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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY OR TRANSITIONAL REPORT
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-20549
BRAVO! FOODS INTERNATIONAL CORP.
(Exact name of registrant as specified in its amended charter)
formerly
China Premium Food Corporation
Delaware 62-1681831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11300 US Highway 1, North Palm Beach, Florida 33408 USA
(Address of principal executive offices)
(561) 625-1411
Registrant's telephone number
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(Former name, former address and former fiscal year
if changed since last report)
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date is as follows:
Date Class Shares Outstanding
August 6, 2004 Common Stock 42,951,792
Transitional Small Business Disclosure Format (Check One) YES [ ] NO [x]
BRAVO! FOODS INTERNATIONAL CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated balance sheets as of F-1
June 30, 2004 (unaudited) and December 31, 2003
Consolidated statements of operations F-3
(unaudited) for the three and six months ended
June 30, 2004 and 2003
Consolidated statements of cash flows F-4
(unaudited) for the six months ended
June 30, 2004 and 2003
Notes to consolidated financial statements (unaudited) F-5
Item 2. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
Item 3. Controls and Procedures 25
PART II - OTHER INFORMATION
Item 2. Changes In Securities and Use of Proceeds 25
Item 6. Exhibits and reports on Form 8-K 29
SIGNATURES 30
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
ONSOLIDATED BALANCE SHEETS
December 31, June 30,
2003 2004
------------ --------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 58,859 $ 682,732
Accounts receivable - net 25,921 603,167
Other receivables 6,331 6,331
Inventories 54,995 87,783
Prepaid expenses 201,617 638,026
----------- -----------
Total current assets 347,723 2,018,039
Furniture and equipment, net 68,623 63,427
License rights, net of accumulated
amortization 24,065 156,106
Deferred product development costs 41,711 173,452
Deposits 10,736 10,736
----------- -----------
Total assets $ 492,858 $ 2,421,760
=========== ===========
Liabilities and Capital Deficit
Current liabilities:
Note payable to International Paper $ 187,743 $ 187,743
Notes payable to Alpha Capital 100,000 113,863
Note payable to Mid-Am Capital LLC 150,000 58,902
Note payable to Libra Finance - 19,791
Note payable to Longview - 13,863
Note payable to Stonestreet - 6,605
Note payable to Whalehaven - 1,219
Note payable to Bi-Coastal - 19,791
Note payable to Gem Funding - 2,083
Note payable to Warner Brothers 147,115 147,115
Accounts payable 2,123,705 1,834,004
Accrued liabilities 610,665 916,078
----------- -----------
Total current liabilities 3,319,228 3,321,057
Dividends payable 582,823 734,035
Other notes payable 310,098 285,988
----------- -----------
Total liabilities 4,212,149 4,341,080
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F-1
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2003 2004
------------ --------
(Unaudited)
Commitments and contingencies
Capital Deficit (Note 2):
Series B convertible, 9% cumulative, and
redeemable preferred stock, stated
value $1.00 per share, 1,260,000 shares
authorized, 107,440 shares issued
and outstanding, redeemable at $107,440 107,440 107,440
Series F convertible and redeemable
preferred stock, stated value $10.00
per share, 130,515 and 75,515 shares
issued and outstanding 1,205,444 697,461
Series G convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 58,810 shares
issued and outstanding in 2003 520,604 -
Series H convertible, 7% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 165,500 shares
issued and outstanding 895,591 895,591
Series I convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 30,000 shares
issued and outstanding 72,192 72,192
Series J convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 200,000 shares
issued and outstanding 1,854,279 1,854,279
Series K convertible, 8% cumulative and
redeemable preferred stock, stated
value $10.00 per share, 95,000 shares
issued and outstanding - 950,000
Common stock, par value $0.001 per share,
300,000,000 shares authorized,
28,047,542 and 42,951,792 shares issued
and outstanding 28,045 42,949
Additional paid-in capital 21,144,896 25,232,580
Accumulated deficit (29,548,471) (31,772,501)
Translation adjustment 689 689
----------- -----------
Total capital deficit (3,719,291) (1,919,320)
----------- -----------
Total liabilities and capital deficit $ 492,858 $ 2,421,760
=========== ===========
See accompanying notes.
F-2
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, Three Months Ended June 30,
2003 2004 2003 2004
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue - unit sales $ 226,060 $ 1,489,185 $ 133,142 $ 1,121,727
Revenue - net kit sales 2,737 - - -
Revenue - gross kit sales 523,103 390,377 221,328 319,629
----------- ----------- ----------- -----------
Total revenue 751,900 1,879,562 354,470 1,441,356
Cost of sales (122,535) (1,265,087) (42,173) (934,966)
----------- ----------- ----------- -----------
Gross margin 629,365 614,475 312,297 506,390
Selling expenses 680,530 617,420 319,455 364,382
Product development 1,654 21,172 1,160 17,527
General and administrative expense 1,291,131 1,662,027 518,661 961,061
----------- ----------- ----------- -----------
Loss from operations (1,343,950) (1,686,144) (526,979) (836,580)
Other (income) expense
Interest expense 4,079 74,995 2,035 43,310
----------- ----------- ----------- -----------
Loss before income taxes (1,348,029) (1,761,139) (529,014) (879,890)
Provision for income taxes - - - -
----------- ----------- ----------- -----------
Net loss (1,348,029) (1,761,139) (529,014) (879,890)
Dividends accrued for Series B preferred stock (4,795) (4,822) (2,411) (2,411)
Dividends accrued for Series G preferred stock (27,406) (15,633) (13,607) (4,769)
Dividends accrued for Series H preferred stock (60,920) (57,766) (30,628) (28,883)
Dividends accrued for Series I preferred stock (11,902) (11,968) (5,984) (5,984)
Dividends accrued for Series J preferred stock (58,302) (79,780) (34,302) (39,890)
Deemed dividend for Series J preferred stock (367,211) - (92,491) -
Dividends accrued for Series K preferred stock - (24,319) - (18,883)
----------- ----------- ----------- -----------
Net loss applicable to common shareholders $(1,878,565) $(1,955,427) $ (708,437) $ (980,710)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 25,938,434 35,398,982 26,032,085 39,796,419
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.07) $ (0.06) $ (0.03) $ (0.02)
=========== =========== =========== ===========
Comprehensive loss and its components
consist of the following:
Net loss $(1,348,029) $(1,761,139) $ (529,014) $ (879,890)
Foreign currency translation adjustment (272) - (3,319) -
----------- ----------- ----------- -----------
Comprehensive loss $(1,348,301) $(1,761,139) $ (532,333) $ (879,890)
=========== =========== =========== ===========
See accompanying notes.
