Net loss six months ended June 30, 2003								(8,762)
Balance June 30, 2003	1,052,600			1,050		16,000		(22,845)

Net loss year ended December 31, 2002								(6,323)
Balance December 31, 2002	1,052,600			1,050		16,000		(14,083)

See accompanying notes

MEDINA COFFEE, INC.
(A Development Stage Company)

(Unaudited) Statement of Cash Flows

	Six months Ended June 30, 2003		Six months Ended June 30, 2002		Year Ended Dec 31, 2002		Year Ended Dec 31, 2001

Cash Flows from Operating Activities
Net (Loss)	$	(8,762)	$	(5,690)	$	(6,323)	$	(3,275)
Depreciation		-		-		380		-
Adjustments to reconcile net loss to cash (used) in operating activities		(3,060)		-		-		-
Changes in assets and liabilities Accounts Payable		2,117		0		(1,408)		0
Officers Notes Payable		0		0		0		0
Officers Advances Payable		4,575		200		2,002		2,980

Net Cash (used) in operating results		(1,984)		(5,490)		(7,151)		(295)

Cash Flows from Financing Activities Proceeds from issuance of stock		(15,050)		15,050		15,050		0
Cash Flows from Investing Activities Purchase of Property.		0		0		0		0

Net increase (decrease) in cash		(12,309)		9,560		4,099		(295)
Cash at Beginning of Period		13,300		20		20		315

Cash at End of Period	$	991	$	9,580		4,119		20

See accompanying notes

MEDINA COFFEE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

June 30, 2003 and 2002

(Unaudited)

Notes 1 - History and Organization of the Company

The Company was organized October 4, 1999, under the laws of the State of Nevada as Medina Copy, Inc. The Company currently has no operations 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 October 6, 1999, the Company changed its name to Medina Coffee, Inc.

The Company has devoted substantially all of its present efforts to: (1) researching the espresso cart industry; (2) searching the Puget Sound Area for potential sites to place an espresso cart; (3) developing a business plan; and (4) preparing an SB-1 prospectus offering to allow the Company to raise capital and test the interest of investors in the espresso cart industry. The Company began operations with a cart in December of 2002. It assumed management of Cafe 510, Bellevue Art Museum in January of 2003.

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 2002 and $ 0 during 2001.

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:

		2002		2001

Equipment	$	3,800	$	-0-
Accumulated Depreciation	$	380	$	-0-

	$	3,420	$	-0-

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 Harry Miller, 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 Notes Payable

Mr. Harry Miller loaned the Company, $1,000 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 balance due to Mr. Miller were $0 and $0 on June 30, 2002 and 2001 respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

The following discussion and analysis should be read in conjunction with the financial statements, including the notes thereto, appearing elsewhere in this document.

Overview

Since Medina was formed on October 4, 1999, Medina has been involved in research and development of its espresso cart based business and it wasn't until December of 2002 it actually commenced operations. Medina took over the management of Cafe 510 at the Bellevue Art Museum and set up its first espresso cart outside the Bellevue Art Museum. Given the foregoing, there were no revenues from operations until the fourth quarter of 2002. Without revenues to offset expenditures, Medina has reported a loss in each of quarter of existence and continues to report a loss due to its early stage in operations.

Plan of Operation

Medina has achieved items one and two, of its original Plan of Operation. During the next six months Medina expects to continue to focus on the following:

1.	Establish an operations procedural manual to ensure that each espresso cart/cafe provides a consistent quality product and a superior level of customer service.
2.	Increase the awareness of the local community of Medina's operations through marketing and promotions.
3.	Continue to evaluate the operating success of our first espresso cart and fine tune operation procedures and future growth plans.
4.	Determine the number of feasible locations in which espresso carts will be placed.

Given the delays experienced in establishing its first location, Medina has scaled back its expectations in opening up additional espresso carts in the Bellevue, Medina and Seattle area over the next six month period. Instead of five additional espresso cart locations Medina hopes to open at least two additional locations in the next six month period.

Medina anticipates the following expenditures over the next six months as it designs, outfits and tests its first espresso cart:

Labour for six months⁽¹⁾	$ 9,000
Rent or lease expenses (twelve months)⁽²⁾	$ 3,000
Miscellaneous	$ 1,500
Total Cost:	$ 13,500

Notes:

(1) Labour costs are higher than originally anticipated as Medina anticipates it will need three employees to operate the espresso cart and 510 Cafe. One employee will be full time and two will be part time.
(2) Medina does not pay a rent to the Bellevue Art Museum in connection with its espresso cart operations. Instead, Medina has agreed to share 50% of any profits after expenses obtained from operating at this location.

