UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

Commission file number:  0-11734
                         -------

                         CHINA FOOD AND BEVERAGE COMPANY
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)



           NEVADA                                       87-0548148 
   ------------------------                 ------------------------------------
   (State of Incorporation)                 (I.R.S. Employer Identification No.)


                 82-66 Austin Street Kew Gardens, New York 11415
                 -----------------------------------------------
                    (Address of Principal Executive Offices)

                                 (212) 398-7833
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

               SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF
                      THE SECURITIES EXCHANGE ACT OF 1934:


                                                   Name of Each Stock Exchange
            Title of Each Class                        on Which Registered 
  ----------------------------------------         ---------------------------
  Common Stock, Par Value $0.001 Per Share                     None 

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-B is not contained herein and will not be contained, to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

         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 was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
YES   x       NO       
    -----        -----

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant at December 31, 1998, was approximately $250,000.

         The  number of shares  of  Registrant's  Common  Stock  outstanding  on
December 31, 1998, was 5,250,086.

         The  Registrant's  total revenues for the year ended December 31, 1998,
were $15,957,499.


                                      Total of Sequentially Numbered Pages:
                                                                           -----
                                                     Exhibit Index on Page:
                                                                           -----


                                        1

<PAGE>

                                TABLE OF CONTENTS

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS............................................3

ITEM 2.     DESCRIPTION OF PROPERTY............................................5

ITEM 3.     LEGAL PROCEEDINGS..................................................5

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................5

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS............................................................6

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS..............................................7

ITEM 7.     FINANCIAL STATEMENTS..............................................10

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.....................11

                                    PART III

ITEM  9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.................11

ITEM 10.    EXECUTIVE COMPENSATION............................................12

ITEM 11.    SECURITY OWNERSHIP OF BENEFICIAL OWNERS...........................13

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................13

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K..................................14

         SIGNATURES...........................................................15

         INDEX TO EXHIBITS....................................................16


                                        2

<PAGE>

                                     PART I

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ITEM 1.   DESCRIPTION OF BUSINESS

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Business Development
--------------------

         China Food & Beverage Company,  a Nevada corporation (the "Company" or,
"Corporation"),  has executive offices at: 82-66 Austin Street, Kew Gardens, New
York 11415. The Company was incorporated in Nevada on November 6, 1981 under the
name Logos Scientific Inc. Until 1991, the Company sold and distributed  medical
diagnostic  equipment  through its  Volu-Sol  division.  The  Company  sold that
division in December 1991. On May 5, 1992, the Company changed its name to Logos
International, Inc.

         During 1992 and 1993, the Company's operations involved the acquisition
of small  companies  with  diverse  operations.  The  Company  acquired  several
subsidiaries  including: an automotive body and paint shop, an automobile towing
operation,  an art and frame gallery, an office staffing company, and a printing
and  publishing  concern.  The  Company  primarily  acquired  small,  distressed
companies  located  in  the  State  of  Utah.  The  Company's  intention  was to
restructure the operations of these subsidiaries to increase their cash flow and
revenues.  Due  primarily  to  undercapitalization,  the  Company's  attempts to
reverse the fortunes of its subsidiaries  failed.  Throughout 1993 and 1994, the
Company liquidated or otherwise  transferred all of its subsidiary  corporations
and other assets in an attempt to settle  actual and potential  liabilities.  By
the end of 1994, the Company had disposed of nearly all of its assets.  For more
information on these events, see the Company's Form 10-KSB for fiscal year ended
December 31, 1994.

         On October 23, 1995,  the Company  acquired all  outstanding  shares of
OMAP International  Incorporated,  a closely-held Nevada corporation ("OII"). As
consideration for the acquisition of OII, the Company issued 433,805  restricted
shares of the Company's  common stock to the shareholders of OII.1 OII owned the
right to acquire patents related to a collating device which sorts and assembles
flat sheets of paper. OII also owned all outstanding capital stock of OMAP SA, a
Belgian research and development  company which filed for bankruptcy  protection
shortly after the Company's  acquisition of OII. The Company changed its name to
OMAP  Holdings  Incorporated  to  reflect  its  ownership  of OII and  moved its
principal  offices  to  Kew  Gardens,   New  York.  The  three  individuals  who
collectively  owned,  directly or indirectly,  100% of OII's outstanding  common
stock prior to October 23, 1995 were Aster De  Schrijver,  James Tilton and Jane
Zheng.  Pursuant to the  acquisition  of OII, the Company  underwent a change of
control and these three individuals obtained a majority interest in the Company.
De Schrijver,  Tilton and Zheng were also  appointed as the Company's  directors
and/or officers.

         On December 15, 1995, the Company  acquired  technology and proprietary
information  necessary to manufacture and develop collators  including drawings,
production  know-how,  and trade names and information  related to distributors.
This  information  and technology  were known as the "Barenthin  Technology." In
exchange for the Barenthin  Technology,  the Company  issued  11,112  restricted
shares of Common Stock.

         On December 15, 1995, the Company also acquired beneficial ownership of
100% of the outstanding  shares of Establissements R. Kohl, a French corporation
("Kohl"). Kohl manufactured lighting equipment and heating devices.

          (1) In return for Kohl's shares,  the Company issued a total of 19,048
shares of restricted Common Stock to the former owners of Kohl. The Company also
paid  $1,000,000 in bank drafts and made a $200,000 loan to Kohl. Kohl owned and
operated an  approximately  100,000 square foot  manufacturing  plant in Calais,
France and the machinery and equipment housed in the plant.
------------------------


                                       3

<PAGE>

         The Company made these three  acquisitions in 1995 pursuant to a single
business plan.  The Company  planned to develop the patents owned by OII and the
Barenthin  technology to manufacture paper collators in the manufacturing  plant
operated by Kohl. Kohl was to manufacture and distribute  three different models
of collators  varying as to quality and price, each of which would implement the
patents which were obtained  through the Company's  acquisition of OII. Kohl was
also to continue manufacturing heating equipment and lighting fixtures. Finally,
Kohl was to  produce a line of  portable  food  vending  machines,  including  a
vending  machine  that  cooks and  dispenses  french  fries for which Kohl owned
patents.

         During the 1996 fiscal year, Kohl continued to produce and sell heating
and lighting  equipment as it had done prior to its  acquisition by the Company.
Kohl also produced  prototypes for its paper  collators and patented  french fry
machine.  However,  Kohl could not obtain the  investment  capital  necessary to
produce and distribute either the collators or the vending machines according to
Kohl's  business plan.  Kohl's  revenues were also  insufficient  to finance the
production  and  distribution  of  these  products.  Accordingly,   neither  the
collators  nor the vending  machines  were ever sold by Kohl.  The  inability to
obtain  investment  capital,  paired with capital  expenditures Kohl had made in
connection  with the  development of collators and vending  machine  prototypes,
created a working capital  deficiency which impaired Kohl's ongoing  operations.
Kohl became delinquent with several of its trade creditors and in November 1996,
Kohl applied for protection  under the bankruptcy  laws of France.  On April 28,
1997,  the French  Tribunal  administering  the  bankruptcy  of Kohl sold all of
Kohl's  assets  except the french fry vending  machines and  inventory and spare
parts related thereto, vendor patents and the Company's license. The Company may
appeal this sale and is currently investigating its rights under applicable law.
For more  information on Kohl, see "Item 6 Management's  Discussion and Analysis
of Financial Condition and Results of Operations."

