UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




FORM
10-Q




x
            QUARTERLY REPORT UNDER SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934





For the
quarterly period ended March 31, 2010





 ̈
            TRANSITION REPORT UNDER SECTION
      13 OR 15(d) OF THE EXCHANGE
ACT





For the
transition period from _______________ to ____________________


Commission
File Number: 000-21247





LATTENO
FOOD CORP.


(FORMERLY
B&D FOOD CORP.)





(Exact
Name of Small Business Issuer as Specified in Its Charter)




Delaware
            
            13-2622429(State
      or Other Jurisdiction
              of
      Incorporation or Organization)
            
            (IRS
      Employer
              Identification
      No.)


8953
Woodbine Avenue


Markham,
Ontario, Canada L3R 0J9


(Address
of Principal Executive Offices)




(905)
474-5593 Ext. 111


(Registrant’s
Telephone Number)




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
as required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.


YES x NO  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o No o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer
            o
            
            Accelerated
      filer
            oNon-accelerated
      filer
            o
            
            Smaller
      reporting company
            x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes   ̈     No
x




As of
March 31, 2010, there were 28,222,521shares of Common Stock, par value $0.001
per share issued and outstanding.









TABLE
OF CONTENTS





PagePART
      IItem
      1.
              Financial
      Statements
              2Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              13Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              25Item
      4.
              Controls
      and Procedures
              25PART
      IIItem
      1.
              Legal
      Proceedings
              26Item
      1A.
              Risk
      Factors
              26Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              26Item
      3.
              Defaults
      Upon Senior Securities
              26Item
      4.
              Submission
      of Matters to a Vote of Securities Holders
              26Item
      5.
              Other
      Information
              26Item
      6.
              Exhibits
              26




1




PART I.
FINANCIAL INFORMATION





ITEM 1.
FINANCIAL STATEMENTS




LATTENO
FOOD CORP. AND SUBSIDIARY
  CONSOLIDATED
FINANCIAL STATEMENTS
  MARCH
31, 2010


2




LATTENO FOOD
CORP. AND SUBSIDIARY


MARCH
31, 2010
  CONTENTS
  PageCONSOLIDATED
      FINANCIAL STATEMENTSConsolidated
      Balance Sheets as at March 31, 2010 and December 31, 2009
                                  3 -
      4Consolidated
      Statements of Operations and Comprehensive Loss for the Three Months Ended
      March 31, 2010
                                  5Consolidated
      Statements of Cash Flows for the Three Months Ended March 31,
      2010
                                  6Notes
      to the Consolidated Financial Statements
                                  7 -
      12
  
  LATTENO FOOD CORP. AND
SUBSIDIARY
  CONSOLIDATED
BALANCE SHEETS
  AS
AT
  (Expressed
in United States Dollars)
  MARCH 31,
                      2010
                      (unaudited)
                    
                    
                    December 31,
                      2009
                      (audited)ASSETSCurrent AssetsCash
      and cash equivalents
                    
                    $
                    9,926
                    
                    
                    $
                    64,409Accounts
      receivable, net of allowance for doubtful accounts of $Nil (2009 -
      $Nil)
                    
                    
                    552,824
                    
                    
                    
                    612,606Note
      receivable-current portion (Note
      4)
                    
                    
                    148,491
                    
                    
                    
                    148,491Total
      Current Assets
                    
                    
                    711,241
                    
                    
                    
                    825,506Long-Term
      AssetsNote
      receivable (Note 4)
                    
                    
                    5,414,464
                    
                    
                    
                    5,450,224Property
      and Equipment, net of accumulated depreciation (Note 5)
                    
                    
                    8,383,672
                    
                    
                    
                    6,542Total
      Long-Term Assets
                    
                    
                    13,798,136
                    
                    
                    
                    5,456,766Other
      AssetsIntangible
      assets (Note 6)
                    
                    
                    8,352,800
                    
                    
                    
                    9,987,200Total
      Other Assets
                    
                    
                    8,352,800
                    
                    
                    
                    9,987,200Total
      Assets
                    
                    $
                    22,862,177
                    
                    
                    $
                    16,269,472
  The
accompanying notes are an integral part of these consolidated financial
statements.
 3
  LATTENO FOOD CORP. AND
SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS (Continued)
  AS
AT
  (Expressed
in United States Dollars)
  March 31,
                        2010
                        (unaudited)
                      
                      
                      December 31,
                        2009
                        (audited)LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable (Note 7)
                      
                      $
                      1,306,594
                      
                      
                      $
                      1,315,266Due
      on acquisition of intangibles
                      
                      
                      3,594,567
                      
                      
                      
                      12,108,600Accrued
      liabilities and other payables (Note
      8)
                      
                      
                      2,215,862
                      
                      
                      
                      1,244,961Convertible
      debentures and promissory notes - current portion (Note 9)
                      
                      
                      3,098,419
                      
                      
                      
                      3,043,182Total
      Current Liabilities
                      
                      
                      10,215,442
                      
                      
                      
                      17,712,009Long-Term
      LiabilitiesConvertible
      debentures and promissory notes (Note 9)
                      
                      
                      9,418,439
                      
                      
                      
                      912,048Total
      Liabilities
                      
                      
                      19,633,881
                      
                      
                      
                      18,624,057Commitments,
      Note 10Going
      Concern, Note 2Stockholders'
      DeficitCommon
      shares of $0.001 par value; Authorized: 400,000,000 shares; Issued and
      outstanding: 28,222,521
                      
                      
                      28,222
                      
                      
                      
                      28,222Additional
      paid-in capital
                      
                      
                      23,433,380
                      
                      
                      
                      18,666,131Stock
      to be issued
                      
                      
                      110,000
                      
                      
                      
                      110,000Deferred
      stock based compensation
                      
                      
                      (230,444
                      )
                      
                      
                      (247,727
                      )Accumulated
      other comprehensive income (loss)
                      
                      
                      (49,922
                      )
                      
                      
                      (908,225
                      )Noncontrolling
      Interest in Subsidiary
                      
                      
                      -
                      
                      
                      
                      121,381Accumulated
      deficit
                      
                      
                      (20,062,940
                      )
                      
                      
                      (20,124,367
                      )Total
      Stockholders' Deficit
                      
                      
                      3,228,296
                      
                      
                      
                      (2,354,585
                      )Total
      Liabilities and Stockholders' Deficit
                      
                      $
                      22,862,177
                      
                      
                      $
                      16,269,472
  The
accompanying notes are an integral part of these consolidated financial
statements.
 4
  LATTENO FOOD CORP. AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
  FOR
THE THREE MONTHS ENDED MARCH 31,
  (Expressed
in United States Dollars)
 
 2010
                                        (unaudited)
                                      
                                      
                                      2009
                                        (unaudited)REVENUES
                                      
                                      $
                                      3,040
                                      
                                      
                                      $
                                      -COST
      OF GOODS SOLD
                                      
                                      
                                      24,648
                                      
                                      
                                      
                                      -GROSS
      LOSS
                                      
                                      
                                      (21,608
                                      )
                                      
                                      
                                      -EXPENSESGeneral
      and administrative
                                      
                                      
                                      128,862
                                      
                                      
                                      
                                      28,828Management
      and directors fees
                                      
                                      
                                      67,500
                                      
                                      
                                      
                                      60,000Rent
      and occupancy costs
                                      
                                      
                                      200,727
                                      
                                      
                                      