Our operations at Cafe 510 are running loss of approximately $1,000 per month after off-set by the Bellevue Art Museum. The off-set provided by the Bellevue Art Museum ended in June 2003 and we expect we will run at a loss of approximately $2,000 per month if we are unable to further increase revenues or reduce our costs. We opened up our espresso cart in front of the Bellevue Art Museum in June 2003. Although we believe this will eventually attract more street and local pedestrian traffic to our location results have been limited due to construction an weather.

Medina's plans over the next six months will require substantial capital investment. The monies currently on hand will not be sufficient to finance Medina's operation over the next six months. Management of Medina estimates it will need a minimum of $50,000 over the next six months to implement its revised business strategy. Medina intends to pay for its expansion using cash generated from sales of operating espresso carts, capital stock, notes and/or assumption of indebtedness. There can be no assurance, however, that sales from operation will materialize or that Medina will be able to secure financing on terms satisfactory to Medina, if at all. Failure by Medina to obtain sufficient additional capital in the future will limit or eliminate Medina's ability to implement its business strategy. Future debt financings, if available, may result in increased interest and amortization expense, increased leverage, decreased income available to fund further acquisitions and expansion, and may limit Medina's ability to withstand competitive pressures and render Medina more vulnerable to economic downturns. Future equity financings may dilute the equity interest of existing stockholders.

Results of Operations

Revenue.

Total revenue for the period ended June 30, 2003 was $ 25,027 compared to revenues of $0 for the period ended June 30, 2002. We had no operations in 2001. The majority of our revenues were derived from our operations at Cafe 510 and our espresso cart operations at the Bellevue Art Museum.

Expenses.

Our expenses are directly related to the costs of goods sold was $ 18,472 for the period year ended June 30, 2003 compared to $0 for the period ended June 30, 2002. Labour formed a large part of this expense. Our general and administrative costs for the period ended June 30, 2003 was $ 10,436 compared to general and administrative costs of $ 5,690 for the period year ended June 30, 2002. 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/General and Administrative Expenses

Medina's net loss for the six months ended June 30, 2003 was $ 3,881 or approximately $ 1,709 less than recorded for the same period in 2002. The majority of the costs and expenses Medina has incurred over the last six months have been related to the cost of compliance with SEC filing requirements as a 12g reporting company. The majority of these costs and expenses have been covered by the funds received from Medina's registered offering.

Liquidity and Capital Resources

As of June 30, 2003, Medina had $ 991 in cash, and $ 10,236 in liabilities of which $ 8,145 is a promissory note to Mr. Miller. The note carries no interest and is payable in five years. Medina acquired its first coffee cart for a cost of $4,006. This is the sole asset of Medina. During the quarter ended June 30, 2002, Medina received $15,050 from the sales of its equity securities under a registered offering. Medina did not sell any further securities in 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.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-QSB report may contain certain "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and/or releases, which represent our expectations or beliefs, including but not limited to, statements concerning our economic performance, financial condition, growth and marketing strategies, availability of additional capital, ability to attract suitable personal and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," "might," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important facts, including but not limited to those risk factors Company's Amended Registration Statement on Form SB-1 filed with the Securities and Exchange Commission on January 8, 2002.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Medina's primary market risk exposure is that of interest rate risk on borrowings under our credit lines, which are subject to interest rates based on the banks' prime rate, and a change in the applicable interest rate that would affect the rate at which we could borrow funds or finance equipment purchases.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) as of a date within ninety days of the filing date of this annual report on Form 10-KSB. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in internal controls.

There were no significant changes in Medina's internal controls or in any factors that could significantly affect internal controls subsequent to the date of the Chief Executive Officer and the Chief Financial Officer's evaluation.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

To Medina's knowledge, no lawsuits were commenced against Medina during the quarter ended June 30, 2003, nor did Medina Commence any lawsuits during the same period.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Changes in Securities

None.

Recent Sales of Unregistered Securities

None.

Recent Sales of Registered Securities

None.

Use of Proceeds

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits.

Exhibit Number	Exhibit Title
3.1	Articles of Incorporation as Amended (incorporated by reference from our Form SB-1 Registration Statement, filed July 10, 2000)
3.2	Articles of Amendment (incorporated by reference from our Form SB-1 Registration Statement, filed July 10, 2000)
3.2	Bylaws (incorporated by reference from our Form SB-1 Registration Statement, filed July 10, 2000)
31	Certificate of CEO/CFO as Required by Rule 13a-14(a)/15d-14
32	Certificate of CEO/CFO as Required by Rule Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code

b. Reports of Form 8-K.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEDINA COFFEE, INC.
Date: August 14, 2003	/s/ Harry Miller By:_____________________________ Harry Miller, Chief Executive Officer, President, Secretary and Director