         After the bankruptcy  proceedings of Kohl, the Company discontinued its
involvement in the  manufacture of collators,  heaters,  lighting  equipment and
other products designed,  manufactured  and/or produced by Kohl. The Company was
left  with  few  assets,  most of  which  were  related  to the  manufacture  of
collators.

         On March 15, 1997, the Company entered into an agreement to acquire all
of the  capital  stock of American  China  Development  Corporation,  a Bahamian
corporation  ("ACDC").  ACDC  owns a 60%  interest  in a  joint  venture  in the
People's  Republic of China ("PRC") which operates a beer brewery in the city of
Qidong in the Jiangsu province of the PRC. The joint venture's brewery, known as
the Nantong Aitesi Beer Company, Ltd., produces and distributes beer in the city
of Qidong and to surrounding  areas within a 50 mile radius.  The Company was to
purchase ACDC from Dizon Investments  Limited,  an investment  company organized
under the laws of the  British  Virgin  Islands.  The  Agreement  called for the
Company to acquire  ACDC in exchange  for  issuing  6,667  restricted  shares of
Common Stock to Dizon.  On November 8, 1998, the Company and Dizon rescinded the
Agreement  because  verifiable  financials  were never  delivered  and the 6,667
shares, which were being held in escrow, were returned to the Company

         The Company's  development has remained focused in pursuit of acquiring
breweries  in the People's  Republic of China of which  progress is set forth in
detail in Item 6 -  "Management's  Discussion  and  Analysis  of  Operations  of
Financial Condition and Results of Operations."

Business of Issuer
------------------

         Since the  disposition of Kohl,  the Company's  business has focused on
seeking to invest in business  opportunities  primarily  related to the food and
beverage  industry.  The  Company  will  continue  to seek to  acquire,  similar
businesses both in China and other  countries.  To a lesser extent,  the Company
will also seek to invest in domestic food and beverage  concerns and in entities
with operations outside of the food and beverage industry.

         The  Company  intends  to locate its  target  investment  opportunities
through  contacts which  management has in the food and beverage  industry.  The
Company  has no full  or part  time  employees,  aside  from  its  officers  and
directors.  If the  Company  requires  additional  personnel  to  carry  out its
business  objectives,  it will  retain  outside  consultants.  In the past,  the
Company has been successful in retaining consultants through the issuance of its
Common Stock and the Company  intends to continue this practice in an attempt to
avoid expending valuable cash flows.


                                        4

<PAGE>

         Since the Company does not have significant  liquid assets, the Company
intends to acquire  business  opportunities  through the  issuance of its equity
securities. This will likely result in future dilution of the ownership interest
enjoyed by the  Company's  current  shareholders.  The Company has had some past
experience in acquiring  subsidiaries in this manner.  However,  the Company can
provide no assurance that it will be able to continue such  acquisitions  in the
future.  It is also likely  that any future  acquisitions  by the  Company  will
require the Company to make capital contributions to the acquired businesses.

         Though three of seven board members of Anhui Haodun  Brewery Co., Ltd.,
sit on the board of China Food and  Beverage  Development,  the Company does not
intend to  participate  in the day to day  management of any business  which the
Company may acquire.  The Company's objective is to find business entities which
the Company feels are greatly  undervalued,  acquire such  entities  through the
issuance of Common  Stock,  make  required  investments  in such  entities,  and
receive a return on its investment in the form of dividends or  appreciation  in
the value of the subsidiary.

--------------------------------------------------------------------------------

ITEM 2.   DESCRIPTION OF PROPERTY

--------------------------------------------------------------------------------

         The Company  presently owns a complex of  approximately 14 buildings of
various  dimensions  and square  footage,  situated at: #28 Juichang Rd.,  Luan,
Anhui province, People's Republic of China .

--------------------------------------------------------------------------------

ITEM 3.   LEGAL PROCEEDINGS

--------------------------------------------------------------------------------

         On September 7, 1993,  V.K.  Holdings,  Inc.  ("VK"),  sued the Company
(Case Number  93-05193-00-0-G),  in the 319TH Judicial  District Court of Nueces
County, Corpus Christi,  Texas. VK alleged fraud,  violation of securities laws,
and other related  causes of action.  Also named as defendants in the suit were:
Chad  Burnett,  Richard  Surber and Kenneth R. O'Neal,  in their  capacities  as
officers  and  directors  of the  Company in  November  1992,  the time when the
alleged fraudulent acts took place. On April 9, 1998, Judge Max Bennett,  of the
319th District Court, entered an Order dismissing the action against the Company
and all the Defendants for, "Want of Prosecution."

         Canton Financial Services Corporation, Salt Lake City, Utah, filed suit
against the Company in the Third Judicial  District Court, Salt Lake City, Utah,
in December of 1998, for the amount of $45,253.48  for  non-payment of services.
The lawsuit settled for $40,500 and dismissed on March 1, 1999.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

         During  the  fourth  quarter  of the 1998  fiscal  year,  there were no
matters submitted to a vote of the Company's shareholders.


                                        5

<PAGE>

                                     PART II

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ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

--------------------------------------------------------------------------------

Market Information
------------------

         The  following  table sets forth the prices of the Common  Stock on the
OTC Bulletin  Board for each quarter  during  fiscal years 1997 and 1998.  These
over-the-counter market quotations are based on inter-dealer bid prices, without
markup,  markdown,  or  commission,  and may not  necessarily  represent  actual
transactions.  The  increases  reflected  in the  quarters  ended June 30, 1998,
September  30, 1998 and December 31, 1998,  are  attributable  to the 1-for- 100
reverse split effected by the Company on December 21, 1998.


                  QUARTER                    HIGH                       LOW
                  -------                    ----                       ---

Quarter Ending December 31, 1998            $5.00                      $5.00

Quarter Ending September 30, 1998           $0.07                      $0.07

Quarter Ended June 30, 1998                 $0.56                      $0.56

Quarter Ended March 31, 1998                $0.66                      $0.65

Quarter Ended December 31, 1997             $2.12                      $0.75

Quarter Ended September 30, 1997            $0.56                      $0.31

Quarter Ended June 30, 1997                 $0.63                      $0.02

Quarter Ended March 31, 1997                $0.08                      $0.03


Shareholders
------------

      There  were  approximately  1,548  record  holders  of Common  Stock as of
December 31, 1998,  holding a total of  5,250,086  outstanding  shares of Common
Stock.

Reverse Split
-------------

      On December 21, 1998,  the Company  effected a 1-for-100  reverse split of
its Common  Stock.  The reverse split  affected only the issued and  outstanding
Common Stock and did not affect the number of shares of Common Stock  authorized
for issuance by the Company.  All fractional  shares  resulting from the reverse
split were rounded up to the nearest whole share.

Dividends
---------

      The Company  has never  declared a cash  dividend on its Common  Stock and
does  not  anticipate  doing  so in the  near  future.  The  future  payment  of
dividends,  if any, on the Common Stock is within the discretion of the board of
directors  and will  depend on the  Company's  earnings,  capital  requirements,
financial condition, and other relevant factors.


                                        6

<PAGE>
--------------------------------------------------------------------------------

ITEM 6    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

--------------------------------------------------------------------------------

      The  Company's  analysis  of its  financial  condition  and results of its
operations was addressed in the Company's 10-KSB,  filed, on or about, April 14,
1998.  Several  significant  events have occurred since that filing to date that
are set forth  below,  and may be  considered  material  changes  affecting  the
Company's position.