                                      200,727Depreciation
                                      
                                      
                                      164
                                      
                                      
                                      
                                      -TOTAL
      OPERATING EXPENSES
                                      
                                      
                                      397,253
                                      
                                      
                                      
                                      289,555LOSS
      FROM OPERATIONS
                                      
                                      
                                      (418,861
                                      )
                                      
                                      
                                      (289,555
                                      )Interest
      expense, net
                                      
                                      
                                      (116,514
                                      )
                                      
                                      
                                      (69,633
                                      )Foreign
      exchange
                                      
                                      
                                      403,101
                                      
                                      
                                      
                                      (1,181,746
                                      )Other
      income, net
                                      
                                      
                                      139,968
                                      
                                      
                                      
                                      -NET
      INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
                                      
                                      
                                      7,694
                                      
                                      
                                      
                                      (219,922
                                      )Provision
      for income taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -NET
      INCOME (LOSS) FROM OPERATIONS BEFORE NON-CONTROLLING
    INTEREST
                                      
                                      
                                      7,694
                                      
                                      
                                      
                                      (219,922
                                      )Non-controlling
      interest in income of subsidiary
                                      
                                      
                                      (53,733
                                      )
                                      
                                      
                                      -NET
      INCOME (LOSS)
                                      
                                      $
                                      61,427
                                      
                                      
                                      $
                                      (219,922
                                      )FOREIGN
      CURRENCY TRANSLATION ADJUSTMENT
                                      
                                      
                                      858,303
                                      
                                      
                                      
                                      -COMPREHENSIVE
      INCOME (LOSS)
                                      
                                      $
                                      917,730
                                      
                                      
                                      $
                                      (219,922
                                      )GAIN
      (LOSS) PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC
                                      
                                      $
                                      0.00
                                      
                                      
                                      
                                      (0.03
                                      )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC
                                      
                                      
                                      28,222,521
                                      
                                      
                                      
                                      7,449,348GAIN
      (LOSS) PER WEIGHTED NUMBER OF SHARES OUTSTANDING - DILUTED
                                      
                                      $
                                      0.00
                                      
                                      
                                      $
                                      (0.03
                                      )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED
                                      
                                      
                                      38,275,451
                                      
                                      
                                      
                                      7,449,348
  The
accompanying notes are an integral part of these consolidated financial
statements.
 5
  LATTENO FOOD CORP. AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
  FOR
THE THREE MONTHS ENDED MARCH 31,
  (Expressed
in United States Dollars)
  2010
                                            (unaudited)
                                          
                                          
                                          2009
                                            (unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      earnings (loss)
                                          
                                          $
                                          61,427
                                          
                                          
                                          $
                                          (2,182,816
                                          )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
                                          
                                          
                                          164
                                          
                                          
                                          
                                          227Minority
      interest
                                          
                                          
                                          (53,733
                                          )
                                          
                                          
                                          121,381Interest
      due to convertible notes
                                          
                                          
                                          108,141
                                          
                                          
                                          
                                          335,388Stock
      based compensation
                                          
                                          
                                          17,283
                                          
                                          
                                          
                                          175,804Acquisition
      of subsidiary
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,121,400Imputed
      interest on note receivable
                                          
                                          
                                          (139,967
                                          )
                                          
                                          
                                          (568,383
                                          )Changes
      in operating assets and liabilities:Accounts
      receivable
                                          
                                          
                                          59,782
                                          
                                          
                                          
                                          (612,606
                                          )Prepaid
      and sundry assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          12,885Current
      portion- note receivable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (22,067
                                          )Note
      receivable
                                          
                                          
                                          175,727
                                          
                                          
                                          
                                          724,976Accounts
      payable
                                          
                                          
                                          (8,666
                                          )
                                          
                                          
                                          935,399Due
      on acquisition of intangibles
                                          
                                          
                                          (437,013
                                          )
                                          
                                          
                                          -Accrued
      liabilities and other payables
                                          
                                          
                                          97,399
                                          
                                          
                                          
                                          (801,334
                                          )NET
      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
                                          
                                          
                                          (119,456
                                          )
                                          
                                          
                                          240,254CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of equipment
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (4,751
                                          )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from (repayment of) bank loans
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (669
                                          )Repayment
      of  advances to related parties
                                          
                                          
                                          -
                                          
                                          
                                          
                                          442,800Proceeds
      from the issuance of common stock
                                          
                                          
                                          -
                                          
                                          
                                          
                                          295,000NET
      CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
                                          
                                          
                                          -
                                          
                                          
                                          
                                          737,131EFFECT
      OF FOREIGN CURRENCY TRANSLATION
                                          
                                          
                                          64,973
                                          
                                          
                                          
                                          (908,225
                                          )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                                          
                                          
                                          (54,483
                                          )
                                          
                                          
                                          64,409CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                          
                                          
                                          64,409
                                          
                                          
                                          
                                          -CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                          
                                          $
                                          9,926
                                          