F-3
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2003 2004
---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $(1,348,029) $(1,761,139)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 49,515 148,618
Stock issuance for compensation and finder's fee 28,000 116,000
Registration costs for financing - (1,783)
Loss on disposal of fixed assets 15,853 -
Increase (decrease) from changes in:
Accounts receivable 96,510 (577,246)
Other receivable (61,056) -
Advance to vendors (13) -
Inventories (80) (32,788)
Prepaid expenses (99,919) (436,409)
Accounts payable and accrued expenses 324,452 15,713
Deferred product development costs - (279,241)
----------- -----------
Net cash used in operating activities (994,767) (2,808,275)
----------- -----------
Cash flows from investing activities:
Purchase of equipment (15,367) (7,852)
----------- -----------
Net cash used in investing activities (15,367) (7,852)
----------- -----------
Cash flows from financing activities:
Proceeds of Series J preferred stock 1,000,000 -
Proceeds of Series K preferred stock - 950,000
Convert account payable into note payable - 1,128,386
Convertible notes payable - 2,640,000
Payment of note payable, bank loan and license
fee payable (122,938) (1,278,386)
----------- -----------
Net cash provided by financing activities 877,062 3,440,000
----------- -----------
Effect of changes in exchange rates on cash (272) -
----------- -----------
Net (decrease) increase in cash and cash equivalents (133,344) 623,873
Cash and cash equivalents, beginning of period 224,579 58,859
----------- -----------
Cash and cash equivalents, end of period $ 91,235 $ 682,732
=========== ===========
See accompanying notes.
F-4
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 -Interim Periods
The accompanying unaudited consolidated financial statements include the
accounts of Bravo! Foods International, Corp. and its wholly owned
subsidiary China Premium Food Corp (Shanghai) Co., Ltd. (the "Company").
The Company is engaged in the sale of flavored milk products and flavor
ingredients in the United States, Mexico and nine countries in the Middle
East.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10QSB and
Article 10 of Regulation S-X. All significant inter-company accounts and
transactions have been eliminated in consolidation. The consolidated
financial statements are presented in U.S. dollars. Accordingly, the
accompanying financial statements do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the period
ended June 30, 2004 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2004. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report for the year ended December
31, 2003.
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 $31,772,501, a capital deficit
of $1,919,320, negative working capital of $1,303,018 and is delinquent on
certain of its debts at June 30, 2004. Further, the Company's auditors
stated in their report on the Company's Consolidated Financial Statements
for the year ended December 31, 2003, that these conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management plans to increase gross profit margins in its U.S.
business, grow its international business, and obtain additional financing
and is in the process of repositioning its products with the launch of four
new product lines in the second and third quarters of 2004. 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 and has raised $3,590,000 in the first
and second quarters of 2004. No assurances can be given that the Company
will be successful in carrying out its plans. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Revenue Recognition
The Company recognizes revenue in the United States at the gross amount of
its invoices for the sale of finished product to wholesale buyers.
Commencing with the first quarter 2004, the Company no longer uses the sale
of "kits" as a revenue event in the United States. Rather, the Company takes
title to its branded flavored milks when they are shipped by the
Company's third party processors and recognize as revenue the gross
wholesale price charged to the
F-5
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company's wholesale customers. Expenses for slotting fees and certain
promotions are treated as a reduction of reported revenue. The Company
determines gross margin by deducting from the reported wholesale price the
cost charged by the Company's third party processors to produce the branded
milk products. The sale of "kits" will remain as the revenue model for the
Company's international business.
The Company recognizes revenue for its international business at the gross
amount of its invoices for the sale of flavor ingredients and production
rights (collectively referred to as "kits") at the time of shipment of
flavor ingredients to processor dairies with whom the Company has
production contracts 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 for the processors' purchase of
flavor ingredients and fees charged by the Company to the processors for
production rights. The Company formulates the price of production rights
to cover its royalties under intellectual property licenses, which varies
by licensor as a percentage 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 goods sold the cost of flavor ingredients
paid by the processor dairies to ingredients suppliers. 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.
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 statements of operations on a
gross basis, whereby the total amount billed to the customer is recognized
as revenue.
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.
F-6
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
Six Months Ended
June 30,
------------------------------
2003 2004
---- ----
Net loss applicable to common
shareholders as reported: $(1,878,565) $(1,955,427)
Add: total stock based employee
compensation expense determined
under fair value method for all awards (4,500) -
----------- -----------
Pro forma net loss $(1,883,065) $(1,955,427)
=========== ===========
Loss per share:
As reported $ (0.07) $ (0.06)
Pro forma $ (0.07) $ (0.06)
Note 2 - Transactions in Capital Deficit
On February 1, 2004, the Company agreed to issue 750,000 shares of
its common stock and warrants to purchase an additional 750,000 shares of
common stock to Marvel Enterprises, Inc. The Company issued its equity in
connection with the grant of an intellectual property license by Marvel on
January 17, 2004, giving the Company the right to use certain Marvel Comics
characters on the Company's Slammers(r) line of flavored milks. The
warrants have an exercise price of $0.10 per share for the first year and,
upon the occurrence of certain conditions tied to the royalty performance
under the license, can be extended for an additional year with an exercise
price of $0.14 per share. The Company made this private offering to Marvel
Enterprises, an accredited investor, pursuant to Rule 506 of Regulation D
and Section 4(2) of the Securities Act of 1933.
On February 12, 2004, the Company held a special meeting of
shareholders at which the shareholders approved an increase of the
Company's authorized common stock from 50,000,000 shares to 300,000,000
shares.
On February 17, 2004, the Company converted 875 shares of Series G
Convertible Preferred Stock into 215,164 shares of common stock pursuant to
a January 12, 2004 notice of conversion from Nesher, LP, at a conversion
price of $0.0407. The conversion did not include accrued and unpaid
dividends on the converted preferred. The Company and the holder delayed
processing this notice in light of the Company's special meeting of
shareholders held February 12, 2004. The shares of common stock issued
pursuant to this conversion were retired and cancelled on March 5, 2004 and
issued to third parties on that date in accordance with the instructions of
Nesher, LP.
On February 17, 2004, the Company converted 1,400 shares of Series G
Convertible Preferred Stock into 343,980 shares of common stock pursuant to
a January 12, 2004 notice of
F-7
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
conversion from Talbiya Investments, Ltd., at a conversion price of
$0.0407. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company and the holder delayed processing
this notice in light of the Company's special meeting of shareholders held
February 12, 2004. The shares of common stock issued pursuant to this
conversion were retired and cancelled on March 5, 2004 and issued to third
parties on that date in accordance with the instructions of Talbiya
Investments, Ltd.
On February 17, 2004, the Company converted 700 shares of Series G
Convertible Preferred Stock into 172,162 shares of common stock pursuant to
a January 12, 2004 notice of conversion from The Keshet Fund, LP, at a
conversion price of $0.0407. The conversion did not include accrued and
unpaid dividends on the converted preferred. The Company and the holder
delayed processing this notice in light of the Company's special meeting of
shareholders held February 12, 2004. The shares of common stock issued
pursuant to this conversion were retired and cancelled on March 5, 2004 and
issued to third parties on that date in accordance with the instructions of
The Keshet Fund, LP.
On February 17, 2004, the Company converted 2,025 shares of Series G
Convertible Preferred Stock into 497,951 shares of common stock pursuant to
a January 12, 2004 notice of conversion from Keshet LP, at a conversion
price of $0.0407. The conversion did not include accrued and unpaid
dividends on the converted preferred. The Company and the holder delayed
processing this notice in light of the Company's special meeting of
shareholders held February 12, 2004. The shares of common stock issued
pursuant to this conversion were retired and cancelled on March 5, 2004 and
issued to third parties on that date in accordance with the instructions of
Keshet, LP.