      On March  15,  1997,  the  Company  signed an  Agreement  to  acquire  all
outstanding  capital  stock of a  Bahamian  corporation  called  American  China
Development  Corporation ("ACDC").  ACDC owned a 60% interest in a joint venture
in the People's  Republic of China (the "PRC").  According to the Joint  Venture
Agreement  ("JVA"),  ACDC  would  obtain  a 60%  equity  interest  in a  limited
liability company within the Chinese territory to be operated in accordance with
the Laws of the PRC on Joint Ventures Using Chinese and Foreign Investment.  The
purpose of the joint  venture  was to operate an  existing  beer  brewery in the
Jiangsu  province of the PRC known as the  Nantong  Aitesi  Beer  Company.  This
brewery  has been in  existence  since the 1950's and has been State owned since
that time. The brewery currently distributes beer locally to the City of Quidong
and surrounding areas within a 50 mile radius.

      On September 25, 1997, the Company executed a Consulting  Agreement with a
company known as The Hayden Group,  Inc.  Pursuant to the Consulting  Agreement,
the Company was to receive consulting services related to management,  marketing
and corporate structure.

      On  March  5,  1998,  the  Company  terminated  its  September  25,  1997,
Consulting Agreement with The Hayden Group, Inc.,  referenced to herein above in
the preceding  Section.  The Hayden Group failed to carry out its obligations as
set forth in the Agreement.  Accordingly, the Company's management felt that the
unilateral   termination   was   warranted   based   on   The   Hayden   Group's
non-performance.

      On October 7, 1997,  the Company  executed a $160,000  promissory  note to
settle any and all potential  claims against the Company  stemming from an April
1996  offshore  offering  of the  Company's  Common  Stock  which had since been
rescinded.  The  promissory  note  bears  interest  a rate of 19.5% and  matures
October  19,  1998.  The Company  issued  7,677  pre-December  21, 1998 1 to 100
reverse  split shares of Common  Stock to an escrow  agent to secure  payment of
principal  and interest  due on the note.  The 7,677 shares are listed as issued
but not outstanding.  In the event the Company defaults on the note payable, the
shares of stock will be used to pay the note. At December 31, 1997,  the accrued
interest  was  $53,000.  The Company  canceled  the  3,500,000  pre-split or the
116,667  post-spilt  shares which were issued in 1996.  In  anticipation  of the
December 21, 1998,  reverse  split and the employee  option  program  adopted on
January 8,1999,  James Tilton,  Jane Zheng relinquished  their  above-referenced
options on December 9, 1998.

      On or about December 17, 1997, the Company  entered into an Agreement with
Tiancheng  Co., Ltd., a subsidiary of China  International  Trust and Investment
Corporation  ("CITIC")to locate and assist the Company in acquisition of no less
than 2, and up to as many as 8, additional  breweries and beverage  companies in
the Peoples  Republic of China.  CITIC owns numerous  companies  throughout  the
world. It has representative offices in Tokyo, New York, and Frankfurt, Germany,
as well as in China proper.  CITIC had assets of approximately $31.3 billion and
shareholder's equity of approximately $20 billion, and earned approximately $247
million in the year 1995.  CITIC has  investments  in  several  Asian  satellite
projects,  including  AsiaSat II, Cathay Pacific  Airways,  Dragon Air and CITIC
Industrial Bank,  China's sixth largest bank. In return for Tiancheng  assisting
the Company in locating and acquiring brewery and/or beverage sites in China, as
well as, performing any and due diligence that may be required or requested with
regard to these  acquisitions,  the Company was to pay to  Tiancheng  the sum of
$150,000 cash, and

500,000 pre-December 21, 1998 1 to 100 reverse split shares of restricted Common
Stock to be valued at no less than $5.00 from one year of the date of  issuance.
It was agreed that should the stock's value be less than $5.00 one year from the
date of issuance, the Company would issue additional shares to Tiancheng to make
up the difference.  Tiancheng also agreed to assist the Company in financing any
acquisitions  that result from its efforts as set forth in the Agreement between
the parties. A translated Trust Agreement is listed herein as Exhibit E(1).

      On December  31,1998,  the Company  entered into a modification  Agreement
with Tiancheng (China) Co., Ltd.  ("Tiancheng") pursuant to which paragraph 4 of

                                        7

<PAGE>

the  December  17,  1997  Agreement  was  amended  so  that  Tiancheng's   total
compensation  shall  consist of  $150,000  and 500,000  shares of the  Company's
common stock without valuations attached thereto: Item 13 (Exhibit E(2)).

      On November 7, 1995, ADS Ltd.,an Isle of Man corporation, acquired 341,786
(pre-December  21,  1998  1 to  100  reverse  split)  shares  of  the  Company's
unregistered  Common  Stock.  Because  of the  bankruptcy  of OMAP SA,  which is
referred to herein supra,  of which  principals  of ADS were also  principals in
OMAP SA, the Company placed a stop-transfer on ADS's 341,786 shares.  Based upon
the advice of Company's counsel,  that the Company's legal standing was somewhat
tenuous,  the  stop-transfer  on the 341,786 ADS shares was removed on March 12,
1998.

      On March 15,  1997,  Dizon  Investments  Ltd.,  a British  Virgin  Islands
corporation  ("Dizon"),  and OMAP  Holdings,  Inc.,  China  Foods  and  Beverage
Company's  (the  "Company")  former  corporate  name,  entered into an Agreement
whereby Dizon was to sell its interest,  all the  outstanding  common stock,  in
American  China  Development  Corporation  to OMAP  pursuant  to the  terms  and
conditions set forth in that Agreement which is attached hereto and incorporated
herein in Item 13, Exhibit A(1).

      On  November  6,  1998,  Dizon and the  Company,  decided  to enter into a
subsequent Agreement, which is attached hereto and incorporated herein in Item13
Exhibit A(2),which  renders the aforementioned  March 15, 1997 Agreement between
the parties,  null and void,  based upon,  among other things,  that Dizon never
provided  the  Company  with  necessary  and  requisite  financial   information
concerning American China Development Corporation.

      After  entering into a Letter of Intent on December 19, 1997,  the Company
and Victoria Beverage Company Limited ("Victoria"),  an Isle of Man corporation,
entered  into a formal  Agreement  on January  30,  1998,  pursuant to which the
Company  acquired  100%  of  Victoria  Beverage  Company  Limited  ("Victoria").
Victoria  owns a 60% interest in the Sui Ning Beer  Factory  located in Szechuan
Province,  Peoples  Republic  of China.  The  purchase  price was a  $15,000,000
debenture issued in favor of the shareholders of Victoria, payable interest only
at 6.25% per  annum,  semi-annually  commencing  18 months  from the date of the
Agreement; and the principal is payable 5 years from such date. The debenture is
convertible  18 months from the date of the  Agreement at $5.00 per share of the
Company's  Common Stock. If the debenture is converted into the Company's Common
Stock,  Victoria's  former  shareholders  would  become  the  Company's  largest
shareholders and may be capable of influencing the future business  policy.  The
Company filed a Form 8-K with respect to this  transaction on February 13, 1998.
Closing of this  transaction  was  pending  upon the  submission  of  verifiable
financials from Victoria.