                                          
                                          $
                                          64,409
  The
accompanying notes are an integral part of these consolidated financial
statements.   6
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
 1.
                NATURE
      OF OPERATIONS AND BUSINESS
COMBINATIONS
  Latteno
Food Corp. (formerly B&D Food Corp.) (“Latteno” or “the Company”) is a US
corporation that concentrates in acquiring, organizing, developing and upgrading
companies in the food industry, and more specifically in the dairy and coffee
industry.  Currently the Company operates through its subsidiary in
Brazil and is developing a plan of operations for its leased facilities in
Brazil.
  The
Company was incorporated on August 24, 1994 under the laws of the state of
Delaware.  Until October 2004, the principal business activity of the
Company was ownership, management, and sale of residential real estate. This
activity was carried on through the wholly owned subsidiary Rickets Enterprises
International, Inc. In October 2004, the Company sold all of its remaining
revenue producing assets and in December 2004 ceased all its active
operations.
  On July
11, 2005, the Company entered into a Share Purchase Agreement (the “Agreement”)
with BDFC Brasil Alimentos LTDA., a company formed pursuant to the laws of
Brazil (“BDFC”) and the stockholders of BDFC (the “BDFC stockholders”) dated as
July 8, 2005. Pursuant to the Agreement, the Company acquired effectively 100%
of the outstanding equity stock of BDFC from the BDFC
stockholders.  As consideration for the acquisition of BDFC, the
Company agreed to issue 4,767,234 shares of the Company’s common stock to the
BDFC stockholders.  As additional consideration, the Company issued an
8% convertible promissory note, in the amount of $10,000,000 to the BDFC
stockholders in consideration for the entire preferred stock of
BDFC.  The note is payable (principal plus accumulated interest) on
July 8, 2008 and may be converted, at the option of the holder, at any time,
prior to or at the time of repayment by the Company, to the Company’s common
stock at the rate of $4.00 per share.  At the date of the agreement,
BDFC stockholders were also the controlling shareholder of the
Company.
  BDFC was
originally incorporated under the name Eastco Corporation do Brasil Ltda
(“Eastco), under the laws of Brazil on June 2, 1995.  In May 2004, the
name of Eastco was changed to Eastco de Alimentos Ltda., as registered with the
Junta Comercial de Sao Paolo (Commercial Council) and on June 28, 2005 the name
was changed to BDFC Brasil Alimentos Ltda. BDFC has been in the coffee
manufacturing business since 1997.  The Company manufactures and
purchases coffee grains, toasted and milled coffee, soluble coffee and related
products, for sale, import and export.
  On
November 1, 2000, due to adverse financial conditions, BDFC filed a Judicial
Creditor’s Agreement called “Concordata Preventiva”.  This agreement
consolidates the Company’s debts and postpones all obligations to suppliers and
banks for a period of time.  The creditor’s agreement under
“Concordata Preventiva” provided for payment in two installments, the first
installment of 40% to be paid in one year and the remaining 60% to be paid in
two years. BDFC made the full payments of $144,000 and $216,000 on October 30,
2001 and November 25, 2002, respectively.  On March 8, 2005, BDFC paid
an additional $15,562 as required by the courts.  To generate
sufficient cash flows, in January 21, 2003 management leased its manufacturing
facility and equipment to Comercio e Industrias Brasileiras Coimbre S/A
(“Coimbra”), an unrelated party. Rents received from the lease were used by BDFC
to pay its debts.
  On July
1, 2008, the Company completed execution of a stock purchase agreement with SBKF
Investments, Ltd. (the “Purchaser”) for the sale of 100% of the issued and
outstanding common stock of BDFC Brasil Alimentos LTDA. a subsidiary of the
Latteno.  The purchase price was $5,764,847 and in consideration the
Company received a note bearing annual interest of 10% repayable in equal annual
payments of principal and interest of $702,909.  The net liabilities
of BDFC at the time of the sale were $6,204,539, resulting in a gain on sale of
$11,969,386.
  7
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
  1.
                NATURE
      OF OPERATIONS AND BUSINESS COMBINATIONS
  (Continued)
  On May
13, 2009, the Company entered into a purchase and sale agreement to purchase 60%
of the outstanding shares of Global Milk Businesses and Administration of
Private Properties LTDA. ("Global Milk"), a limited liability company,
incorporated in the State of Sao Paulo, Brazil.  Global Milk holds the
rights of certain intellectual property of the brand name products manufactured
and sold under the brand name Teixeira.
  Pursuant
to the agreement, Latteno acquired 300 common shares of Global Milk from
Castrol, LLC ("Castrol"), a Delaware corporation, representing 60% of the
outstanding shares of Global Milk, for consideration of 13,000,000 Brazilian
Reals ($6,312,800).  Latteno and Castrol are then required to
contribute 20,000,000 Brazilian Reals to the company based on their
ownership.  Latteno must make the capital contribution of 12,000,000
Brazilian Reals ($5,880,000) and complete payment for the acquired shares of
13,000,000 Brazilian Reals ($6,312,800) by December 10, 2009 or the shares
issued will be cancelled.  On October 22, 2009 the deadline for
completing the purchase payments was agreed by both parties to be extended to
February 10, 2010.    Latteno funded the purchase and
contribution requirements on February 10, 2010.
  Latteno
has determined that it is the accounting acquirer and has obtained control of
Global Milk.  Latteno has therefore consolidated 100% of Global Milks
assets and liabilities.  The net assets of Global Milk on the date of
acquisition consisted of trademarks and patents valued at $9,987,200 and
liabilities of $3,674,400.
  On
September 1, 2009, our Board of Directors approved, subject to receiving the
approval of the holder of a majority of our outstanding capital stock, an
amendment and restatement of our Articles of Incorporation (the “Restated
Articles”), to change our name to “Latteno Food Corp.” to more accurately
reflect our business operations.  The majority stockholders approved
the Restated Articles pursuant to a written consent dated as of September 1,
2009.
  On
February 10, 2010 Latteno completed the payment and capital contributions
required of the acquisition of Global Milk.  Latteno first acquired
land located in Brazil from AES Comercial Ltda through the issuance of a
convertible debenture totaling $8,446,421 (15,000,000 Reals).  The
note bears interest at 2.75% per annum and matures on February 9,
2015.  This land was then transferred to Global Milk, as part of the
required capital contribution.  Latteno issued an additional
convertible debenture to Global Milk for $2,711,497 (5,000,000
Reals).  The note bears interest at 2.75% per annum and matures on
February 9, 2015.
  Castrol
Latteno’s partner, holder of the 40% non-controlling interest in Global Milk was
notified by Latteno that they were in breach of the non-compete clause of the
shareholders agreement.  The remaining 5,000,000 Reals  payable
to for the GM shares acquired was therefore no longer payable.
  The above
transactions completed the 25,000,000 Reals requirements of Latteno’s
acquisition of Global Milk.
  8
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
 1.
                NATURE
      OF OPERATIONS AND BUSINESS COMBINATIONS
  (Continued)
  On March
11, 2010, as a result of the non-compete and other violations by Castrol, a
special meeting of the shareholders of Global Milk was held and majority
shareholders voted to exclude the partner, Castrol.  As a result,
Global Milk effectively became a wholly owned subsidiary of the
Company.  The transaction was accounted for as a change in the
ownership interests of the Company with an entity under common control, in
accordance with ASC 810-10-65-1,Non-controlling Interests in
Consolidated Financial Statements, an Amendment of ARB 51.  As
a result, the value of the shares transferred to consummate the exclusion of the
partner was $4,767,249, which represented the historical cost basis of the
balance of the net assets transferred.  The following disclosure
provides details regarding the change in the non-controlling ownership interests
of the Company’s subsidiaries, in accordance with ASC
810-10-55-4.
 
 For the Three
                              Months Ended
                              March 31,
                              2010
                            
                            
                            For the Three
                              Months Ended
                              March 31,
                              2009Net
      loss Attributable to Latteno Food Corp.
                            
                            $
                            (53,733
                            )
                            
                            $
                            -Increase
      in Latteno’s Additional Paid in Capital for the exclusion of the
      Shareholders of the Noncontrolling Interest
                            
                            
                            4,767,249
                            
                            
                            
                            -Change
      from Net Income Attributable to Latteno and Transfers (to) from the
      Noncontrolling Interest
                            
                            $
                            4,713,516
                            
                            
                            $
                            -
  2.
                GOING
      CONCERN
  The
Company's consolidated financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.  The Company has raised
capital and financing to cover all of its losses from operations since inception
but the Company's ability to continue as a going concern is contingent upon its
ability to attain and sustain profitable operations and to generate sufficient
capital and financing from external investors and lenders.  For the
period ended March 31, 2010 the Company experienced a net income (loss) of
$100,458 (March 31, 2009 - $(439,844)) and has a working capital deficiency of
$9,465,106 (December 31, 2009 - $16,886,503).
  Management
has recently completed the final payments of the joint venture agreement, where
Latteno acquired 60% of Global Milk, a Brazilian Company which owns certain
rights to the trademarks, customer lists and distribution of food
products.  Management believes that the Global Milk subsidiary will
begin to create positive cash flows from operations in the third quarter of
2010.  In addition, the Company is seeking financing to fund the
ongoing overhead expenses of Latteno.
  In the
opinion of the management, the anticipated growth of operations and the
financing with potential new investors in the future will permit the Company to
continue as a going concern in the coming year, until such time that the Company
obtains profitable operations.
  The
accompanying consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going
concern.
  9
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
 3.
                BASIS
      OF PRESENTATION
  These
interim consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America (“US
GAAP”).
  The
interim results of operations are not necessarily indicative of the results to
be expected for the fiscal year ending December 31, 2010. The Company’s
financial statements contained herein are unaudited and, in the opinion of
management, contain all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of financial position, results of
operations and cash flows for the period presented.  The Company’s
accounting policies and certain other disclosures are set forth in the notes to
the consolidated financial statements contained in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2009.  These financial
statements should be read in conjunction with the Company’s audited consolidated
financial statements and notes thereto. The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures 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.
  The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and include the accounts of the Company and its effectively wholly owned
subsidiary, Global Milk.  All significant inter-company accounts and
transactions are eliminated on consolidation.
  4.
                NOTE
      RECEIVABLE
  On July
1, 2008, the Company completed execution of a stock purchase agreement with SBKF
Investments, Ltd. (the “Purchaser”) for the sale of 100% of the issued and
outstanding common stock of BDFC Brasil Alimentos LTDA. a subsidiary of the
Latteno.  The purchase price totaled $5,764,847 and in consideration
the Company received a note bearing annual interest of 10% repayable in equal
annual payments of principal and interest of $702,909. The balance payable at
March 31, 2010 including accrued interest is
$5,562,955.
  5.
                PROPERTY
      AND EQUIPMENT
  The
components of property and equipment were as follows:
  March 31,
                                2010
                              
