10QSB 1 java10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: JUNE 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______________to________________ Commission file number 000-50547 JAVA EXPRESS INC. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 88-0515333 ------------------------------- ------------------------------- (State or other jurisdiction of IRS Employer Identification No.) incorporation or organization) 5017 Wild Buffalo Avenue, Las Vegas, NV 89131 ---------------------------------------------- (Address of principal executive offices) (702) 839-1098 ------------------------ 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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: August 1, 2004 - 4,501,000 common shares $0.001. Transitional Small Business Disclosure Format (check one). Yes [ ] No [X] -1- TABLE OF CONTENTS PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS...............................................3 ITEM 2. PLAN OF OPERATION.................................................13 ITEM 3. CONTROLS AND PROCEDURES...........................................17 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.................................................17 ITEM 2. CHANGES IN SECURITIES.............................................17 ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............17 ITEM 5. OTHER INFORMATION.................................................17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................18 SIGNATURES.................................................................18 -2- PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The financial information set forth below with respect to our statements of operations for the three month period ended June 30, 2004 and 2003 is unaudited. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three month period ended June 30, 2004 are not necessarily indicative of results to be expected for any subsequent period. -3- JAVA EXPRESS, INC. (A Development Stage Company) BALANCE SHEETS (Unaudited) June 30, March 31, 2004 2004 ------------- ------------- ASSETS: Current Assets: Cash & Cash Equivalents $ 1,972 $ 3,597 Available-for-Sale Marketable Security 24,388 - ------------- ------------- Total Current Assets 26,360 3,597 ------------- ------------- Fixed Assets: Equipment - 8,000 Furniture & Fixtures - 22,088 Less Accumulated Depreciation - (8,491) ------------- ------------- Net Fixed Assets - 51,597 ------------- ------------- Total Assets $ 26,360 $ 55,194 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities: Accounts Payable $ 399 $ 3,824 Related Party Note Payable 13,900 13,052 Short-Term Payable - 10,090 ------------- ------------- Total Liabilities 14,299 26,966 ------------- ------------- Stockholders' Equity: Preferred Stock, Par value $.001 Authorized 10,000,000 shares No shares issued at June 30, 2004 and March 31, 2004 - - Common Stock, Par value $.001 Authorized 50,000,000 shares, Issued 4,501,000 and 4,501,000 shares at June 30, 2004 and March 31, 2004 4,501 4,501 Paid-In Capital 167,221 167,221 Accumulated Other Comprehensive Income (6,104) - Deficit Accumulated During Development Stage (153,557) (143,494) ------------- ------------- Total Stockholders' Equity 12,061 28,228 ------------- ------------- Total Liabilities and Stockholders' Equity $ 26,360 $ 55,194 ============= ============= The accompanying notes are an integral part of these financials statements. F-1 4 JAVA EXPRESS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited) Cumulative since December 14, 2001 For the Three Months Ended Inception of June 30, Development 2004 2003 Stage -------------- -------------- -------------- Revenues: $ - $ - $ - -------------- -------------- -------------- Expenses: General & Administrative 14,660 21,156 165,884 -------------- -------------- -------------- Operating Loss (14,660) (21,156) (165,884) Other Income (Expense): Interest (90) - (395) Misc Income - - 2,300 Gain on Sale of Equipment 4,687 - 10,422 -------------- -------------- -------------- Income (Loss) Before Income Taxes (10,063) (21,156) (153,557) Income Taxes - - - -------------- -------------- -------------- Net Income (Loss) (10,063) (21,156) (153,557) Other Comprehensive Income Unrealized Loss on Available-for-Sale Securities (6,104) - (6,104) -------------- -------------- -------------- Other Comprehensive Income (6,104) - (6,104) -------------- -------------- -------------- Total Comprehensive Income $ (16,167) $ (21,156) $ (159,661) ============== ============== ============== Basic & Diluted loss per share $ - $ - ============== ============== Weighted Average Shares 4,501,000 4,435,730 ============== ============== The accompanying notes are an integral part of these financial statements. F-2 5