On March 1, 2004, the Company issued 80,000 shares of non-voting
Series K 8% Convertible Preferred stock, to Mid-Am Capital, LLC, having a
stated value of $10.00 per Preferred K share, for the aggregate purchase
price of $800,000. Each preferred share is convertible to 100 shares of
the Company's common stock at a conversion price of $0.10, representing
8,000,000 shares of common stock underlying the preferred. In addition,
the following adjustments were made to prior issued warrants for the
purpose of facilitating future fund raising by the Company arising out of
the exercise of the warrants by Holder. The purchase price, as defined in
the Warrant No. 2003-B-002, has been reduced to $0.10, subject to further
adjustment as described in the warrant. The expiration date, as defined in
the warrant, remains as stated. 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 March 1, 2004, the Company issued 750,000 shares of its common
stock to Knightsbridge in compensation for services to be rendered,
pursuant to a November 2003 engagement letter with Knightsbridge Holdings,
LLC for business and operational consulting services. The Company delayed
the issuance of these shares owing to the necessity of a special meeting of
shareholders to increase the Company's authorized shares, which took place
in February 2004. On March 1, 2004, Knightsbridge commenced its services
and the Company issued the shares of common stock.
F-8
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 9, 2004, the Company converted 5,000 shares of Series F
Convertible Preferred Stock into 1,315,789 shares of common stock pursuant
to a January 8, 2004 notice of conversion from Esquire Trade & Finance
Inc., at a conversion price of $0.038. The conversion did not include
accrued and unpaid dividends on the converted preferred. The Company and
the holder delayed processing this notice in light of the Company's special
meeting of shareholders held February 12, 2004. The shares of common stock
issued pursuant to this conversion were issued to third parties in
accordance with the instructions of Esquire Trade & Finance Inc.
On April 1 2004, the Company converted 5,000 shares of Series F
Convertible Preferred Stock into 1,315,789 shares of common stock pursuant
to a January 27, 2004 notice of conversion from Austinvest Anstalt Balzers,
at a conversion price of $0.038. The conversion did not include accrued
and unpaid dividends on the converted preferred. The Company and the
holder delayed processing this notice in light of the Company's special
meeting of shareholders held February 12, 2004. The shares of common stock
issued pursuant to this conversion were issued to third parties on that
date in accordance with the instructions of Austinvest Anstalt Balzers.
The Company issued the preferred and the underlying common stock upon
conversion to an accredited investor, pursuant to a Regulation D offering.
On April 2, 2004, the Company and Mid-Am Capital, LLC entered into
Supplement No.1 to the Series K Convertible Preferred Subscription
Agreement, by which the Company sold an additional 15,000 shares of its
Series K Convertible Preferred Stock utilizing the proceeds from a certain
promissory note issued by the Company to Mid-Am in the face amount of
$150,000. With the consummation of this sale, the $150,000 promissory note
was deemed paid in full by the Company. The Company issued the preferred
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 4,862 shares of Series G
Convertible Preferred Stock into 700,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from Nesher, LP, at a conversion
price of $0.0853. The conversion included accrued and unpaid dividends of
$11,089 on the preferred converted. The Company issued the preferred and
the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 4,478 shares of Series G
Convertible Preferred Stock into 650,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from Talbiya B. Investments, Ltd., at
a conversion price of $0.0853. The conversion included accrued and unpaid
dividends of $10,662 on the preferred converted. The Company issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 1,919 shares of Series G
Convertible Preferred Stock into 275,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from The Keshet Fund, LP, at a
conversion price of $0.0853. The conversion included accrued
F-9
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
and unpaid dividends of $4,265 on the preferred converted. The Company
issued the preferred and the underlying common stock upon conversion to an
accredited investor, pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 7,677 shares of Series G
Convertible Preferred Stock into 1,100,000 shares of common stock pursuant
to a March 25, 2004 notice of conversion from Keshet, LP, at a conversion
price of $0.0853. The conversion included accrued and unpaid dividends of
$17,060 on the preferred converted. The Company issued the preferred and
the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 20, 2004, the Company entered into a Subscription Agreement
with Longview Fund, LP and Alpha Capital Aktiengesellschaft for the
issuance of two convertible 10% notes in the amount of $250,000 each and
five-year warrants for the purchase of, in the aggregate, 3,000,000 shares
of common stock, at $0.15 per share. The notes are convertible into shares
of common stock of the Company at $0.10 per common share. Conversions are
limited to a maximum ownership of 9.99% of the underlying common stock at
any one time. The notes are payable in twelve equal monthly installments,
commencing November 1, 2004. The installment payments consist of principal
and a "premium" of 20% of the principal paid per installment. The Company
has the option to defer such payment until the note's maturity date on
October 1, 2005, if the Company's common stock trades above $0.20 for the
five trading days prior to the due date of an installment payment. In
connection with this transaction, the Company issued two additional notes
in the aggregate amount of $50,000, upon identical terms as the principal
notes, as a finder's fee, and paid $20,000 in legal fees. The common stock
underlying all notes and warrants carry registration rights. The Company
issued the convertible notes and warrants to accredited investors, pursuant
to a Regulation D offering.
On April 30, 2004, the Company converted 20,000 shares of Series F
Convertible Preferred Stock into 1,945,525 shares of common stock pursuant
to an April 27, 2004 notice of conversion from Esquire Trade & Finance
Inc., at a conversion price of $0.1028. The Company issued the preferred
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 30, 2004, the Company converted 20,000 shares of Series F
Convertible Preferred Stock into 1,945,525 shares of common stock pursuant
to an April 27, 2004 notice of conversion from Austinvest Anstalt Balzers,
at a conversion price of $0.1028. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On April 30, 2004, the Company converted 2,500 shares of Series F
Convertible Preferred Stock into 243,191 shares of common stock pursuant to
an April 27, 2004 notice of conversion from Esquire Trade & Finance Inc.,
at a conversion price of $0.1028. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
F-10
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On April 30, 2004, the Company converted 2,500 shares of Series F
Convertible Preferred Stock into 243,191 shares of common stock pursuant to
an April 27, 2004 notice of conversion from Austinvest Anstalt Balzers, at
a conversion price of $0.1028. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On May 20, 2004, the Company converted 9,226 shares of Series G
Convertible Preferred Stock into 620,578 shares of common stock pursuant to
a May 19, 2004 notice of conversion from Nesher, LP, at a conversion price
of $0.148. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On May 20, 2004, the Company converted 13,972 shares of Series G
Convertible Preferred Stock into 939,782 shares of common stock pursuant to
a May 19, 2004 notice of conversion from Keshet, LP, at a conversion price
of $0.148. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On June 17, 2004, the Company issued 87,195 of its common stock to
Stephen Nollau, a former consultant, for services rendered. The Company
issued the common stock pursuant to a Form S-8 registration statement,
filed by the Company on June 16, 2004.
On June 29, the Company converted 234 shares of Series G Convertible
Preferred Stock into 13,604 shares of common stock pursuant to a June 15,
2004 notice of conversion from Nesher, LP, at a conversion price of $0.172.