      On April  20,1998,  the Company  rescinded  the  aforementioned  Agreement
because Victoria  rescinded their Agreement with the Sui Ning Beer Factory ("Sui
Ning"),  because Victoria was unable to obtain certified  financial  information
from Sui Ning.  Since the Company's  Agreement  with the Sellers was  predicated
upon Victoria's  majority ownership in Sui Ning, the Company and Sellers decided
that the Agreement was no longer viable. On April 27,1998, the Company filed the
appropriate Form 8-K; Item 13 (Exhibits B(1) and B(2))

      Though the  Company  and the  Sellers  rescinded  their  January  30, 1998
Agreement to purchase  Victoria,  based upon the fact that Victoria had recently
acquired a majority  interest in the Anhui Haodun  Brewery,  Ltd.  ("Anhui"),  a
brewery located in the People's  Republic of China,  the Sellers and the Company
entered into an Agreement on April 27, 1998, pursuant to which the Company would
purchase  from the Sellers,  100% of  Victoria's  stock in Anhui in return for a
debenture in the face amount of US$21,000,000, which shall be for a term of five
(5) years  bearing an  interest  rate of eight  percent  (8%) per annum.  At the
Company's  option,  the debenture may be converted  into shares of the Company's
common  stock at a  conversion  price of five  dollars  ($5.00)  per share.  The
Sellers  were able to provide the Company  with  appropriate  documentation  and
accounting verifying that Victoria owned a fifty-five percent (55%) ownership of
Anhui. If the debenture is converted into the Company's Common Stock, Victoria's
former  shareholders would become the Company's largest  shareholders and may be
capable of influencing the Company's future business policies. The Company filed
a Form 8-K with respect to this transaction on May 6, 1998.

       The Company,  as Buyers, and Calder  Investments,  Ltd. and Li Lin Hu, as
Sellers,  entered into an  Agreement  on January 30,  1998,  whereby the Company


                                        8

<PAGE>

would purchase 100% of the stock in the Victoria Beverage Company, Ltd. On April
20, 1998, the Company rescinded this Agreement because Victoria  rescinded their
Agreement  with the Sui Ning Beer Factory  ("Sui  Ning"),  because  Victoria was
unable to  obtain  certified  financial  information  from Sui  Ning.  Since the
Company's  Agreement with the Sellers was predicated  upon  Victoria's  majority
ownership  in Sui Ning,  the Company  decided that the  Agreement  was no longer
viable,  and the  Sellers  agreed.  On April 27,  1998,  the  Company  filed the
appropriate Form 8-K.

      On December 30, 1998, the Company closed on the April 27, 1998,  Agreement
with Calder Investments Limited and Li, Lin Hu by issuing its 5 year and one day
8% Debenture in the amount of $10,500,000 to each of Calder Investments  Limited
and Li, Lin Hu. This  issuance  consummated  the  transactions  described in the
Company 8-K dated May 6, 1998. On the same day,  December 30, 1998,  the Company
caused  the  conversion  of  the  Debentures   above   described  in  the  terms
incorporated  therein by  issuing  to each of Li, Lin Hu and Calder  Investments
Limited  thereupon caused 1,050,000 of their shares to be issued to Anhui Lui An
Beer  Company  Ltd.,  to redeem  their note to Anhui Lui An Beer Company Ltd. On
December 31, 1998, the Company issued a total of 4,200,000  shares of its common
stock to the following persons and entities in the following amounts pursuant to
Debentures which were converted on December 30, 1998; Calder Investments Limited
= 1,050,000  shares of common  stock;  Li, Lin Hu =  1,050,000  shares of common
stock Anhui Liu An Beer Company Ltd. = 2,100,000  shares of common  stock.  This
issuance caused the three individuals and entities above set forth to become the
control persons of the Registrant. (Exhibits D(1), D(2) and D(3).

      Through a reverse merger  recapitalization  by which the Company  acquired
100% of Victoria Beverage  Company,  Ltd., for 4,200,000 shares of the Company's
common stock,  resulted in the Company  owning 55% of Anhui Hao Dun Brewery Co.,
Ltd.,  situated in the People's Republic of China. As opposed to the year ending
1997, when the Company had no liquid assets,  as a result of the  aforementioned
acquisition,  the  Company's  total  assets  year  ending  1998  were  valued at
$15,998,864  of  which,  as set  forth  on page F-4 of the  Financials  attached
hereto.  Total "Current Assets" are $3,560,007.  The "Fixed Assets" ($9,074,934)
include a complex of buildings and equipment for making beer. The  "construction
in  progress" as listed under  "Other  Assets"  refers to a nitrogen  separating
machine being developed in conjunction with the brewing processes. There is also
a  "deposit"  of  $215,000  that  is  owed  the  company  via a  rescinded  ITEX
transaction.

      On December 10, 1998, the Company authorized a reverse split of its common
stock on the basis of 1 new share for every 100 shares owned by  shareholders of
record. Fractional shares were rounded up to the next whole share. The effective
date of the reverse  split was  December  21,  1998.  The total number of shares
issued and  outstanding  before the reverse was  7,364,349.  The total number of
shares issued and outstanding  after the reverse was approximately  73,644.  The
Company filed the  appropriate 8-K reflecting 1 to 100 reverse split on December
18, 1998.

Events That Took Place Subsequent to Fiscal Year Ending December 31, 1998
-------------------------------------------------------------------------

      The following  material events took place after the December 31, 1998 year
end:

      On January 6, 1999,* a majority of the  shareholders of the Company voting
their shares in lieu of a formal shareholders meeting adopted the Company's 1999
Stock Option Plan  reserving  for  issuance  1,000,000  shares of the  Company's
common  stock  which  plan  is to be  administered  by the  Company's  Board  of
Directors.  At the same time, the  shareholders  voted in favor of James Tilton,
Jane Zheng,  Kitty Chow, Stanley Merdinger and Li, Lin Hu to be directors of the
Company until the next shareholders meeting. (The shares have been issued by the
Company's auditors on December 31, 1998.)

      The Company  enacted the 1999 Stock Option Plan (the "Plan") on January 8,
1999, which is intended to provide incentives:  (a) to the officers,  directors,
counsels  and  other  employees  of  China  Food &  Beverage  Company,  a Nevada
corporation  (the  "Company"),  and any  present or future  subsidiaries  of the
Company   (individually  a  "Related   Corporation"  and  collectively  "Related
Corporations")  by providing  them with  opportunities  to purchase stock in the
Company  pursuant to options granted  hereunder that qualify as "incentive stock
options" under Section  422A(b) of the Internal  Revenue Code of 1986,as amended


                                       9

<PAGE>

(the "Code")  (individually an "ISO" and collectively "ISOs"); (b) to directors,
officers,  employees and consultants of the Company and Related  Corporations by
providing them with  opportunities  to purchase stock in the Company pursuant to
options  granted  hereunder  that  do  not  qualify  as  ISOs   (individually  a
"Non-Qualified   Option"and  collectively   "Non-Qualified   Options");  (c)  to
directors,  officers,  employees  and  consultants  of the  Company  and Related
Corporations  by providing them with awards of stock in the Company  ("Awards");
and (d) to director,  officers,  employees  and  consultants  of the Company and
Related  Corporations  by  providing  them  with  opportunities  to make  direct
purchases  of stock in the Company  ("Purchases").  Both ISOs and  Non-Qualified
Options are referred to hereinafter  individually as an "Option"and collectively
as "Options." Options,  Awards and authorizations to make Purchases are referred
to hereinafter collectively as "Stock Rights". As used herein the terms "parent"
and  "subsidiary"   mean  "parent   corporation"  and  subsidiary   corporation,
respectively,  as those  terms are  defined  in  Section  425 of the  Code.  The
specifics  of  the  Plan  were  filed  on  January  8,  1999  pursuant  to a S-8
Registration and may be viewed in their entirety via the Edgar filing system.

      Li, Lin Hu was  appointed as a Director of the Company on January 6, 1999,
a former 50% owner of Victoria Beverage Company and currently a senior executive
with Tiancheng.