JAVA EXPRESS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited) Cumulative since December 14, 2001 For the Three Months Ended Inception of June 30, Development 2004 2003 Stage -------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (10,063) $ (21,156) $ (153,557) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation 2,650 1,226 13,831 Stock Issued for Interest on Note - - 98 Gain on Sale of Equipment (4,687) - (10,422) Changes in Operating Assets & Liabilities Increase (Decrease) in Accounts Payable (3,425) - 399 Increase (Decrease) in Accrued Interest 90 - 297 -------------- -------------- -------------- Net Cash Used in Operating Activities (15,435) (19,930) (149,354) -------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from Sale of Equipment - - 13,045 Purchase of Furniture & Fixtures - (8,000) (19,588) Purchase of Equipment - (5,500) (50,500) -------------- -------------- -------------- Net Cash Used by Investing Activities - (13,500) (57,043) -------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Sale of Common Stock - 71,687 153,566 Capital Contributed by Shareholder - 58 2,058 Proceeds from Note Payable 13,810 - 52,745 -------------- -------------- -------------- Net Cash Provided by Financing Activities 13,810 71,745 208,369 -------------- -------------- -------------- Net (Decrease) Increase in Cash (1,625) 38,315 1,972 Cash Beginning of Period 3,597 7,724 - -------------- -------------- -------------- Cash at End of Period $ 1,972 $ 46,039 $ 1,972 ============== ============== ============== F-3
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JAVA EXPRESS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Continued) (Unaudited) Cumulative since December 14, 2001 For the Three Months Ended Inception of June 30, Development 2004 2003 Stage -------------- -------------- -------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ - $ - $ - Franchise and income taxes $ - $ - $ 200 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Converted Note Payable to Common Stock $ - $ - $ 16,000 On June 21, 2004, the Company exchanged all of its equipment, furniture and fixtures for 15,242 shares of Imedia International, Inc. with a market price of $2.00 per share and repayment of its $12,935 related note payable and $10,000 short term note payable. F-4 The accompanying notes are an integral part of these financial statements.
7 JAVA EXPRESS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for Java Express, Inc. is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Interim Reporting ----------------- The unaudited financial statements as of June 30, 2004 and for the three month period then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Nature of Operations and Going Concern --------------------------------------- The accompanying financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations. Several conditions and events cast doubt about the Company's ability to continue as a "going concern". The Company has incurred net losses of approximately $154,000 for the period from December 14, 2001 (inception) to June 30, 2004 and requires additional financing in order to finance its business activities on an ongoing basis. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses. The Company's future capital requirements will depend on numerous factors including, but not limited to, the development and success of the Company's coffee kiosks. These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a "going concern". While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the "going concern" assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. F-5 8 JAVA EXPRESS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Nature of Operations and Going Concern (Continued) ------------------------------------------------- If the Company were unable to continue as a "going concern", then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported expenses, and the balance sheet classifications used. Organization and Basis of Presentation -------------------------------------- The Company was incorporated under the laws of the State of Nevada on December 14, 2001. The Company's fiscal year end is March 31. Since December 14, 2001, the Company is in the development stage, and has not commenced planned principal operations. Nature of Business ------------------- The Company has no products or services as of June 30, 2004. The Company was organized to develop and market coffee through a retail coffee kiosk-store located in Las Vegas, Nevada malls. Cash and Cash Equivalents ------------------------- For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Concentration of Credit Risk ---------------------------- The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. F-6 9 JAVA EXPRESS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment ---------------------- Property and equipment are stated at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, principally on a straight-line basis for 3 to 7 years. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their useful lives. The Company identifies and records impairment losses on long-lived assets such as property and equipment when events and circumstances indicate that such assets might be impaired. The Company considers factors such as significant changes in the regulatory or business climate and projected future cash flows from the respective asset. Impairment losses are measured as the amount by which the carrying amount of intangible asset exceeds its fair value. Pervasiveness of Estimates -------------------------- The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Loss per Share -------------- Basic loss per share has been computed by dividing the loss for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years. There were no common equivalent shares outstanding at June 30, 2004 and 2003. F-7 10 JAVA EXPRESS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) NOTE 2 - INCOME TAXES As of March 31, 2004, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $164,000 that may be offset against future taxable income through 2023. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount. NOTE 3 - DEVELOPMENT STAGE COMPANY The Company has not begun principal operations and as is common with a development stage company, the Company has had recurring losses during its development stage. Continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to be successful in its planned activity, and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and long term financing, which will enable the Company to operate for the coming year. NOTE 4 - COMMITMENTS As of June 30, 2004, all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities. NOTE 5 - RELATED PARTY TRANSACTIONS During the January and March 2004, a related party loaned the Company $12,935, with an imputed interest of prime plus 2 percent, due and payable June 30, 2004. The holder of the note has the option to convert the entire amount or any portion thereof into common stock. The note can be converted anytime after June 30, 2004 but no later than December 31, 2005 at a share price equal to the bid price or if there is no bid price, a total of 150,000 common shares. On June 21, 2004, the Company exchanged all of its equipment, furniture and fixtures for 15,242 shares of Imedia International, Inc. with a market price of $2.00 per share and repayment of its $12,935 related note payable and $10,000 short term note payable. As of June 30, 2004 and March 31, 2004, amounts due to related parties was $13,900 and $13,052 with an interest rate of 6% to 10%. F-8 11 JAVA EXPRESS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) NOTE 6 -SHORT-TERM NOTES PAYABLE On February 2, 2004, an unrelated party loaned the Company $10,000, with an imputed interest of prime plus 2 percent, due and payable June 30, 2004. The holder of the note shall have the option to convert the entire amount or any portion thereof into common stock. The note can be converted anytime after June 30, 2004 but no later than December 31, 2005 at a share price equal to the bid price or if there is no bid price, a total of 110,000 common shares. On June 21, 2004, the Company exchanged all of its equipment, furniture and fixtures for 15,242 shares of Imedia International, Inc. with a market price of $2.00 per share and repayment of its $12,935 related note payable and $10,000 short term note payable. NOTE 7 - COMMON STOCK TRANSACTIONS On December 15, 2001, 2,000,000 shares of common stock were issued at $0.01 per share. On March 25, 2002, 2,000,000 shares of common stock were issued at $0.02 per share. On July 9, 2002, the Company converted a $16,000 note payable including interest payable of $98 into 300,000 shares of Common Stock. On December 31, 2002, the Company issued 30,000 shares of common stock for $0.50 per share. On February 15, 2003, the Company issued 13,000 shares of common stock for $0.50 per share. On April 23, 2003, the Company issued 100,000 shares of common stock for $0.50 per share. On May 18, 2003, the Company issued 10,400 shares of common stock for $0.50 per share. On June 2, 2003, the Company issued 10,000 shares of common stock for $0.50 per share. On June 26, 2003, the Company issued 23,000 shares of common stock for $0.50 per share On July 9, 2003, the Company issued 5,000 shares of common stock for $0.50 per share. On July 17, 2003, the Company issued 8,000 shares of common stock for $0.50 per share. On July 23, 2003, the Company issued 1,600 shares of common stock for $0.50 per share. F-9 12 In this report references to "Java Express," "we," "us," and "our" refer to Java Express, Inc. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This report contains these types of statements. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "project," or "continue" or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. ITEM 2. PLAN OF OPERATION. General -------- Java Express, Inc. was incorporated on December 14, 2001 under the laws of the State of Nevada for the purpose of selling coffee and other related items to the general public from retail coffee shop locations. Our principal business offices are located at 5017 Wild Buffalo Avenue, Las Vegas, Nevada 89131. The Company was organized to develop and market coffee through a retail coffee kiosk-store located in Las Vegas, Nevada malls. Limited Operations; Losses Since Inception ------------------------------------------ Our activities to date have been limited to our formation, property site study, kiosk design, business plan development, some equipment purchase and sale, and the completion of various placements of our stock. We have experienced losses from inception of $153,557; during the three month period ended June 30, 2004 our operating losses equaled $14,660 which was offset by a $4,687 gain on the sale of our remaining equipment as discussed below. We have $1,972 cash on hand, $399 in accounts payable and we owe related parties $13,900 which was advanced during our first quarter. Since inception, we have primarily financed our operations through the sale of our common stock and loans from related parties. The loans are discussed below under "Convertible Notes." Purchase and Sale of Equipment/Available for Sale Marketable Security --------------------------------------------------------------------- In anticipation of the opening or our first kiosk, we spent approximately $53,103, net of depreciation, on coffee equipment and furniture which included espresso machines, stools, chairs and tables, a counter top, a commercial refrigerator, and various office equipment. Most of this equipment and furniture was purchased during the nine months ended December 31, 2003 from wholesalers who had no affiliation with us. However, because