The conversion did not include accrued and unpaid dividends on the
converted preferred. The Company issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering. This conversion exhausted the outstanding Series G
convertible preferred.
On June 29, the Company converted 1,850 shares of Series G
Convertible Preferred Stock into 107,558 shares of common stock pursuant to
a June 15, 2004 notice of conversion from Keshet, LP, at a conversion price
of $0.172. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering. This conversion exhausted the outstanding
Series G convertible preferred.
On June 29, the Company converted 3,472 shares of Series G
Convertible Preferred Stock into 201,860 shares of common stock pursuant to
a June 15, 2004 notice of conversion from The Keshet Fund, LP, at a
conversion price of $0.172. The conversion did not include accrued and
unpaid dividends on the converted preferred. The Company issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a
F-11
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Regulation D offering. This conversion exhausted the outstanding Series G
convertible preferred.
On June 29, the Company converted 8,091 shares of Series G
Convertible Preferred Stock into 470,406 shares of common stock pursuant to
a June 15, 2004 notice of conversion from Talbiya B. Investments, Ltd, at a
conversion price of $0.172. The conversion did not include accrued and
unpaid dividends on the converted preferred. The Company issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering. This conversion exhausted
the outstanding Series G convertible preferred.
On June 30, 2004, the Company entered into Subscription Agreements
with Longview Fund, LP, Alpha Capital Aktiengesellschaft, Whalehaven Funds
Limited, Stonestreet Limited Partnership and Mid-Am Capital L.L.C for the
issuance of convertible 10% notes in the aggregate amount of $1,300,000 and
five-year "A" warrants for the purchase of, in the aggregate, 5,200,000
shares of common stock, at $0.25 per share, and five-year "B" warrants for
the purchase of, in the aggregate, 13,000,000 shares of common stock, at
$2.00 per share. The notes are convertible into shares of common stock of
the Company at $0.15 per common share. Conversions are limited to a
maximum ownership of 9.99% of the underlying common stock at any one time.
The notes are payable in twelve equal monthly installments, commencing
January 1, 2005. The installment payments consist of principal and a
"premium" of 20% of the principal paid per installment. The Company has
the option to defer such payment until the note's maturity date on December
1, 2005, if the Company's common stock trades above $0.20 for the five
trading days prior to the due date of an installment payment. In
connection with this transaction, the Company issued additional notes in
the aggregate amount of $40,000 to Gem Funding, LLC, Bi-Coastal Consulting
Corp., Stonestreet Limited Partnership and Libra Finance, S.A upon
identical terms as the principal notes, as a finder's fee, and paid $12,500
in legal fees. The common stock underlying all notes and warrants carry
registration rights. The Company issued the convertible notes and warrants
to accredited investors, pursuant to a Regulation D offering.
F-12
BRAVO! FOODS INTERNATIONAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 - Business Segment and Geographic Information
The Company operates principally in the single serve flavored milk industry
segment, under two distinct business models. In the United States, the
Company is responsible for the sale of finished Slammers(r) flavored milk
(referred to as "unit sales") to retail outlets. For these unit sales, the
Company recognizes as revenue the invoiced wholesale prices that the
Company charges to the retail outlets that purchase the Slammers(r)
flavored milks. In countries other than the United States, the Company's
revenue is generated by the sale of kits to dairy processors. Each kit
consists of flavor ingredients for the Company's Slammers(r) 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. The
Company currently sells kits to SADAFCO, a third party dairy processor
located in Saudi Arabia, for distribution to eleven Middle Eastern
countries.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2004
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 the development and marketing
of a Company owned Slammers(r) trademarked brand, the obtaining of license
rights from third party holders of intellectual property rights to other
trademarked brands, logos and characters and the granting of production and
marketing rights to processor dairies to produce branded flavored milk.
The Company generates revenue in its international (non-US) business
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 generates revenue from the unit sales of
finished branded flavored milks to retail consumer outlets.
The Company's new product introduction and growth expansion continues
to be expensive, and the Company reported a net loss of $1,761,139 for the
six-month period ended June 30, 2004, with a net loss of $879,890 for the
three months ended June 30, 2004. As shown in the accompanying financial
statements, the Company has suffered operating losses and negative cash
flows from operations since inception and at June 30, 2004 has an
accumulated deficit, a capital deficit, is delinquent on certain debts and
has 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 international business 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 management will be successful in carrying out
the Company's plans.
14
CORPORATE GOVERNANCE
The Board of Directors
The Company's board has positions for seven directors that are elected
as Class A or Class B directors at alternate annual meetings of the
Company's shareholders. Six of the seven current 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, and the audit committee in
particular, reviews the Company's financial condition and 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 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 CFO's office, from which the Company
prepares financial reports. These financial reports are audited or
reviewed by Lazar Levine & Felix LLP, independent certified accountants and
auditors. The Company's chief financial officer reviews the preliminary
financial and non-financial information prepared in house with the
Company's securities counsel and 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. Currently, there is one vacancy on the audit
committee.
Compensation Committee
The Company's compensation committee is composed of three independent
directors who 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. Currently, there is one
vacancy on the compensation committee.
15
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
United States
-------------
The Company recognizes revenue in the United States at the gross
amount of its invoices for the sale of finished product to wholesale
buyers. The Company takes title to its branded flavored milks when
they are shipped by the Company's third party processors and recognize as
revenue the gross wholesale price charged to the Company's wholesale
customers. The Company's gross margin is determined by the reported
wholesale price less the cost charged by Jasper Products, the Company's
third party processor, to produce the branded milk products.
Prior to 2004, the Company reported revenue in the United States from
its sale of "kits" to third party dairy processors and from the differential
between the cost of producing finished product and the wholesale price of its
finished product. Commencing in 2004, the Company reports revenue from its
sale of finished product on the wholesale level. The Company reports the cost
of production charged by a third party dairy processor as the cost of goods
sold. This change in revenue recognition has resulted in materially higher
reported revenue for the Company, with a corresponding material increase in
reported cost of goods sold.
International Sales
-------------------
The Company recognizes revenue in its international (non US) business
at the gross amount of its invoices for the sale of kits at the time of
shipment of flavor ingredients to processor dairies with whom the Company
has production contracts 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
16
under this model consists of the cost of the processors' purchase of flavor
ingredients and fees charged by the Company to the processors for
production rights. The price of production rights is formulated to cover
the Company's intellectual property licenses, which varies by licensor as a
percentage 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 goods 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.
RESULTS OF OPERATIONS
Financial Condition at June 30, 2004
------------------------------------
As of June 30, 2004, we had an accumulated deficit of $31,503,898,
cash on hand of $682,732 and reported total capital deficit of $1,919,320.
For this same period of time, we had revenue of $1,879,562 and
general and administrative expense of $1,662,027.
After interest expenses of $74,995, cost of goods sold of $1,265,087,
product development costs of $21,172 and selling expenses of $617,420
incurred in the operations of the Company, we had a net loss of $1,761,139.
Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003
-------------------------------------------------------------------------
Consolidated Revenue
We had revenues for the six months ended June 30, 2004 of $1,879,562,
with cost of sales of $1,265,087, resulting in a gross margin of $614,475.