      The fact that the Company  conducts  business and owns the majority of its
assets in the  People's  Republic of China could  expose the Company to material
and possible  economic risks.  These risks may include,  but are not limited to,
military  repression,  expropriation,  changing fiscal regimes,  fluctuations in
currency exchange rates, high rates of inflation, worker unrest, and the absence
of  industrial  and  economic  infrastructure.  Operations  may be  affected  by
government regulations with respect to productions restrictions, price controls,
export controls,  embargoes,  income and other taxes, environmental legislation,
labor,  welfare  benefit  policies,  land use,  etc. The effect of these factors
cannot be accurately assessed or predicted.

      * The S-8 filed on  January  8,  1999,with  the SEC via the  Edgar  filing
system  inadvertently  stated that the Company enacted the Employee Stock Option
plan was enacted on January 6, 1998. The correct date should be January 6, 1999.

Results of Operations
---------------------

      As a  result  of  the  aforementioned  acquisition  of  Victoria  Beverage
Company,  Ltd., and its subsidiary,  Anhui Hao Dun Brewery Co., Ltd.  ("Anhui"),
the Company's "Total Liabilities and Stockholder's  Equity" for year ending 1998
was $15,998,864 of which,  as set forth on Page F-5 of the attached  Financials,
$1,570,730  represents  the 45%  minority  stockholder  interest  in Anhui.  The
"Consolidated  Statement  of  Operations"  set forth on Page F-6 of the attached
Financial  Statements,  the Net Sales increased in 1998 by 8.8% and, an increase
in the price of  materials  can be  attributed  to a 15% increase of the Cost of
Sales,  consequently,  the Gross  Margin  decreased  2%. It should be noted that
"Selling Expenses" in 1998 decreased  dramatically (60%). This difference can be
attributed to the brewery having to expend less in advertising  costs because it
obtained an official trade mark which resulted in valuable name recognition.  In
year ending 1997, the brewery had comprehensive income of $815,450.  As a result
of the acquisition in 1998,  "Minority  Interest" deduction of $343,494 in 1998,
resulted in a "Net  Comprehensive  Income" of 48% less than in 1997. The "income
per share" was down as well, from $0.19 to $0.09.

Capital Resources and Liquidity
-------------------------------

      During  1998,  the Company  issued  9,902  shares of Common Stock for cash
valued at $54.11 per share;  1,016,942 shares were issued for services  rendered
valued at $0.46 per  share;  and,  241  shares  valued at $62.24  per share were
issued for debt conversion.  The increase of positive cash flow reflected on the
"Consolidated  Statements  of Cash Flow" Page F-8 of attached  Financials,  is a
result of money spent by the beverage company purchasing fixed assets.

--------------------------------------------------------------------------------

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

--------------------------------------------------------------------------------

      See the audited  financial  statements  attached  hereto and  numbered F-1
through F-15.

                                       10
<PAGE>

                         CHINA FOOD AND BEVERAGE COMPANY
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 1998


<PAGE>

                                 C O N T E N T S


Independent Auditors' Report.............................................. F - 3

Consolidated Balance Sheet................................................ F - 4

Consolidated Statements of Operations..................................... F - 6

Consolidated Statements of Stockholders' Equity........................... F - 7

Consolidated Statements of Cash Flows..................................... F - 8

Notes to the Consolidated Financial Statements........................... F - 10


<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


Board of Directors
China Food and Beverage Company and Subsidiaries
Las Vegas, Nevada


We have audited the  accompanying  consolidated  balance sheet of China Food and
Beverage and  Subsidiaries as of December 31, 1998 and the related  consolidated
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended December 31, 1998 and 1997. These  consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of China
Food and Beverage  Company and  Subsidiaries  as of December  31, 1998,  and the
consolidated  results  of their  operations  and their  cash flows for the years
ended  December  31,  1998 and  1997,  in  conformity  with  generally  accepted
accounting principles.



Jones, Jensen & Company
Salt Lake City, Utah
April 7, 1999


                                      F-3
<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                           Consolidated Balance Sheet


                                     ASSETS
                                     ------

                                                             December 31,
                                                                 1998
                                                          -----------------
CURRENT ASSETS

   Cash and cash equivalent                               $         425,681
   Accounts receivable (net) (Note 1)                             1,552,549
   Note receivable                                                  102,680
   Inventory (Note 5)                                             1,438,968
   Other receivables                                                 40,129
                                                          -----------------

     Total Current Assets                                         3,560,007
                                                          -----------------
PROPERTY AND FIXED ASSETS (Note 4)

   Buildings                                                      3,339,090
   Machinery and equipment                                        8,126,686
   Land                                                             277,817
   Accumulated depreciation                                      (2,390,842)
                                                          -----------------

     Total Fixed Assets                                           9,352,751
                                                          -----------------
OTHER ASSETS

   Construction in progress                                         227,810
   Deferred and prepaid expenses (Note 6)                         2,643,296
   Deposit                                                          215,000
                                                          -----------------

     Total Other Assets                                           3,086,106
                                                          -----------------
     TOTAL ASSETS                                         $      15,998,864
                                                          =================



       The accompanying notes are an integral part of these consolidated
                              financial statements.


                                      F-4

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                     Consolidated Balance Sheet (Continued)

                                                                    December 31,
                                                                        1998
                                                                   ------------
CURRENT LIABILITIES

   Accounts payable                                                $    986,222
   Related party payable                                                148,226
   Accrued expenses                                                   1,311,044
   Taxes payable (Note 3)                                             5,291,836
   Customer prepayments                                                 425,152
   Notes payable (Note 2)                                             4,490,098
                                                                   ------------

     Total Current Liabilities                                       12,652,578
                                                                   ------------
LONG-TERM LIABILITIES

   Other liabilities                                                    163,227
                                                                   ------------
     Total Long-Term Liabilities                                        163,227
                                                                   ------------
     Total Liabilities                                               12,815,805
                                                                   ------------
MINORITY INTEREST                                                     1,570,730
                                                                   ------------
STOCKHOLDERS' EQUITY

   Common stock; 100,000,000 shares authorized of $0.001
    par value, 5,257,764 shares issued and 5,250,086 outstanding          5,258
   Additional paid-in capital                                           329,649
   Stock subscription receivable                                        (23,083)
   Other comprehensive income                                             7,692
   Retained earnings                                                  1,292,813
                                                                   ------------

     Total Stockholders' Equity                                       1,612,329
                                                                   ------------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $ 15,998,864
                                                                   ============



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-5

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                      Consolidated Statements of Operations


                                                For the Years Ended
                                                    December 31,
                                          ------------------------------
                                              1998               1997
                                          ------------      ------------

NET SALES                                 $ 15,957,499      $ 14,659,236

COST OF SALES                               10,647,010         9,226,327
                                          ------------      ------------

GROSS MARGIN                                 5,310,489         5,432,909
                                          ------------      ------------

COSTS AND EXPENSES

   Selling expenses                            184,672           459,503
   General and administrative                1,525,012         1,479,783
                                          ------------      ------------

     Total Costs and Expenses                1,706,684         1,939,286
                                          ------------      ------------

INCOME BEFORE OTHER EXPENSE                  3,603,805         3,493,623
                                          ------------      ------------

OTHER EXPENSE

   Interest expense                            664,259           696,630
                                          ------------      ------------

     Total Other Expense                       664,259           696,630
                                          ------------      ------------