                              
                              December 31,
                                2009Land
                              
                              $
                              8,377,500
                              
                              
                              $
                              -Computers,
      machinery and equipment
                              
                              
                              5,188
                              
                              
                              
                              5,357Furniture
      and fixtures
                              
                              
                              1,372
                              
                              
                              
                              1,4168,384,060
                              
                              
                              
                              6,773Accumulated
      depreciation
                              
                              
                              (388
                              )
                              
                              
                              (231
                              )Net
      book value
                              
                              $
                              8,383,672
                              
                              
                              $
                              6,542
  10
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
 6.
                    INTANGIBLE
      ASSETS
  Latteno
has determined that it is the accounting acquirer and has obtained control of
Global Milk.  Latteno has therefore consolidated 100% of Global Milks
assets and liabilities.  The net assets of Global Milk on the date of
acquisition consisted of trademarks and patents valued at $9,987,200 and
liabilities of $3,674,400.
 7.
                ACCOUNTS
      PAYABLE
 
 March 31,
                          2010
                        
                        
                        December 31,
                          2009Trade
      payable
                        
                        $
                        1,156,594
                        
                        
                        $
                        1,190,266Rent
      payable
                        
                        
                        150,000
                        
                        
                        
                        125,000$
                        1,306,594
                        
                        
                        $
                        1,315,266
  8.
                ACCRUED
      LIABILITIES AND OTHER PAYABLES
 
 March 31,
                          2010
                        
                        
                        December 31,
                          2009Employees
      and related institutions
                        
                        $
                        105,691
                        
                        
                        $
                        65,403Amounts
      payable to stockholders of the Company, unsecured, non interest bearing
      and payable on demand
                        
                        
                        1,194,738
                        
                        
                        
                        1,169,558Other
      accrued liabilities
                        
                        
                        915,433
                        
                        
                        
                        10,000$
                        2,215,862
                        
                        
                        $
                        1,244,961
  Included
in other accrued liabilities are debts assumed by Global Milk as payment in part
for the balance owing on acquisition of intangibles.  These debts are
with current suppliers of Global Milk and are unsecured and due on
demand.
  9.
                CONVERTIBLE
      DEBENTURES AND PROMISSORY NOTES
  Composed
of:
  March 31,
                          2010
                        
                        
                        December 31,
                          2009Convertible
      debentures
                        
                        $
                        11,140,727
                        
                        
                        $
                        2,614,256Promissory
      notes
                        
                        
                        1,376,131
                        
                        
                        
                        1,340,974$
                        12,516,858
                        
                        
                        $
                        3,955,230
  The
convertible debentures and promissory notes are unsecured  and become
due as follows:
  March 31,
                          2010
                        
                        
                        December 31,
                          2009Amount
      due in 2010
                        
                        
                        2,762,808
                        
                        
                        
                        2,712,572Amount
      due in 2011
                        
                        
                        335,611
                        
                        
                        
                        330,611Amount
      due in 2013
                        
                        
                        939,112
                        
                        
                        
                        912,047Amount
      due in 2015
                        
                        
                        8,479,327
                        
                        
                        
                        -$
                        12,516,858
                        
                        
                        $
                        3,955,230
  11
  LATTENO
FOOD CORP. AND SUBSIDIARY
  NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
  MARCH
31, 2010
  (Expressed
in United States Dollars)
  9.
                CONVERTIBLE
      DEBENTURES AND PROMISSORY NOTES
(Continued)
  On
February 10, 2010 the Company issued unsecured convertible promissory notes in
the amount of $8,446,421 as payment for the acquisition of vacant land located
in Brazil.  The notes bear annual interest at 2.75% and mature after
five years.  At any time after the first six months, the holder has
the right to convert the principal and interest due into fully paid and
non-assessable shares of the Company’s common stock, par value $.001 per
share.  The number of shares of common stock to be issued upon such
conversion shall be equal to the quotient obtained by dividing the entire
principal amount plus accrued interest (if any) by the average closing price of
the Company's stock, ten days prior to the conversion notice, but not less than
$1.50 per share.
  10.
                COMMITMENTS
  On
September 26, 2008, the Company entered into a lease agreement with SBKF
Investments, Ltd for a term of 18 years, whereby they would leaseback all of the
land building and factory that was sold to them, as described in Note
1.  The Company's remaining lease obligations, with future minimum
annual payments (exclusive of taxes, insurance and maintenance costs) are as
follows:
  Year
      One
                          
                          
                          802,909Year
      Two
                          
                          
                          802,909Year
      Three
                          
                          
                          802,909Year
      Four
                          
                          
                          802,909Year
      Five and thereafter
                          
                          
                          10,237,090$
                          13,448,726
  11.
                  SUBSEQUENT
      EVENTS
  Subsequent
to March 31, 2010, the Company issued various convertible debentures totaling
$192,000, convertible into common shares at a price of $0.30 per
share.  The debentures bears interest at 4 to 10% and are repayable in
full in April 2011.
  12




ITEM 2.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS




INFORMATION
REGARDING FORWARD LOOKING STATEMENTS




The
following discussion should be read in conjunction with the financial statements
and notes thereto set forth in Item 1 of this Report. In addition to historical
information, this discussion and analysis contains forward-looking statements
that relate to future events and expectations and, as such, constitute
forward-looking statements. Forward-looking statements include those containing
such words as "anticipates", "believes", "estimates", "expects", "hopes",
"targets", "should", “will", "will likely result", "forecast", "outlook",
"projects" or similar expressions. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to be materially different
from those expressed or implied in the forward-looking statements.




OVERVIEW





Company
Vision





To
utilize the Company’s assets and human expertise in order to enhance its current
operations and acquire additional operations in order to become one of the
world's largest "breakfast item" food and beverage manufacturing and
distribution companies.





Business
Summary





Latteno
Food Corp. (OTC BB: LATF) is a Delaware corporation that concentrates in
acquiring, organizing, developing and upgrading companies in the international
food and beverage market. Currently Latteno Food Corp. (“Latteno” or “the
Company”) is specializing in the dairy industry and coffee industry. The
Company’s management plans to integrate the operations of manufacturing and
distribution of acquired entities in order to achieve maximum return on capital
for its investors. Currently the Company operates through its subsidiary in
Brazil.