Of the $1,879,562, $1,489,185 was from wholesale sales in the U.S.
operation and $319,630 from kit sales in the Middle East, $26,368 in Mexico
and $44,379 from Parmalat. We did not have revenue for this period in
Canada or for the three months ended June 30, 2004 in Mexico. Our revenue
for the six months ended June 30, 2004 increased by $1,127,662, a 149.97%
increase compared to revenue of $751,900 for the same period in 2003. This
increase is the result of a change in the Company's method of revenue
recognition in the United States, as well as the phasing out of the
Company's Looney Tunes(tm) flavored milk products and the development of
four new branded product lines in the United States, including the launch
of the Company's Slammers(r) line of Marvel Comics Super Heroes(tm) branded
flavored milks during the second quarter. In addition, the Company began
to ship kits to its third-party Middle East dairy processor during the
second quarter.
Consolidated Cost of Sales
We incurred cost of goods sold of $1,265,087 for the six months ended
June 30, 2004, $1,215,268 of which was incurred in our U.S. operations,
$42,041 in connection with the Company's Middle East kit sales and $7,778
in Mexico. Cost of goods sold in 2004 increased by $1,142,552, a 932.43%
increase compared to $122,535 for the same period in 2003. The
17
increase in cost of goods sold reflects the change in the Company's method
of revenue recognition during this period and the increase in sales.
In countries except the United States, the Company's revenue is
generated by the sale of kits to dairy processors. Each kit consists of
flavor ingredients for 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,
less the cost of production charged by the processor, which the Company
records as cost of goods sold.
In the United States, the Company is responsible for the sale of
finished Slammers(r) flavored milk (referred to as "unit sales") to retail
outlets. For these unit sales, the Company recognizes as revenue the
invoiced wholesale prices that the Company charges to the retail outlets
that purchase the Slammers(r) flavored milks. The Company reports as cost
of goods sold the price charged to it by Jasper Products, a third party
processor under contract with the Company, for producing the finished
Slammers(r) products.
Segmented revenues and costs of sales
The following table presents revenue by source and type against costs
of goods sold, as well as combined gross revenues and gross margins. In
countries other than the United States, revenues for the period ended June
30, 2004 were generated by kit sales to third party processors. The
Company's revenue from the sale of finished product to retail outlets is
recorded as "unit sales" on the following table.
Six Months Ended Total
June 30, 2004 United States Canada Mexico Middle East Company
---------------- ------------- ------ ------ ----------- -------
Revenue - unit sales $ 1,489,185 $ - $ - $ - $1,489,185
Revenue - net kit sales - - - -
Revenue - gross kit sales 44,379 - 26,368 319,630 390,377
------------ -------- -------- --------- ----------
Total revenue 1,533,564 - 26,368 319,630 1,879,562
Cost of goods sold (1,215,268) - (7,778) (42,041) (1,265,087)
------------ -------- -------- --------- ----------
Gross margin $ 318,296 $ - $ 18,590 $ 277,589 $ 614,475
============ ======== ======== ========= ==========
Six Months Ended Total
June 30, 2003 United States Canada Mexico China Company
---------------- ------------- ------ ------ ----- -------
Revenue - unit sales $ 226,060 $ - $ - $ - $ 226,060
Revenue - net kit sales 2,737 - - - 2,737
Revenue - gross kit sales 372,578 28,187 93,770 28,568 523,103
------------ -------- -------- --------- ----------
Total revenue 601,375 28,187 93,770 28,568 751,900
Cost of goods sold (74,471) (10,402) (29,910) (7,752) (122,535)
------------ -------- -------- --------- ----------
Gross margin $ 526,904 $ 17,785 $ 63,860 $ 20,816 $ 629,365
============ ======== ======== ========= ==========
18
United States
-------------
Revenues for the period ended June 30, 2004 from unit sales in the
United States increased from $226,060 for the same period in 2003 to
$1,489,185, a 558.76% increase. The increase is the result of a change in
revenue recognition and the introduction of the Company's new product lines
during this period.
In the period ended June 30, 2004, the Company's gross margin for
U.S. sales of $614,475, decreased by $14,890, or by 2.37%, from $629,365
for the same period in 2003. The decrease in gross margin was the result
of the change in revenue recognition for US sales, which required the
Company to recognize the entire cost of production of its milk products
against revenues from the wholesale sales for those products. In addition,
during this period, the Company phased out of the Company's Looney
Tunes(tm) product line and developed four new product lines, utilizing
newly licensed and directly owned branded trademarks. The Company launched
the new product lines, as scheduled, in the second quarter 2004 and expects
costs of production to decrease with greater volume.
Foreign Sales
-------------
Revenues for the period ended June 30, 2004 from kit sales in foreign
countries increased from $150,525 for the same period in 2003 to $345,998,
a 129.86% increase. The increase is the result of the introduction of the
Company's new products during this period in eleven Middle East countries.
The Company recorded $49,819 in costs of kit sales in foreign
countries for the period ended June 30, 2004, an increase of $1,755 or
3.65% from $48,064 for the same period in 2003. As a percentage of sales,
the costs of goods sold deceased to 14.4% for the period ended June 30,
2004, from 31.93% for the same period in 2003. The reduction of cost of
goods sold as a percentage of sales was the result of greater efficiencies
of shipment and lower costs in sourcing the product ingredients in Europe,
rather than the United States.
For the period ended June 30, 2004, the Company's gross profit of
$296,179 for kit sales in foreign countries increased by $193,718, or 189%,
from $102,461 for the same period in 2003. The increase in gross profit
was consistent with the increase in sales volume and the decease in cost of
goods sold for this period.
Consolidated Operating Expenses
The Company incurred selling expenses of $617,420 for the period
ended June 30, 2004, all of which the Company incurred in its United States
operations. The Company's selling expense for this period decreased by
$63,110, a 9.27% decrease compared to selling expense of $680,530 for the
same period in 2003. The decrease in selling expenses in the current
period was due to decreased freight and promotional charges associated with
the Company's transition away from its Looney Tunes(tm) product line and
the development of four new product lines by the Company, utilizing newly
licensed and directly owned branded trademarks.
19
The Company incurred general and administrative expenses for the
period ended June 30 2004 of $1,662,027, of which $1,564,177 the Company
incurred in its United States business operations. The Company's general
and administrative expenses for this period increased by $370,896, a 28.73%
increase compared to $1,291,131 for the same period in 2003. The increase
in general and administrative expenses for the current period in 2004 is
the result of increased overhead expenses for the growth of the Company,
including management salaries, travel and other office expenditures, as
well as development costs for new products.
As a percentage of total revenue, the Company's general and
administrative expenses decreased from 171.7% in the period ended June 30,
2003, to 88.4% for the current period in 2004. The Company anticipates a
continued effort to reduce these expenses as a percentage of sales through
revenue growth, cost cutting efforts and the refinement of business
operations.
Interest Expense
The Company incurred interest expense for the period ended June 30,
2004 of $74,995. The Company's interest expense increased by $70,916, a
1738% increase compared to $4,079 for the same period in 2003. The
increase was due to additional loans in 2004 and utilizing debt to finance
the Company's operations during this period's transition in licensors of
intellectual property utilized by the Company and the development and
launch of new product lines.