INCOME BEFORE TAX                            2,939,546         2,796,993

INCOME TAX EXPENSE (Note 3)                  2,176,226         1,985,657
                                          ------------      ------------

INCOME BEFORE MINORITY INTEREST                763,320           811,336

MINORITY INTEREST                             (343,494)             --   
                                          ------------      ------------

NET INCOME                                     419,826           811,336

OTHER COMPREHENSIVE INCOME

   Currency translation adjustment               3,578             4,114
                                          ------------      ------------

     Total Other Comprehensive Income            3,578             4,114
                                          ------------      ------------

NET COMPREHENSIVE INCOME                  $    423,404      $    815,450
                                          ============      ============

BASIC INCOME PER SHARE                    $       0.09      $       0.19
                                          ============      ============



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-6

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>
                                          Common Stock            Additional       Stock           Other
                                          ------------              Paid-In     Subscription   Comprehensive     Retained
                                     Shares          Amount         Capital      Receivable        Income        Earnings
                                  ----------      ----------      ----------     ----------      ----------     ----------

<S>                                <C>            <C>             <C>            <C>             <C>            <C>       
Balance, December 31, 1996         4,200,000      $    4,200      $1,300,497     $     --        $     --       $   61,651

Currency translation
 adjustment                             --              --              --             --             4,114           --

Net income for the year ended
 December 31, 1997                      --              --              --             --              --          811,336
                                  ----------      ----------      ----------     ----------      ----------     ----------

Balance, December 31, 1997         4,200,000           4,200       1,300,497           --             4,114        872,987

Common stock issued for
 the acquisition of Victoria          37,346              37      (1,991,612)          --              --             --

Common stock issued for
 cash at $54.11 per share              9,902              10         535,875           --              --             --

Common stock issued for
 debt conversion at $62.24
 per share                               241            --            15,000           --              --             --

Common stock issued for
 services rendered at $0.46
 per share                         1,016,942           1,017         469,883        (23,083)           --             --

Cancellation of common
 stock                                (6,667)             (6)              6           --              --             --

Currency translation
 adjustment                             --              --              --             --             3,578           --

Net income for the year ended
 December 31, 1998                      --              --              --             --              --          419,826
                                  ----------      ----------      ----------     ----------      ----------     ----------

Balance, December 31, 1998         5,257,764      $    5,258      $  329,649     $  (23,083)     $    7,692     $1,292,813
                                  ==========      ==========      ==========     ==========      ==========     ==========
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-7

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                 For the Years Ended
                                                                     December 31,
                                                            -----------------------------
                                                                1998             1997
                                                            ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                         <C>              <C>        
   Net income                                               $   419,826      $   811,336
   Adjustments to reconcile net income to net cash
    used by operating activities:
     Depreciation and amortization                              947,924          629,202
     Bad debt expense                                              --             50,946
     Common stock issued for services                           447,817             --
   Changes in assets and liabilities:
     (Increase) decrease in accounts receivable                 997,610       (1,533,003)
     (Increase) decrease in note receivable                     (66,446)         (36,234)
     (Increase) decrease in other receivables                   656,229         (619,824)
     (Increase) decrease in inventory                          (465,773)         (75,273)
     (Increase) in deferred and prepaid assets               (1,989,846)        (191,953)
     (Increase) in deposits                                    (215,000)            --
     Decrease in construction in progress                          --            245,955
     Increase in accounts payable and accrued expenses          870,796          935,832
     Increase (decrease) in customer prepayments                (89,166)         385,420
     Increase in taxes payable                                  671,973        2,075,113
                                                            -----------      -----------

       Net Cash Provided by Operating Activities              2,185,944        2,677,517
                                                            -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES

   Purchase of fixed assets                                  (1,268,585)      (3,282,278)
                                                            -----------      -----------

       Net Cash (Used) by Investing activities               (1,268,585)      (3,282,278)
                                                            -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES

   Common stock issued for cash                                 535,885             --
   Proceeds from notes payable                                4,797,109        2,249,776
   Payments on notes payable                                 (6,067,780)      (1,704,155)
                                                            -----------      -----------

       Net Cash Provided (Used) by Financing Activities        (734,786)         545,621
                                                            -----------      -----------

NET INCREASE (DECREASE) IN CASH                                 182,573          (59,140)

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR                                                        243,108          302,248
                                                            -----------      -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                    $   425,681      $   243,108
                                                            ===========      ===========
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-8

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Continued)


                                                    For the Years Ended
                                                        December 31,
                                                 ------------------------
                                                   1998            1997
                                                 --------        --------
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITY

Cash Paid For:

   Interest                                      $664,259        $696,630
   Income taxes                                  $   --          $   --


SCHEDULE OF NON-CASH FINANCING ACTIVITIES

   Common stock issued for debt                  $ 15,000        $   --



        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       F-9

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a.  Business Organization

              China Food and Beverage  Company (the Company) was incorporated on
              November  6,  1987  under  the laws of the  State of  Nevada.  The
              Company subsequently ceased its original business activity in 1997
              and  thereafter  primarily  investigated  and sought new  business
              opportunities.

              The Company has a 100% owned subsidiary, Victoria Beverage Company
              Limited  (Victoria),  which has a 55% owned subsidiary  (Anhui Hao
              Dun Brewery Co. Ltd.) (Anhui) which was incorporated in the nation
              of China in 1986,  for the purpose of  operating  a beer  brewery.
              Victoria  was  incorporated  in the Isle of Man of May 9, 1993 for
              the purpose of acquiring foreign companies.

              The Company acquired 100% of the shares of Victoria which owns 55%
              of Anhui for 4,200,000  shares of the Company's  common stock. The
              acquisition  was accounted for as a  recapitalization  of Victoria
              because the shareholders of Victoria  controlled the Company after
              the acquisition.  Therefore,  Victoria is treated as the acquiring
              entity.  There  was no  adjustment  to the  carrying  value of the
              assets or liabilities of Victoria in the exchange.  The Company is
              the  acquiring  entity  for legal  purposes  and  Victoria  is the
              surviving  entity for accounting  purposes.  On December 18, 1998,
              the  shareholders  of the Company  authorized a 1-for-100  reverse
              stock   split.   All   references   to  common   stock  have  been
              retroactively restated to reflect the reverse stock split.

              b.  Accounting Method

              The Company's financial  statements are prepared using the accrual
              method of  accounting.  The Company has elected a December 31 year
              end.

              c.  Cash and Cash Equivalents

              Cash equivalents  include  short-term,  highly liquid  investments
              with   maturities   of  three  months  or  less  at  the  time  of
              acquisition.

              d.  Basic Income Per Share

              The  computations  of basic  income per share of common  stock are
              based on the weighted average number of shares outstanding.

              e.  Principles of Consolidation

              The December 31, 1998,  consolidated  financial statements include
              those  of China  Food  and  Beverage  Company,  Victoria  Beverage
              Company Limited and Anhui Hao Dun Brewery Co. Ltd. All significant
              intercompany accounts and transactions have been eliminated.