we have not yet opened our initial business and the fact that some of the equipment/furniture was becoming out-of date, we sold some of our equipment for $13,045 during the quarter ended December 31, 2003, for a gross profit of $5,735. The sale of the -13- equipment reduced our storage fees from approximately $405 per month to $145. The balance of our equipment was used to satisfy three notes payable, totaling $26,966, owed to a related party and a non-related party. The related party also paid us in securities of iMedia Communications, Inc. which trades on the pink sheets at $2.00 per share at the time of the transaction. We realized a gain of $4,687 on the sale of the equipment in the foregoing transaction. In addition we will be cancelling our month to month storage unit. (See below for discussion on Convertible Notes.) We have no commitments for capital expenditures for the next twelve months However, if we are successful in negotiating a lease for a kiosk, we need to spend approximately $40,000 on the construction of a coffee kiosk. Convertible Notes ----------------- We have funded our operations in the last 6 months through loans from both related and non-related parties as evidenced by various convertible notes: Principal No. Note Holder Amount Date Status ___________________________________________________________________________ 1. Kirch Communications $8,435 1/22/2004 Paid on 6/21/04 (John Chris Kirch) 2. Kirch Communications $4,500 3/4/2004 Paid on 6/21/04 (John Chris Kirch) 3. Stephanie Harnicher $10,000 2/2/2004 Paid on 6/21/04 4. Lance Musicant $2,300 6/7/2004 Due 12/31/04 5. Lance Musicant $4,510 5/7/2004 Due 12/31/04 6. John Chris Kirch $5,000 6/22/2004 Due 12/31/04 7. John Chris Kirch $2,000 6/29/2004 Due 12/31/04 All of the above persons/entities are considered related persons except Ms. Harnicher. The first three notes were paid in during our first quarter. On June 21, 2004, we exchanged all or our remaining equipment/furniture for repayment of the three notes payable to Mr. Kirch and Ms. Harnicher, in the aggregate principal amount of $22,935 with imputed interest of prime plus 2% and 15,242 shares of iMedia International, Inc. The shares currently trade on the Pink Sheets and are booked on our balance sheet at $24,388. The three remaining notes have an imputed interest rate of prime plus 2%. Under the terms of the notes: . payment is due on or before December 31, 2004; . the holder has the option to convert the principal into common stock; . the conversion date is after December 31, 2004 but no later than April 24, 2005; . The conversion price shall be at a share price equal to the "bid" price of our stock on the date of conversion or, in the event we have no market for our common stock, the notes can be converted into shares of our common stock at a conversion price of $0.10 per share; . The holder must give notice to Java during the conversion period if he desires to convert, and absent such notice, the conversion rights -14- expire at the expiration of the conversion period; . we have the right to prepay all or part of the notes but in the event we elect to prepay the notes, the holder must receive a 10 day notice from us granting the holder the election to exercise his conversion rights. Plan of Operation for the Next 12 Months ---------------------------------------- Management intends to continue to pursue the first phase of our business plan over the next 12 months, that of establishing a coffee kiosk in Las Vegas, Nevada although management is concerned with the heavy increase in competition. For example, Starbucks(R), our main competitor, has aggressively pursued the Las Vegas coffee shop/kiosk market doubling both types of retail outlets during the past year with approximately 63 stores and 23 kiosks now open. Management also intends to reexamine the potential of the "turnkey" coffee kiosk idea and will continue to develop it, if warranted, in conjunction with establishing and maintaining relationships in the industry. Currently, the $1,972 in cash on hand is not sufficient to fund our operations over the next 12 months management although we can sell our marketable securities to provide some cash flow. Although most of our business development is being handled by our officers/director who are not taking any compensation, we will need approximately $ 90,000 - 100,000 over the next year to continue to develop our business. This includes an estimated $1,000 plus per month associated with a lease of a kiosk space if we are able to successfully negotiate one, and the $40,000 needed to construct the kiosk. It also includes the additional expenses associated with our reporting obligations which commenced in March of 2003 and involve considerable time, energy and professional fees including legal and accounting. As an alternative to a lease and the $40,000 expense of lease improvements, we are also looking into possibly taking over an existing kiosk lease and remodeling it to meet our specifications. This would cost approximately $50,000 for the sublease and then approximately $15,000 for the remodel. The advantage would be monthly payments and the elimination of the initial construction costs. The following is a breakdown of our principal activities in the next twelve months, as well as the anticipated funding and its source: Goal Estimated Cost Funding Source ------------------------------------------------------------------------------ . Continue our day to day $ 16,000 Cash on hand; operations and comply