Loss Per Share
The Company accrued dividends payable of $194,288 to various series
of preferred stock during the period ended June 30, 2004. The Company's
accrued dividends decreased for this period by $336,248, or 63.38%, from
$530,536 for the same period in 2003. The increase in net loss before
accrued dividends of $413,110, from $1,348,029 for the period ended June
30, 2003 to $1,761,139 for the current period, was offset by the 63.38%
decrease in accrued dividends and the increase in the weighted average
number of common shares outstanding, resulting in a decrease in the
Company's current period loss per share from $0.07 for the same period in
2003, compared to loss per share of $0.06 for the current period. The net
loss for the three month period ended June 30, 2004, represents a loss
per share of $0.02
Three Months Ended June 30, 2004 Compared to the
------------------------------------------------
Three Months Ended June 30, 2003
--------------------------------
Revenue
The Company had revenues for the three months ended June 30, 2004 of
$1,441,356, with cost of sales of $934,966, resulting in a gross profit of
$506,390, or 35.1% of sales. Of the $1,441,356, $1,121,727 was from sales
in the Company's U.S. operations and $319,629 from sales in the Middle East.
The Company did not report any sales for Canada or Mexico in the three
months ended June 30, 2004. Our revenue for the three months ended June 30,
2004 increased by $1,086,886, a 307% increase compared to revenue of
$354,470 for the three months ended June 30, 2003. The increase in revenue
in the United States for the three months ended June 30, 2004 is the result
of a change in revenue recognition and the introduction of the Company's
new product lines during this period.
Cost of Goods Sold
The Company incurred cost of goods sold of $943,966 for the three
months ended June 30, 2004, most of which was incurred in our U.S.
operations in the second quarter. Our cost of goods sold for this period
increased by $892,793, a 2,117% increase compared to $42,173 for the three
months ended June 30, 2003. The increase in cost of goods sold in the
United States for the three months ended June 30, 2004 is the result of a
change in revenue recognition and the corresponding material increase in the
cost of good sold.
Operating Expense
The Company incurred selling expenses for the three months ended June
30, 2004 of $364,382 all of which was incurred in our U.S. operations.
Selling expenses increased for the three months ended June 30, 2004 by
$44,927, a 14% increase compared to the selling expense of $319,455 for the
three months ended June 30, 2003. The increase in selling expenses is the
result of the adoption of the refined business plan in the U.S. for the
Company's North America Bravo! operations, including the costs associated
with the sale of finished product to retail establishments through brokers
and distributors.
The Company incurred general and administrative expenses for the
three months ended June 30, 2004 of $961,061, $863,211 of which was
incurred in the U.S. operations. General and administrative expenses for
the three months ended June 30, 2004 increased by $442,400, an 85.3%
increase compared to %518,661 for the same period in 2003. This increase
was the result of the costs associated with the development and launch of
new product lines, licensing costs and cost of agent fees for the Company's
international business.
Interest Expense
The Company incurred net interest expense for the three months ended
June 30, 2004 of $43,310. Interest expense for the three months ended June
30, 2004 increased by $41,275, a 2,028% increase compared to $2,035, for
the same period in 2003. This increase was the result of additional loans
in this period and utilizing debt to finance the Company's operations
during this period's transition in licensors of intellectual property
utilized by the Company and the development and launch of new product
lines.
Net Loss
The Company had a net loss in for the three months ended June 30,
2004 of $879,890 compared with a net loss of $529,014 for the same period
in 2003. The net loss increased by $350,876 or 66.33% compared to the same
period in 2003. The increase in net loss resulted from the costs associated
with the development and launch of new product lines, licensing costs and
the cost of agent fees for the Company's international business.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2004, the Company reported that net cash used in
operating activities was $2,808,275, net cash provided by financing
activities was $3,440,000 and net cash used in investing activities was
$7,852. The Company had a negative working capital of $ 1,303,018 as of
June 30, 2004.
Compared to $994,767 of net cash used in operating activities in the
period ended June 30, 2003, the Company's current year net cash used in
operating activities increased by $1,813,508 to $2,208,275 due to the fact
that the Company did not use its equity to pay service providers in lieu of
cash payments in this current period, recorded a convertible debt
subscription receivable for $625,000 and recorded $279,241 for new license
rights. Included in the net loss in
20
this current period were depreciation and amortization and stock
compensation for a finder fee aggregating $264,618, compared to $77,515 for
the same period in 2003.
Changes in accounts receivable in this current period in 2004
resulted in a cash decrease of $577,246, compared to a cash increase in
receivables of $96,510 for the same period in 2003, having a net result of
a decrease of $673,756. The changes in accounts payable and accrued
liabilities in the period ended June 30, 2003 contributed to a cash
increase of $324,452, whereas the changes in accounts payable and accrued
liabilities for the current period in 2004 amounted to an increase of
$15,713. The Company has adopted and will keep implementing cost-cutting
measures to lower its costs and expenses 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 its cash disbursement needs in the period ended June 30,
2004, and the Company had to rely on equity and debt financing to cover
expenses.
The Company's cash used in 2004 in investing activities for equipment
was $7,852 for computer equipment in the U.S. Compared to disbursements in
the same period in 2003, the $7,852 expenditure was insignificant.
The Company's net cash provided by financing activities for the
period ended June 30, 2004 was $3,440,000. New cash provided by financing
activities for the same period in 2003 was $877,062, for a net increase of
$2,562,938. The increase was due to issuing Series K preferred stock with
gross proceeds of $950,000 and debt in the aggregate amount of $2,640,000
in this current period.
The Company used the proceeds of the current period financing for
working capital purposes and to repay approximately $1,128,386 under a note
to Jasper Products.
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; (3) development, launch
and marketing costs for the Company's line of new branded flavored milk
products, and (4) the payment of guaranteed license royalties. The Company
estimates that its need for financing to meet cash needs for operations
will continue to the fourth quarter of 2004, when cash supplied by operating
activities will approach the anticipated cash requirements for operation
expenses. The Company anticipates the need for additional financing in
2004 to reduce the Company's liabilities, assist in marketing 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 $250,000. The Company will continue to incur significant
selling and other expenses in 2004 in order to derive more revenue in
retail markets, through the introduction and ongoing support of its new
products. 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 versus less than full truck loads. Similarly,
slotting fees, which are paid to warehouses or chain stores
21
as initial set up or shelf space fees, are essentially one-time charges per
new customer. 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 its
branded flavored milk. Presently, the Company is aggressively pursuing the
school and vending 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
2004. Similarly, the Company expects that the greater control over sales
resulting from its refined business model and the anticipated expansion
into bodega stores as well as national chains, such as 7-Eleven, will have
a positive impact on revenues in 2004.