                                      F-10

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              f.  Estimates

              The  preparation  of  financial   statements  in  conformity  with
              generally accepted  accounting  principles  requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and  liabilities  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.

              g.  Accounts Receivable

              The Company's  accounts  receivable  are shown net of an allowance
              for bad debt of $107,150 at December 31, 1998 and 1997.

              h.  Advertising

              The Company has  capitalized  the costs of acquiring the rights to
              advertise on the streets of its home city, Luan,  Peoples Republic
              of China, for 20 years and is amortizing those costs over the life
              of the agreement.

              i.  Foreign Currency Translation

              Monetary assets and liabilities  denominated in foreign currencies
              are  translated  into  United  States  dollars  at the  period and
              exchange   rate.   Non-monetary   assets  are  translated  at  the
              historical   exchange   rate  and  all  income  and  expenses  are
              translated  at the exchange  rates  prevailing  during the period.
              Foreign exchange currency translation  adjustments are included in
              the stockholders' equity section as other comprehensive income.

              j.  Fair Value of Financial Instruments

              As at  December  31,  1998,  the  fair  value  of  cash,  accounts
              receivable and accounts and advances payable including amounts due
              to and from related parties,  approximate  carrying values because
              of the short-term maturity of these instruments.

              k.  Foreign Operations

              The Company currently conducts  activities in The Peoples Republic
              of China (PRC). The Company may be materially  adversely  affected
              by possible  political or economic  instability  in PRC. The risks
              include,   but   are  not   limited   to,   military   repression,
              expropriation,  changing fiscal regimes,  extreme  fluctuations in
              currency  exchange rates,  high rates of inflation and the absence
              of  industrial  and  economic  infrastructure.  Operations  may be
              affected in varying degrees by government regulations with respect
              to  production  restrictions,  price  controls,  export  controls,
              income and other taxes, expropriation of property,  maintenance of
              claims,   environmental   legislation,   labor,   welfare  benefit
              policies, land use, land claims of local residents,  water use and
              safety.   The  effect  of  these  factors   cannot  be  accurately
              predicted.



                                      F-11

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 1 -      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

              l.  Capital Assets and Amortization

              Capital assets are recorded at cost and  amortization  is provided
              over the estimated  economic life on a straight-line  basis at the
              following rates:

                           Machinery                 14 years
                           Buildings                 25 years

              m.  Income Taxes

              Income tax  expense  consist of Gross  Revenue  Tax (GRT) which is
              calculated by multiplying  17% of sales minus the purchasing  tax,
              Consumption Tax (CT) which is calculated by multiplying  $26.84 by
              each  ton of beer  which is sold,  and the City  Construction  Tax
              (CCT) which is calculated by  multiplying  7% of the total GRT and
              CT.

              n.  Change in Accounting Principle

              In June 1997,  the  Financial  Accounting  Standards  Board issued
              Statement  of  Financial  Accounting  Standards  (SFAS)  No.  130,
              "Reporting   Comprehensive   Income."  SFAS  No.  130  establishes
              standards for reporting  and display of  comprehensive  income and
              its components (revenues,  expenses,  gains, and losses) in a full
              set  of  general  purpose  financial  statements.  This  statement
              requires   that  an  enterprise   (a)  classify   items  of  other
              comprehensive  income by their nature in a financial statement and
              (b) display the accumulated balance of other comprehensive  income
              separately from retained  earnings and additional  paid-in capital
              in the equity section of a statement of financial  position.  SFAS
              No. 130 is effective for fiscal years beginning after December 15,
              1997. The Company has retroactively applied the provisions of this
              new  standard  by showing the other  comprehensive  income for all
              years presented.

              o.  Revenue Recognition

              The  Company  recognizes  revenue  at  the  time  the  product  is
              delivered to the customer and expenses are recognized as incurred.



                                      F-12

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 2 -      NOTES PAYABLE
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                         1998
                                                                                     -----------
<S>                                                                                  <C>        
              The Company  has taken out  several  loans from the  Industrial  &
               Commercial  Bank  and the  Agriculture  Bank.  These  loans  bear
               interest at 12%, are due in 1999,
               and are secured by the fixed assets of the Company                    $ 4,416,403

              The  Company  has  received  advances  from its  employees  of the
               Company  which are interest  bearing at rates  between 6% and 12%
               per annum and due on demand. These funds are to be used for staff
               welfare and other
               employee expenses                                                          73,695
                                                                                     -----------

                           Total Notes Payable                                         4,490,098

                           Less: Current Portion                                      (4,490,098)
                                                                                     -----------

                           Long-Term Portion                                         $      --   
                                                                                     ===========

NOTE 3 -      TAXES PAYABLE

              Taxes payable consisted of the following at December 31, 1997:

                           Gross revenue tax                                         $   488,428
                           Consumption tax                                             4,965,341
                           City construction tax                                        (161,933)
                                                                                     -----------

                           Total                                                     $ 5,291,836
                                                                                     ===========
</TABLE>

              The Company  had value added and income tax expense of  $2,176,226
              and  $1,985,657  for the years ended  December  31, 1998 and 1997.
              These  amounts are computed  based on the income of the Company in
              the Peoples Republic of China.

NOTE 4 -      PROPERTY AND FIXED ASSETS
<TABLE>
<CAPTION>
                                                                                                     1998
                                                                            Accumulated            Net Book
                                                           Cost             Depreciation             Value
                                                     ------------------  -------------------   -----------------
<S>                                                  <C>                 <C>                   <C>              
              Machinery and equipment                $        8,126,686  $         1,768,863   $       6,357,823
              Building                                        3,339,090              621,979           2,717,111
              Land                                              277,817                 --               277,817
                                                     ------------------  -------------------   -----------------

                                                     $       11,743,593  $         2,390,842   $       9,352,751
                                                     ==================  ===================   =================
</TABLE>

              During the years ended  December  31,  1998 and 1997,  the Company
              expensed $763,267 and $629,202 in depreciation.



                                      F-13

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 5 -      INVENTORY

              Inventory

              Inventories  for the year ended December 31, 1998 consisted of the
following:

                                                                  1998
                                                           -----------------
              Finished goods                               $           8,677
              Work-in-process                                        943,028
              Raw materials and supplies                             487,263
                                                           -----------------

                           Total                           $       1,438,968
                                                           =================

              Inventories  consist of  bottled  beer,  beer in  process  and raw
              materials  and are stated at the lower of cost or market using the
              average cost method.

NOTE 6 -      DEFERRED AND PREPAID EXPENSES

              Deferred and prepaid expenses consist of the following:

                           Prepaid advertising             $         142,782
                           Trademark                               2,500,514
                                                           -----------------

                                                           $       2,643,296
                                                           =================

              The prepaid  advertising  is being  amortized  over a period of 20
              years, the trademark is being amortized over a period of 15 years.
              Amortization  expense  for the years ended  December  31, 1998 and
              1997 was $184,657 and $-0-, respectively.

NOTE 7 -      CONCENTRATIONS OF RISK

              a.  Cash and Cash Equivalents

              The Company  had cash of $188,440 in banks  located in The Peoples
              Republic of China.  These  accounts are not insured by the Federal
              Deposit  Insurance  Corporation.  Additionally,  the  Company  has
              $237,241  of cash  equivalents  held with ITEX  Corporation.  This
              balance  is  not   insured  by  the  Federal   Deposit   Insurance
              Corporation.

              b.  Accounts Receivable

              The  Company   provides  for  accounts   receivable   as  part  of
              operations.  Management  does  not  believe  that the  Company  is
              subject to credit risks outside the normal course of business.



                                      F-14

<PAGE>

                CHINA FOOD AND BEVERAGE COMPANY AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                           December 31, 1998 and 1997


NOTE 8 -      CUSTOMERS AND EXPORT SALES

              During 1998 and 1997,  the Company  operated one industry  segment
              which is the manufacturing and marketing of alcoholic products.

              The  Company's  financial  instruments  subject to credit risk are
              primarily trade accounts receivable from its customers.