with Cash flows from SEC reporting requirements operations, if any; Sale of marketable securities . Continue to research market $ 10,000 Cash on hand and site locations as well or private loans; investigate other ideas to Sale of marketable help create a niche market securities for Java Express coffee . Acquire a lease on suitable $ 12,000-$15,000 Private loan or property and make tenants sale of stock improvements -16- . Construct kiosk $ 40,000 Sale of stock OR OR Sublease kiosk $ 50,000 Monthly payments and remodel made from advances and cash flows from operations . Acquire equipment Part of contract for kiosk, if needed $ 0 w/ coffee supplier . Purchase inventory $ 2,000-$5,000 Cash on hand, loans, stock sales . Begin operations; work towards $11,000-$30,000 Stock sales, loan, profitability; marketing; accrue Lance Musi- cant compensation, if necessary . Hire and train additional employees $ dictated by loans, stock sales if warranted. cash flows Cash flows from operations Management intends to rigorously control its spending on travel, entertainment and promotion in the next twelve months as it believes Java spent excessively in this category in the past two years in pursuing its business plan. During the next twelve months we believe that our current cash needs can be met in one of two ways: (1) by loans from our director, officers and stockholders or other parties and (2) by private placements of our common stock. We are also pursuing alternative financing with third parties although no commitment from any party has been obtained. In the past we have received loans from two related parties, John Chris Kirch, though Dominion World Investments and Kirch Communications, and Lance Musicant, our president. We have also received a short term loan from an unrelated party. These individuals have indicated possible willingness in the future to advance additional funds. However, there are no written agreements with these parties regarding loans or advances and they are not obligated to provide any funds. If these parties do provide loans or advances, we may repay them, or we may convert them into common stock. We do not, however, have any commitments or specific understandings from any of the foregoing parties or from any other individual, in writing or otherwise, regarding any loans or advances or the amounts. Management also anticipates that additional capital may also be provided by private placements of our common stock. We intend to issue such stock pursuant to exemptions provided by federal and state securities laws. The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions. We do not currently intend to make a public offering of our stock. We also note that if we issue more shares of our common stock our shareholders may experience dilution in the value per share of their common stock. At this time, we have no commitments from anyone for financing of any type. Our auditors have issued a "going concern" opinion in Note 1 of our financial statements where they have indicated that we have suffered recurring losses from operations which raises substantial doubt as to our ability to continue as a going concern. If we are unable to negotiate a lease for a coffee kiosk and/or raise sufficient additional funding to start operations, we may be forced to cease operations entirely. Management could attempt to seek an -16- alternative business opportunity although there is no guarantee that any such search for a business alternative would be successful. Although Management will continue to pursue its coffee business, concern over the heavy market competition has dictated that management examine other marketing techniques for our business. Management believes that without an established name such as Starbucks(R), market penetration will be even more difficult than when our coffee kiosk concept was first pursued starting in early 2002. Management intends to thoroughly re-examine the retail coffee market in the Las Vegas area and attempt to draft new ideas which might give us a market niche. In addition, although we are not actively seeking other business opportunities, if one presented itself, we would not be adverse to investigating it. Off-balance Sheet Arrangements ------------------------------ None. ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer/Chief Financial Officer has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective. (b) Changes in Internal Controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART III PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION None. -17- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits -------- The following exhibits are included as part of this report: Exhibit Number Title of Document ----------------------------------------------------------------------------- 10.5 Convertible Note dated May 7, 2004: $4,510 10.6 Convertible Note dated June 7, 2004: $2,300 10.7 Convertible Note dated June 29, 2004: $2,000 10.8 Convertible Note dated June 22, 2004: $5,000 31 Certification of Principal Executive and Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Reports on Form 8-K -------------------- The Company did not file a report on Form 8-K during the three months ended June 30, 2004. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JAVA EXPRESS, INC. (Registrant) /s/ Lance Musicant DATE: August 6, 2004 By:_________________________________________ Lance Musicant President, Chief Executive Office, Chief Financial Officer and Director (Principal Executive & Accounting Officer) -18-