In the third quarter 2003, the Company commenced an analysis of the
Looney Tunes(tm) brand performance within the context of the possible
renewal of its Warner Bros. licenses for United States, Mexico, China and
Canada. In the fourth quarter 2003, the Company concluded that, as a
function of the sales of flavored milks, the Looney Tunes(tm) brand had not
supported the guaranteed royalty structure required by Warner Bros. for its
licenses. In the fourth quarter 2003, the Company decided not to renew its
license agreements with Warner Bros., and began to develop new products in
anticipation of the consummation of other license relationships with Marvel
Comics and MoonPie for co-branded flavored milk, as well as a new single
Slammers(r) brand. The Company has developed new aseptic products in
anticipation of these licenses and its own singular brand. The Company
launched its Marvel branded Slammers(r) Ultimate Milkshake products in the
second quarter 2004 and plans to launch the rest of the following new
products in the third quarter 2004.
Moon Pie-
Brand Marvel-Slammers Slammers Slim Slammers Pro-Slammers
----- --------------- --------- ------------- ------------
Item Ultimate Milkshake Flavored milk; Low calorie, no Protein Shake
reduced fat 2% sugar added,
milk low carb 1%
milk
Licensed Marvel Super Hero MoonPie logo and Slim Slammers Extreme Sports
Property comic book trade dress, and trademark athletes, and Pro
characters and Slammers mark (owned by Slammers mark
Slammers mark (owned by Bravo! Bravo! Foods) (owned by
(owned by Bravo! Foods) Bravo! Foods)
Foods)
Packaging 16 oz bottles; 11.2 16 oz bottles; 11.2 16 oz bottles 16 oz bottles;
oz Tetra Prisma oz Tetra Prisma 11.2 oz Tetra
Prisma
22
Description Whole milk shake; 5 Chocolate and Chocolate Double protein
flavors; vitamin banana flavors; Fudge and shake; 4 flavors;
fortification matches fortified with 10 French Vanilla; fortified with 10
Marvel Super Hero essential vitamins calcium added essential
powers vitamins
Coincident with the Marvel license, the Company executed a
production agreement with Saudia Dairy & Foodstuff Company (SADAFCO), one
of the largest Middle East dairy processors, headquartered in Jeddah, Saudi
Arabia. SADAFCO will process the Company's Slammers (r) branded flavored
milks, including the Marvel line, for distribution in eleven Middle East
countries. SADAFCO has the capacity to process the Company's branded milk
products for distribution throughout the European Community. The Company's
international business is facilitated by AsheTrade, the Company's
international agent, with offices in Miami, FL and Jeddah, Saudi Arabia.
DEBT STRUCTURE
As of June 30, 2004, the Company has recorded $147,115 in guaranteed
royalty payments to Warner Bros. for the now expired China Looney Tunes
license. The China license had been extended to October 29, 2003 by
agreement of the parties, and the Company did not seek another license from
Warner Bros. for China. This decision was based upon the lack of sales in
the Company's China markets and what the Company perceived to be the
licensor's continuing overall lack of brand support in China. The Company
and Warner Bros. dispute the contractual necessity of the payment of the
balance owed on the China license as a result of the above circumstances.
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 had 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 a different interest calculation. International Paper
imposed a charge of $57,000 to renegotiate the note owing to 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
----------------
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 February 1, 2002 and bear interest at the annual rate of 8%. These
loans are secured by a general security interest in all the Company's
assets. On February 1, 2002, the parties agreed to extend the maturity
dates until the completion of the
23
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 and the notes are now payable on a demand basis.
On August 27, 2003, the Company received the proceeds of a loan from
Mid-Am Capital, L.L.C., in the amount of $150,000. The note was payable
November 25, 2003 and bears interest at the annual rate of 10%. This loan
was secured by a general security interest in all the Company's assets. On
April 2, 2004, this note was paid and cancelled.
On January 28, 2004, the Company converted accounts payable in the
amount of $1,128,386 by the issuance of a 10% short term promissory note to
Jasper Products, LLC, dated January 1, 2004, in the principal amount of
$1,128,386 for amounts owed to Jasper in connection with Jasper's
processing and sale of the Company's products. As of March 31, 2004, the
Company paid $200,000 in principal and was credited an additional $11,350.
On April 20, 2004, the Company paid an additional $200,000. On May 7,
2004, the Company paid $717,036 in full payment of the note's principal and
accrued interest.
On May 6, 2004, the Company issued a secured promissory note to Mid-
Am Capital LLC in the principal amount of $750,000. The note provides for
8% interest and has a maturity date of September 4, 2004. The Company
issued warrants to purchase 3,000,000 shares of the Company's common stock
to Mid-Am in connection with this promissory note. The warrants are
exercisable for one year from issue at an exercise price of $0.25 per
share. The Company used the proceeds of this promissory note to pay the
promissory note issued to Jasper Products in January 2004.
EFFECTS OF INFLATION
The Company believes that inflation has not had any material effect
on its net sales and results of operations.
ITEM 3. 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-QSB (June 30, 2004), 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-QSB was being prepared.
24
b) Changes in Internal Controls. There were no significant changes in
the Company's internal controls or in other factors that could
significantly affect the Company's disclosure controls and procedures
subsequent to the Evaluation Date, nor any significant deficiencies or
material weaknesses in such disclosure controls and procedures requiring
corrective actions. As a result, no corrective actions were taken.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On April 1 2004, the Company converted 5,000 shares of Series F
Convertible Preferred Stock into 1,315,789 shares of common stock pursuant
to a January 27, 2004 notice of conversion from Austinvest Anstalt Balzers,
at a conversion price of $0.038. The conversion did not include accrued
and unpaid dividends on the converted preferred. The Company and the
holder delayed processing this notice in light of the Company's special
meeting of shareholders held February 12, 2004. The shares of common stock
issued pursuant to this conversion were issued to third parties on that
date in accordance with the instructions of Austinvest Anstalt Balzers.
The Company issued the preferred and the underlying common stock upon
conversion to an accredited investor, pursuant to a Regulation D offering.
On April 2, 2004, the Company and Mid-Am Capital, LLC entered into
Supplement No.1 to the Series K Convertible Preferred Subscription
Agreement, by which the Company sold an additional 15,000 shares of its
Series K Convertible Preferred Stock utilizing the proceeds from a certain
promissory note issued by the Company to Mid-Am in the face amount of
$150,000. With the consummation of this sale, the $150,000 promissory note
was deemed paid in full by the Company. The Company issued the preferred
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 4,862 shares of Series G
Convertible Preferred Stock into 700,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from Nesher, LP, at a conversion
price of $0.0853. The conversion included accrued and unpaid dividends of
$11,089 on the preferred converted. The Company issued the preferred and
the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 4,478 shares of Series G
Convertible Preferred Stock into 650,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from Talbiya B. Investments, Ltd., at
a conversion price of $0.0853. The conversion included accrued and unpaid
dividends of $10,662 on the preferred converted. The Company issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 1,919 shares of Series G
Convertible Preferred Stock into 275,000 shares of common stock pursuant to
a March 25, 2004 notice of conversion from The Keshet Fund, LP, at a
conversion price of $0.0853. The conversion included accrued and unpaid
dividends of $4,265 on the preferred converted. The Company issued the
preferred
25
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 8, 2004, the Company converted 7,677 shares of Series G
Convertible Preferred Stock into 1,100,000 shares of common stock pursuant
to a March 25, 2004 notice of conversion from Keshet, LP, at a conversion
price of $0.0853. The conversion included accrued and unpaid dividends of
$17,060 on the preferred converted. The Company issued the preferred and
the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 20, 2004, the Company entered into a Subscription Agreement
with Longview Fund, LP and Alpha Capital Aktiengesellschaft for the
issuance of two convertible 10% notes in the amount of $250,000 each and
five-year warrants for the purchase of, in the aggregate, 3,000,000 shares
of common stock, at $0.15 per share. The notes are convertible into shares
of common stock of the Company at $0.10 per common share. Conversions are
limited to a maximum ownership of 9.99% of the underlying common stock at
any one time. The notes are payable in twelve equal monthly installments,
commencing November 1, 2004. The installment payments consist of principal
and a "premium" of 20% of the principal paid per installment. The Company
has the option to defer such payment until the note's maturity date on
October 1, 2005, if the Company's common stock trades above $0.20 for the
five trading days prior to the due date of an installment payment. In
connection with this transaction, the Company issued two additional notes
in the aggregate amount of $50,000, upon identical terms as the principal
notes, as a finder's fee, and paid $20,000 in legal fees. The common stock
underlying all notes and warrants carry registration rights. The Company
issued the convertible notes and warrants to accredited investors, pursuant
to a Regulation D offering.