Latteno's
business model is simple and efficient – Acquisition of a key brand name and
distribution system, an "Engine", that will be able to carry the group's
products to existing customers in various locations.





The
Company is continuing to apply its strategy and seeks growth through the
acquisition of plantations, processing and distribution companies across the
world.





Unless
otherwise stated, currencies are stated in US dollars throughout this
document.





History
and Nature of Operations





The
Company was formed as a holding company through a reverse merge in 2004, in
order to acquire companies that will manufacture, process and distribute
high-quality coffee products from various companies on a worldwide basis. The
Company began its operations under the name B&D Food Corp. as a Brazilian
coffee trader, producer and distributor. Its founders share 30 years of
experience in the soft commodity world and have managed every aspect of its
chain: trading, manufacturing, distribution and branding.





In 2005,
the Company obtained a manufacturing arm by acquiring BDFC Brasil Alimentos LTDA
(“BDFC”) which owns and operates a coffee manufacturing plant. BDFC has the
ability to manufacture and pack roasted and ground coffee, instant coffee and
several mixtures of coffee and tea like cappuccino and others. Currently, the
Company is focusing on selling its coffee products in South America and Eastern
Europe. In addition, the Company is looking to acquire a strong marketing
capability in the United States.




13




In the
summer of 2008, the Company ceased operations in the coffee division and began
to restructure its debt and equity in an effort to position itself for strategic
acquisitions. The first phase of this restructuring involved the sale of the
BDFC subsidiary and the leasing back of the land and building where the coffee
plant operations were located. This eliminated much of the debt that was
associated with the BDFC subsidiary, but still enabled the Company to enter back
into the coffee industry at the appropriate time in the future. The phase stage
of restructuring if in process and is further described in the Financing section
below.




On May
13, 2009, the Company entered into a purchase and sale agreement to purchase 60%
of the outstanding shares of Global Milk Businesses and Administration of
Private Properties LTDA. ("Global Milk"), a limited liability company,
incorporated in the State of Sao Paulo, Brazil. Global Milk holds the rights of
certain intellectual property of the brand name products manufactured and sold
under the brand name Teixeira, a very strong dairy product brand name and
distribution system throughout Brazil. On March
11, 2010, as a result of the non-compete and other violations by Castrol, a
special meeting of the shareholders of Global Milk was held and majority
shareholders voted to exclude the partner, Castrol.  As a result,
Global Milk effectively became a wholly owned subsidiary of the
Company




The
acquisition of the Teixeira brand, has given Latteno the key branding and
manufacturing components that it required to now seek out further strategic
acquisitions, re-enter the coffee industry and expand operation internationally
carrying its products using proven distribution lines and well known brand
names.




On June
19, 2009, Spence Walker was appointed as Chief Financial Officer and a member of
the Board of Directors of the Company. At this time the head offices of Latteno
Food Corp were moved to Markham, Ontario, Canada.




Keys
to Success




Establishing strong management
team-The right
acquisitions are the foundation upon which the Latteno plan is built. A strong
acquisition team is mission critical as this is where the revenue and
profitability of our product offerings is generated. The food industry space has
low costs of entry and competitors can be easily spawned, however Latteno will
be able to create a larger profit due to its broader scope and vast sources of
revenues and sales opportunities and therefore can offer its employees a better
deal and rewards. A critical component is that our plan facilitates that our
acquisition team will have ownership in Latteno thus maximizing the commitment
to our mutual success.




14




Offering a broader range of
products - Latteno shall continue to grow and expand product lines. Size
and a functional distribution of our product lines will give us an immediate
competitive advantage to our competitors and will allow all new products to
lever their sales and marketing campaigns off the existing and expanding brands.
The greater our brands the more new products we are able to effectively
introduce. There is no better time to grow in South America than right now.
Acquisitions and personnel are inexpensive and are looking for opportunities to
prosper.




Keeping costs low - Latteno
is committed to a common sense, frugal start up, controlled growth and
innovative management processes. Our initial staff/management team shall be busy
filling many roles until such time as the organization can profitably expand and
then fill the roles needed by an expanding profitable organization.




Be properly capitalized - It
is possible to invest less into this business model however our plan includes
budgets and forecasts and we will come across many opportunities for which
immediate action is needed to take advantage of the opportunity. Thus we have
addressed this with real costs and real expectations and more than enough
capital.




Securing high volume clients
- We plan to pursue direct strategic relationships based on our mass and product
lines with high volume clients. The Latteno marketing strategy shall target
client's concerns in four specific areas: product, product accountability,
financial return and internal client costs for distribution.




Mergers,
acquisitions and expansion-are the primary key to the
success of Latteno’s revenue stream. It will be imperative to maintain tight
managerial control of the acquisition marketing strategies while at the same
time allowing these strategies to be fluid enough to adapt immediately to fit
Latteno’s needs ensuring no disruption of incoming inventories from contracted
clients. A company with nothing to sell - sells nothing.




15




MANGEMENT
TEAM




Daniel Ollech has been our
Chairman of the Board and President since April 29, 2005 and is currently the
Chief Executive Officer. From 2003 to the present, Mr. Daniel Ollech has served
as a director of Livorno Investments S.A. (“Livorno”), an international holding
company with interests in various world trading companies in the areas of
coffee, sugar, and oil. Since 2001, Mr. Daniel Ollech has also been a Director
(which in Brazil equates to an executive officer), of UCS Group, a company which
provides financing through factoring and securitizations. Prior to 2001, Mr.
Daniel Ollech managed his own investment portfolio. Mr. Daniel Ollech graduated
with a degree in marketing from Escola Superior de Marketing, in
1980.




Spence Walker joined our
parent company in June, 2009 as Chief Financial Officer and Director. In
addition to his role with Latteno Food Corp, Mr. Walker is a Canadian resident
and is a licensed Certified Public Accountant in the US and a Chartered
Accountant in Canada. Mr. Walker is a partner in the professional services firm,
DNTW Chartered Accountants, LLP (“DNTW”), which he joined in 2007. Prior to
Joining DNTW, Mr. Walker was a partner in Walker & Company Chartered
Accountants, which he formed in 2004 and prior to that he was employed by a
mid-sized accounting firm, SF Partnership, LLP from 2001 to 2004. Mr. Walker
earned his BComm in 2001 from Ryerson University, his CA in 2003 and his CPA in
2004. In 2007, Mr. Walker took on the responsibility for leading DNTW’s audit
services and has overall responsibility for the Markham office. Mr. Walker also
serves as director on other public and private companies in Canada and the
US.




Jacques Ollech has been a
Director and our Executive Vice President since January 12, 2006. Mr. Jacques
Ollech has over 20 years of experience in the coffee industry as a manufacturer,
broker and distributor in Brazil, Russia, China, Europe and Israel. From 1991 to
the present, Mr. Jacques Ollech has also served as a director of the
Livorno.





Arnaldo Segal is the legal
representative of Latteno Food Corp in Brazil and joined Global Milk as
President in February 2010.  Mr. Segal is a Brazilian national who has over
20 years experience in retail and distribution.  Mr. Segal received his
Bachelor of Science in Electronic Engineering from the University of São Paulo –
Polytechnic School of engineering in 1978.





