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: September 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)
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 November 1, 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 September 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 September September December December
------ 30, 2004 30, 2003 31, 2003 31, 2002
----------- ----------- ----------- -----------
Current Assets
Cash $ 18,328 $ 1,200 $ 108 $ 4,119
----------- ----------- ----------- -----------
Total Current Assets 18,328 1,200 108 4,119
Property & Equipment 0 3,420 3,040 3,420
----------- ----------- ----------- -----------
TOTAL ASSETS $ 18,328 $ 4,620 $ 3,148 $ 7,539
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Officers Advances (Note #6) $ 20,000 $ 21,431 $ 42,340 $ 3,980
Officers Notes Payable 0 0 0 0
Accounts Payable 0 0 0 592
----------- ----------- ----------- -----------
Total Current Liabilities 20,000 21,431 42,340 4,572
----------- ----------- ----------- -----------
Stockholder's Equity: Common stock, $.001 par
value, authorized 100,00,000 shares; 1,152,458;
1,052,600; 1,052,600; and 1,052,600 shares issued
and outstanding at September 30, 2004, September
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
(68,651) (33,861) (56,242) (14,083)
----------- ----------- ----------- -----------
Total Stockholder's Equity (Deficit) (1,672) (16,811) (39,192) 2,967
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY (DEFICIT)
$ 18,328 $ 4,620 $ 3,148 $ 7,539
=========== =========== =========== ===========
See accompanying notes
F-1
MEDINA COFFEE, INC.
(A Development Stage Company)
(Unaudited) Statement of Operations
-----------------------------------
October 4,
1999
Nine Months Nine Months (inception)
Ended Ended Year Ended Year Ended to
September September December December September
30, 2004 30, 2003 31, 2003 31, 2002 30, 2004
----------- ----------- ----------- ----------- -----------
Revenue $ -- $ 33,354 $ 40,914 $ 4,720 $ 45,634
Cost of Goods Sold -- 23,226 21,599 3,754 25,353
----------- ----------- ----------- ----------- -----------
Gross Profit $ -- $ 10,128 $ 19,315 $ 966 $ 20,281
General and Administrative 12,409 29,906 61,474 7,289 88,932
----------- ----------- ----------- ----------- -----------
Net Loss $ (12,409) $ (19,778) $ (42,159) $ (6,323) $ (68,651)
=========== =========== =========== =========== ===========
Net Loss per share
Basic and diluted $ (0.0118) $ (0.0188) $ (0.0401) $ (0.0061) $ (0.0729)
Weighted average number of
common shares outstanding 1,052,600 1,052,600 1,052,600 1,033,267 941,126
=========== =========== =========== =========== ===========
See accompanying notes
F-2
MEDINA COFFEE, INC.
(A Development Stage Company)
(Unaudited) Statement of Stockholder's Equity
---------------------------------------------
Deficit
accumulated
Additional during
Common Stock Paid-in development
Shares Amount capital stage
----------- ----------- ----------- -----------
Balance December 31, 2002 1,052,600 $ 1,050 $ 16,000 $ (14,083)
----------- ----------- ----------- -----------
Net loss nine months ended
September 30, 2003 -- -- -- (19,778)
Balance September 30, 2003 1,052,600 $ 1,050 $ 16,000 $ (33,861)
=========== =========== =========== ===========
Balance December 31, 2003 1,052,600 $ 1,050 $ 16,000 $ (56,242)
Net loss nine months ended
September 30, 2004 -- -- -- (12,409)
Exchange Debt for Stock 99,858 100 49,829 --
Balance September 30, 2004 1,152,458 $ 1,150 $ 65,829 $ (68,651)
=========== =========== =========== ===========
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
F-3
MEDINA COFFEE, INC.
(FORMERLY MEDINA COPY, INC.)