On April 30, 2004, the Company converted 20,000 shares of Series F
Convertible Preferred Stock into 1,945,525 shares of common stock pursuant
to an April 27, 2004 notice of conversion from Esquire Trade & Finance
Inc., at a conversion price of $0.1028. The Company issued the preferred
and the underlying common stock upon conversion to an accredited investor,
pursuant to a Regulation D offering.
On April 30, 2004, the Company converted 20,000 shares of Series F
Convertible Preferred Stock into 1,945,525 shares of common stock pursuant
to an April 27, 2004 notice of conversion from Austinvest Anstalt Balzers,
at a conversion price of $0.1028. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On April 30, 2004, the Company converted 2,500 shares of Series F
Convertible Preferred Stock into 243,191 shares of common stock pursuant to
an April 27, 2004 notice of conversion from Esquire Trade & Finance Inc.,
at a conversion price of $0.1028. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On April 30, 2004, the Company converted 2,500 shares of Series F
Convertible Preferred Stock into 243,191 shares of common stock pursuant to
an April 27, 2004 notice of conversion from Austinvest Anstalt Balzers, at
a conversion price of $0.1028. The Company
26
issued the preferred and the underlying common stock upon conversion to an
accredited investor, pursuant to a Regulation D offering.
On May 20, 2004, the Company converted 9,226 shares of Series G
Convertible Preferred Stock into 620,578 shares of common stock pursuant to
a May 19, 2004 notice of conversion from Nesher, LP, at a conversion price
of $0.148. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On May 20, 2004, the Company converted 13,972 shares of Series G
Convertible Preferred Stock into 939,782 shares of common stock pursuant to
a May 19, 2004 notice of conversion from Keshet, LP, at a conversion price
of $0.148. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering.
On June 17, 2004, the Company issued 87,195 of its common stock to
Stephen Nollau, a former consultant, for services rendered. The Company
issued the common stock pursuant to a Form S-8 registration statement,
filed by the Company on June 16, 2004.
On June 29, the Company converted 234 shares of Series G Convertible
Preferred Stock into 13,604 shares of common stock pursuant to a June 15,
2004 notice of conversion from Nesher, LP, at a conversion price of $0.172.
The conversion did not include accrued and unpaid dividends on the
converted preferred. The Company issued the preferred and the underlying
common stock upon conversion to an accredited investor, pursuant to a
Regulation D offering. This conversion exhausted the outstanding Series G
convertible preferred.
On June 29, the Company converted 1,850 shares of Series G
Convertible Preferred Stock into 107,558 shares of common stock pursuant to
a June 15, 2004 notice of conversion from Keshet, LP, at a conversion price
of $0.172. The conversion did not include accrued and unpaid dividends on
the converted preferred. The Company issued the preferred and the
underlying common stock upon conversion to an accredited investor, pursuant
to a Regulation D offering. This conversion exhausted the outstanding
Series G convertible preferred.
On June 29, the Company converted 3,472 shares of Series G
Convertible Preferred Stock into 201,860 shares of common stock pursuant to
a June 15, 2004 notice of conversion from The Keshet Fund, LP, at a
conversion price of $0.172. The conversion did not include accrued and
unpaid dividends on the converted preferred. The Company issued the
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering. This conversion exhausted
the outstanding Series G convertible preferred.
On June 29, the Company converted 8,091 shares of Series G
Convertible Preferred Stock into 470,406 shares of common stock pursuant to
a June 15, 2004 notice of conversion from Talbiya B. Investments, Ltd, at a
conversion price of $0.172. The conversion did not include accrued and
unpaid dividends on the converted preferred. The Company issued the
27
preferred and the underlying common stock upon conversion to an accredited
investor, pursuant to a Regulation D offering. This conversion exhausted
the outstanding Series G convertible preferred.
On June 30, 2004, the Company entered into Subscription Agreements
with Longview Fund, LP, Alpha Capital Aktiengesellschaft, Whalehaven Funds
Limited, Stonestreet Limited Partnership and Mid-Am Capital L.L.C for the
issuance of convertible 10% notes in the aggregate amount of $1,300,000 and
five-year "A" warrants for the purchase of, in the aggregate, 5,200,000
shares of common stock, at $0.25 per share, and five-year "B" warrants for
the purchase of, in the aggregate, 13,000,000 shares of common stock, at
$2.00 per share. The notes are convertible into shares of common stock of
the Company at $0.15 per common share. Conversions are limited to a
maximum ownership of 9.99% of the underlying common stock at any one time.
The notes are payable in twelve equal monthly installments, commencing
January 1, 2005. The installment payments consist of principal and a
"premium" of 20% of the principal paid per installment. The Company has
the option to defer such payment until the note's maturity date on December
1, 2005, if the Company's common stock trades above $0.20 for the five
trading days prior to the due date of an installment payment. In
connection with this transaction, the Company issued additional notes in
the aggregate amount of $40,000 to Gem Funding, LLC, Bi-Coastal Consulting
Corp., Stonestreet Limited Partnership and Libra Finance, S.A upon
identical terms as the principal notes, as a finder's fee, and paid $12,500
in legal fees. The common stock underlying all notes and warrants carry
registration rights. The Company issued the convertible notes and warrants
to accredited investors, pursuant to a Regulation D offering.
Subsequent Events
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits - Required by Item 601 of Regulation S-B: None
(b) Reports on Form 8-K
Form 8-K concerning marketing plans, filed on April 19, 2004
Form 8-K concerning public conference call, filed on April 28, 2004
Form 8-K concerning public conference call, filed on May 17, 2004
Form 8-K concerning marketing and product launch update, filed on
June 9, 2004
Form 8-K concerning interim results of product launch, filed on July
12, 2004
28
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf of the
undersigned, duly authorized.
BRAVO! FOODS INTERNATIONAL CORP.
(Registrant)
Date: August 6, 2004
/s/Roy G. Warren
Roy G. Warren, Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, Bravo! Foods
International Corp. 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 August 6, 2004
and Director
/S/ Tommy E. Kee Chief Financial Officer August 6, 2004
29