Javier Tano Feijo resigned as
is the President of Global Milk in February 2010 and now reports directly to Mr.
Arnaldo Segal, but has been re-engaged as a consultant and maintains
responsibility for the operating segment for the distribution of dairy products.
Mr. Javier Tano Feijo is a seasoned executive with over 20 years of experience
in Brazilian consumer goods companies. Mr. Feijo has taken part in many merger
and acquisition transactions between Brazilian and multi-national
companies.




16




PLAN
OF OPERATIONS




Summary
of Current Operations




Latteno
has current and potential operations in two divisions and is a holder of an
option:




Global Milk Ltd. – A
100% owned Brazilian company that owns one of Brazil's most recognized dairy
product brands. The Company operates a wide spread and efficient distribution
system throughout Brazil.




Brazil Coffee Plant–
Lease agreement for a non-operational factory in need of refurbishment, that
produces instant and ground coffee.





Dairy




Latteno
has acquired 100% of the common stock of Global Milk,a private Brazilian
Company that owns the Teixeira brand name, distribution system and sales system.
Latteno exclusively out-sources all of the production of the Teixeira products
to the Teixeira factories. This acquisition was made in order to utilize the
Teixeira distribution system and extensive brand recognition as its Brazilian
"Engine" that will promote the group's products.




About
Teixeira




Solon
Teixeira de Rezende, started operations of Dairy Teixeira Ltda. with his father,
Jerome Tan and his brothers Joseph and Juarez in 1950 in Sao Paulo and southern
Minas Gerais. In ten years they opened two new factories then launched the first
grated Parmesan cheese in the market.




In 1967,
Tan acquired more factories and prospered in the 70’s which got them ready for a
period of great growth in the 80's. With the opening of production facilities in
Sao Paulo and Minas Gerais, they were able to expand with several new points of
delivery of milk in these States. The results could not be better: it rode to
220 million liters per year approaching the end of the decade.




In 1989,
in another step of success in the dairy market of Brazil, Teixeira revised its
corporate base and reorganized its operations in preparation for the global
economy that it envisioned. This effort was born S. Teixeira Food Products
Ltda.




17




With a
modern view of the market, Teixeira outsources certain stages of production,
specializing in the areas of: finishing, packaging, sales and marketing,
distribution, logistics, customer service, delivery and quality control.
Teixeira aims to meet the diverse needs of the market and consumer, consistent
with an international market approach. Teixeira now has two production units, a
third under construction and partners and suppliers in several Brazilian states
and in other parts of the world such as Australia, New Zealand, United States,
Europe and Mercosur. This position gives Teixeira the benefit of being close to
various types of raw materials, packaging and technology. It holds the market
leadership with the grated parmesan cheese, winner of the Top Five of the
journal Modern Supermarket and numerous national and international awards
quality of their products.




Teixeira
makes all of this possible with a consistent philosophy of three keys to
success:




1. 
   Selling products at reasonable prices utilizing a maximum quality
of production and services to its customers;


2. 
   Seed continuous partnership and trust among its employees,
employees and suppliers; and


3. 
   Increasing the recognition of Mark Teixeira, its main
asset.




Found in
outlets throughout Brazil for 50 years, the products of the Teixeira brand are
living proof of success.




Coffee




Brazil




Latteno
is currently leasing an instant and roasted coffee factory located in Cruzeiro,
Sao-Paulo, which was property the Company previously owned under its BDFC
subsidiary. The factory has, in the past, produced large amounts of spray-dried
and roasted coffee but is currently in need of a massive refurbishment and
system upgrade.




In
addition to the lease, the Company has maintained ownership of four brand names:
"Samba Café", "Vivenda", "Torino" and "Brazilian Best", used in the past by
Latteno to sell its instant and roasted coffee across the world.




In the
future, the Company plans to utilize the factory in one of two
options:




1. 
   Invest the needed funds in order to upgrade its machinery and
systems in order to produce its various coffee products.


2. 
   Invest funds to convert the factory into a powdered milk
manufacturer.




Latteno’s
management focus is currently on the successful transition of the Teixeira
operations into the Latteno group. When management is confident that the
transition is complete and effective, they will begin to examine both of the
aforementioned options in order to determine the most suitable option in light
of Latteno’s overall vision.




18




Distribution




Latteno
plans to use Teixeira's brand recognition and distribution system (see dairy
business in previous section) in order to carry its coffee and other breakfast
products to markets throughout Brazil.




In the
future, Latteno plans to acquire additional "Engines" in target markets
throughout US, Europe and Asia that will carry the group's products to customers
worldwide.




Competition




The
coffee industry is extremely competitive and includes several companies, which
have achieved substantially greater market shares than we have and have longer
operating histories, larger customer bases and substantially greater financial,
development and marketing resources than we do. Our proprietary brand coffees
may compete with many other branded coffees which are sold in supermarkets and
specialty stores, primarily in Brazil and the United States. Examples of
companies we may compete with include, but are not limited to Nestle, Companhia
Cacique de Cafe Soluvel, Cafe Soluvel Brasilia and Companhia lguacu de Cafe
Soluvel.




Beside
the Company's experienced management, Latteno's main advantage over any newcomer
to this volatile market is its ability to distribute its products to Brazil's
largest consumer markets from day one of production, with minimal overhead
expenses through the Teixeira distribution system.




Milestones




In the
first twelve months of operations, commencing after the first stage of the
internal restructuring and the acquisition of Global Milk (July 2009), the
Company has completed or plans to complete the following
milestones:





·   
 Commenced sales of Teixeira products during the 2nd half of July,
2009.




·     
Established initial working capital through supplier credit lines




·     
Established funding for overhead and head office costs




·     
Transition the operation of Teixeira to the Global milk subsidiary, such that
distribution, customer service and sales are all processed and managed under the
Global Milk by month six.




·     
Increase Global Milk’s customer base and sales on a weekly basis




·     
Increase overall performance and profitability of Global Milk such that it
reaches a self sustaining status as well as reach a profitable status for the
Latteno group as a whole




19




·
            Completed private placements and
      other forms of financing in the amount of approximately $1.5 million to
      facilitate certain working capital requirements of Global Milk and head
      office costs of the Latteno reporting entity, until Global Milk reaches
      cash positive operations





·
            Completed financing in the amount
      of $14 million in February 2010 to facilitate payment of the acquisition
      cost of Global Milk and to meet the capital contribution requirements into
      Global Milk, as per the acquisition
  agreement





·
            Achieve gross revenues of
      approximately $3 million





·
            Generate net operating cash flows
      of approximately $0.5
million




In the
second year of operations the Company plans to complete the following
milestones:




·
            Introduce key individuals to
      create a sound management team and board of directors that add to industry
      experience to the Latteno
team





·
            Increase annual gross revenues to
      $80 million and annual net operating cash flow to $12
      million





·
            Commence a second strategic
      acquisition of a food
company





·
            Begin selling Latteno coffee
      products through Teixeira distribution
  lines





·
            Expand geographically to become
      an exporter to markets with a high demand for coffee and other related
      breakfast products, i.e. U.S., China and
  Europe





·
            Review existing OTCBB listing and
      AMEX listing and devise a plan for entering NASDAQ or equivalent
      exchange




In the
third and subsequent years of operation the Company plans to complete the
following milestones:




·
            Continue expansion by completing
      3rdand 4thacquisitions by year
      four





·
            Acquisitions and expansion will
      be established in all US, European, Asian and South American markets where
      opportunities exist





·
            At the end of year four net cash
      from operations averages $3 million per
  month





·
            At the end of year four gross
      revenues averages $20 million per
month





·
            We can develop vertically defined
      markets and alliances




20




Results
of Operations for the Three Months Ended March 31, 2010





During
the quarter, we discovered that the supplier of our Teixeira products, who we
have purchased exclusive rights to the brand name, had breached the non-compete
clause of the purchase agreement.  The purchase price, in accordance with
the payment terms, was reduced by 5,000,000 Reals.  This led to our further
investigation which discovered further violations by our Global Milk partner and
their relationship with the previous owners of Teixeira.  We therefore
filed with the Brazilian courts and the exclusion of them as a partner was
approved.  As a result of this ongoing dispute, we were forced to suspend
operations, as we were no longer on terms necessary to purchase our goods for
sale from the Teixeira supplier.