(A Development Stage Company)
(Unaudited) Statement of Cash Flows
-----------------------------------
October 4,
Nine Nine 1999
Months Months (inception)
Ended Ended Year Ended Year Ended to
September September December December September
30, 2004 30, 2003 31, 2003 31, 2002 30, 2004
----------- ----------- ----------- ----------- -----------
Cash Flows from Operating Activities
Net (Loss) $ (12,409) $ (19,778) $ (42,159) $ (6,323) $ (68,651)
Depreciation -- -- 380 380 760
Adjustments to reconcile
net loss to cash (used) in
operating activities
Cash in assets and liabilities
Accounts Payable 0 (592) (592) (1,408) 0
Officers Notes Payable 0 0 0 0 0
Officers Advances Payable (22,340) 17,451 38,360 200 20,000
----------- ----------- ----------- ----------- -----------
Net Cash (used in
operating results (34,749) (2,919) (4,011) (7,151) (47,891)
----------- ----------- ----------- ----------- -----------
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 18,220 (2,919) (4,011) 4,099 18,328
Cash at Beginning of Period 108 4,119 4,119 20 0
----------- ----------- ----------- ----------- -----------
Cash at End of Period $ 18,328 $ 1,200 $ 108 $ 4,119 $ 18,328
=========== =========== =========== =========== ===========
See accompanying notes
F-4
MEDINA COFFEE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 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
President and CEO of the company, 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 de 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.
F-5
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 -- 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
F-6
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 has advanced funds to the company to pay for any costs incurred by it.
These funds are interest free. The balance due Mr. Miller was $ 21,431 on
September 30, 2003. The balance due Mr. Halter was $20,000 on September 30,
2004.
F-7
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 Plan of Operation
We were formed on October 4, 1999 for the purpose of developing an
espresso cart based business. We obtained and delivered our first espresso cart
to the Bellevue Art Museum on July 30, 2002. However, by the end of fiscal 2003,
the decision was made to cease operations in the espresso cart business.
On June 14, 2004, Mr. Harry Miller, our then 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 our issued and outstanding common shares.
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.
We presently intend 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, we do
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, we anticipate
that we will have, aside from carrying on our search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should we
incur any significant liabilities prior to a combination with a private company,
we may not be able to satisfy such liabilities as they incurred.
If we pursue one or more combination opportunities beyond the
preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust our ability to
continue to seek such combination opportunities before any successful
combination can be consummated. In that event, our common stock will become
worthless and holders will receive a nominal distribution, if any, upon the our
liquidation and dissolution.
In our pursuit for a combination partner, management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. Management does not intend to pursue any
combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish us 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. We will, if necessary funds are available, engage attorneys and/or
accountants in our efforts to investigate a combination candidate and to
consummate a business combination. We 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, we may
also obtain reports from independent organizations of recognized standing
covering the technology being developed and/or used by the candidate. Our
limited financial resources may make the acquisition of such reports difficult
or even impossible to obtain and, thus, there can be no assurance that we will
have sufficient funds to obtain such reports when considering combination
proposals or candidates.
To the extent we are unable to obtain the advice or reports from
experts, the risks of any combined enterprise's being unsuccessful will be
enhanced. Furthermore, to our knowledge, 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.
We 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, we will not generally take other steps to verify
independently information obtained in this manner which is favorable. Unless
something comes to our attention which puts us on notice of a possible
disqualification which is being concealed from them, we 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 nine month period ended September 30, 2004 was $0
compared to revenues of $33,354 for the nine month period ended September 30,
2003. 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 were $0
for the nine month period ended September 30, 2004 compared to $23,226 for the
nine month period ended September 30, 2003. Our general and administrative costs
for the nine month period ended September 30, 2004 were $12,409, compared to
general and administrative costs of $29,906 for the nine month period ended
September 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 U.S. Securities and Exchange Commission.
Loss Per Period.
Our net loss per share for the nine months ended September 30, 2004 was
$(0.0118), the net loss per share in the same period in 2003 being $0.0188.
Liquidity and Capital Resources.
As of September 30, 2004, we had $18,328 in cash and $20,000 in
liabilities. This is in comparison to $1,200 in cash and $21,431 in liabilities
for the quarter ended September 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
We maintain controls and procedures designed to ensure that information
required to be disclosed in the reports that we file or submit 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, our Chief
Executive Officer/Chief Financial Officer concluded that our 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.
We 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 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
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: November 3, 2004 /s/ Timothy P. Halter
----------------------------
Timothy P. Halter, President
and Chief Financial Officer