We have
spent the remainder of our efforts negotiating directly with the suppliers who
our partner had previously acted as a go between.  To date, we have been
successful in doing so and will continue to re-structure our supplier chain over
the coming months.  Although this has put a damper on our first and second
quarter results, the continued affect of these circumstances is very positive
for Latteno.  We now have full ownership of the equity of Global Milk and
will be able to reduce our product costs and cost of delivery, from being free
to negotiate directly with suppliers.  Our customer base that we have
acquired and developed over the past year still exists and they have indicated
their willingness to continue, once our operations recommence.





In
addition, we feel our risk of losing any customers or suppliers to our old
partner is limited, due to contractual and court orders prohibiting them from
utilizing the Teixeira brand name.  This is evident also, by our successful
negotiations with suppliers and customers.




Hiring
of Management and Other Professionals




As a
result of conflicts of interest we believe existed with Javier Tano Feijo, we
have terminated the contract with him as the President of Global Milk.  We
have engaged the services of Mr. Arnaldo Segal as the legal representative of
Latteno Food Corp in Brazil and he became the new President of Global Milk,
replacing Javier Tano Feijo in February 2010.  Mr Javier Tano Feijo
continues as Head of Commercial Operations, through a consulting agreement with
Global Milk. We have also retained Mrs. Juliana Carrilo Vieira as the legal
counsel for Global Milk.





Branding
and Name Registrations




We have
registered our subsidiary, Global Milk, with over 30 vendors and customers,
including Pão de Açucar S/A , Carrefour, WalMart , Makro, Sodexo, Atacadão,
Martins,Tenda, and Roldão.




Royalties
Earned and Receivable




According
to the agreement for use of the trade name we are owed royalties on any sales of
the trade name by Teixiera, until such time as the operations have been
transferred.  Since commencement of operations in June 2009, we have earned
and have royalties receivable from S.Teixeira Industria de Laticinios Ltda
(“Teixeira”) in excess of $600.000.  The amount refers to the percentage on
Teixeira gross sales in excess $12,000,000 in the period from May 15, 2009 to
March 31st, 2010.  The Company received these royalties on sales of
Teixeira products as a transitional remedy until such time as Global Milk was
transacting the purchase and sales directly.  The balance owing will be
offset against the final payment of the balance owing to Teixeira for the
acquisition of their intangible assets and expected to occur in the second
quarter of 2010.




Customers
and Sales




Due to
the need to suspend operations as discussed above, we have had minimal sales
activity.  However we continue to discuss terms with new customers, who
have indicated their desire to purchase from us in the future.





In July
2010, we will commence sales and operations with 28 sales reps covering the
state of Sao Paulo (46% of Brazilian GDP) with sales expected to be between
R$2.5 to 3 million in the first month.





By August
2010 we will plan to start sales in three other states (Rio de Janeiro, Bahia
and Pernambuco ) which represent another 25% of Brazilian GDP.




Structure





During
the quarter, we moved Global Milk offices to Rua Jaragua 90 ,Bom Retiro ,Sao
Paulo and reduced our rent payments, these offices will be used as a temporary
location, until our full operations are ready to commence at which time we will
move to offices closer to our logistic distributor.




Inflation





Our
results of operations have not been affected by inflation and management does
not expect that inflation risk would cause material impact on its operations in
the future.





Seasonality





Our
results of operations are not materially affected by seasonality and we do not
expect seasonality to cause any material impact on our operations in the near
future.





21




FINANCIAL
CONDITION AND LIQUIDITY




Financing





Latteno
has mapped out a strong, consistent and achievable growth that will achieve a
self sustaining status within its first year of operations under the Global Milk
subsidiary.




On
February 10, 2010 Latteno completed the payment and capital contributions
required of the acquisition of Global Milk.  Latteno first acquired land
located in Brazil from AES Comercial Ltda through the issuance of a convertible
debenture totalling $8,446,421 (15,000,000 Reals).  The note bears interest
at 2.75% per annum and matures on February 9, 2015.  This land was then
transferred to Global Milk, as part of the required capital contribution. 
Latteno issued an additional convertible debenture to Global Milk for $2,711,497
(5,000,000 Reals).  The note bears interest at 2.75% per annum and matures
on February 9, 2015.




Latteno’s
partner, the 40% non-controlling interest of Global Milk was notified by Latteno
that they were in violation of the shareholders agreement, due to breach of the
non-compete clause.  The remaining 5,000,000 Reals ($2,815,474) payable to
Castrol for the GM shares acquired was therefore no longer payable.




The above
transactions completed the 25,000,000 Reals requirements of Latteno’s
acquisition of Global Milk.





We have
negotiated working capital funding for our purchases in the amount of 1,000,000
Reals and continuing to negotiate credit terms with suppliers as our operations
mature.





This
fiscal year to date, we have raised over $200,000 in the form of loans and
convertible debentures to provide necessary working capital funding.  We
are continuing to seek similar financing until such time as our Global Milk
operations reach a profitable stage.  This is expected to be in the third
quarter of 2010.




Capital
Restructuring




In the
summer of 2008, the Company ceased operations in the coffee division and began
to restructure its debt and equity in an effort to position itself for strategic
acquisitions. The first phase of this restructuring involved the sale of the
BDFC subsidiary and the leasing back of the land and building where the coffee
plant operations were located. This eliminated much of the debt that was
associated with the BDFC subsidiary, but still enabled the Company to enter back
into the coffee industry at the appropriate time in the future. Concurrent with
the sale and leaseback transaction, senior management agreed to convert all
existing convertible debentures into preferred shares, thus further reducing the
overall debt requirements.




As the
second phase of the Company’s efforts to restructure itself, the Company filed
an information statement with the SEC on September 14, 2009 notify stockholders
of the following:




On or
about September 1, 2009, the Company received written consents in lieu of a
meeting of Stockholders from holders of 72,654,538 shares representing
approximately 46% of the 154,986,955 shares of the total issued and outstanding
shares of voting stock of the Company and shareholders holding 3,373,956 Series
A Convertible Preferred shares which represent 337,395,600 voting shares of
common stock. The holders of the Series A Convertible Preferred shares, have the
right to vote 100 times the number of shares of common stock that the Series A
Convertible Preferred is convertible into on all matters submitted to the
shareholders. The Series A Convertible Preferred shares are each convertible
into one hundred shares of common stock.  Therefore the 3,373,956 Series A
Convertible Preferred shares are convertible into 337,395,600 common shares and
the shareholders have the right to vote one hundred times the number of shares
pursuant to the rights designated to the Series A Convertible Preferred Shares
and has voted such amount in favor of approving of the Company (the “Majority
Stockholders”) to effect a 20-for-1 reverse stock split (pro-rata reduction of
outstanding shares) of our issued and outstanding shares of Common Stock (the
“Reverse Stock Split”) authorizing the Company's Board of Directors, to effect a
reverse split of the Company’s common stock of 20:1 (pursuant to which the
number of authorized shares of common stock will remain 400,000,000 following
such reverse stock split); any fractional shares post-split will be rounded up
to the next whole share. Additionally the Reverse Stock Split will affect the
conversion ratio for all instruments convertible into shares of the Company’s
Common Stock including its convertible notes, warrants and outstanding preferred
stock.




22




On
September 1, 2009, the Board of Directors of the Company approved the
above-mentioned actions, subject to stockholder approval. The Majority
Stockholders approved the actions by written consent in lieu of a meeting on
September 1, 2009, in accordance with the Delaware Business Corporation Act
(“DBCA”).




The Board
of Directors believes that, among other reasons, the number of outstanding
shares of our Common Stock have contributed to a lack of investor interest in
the Company and has made it difficult to attract new investors and potential
business candidates. The Board of Directors has proposed the Reverse Stock Split
as one method to attract business opportunities in the Company.




We
believe that the reverse stock split may improve the price level of our Common
Stock and that the higher share price could help generate interest in the
Company among investors and other business opportunities. However, the effect of
the reverse split upon the market price for our Common Stock cannot be
predicted, and the history of similar stock split combinations for companies in
like circumstances is varied. There can be no assurance that the market price
per share of our Common Stock after the reverse split will rise in proportion to
the reduction in the number of shares of Common Stock outstanding resulting from
the reverse split. The market price of our Common Stock may also be based on our
performance and other factors, some of which may be unrelated to the number of
shares outstanding.




The
advantage of the Reverse Stock Split will be to permit the Company to pursue
financing from investors and issue shares of common stock in exchange for the
financing. This is the main purpose for the Reverse Stock Split and if the
Reverse Stock Split is not completed, the Company would not be able to issue
additional shares sufficient to complete a financing. The main disadvantage to
the Reverse Stock Split is that it may have an anti-takeover effect and
discourage any potential mergers or tender offers.




On
September 1, 2009, the Company's Board of Directors and persons owning a
majority of the Company’s voting securities approved a resolution authorizing
the Company to amend the Articles of Incorporation to change the Company’s name
to “Latteno Food Corp.” The Board believes that the name change better reflects
the nature of the Company’s current and anticipated operations. The Company had
operated under the name B&D Food Corp. which reflected the Company’s prior
business operations.




The final
phase of restructuring is planned to take place subsequent to the effectiveness
of the stock split, in the second quarter of 2010, and entails converting
certain convertible and other forms of debt currently residing in the parent
Company. The Company intends to make an offer for conversion at a price relative
to the current trading price of the recently split stock. This will satisfy
certain debt holders whose debt has reached maturity and reduce the current
working capital requirements of the company during this transitional
period.




23




MARKET
RISK AND CONTINGENT LIABILITIES





The
Company is seeking to operate primarily in Brazil, making it susceptible to
changes in the economic, political, and social conditions in Brazil. Brazil has
experienced political, economic, and social uncertainty in recent years,
including an economic crisis characterized by exchange rate instability and
Brazilian Real devaluation, increased inflation, high domestic interest rates,
negative economic growth, reduced consumer purchasing power and high
unemployment. Under its current leadership, the Brazilian government has been
pursuing economic stabilization policies, including the encouragement of foreign
trade and investment and an exchange rate policy of free market flotation. In
the last year, there was an improvement in the Brazilian economic environment.
Nevertheless, no assurance can be given that the Brazilian government will
continue to pursue these policies, that these policies will be successful if
pursued or that these policies will not be significantly altered. In case of a
decline in the Brazilian economy, political or social problems or a reversal of
Brazil's foreign investment policy it is likely that any such change will have
an adverse effect on the Company's results of operations and financial
condition. Additionally, inflation in Brazil may lead to higher wages and
salaries for employees and increases in the cost of raw materials, which would
adversely affect the Company's profitability.





Risks
inherent in foreign operations include nationalization, war, terrorism, and
other political risks and risks of increases in foreign taxes or changes in U.S.
tax treatment of foreign taxes paid and the imposition of foreign government
royalties and fees.




24




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
required for smaller reporting companies.




ITEM
4T. CONTROLS AND PROCEDURES





Disclosure Controls and
Procedures





Based on
our management’s evaluation, with the participation of our Chief Executive
Officer and Chief Financial Officer, as of March 31, 2010, the end of the
period covered by this report, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Exchange Act) were effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in the rules and forms of the SEC and is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.





Internal
Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting and for the assessment of the effectiveness of
internal control over financial reporting. As disclosed in our Annual Report on
Form 10-K for the year ended December 31, 2009, management concluded that
our internal control over financial reporting was effective as of
December 31, 2009.





Changes in Internal
Controls





There was
no change in our internal control over financial reporting that occurred during
the quarter ended March 31, 2010 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





The
design of any system of controls and procedures is based in part upon certain
assumptions about the likelihood of future events. There can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.





25




PART
II.   OTHER INFORMATION




ITEM 1.   LEGAL
PROCEEDINGS




As at
March 31, 2010, the Company is currently a party to litigation relating to
claims the Company commenced in January 2010 against the predecessor owners of
the Teixeira brand name, for breach of non-compete terms of the purchase
agreement and for theft of company property and records.




ITEM 1A.
RISK FACTORS.





As a
small business company, we are not required to provide the information required
by this item.





ITEM 2.   UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.




Not
applicable.




ITEM 3.   DEFAULTS
UPON SENIOR SECURITIES.




The
Company has not defaulted on any senior securities.




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




Not
applicable.




ITEM 5.   OTHER
INFORMATION




Not
applicable.





ITEM 6.   EXHIBITS
AND REPORTS ON FORM 8-K




(a)
            EXHIBITS




2.1 Share
Purchase and Sale Agreement**


10.1 8-K
Report re Entry into a Material Definitive Agreement, September 28, 2008
*


10.2
First Amendment to the Series A Preferred Shares Subscription Agreement
*


10.3 BDFC
Leaseback Agreement *


10.4
Shareholders Agreement of Global Milk Businesses and Administration of Private
Properties LTDA. **


10.5
Agreement for the Surrender and Transfer of Trademarks**


10.6
Alteration of Social Contract of Global Milk Businesses and Administration of
Private Properties LTDA. **


31.1
Certification by Daniel Ollech, Chief Executive Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002


31.2
Certification by Spence Walker, Chief Financial Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002


32.1
Certification by Daniel Ollech, Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002


32.2
Certification by Spence Walker, Chief Financial Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002




*
incorporated by reference from our Form 10-Q Current Report, filed November 19,
2008


**
incorporated by reference from our Form 10-Q Current Report, filed May 20,
2009




(b)
            Reports
      on Form 8K





On May 7,
2010, the Company filed a form 8K with the SEC for Completion of Acquisition of
Global Milk Businesses and Administration of Private Properties
LTDA





26




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Markham, Ontario, on
the 17th of
March 2010.




LATTENO
      FOOD CORPBy:
      /s/ Daniel OllechDaniel
      OllechChief
      Executive Officer




27