                                                           For the Years Ended
                                                               December 31,
                                              1998                 1997
                                      -------------------   -----------------

              Foreign sales           $        15,957,499   $      14,659,236
                                      ===================   =================

NOTE 9 -      YEAR 2000 ISSUE

              The Company is conducting a  comprehensive  review of its computer
              systems to identify the systems that could be affected by the Year
              2000 Issue,  and is developing an  implementation  plan to resolve
              the issue.

              The Issue is whether  computer  systems  will  properly  recognize
              date-sensitive  information when the year changes to 2000. Systems
              that do not properly  recognize  such  information  could generate
              erroneous  data or cause a system to fail.  The Company is heavily
              dependent  on computer  processing  in the conduct of its business
              activities.

              Estimated Cost of Remediation
              -----------------------------

              Because the Company has not  completed  its review of the computer
              systems,  management  is unable to estimate the cost of making the
              systems Year 2000 compliant.



                                      F-15

<PAGE>

--------------------------------------------------------------------------------

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

--------------------------------------------------------------------------------

None.


--------------------------------------------------------------------------------

                                    PART III

--------------------------------------------------------------------------------

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

--------------------------------------------------------------------------------


      Name                      Age        Position(s) and Office(s)
      ----                      ---        -------------------------

      James Tilton               37        President, Chief Executive Officer,
                                           Treasurer, Director

      Jane Zheng                 36        Secretary, Director

      Stanley Merdinger          56        Director

      Kitty Chow                 56        Director


      James  Tilton was  appointed  the  Company's  president,  chief  executive
officer,  treasurer and one of its directors on October 23, 1995. Mr. Tilton has
extensive business and marketing  experience in the Far East and has worked with
his wife, Jane Zheng, in partnership with the Metallic Building Company ("MBC"),
a subsidiary  of NCI Building  Systems,  to market its  pre-engineered  building
materials in the People's  Republic of China  ("PRC")  since 1992.  For the last
five years and again with Jane Zheng,  he has assisted Star Brite, a division of
Oceans  Bio-Tech,  in  establishing a sales  distribution  system in PRC for its
chemical  products.  Mr. Tilton is also a director of Tianrong Building Material
Holdings, Ltd., a Utah corporation.

      Jane Zheng was  appointed  as  secretary  and a director of the Company on
October 23, 1995. Ms. Zheng has extensive  business and marketing  experience in
the Far East and has worked with her husband,  James Tilton, in partnership with
the Metallic Building Company ("MBC"), a subsidiary of NCI Building Systems,  to
market its pre-  engineered  building  materials in the PRC since 1992.  For the
last five years and again with James Tilton,  Ms. Zheng has assisted Star Brite,
a division of Oceans Bio-Tech,  in establishing a sales  distribution  system in
China for its  chemical  products.  She  received  her  engineering  degree from
Shanghai  University,  in Shanghai,  China.  Ms. Zheng also has an MBA degree in
Finance from Adelphi University,  New York, and serves as a director of Tianrong
Building Material Holdings, Ltd., a Utah corporation.

      Stanley  Merdinger  was  appointed as a director of the Company in January
1997. Over the past five years, Mr.  Merdinger has been extensively  involved in
international finance and consulting.

      Kitty Chow was  appointed as a director of the Company in September  1997.
From 1989 through 1990,  Ms. Chow was the vice  president of First  Westminister
Mortgage  Bank.  From 1991  through  1997,  Ms. Chow was the vice  president  at
American Chinese Broadcast Corp., T&L Advantage Corp., and Provident  Consulting
Corp.,  was president of Yen Ting Consulting  Corp.,  and was a director of both
U.S.A. University Council and ACC Jin Tai Industrial Group.


                                       11
<PAGE>

Compliance With Section 16(a) of the Exchange Act
-------------------------------------------------

      Based  solely upon a review of Forms 3, 4 and 5 furnished  to the Company,
the  Company is not aware of any person  who, at any time during the fiscal year
ended December 31, 1998, was a director,  officer,  or beneficial  owner of more
than ten percent of the Common Stock of the Company, and who failed to file on a
timely basis reports required by Section 16(a) of the Securities Exchange Act of
1934 during such fiscal year.

--------------------------------------------------------------------------------

ITEM 10.  EXECUTIVE COMPENSATION

--------------------------------------------------------------------------------

      The following table summarizes certain  information  concerning  executive
compensation  paid to or accrued by the Company's chief executive officer during
the Company's  last three fiscal years.  During this time no executive  officer,
excluding James Tilton, the current chief executive officer,  earned or received
annual compensation exceeding $100,000.

<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE

                                         Annual Compensation Awards         Long Term Compensation

Name and Principal Position      Year     Salary($)    Bonus($)    Other       Restricted    Options/    LTI       Other
                                                                   Annual      Stock         SARs (#)    Payout
                                                                   Comp.       Awards
------------------------------------------------------------------------------------------------------------------------
<S>                              <C>      <C>           <C>         <C>         <C>           <C>         <C>       <C>
James Tilton,                    1998     34,500+      -0-         -0-         -0-           -0-         -0-       -0-
President and Chief              1997     68,500*      -0-         -0-         -0-           -0-         -0-       -0-
Executive Officer
</TABLE>

      + This  dollar  figure  represents  500  shares of Common  Stock that were
issued as compensation as the Company's director and officer for the fiscal year
1998, as follows: 500 shares valued at $69.00 per share issued on or about 2/11,
1998.

      The Company has compensated its directors by issuing them shares of Common
Stock registered  pursuant to a Form S-8 registration  statement.  The number of
shares issued to directors as compensation for services is based on the time and
effort  expended by the directors  during the year,  as determined  from time to
time by the Company's  board of  directors,  and is not evidenced by any written
compensation plan.

      The Company has an Employment Agreement,  effective October 23, 1995, with
James  Tilton,  its  president  and chief  executive  officer.  Pursuant  to the
Agreement, Mr. Tilton received an initial salary of $60,000, subject to periodic
review and  adjustment  by the board of  directors.  The  Company  also pays the
health  insurance  premiums of Mr. Tilton and his dependents.  The Agreement was
initially for a term of one year, but has been renewed for an additional year.

      On February 11, 1998,  the Company passed a resolution for the issuance of
500  shares  of its  Common  Stock to each of the  following  entities:  Stanley
Merdinger,  who presently is a director of the Corporation,  as compensation for
services  rendered on behalf of the Corporation;  Kitty Chow, who presently is a
director of the Corporation, for services rendered on behalf of the Corporation;
Ms. Deanne Ofsink,  an attorney who rendered legal services to the  Corporation;
Jane  Zheng,  as an  inducement  to remain as an  officer  and  director  of the
Corporation;  and,  500  shares  of its  Common  Stock  to James  Tilton,  as an
inducement  to remain as an officer and  director of the  Company.  The proposed
maximum  offering  price of the  Company's  Common Stock issued to each party in
this  paragraph was $0.69 per share for an aggregate  offering price of $34,500.
Each individual's  stock issuance was issued pursuant to a Form S-8 registration


                                       12
<PAGE>

and was  accompanied  by a Letter of Consent and an Opinion  Letter  prepared by
Herbert M. Jacobi, Esq., counsel for the Company,  regarding the legality of the
securities  being  registered  under the Form S-8  registration  and, Consent of
Jones,  Jensen and Co.,  independent public accountants for the Registrant.  The
formal filing of the applicable S-8 registration forms was on February 23, 1998.

      On July 6,  1998,  the  Company  issued  500  shares of its  Common  Stock
pursuant to an Employee Stock  Registration  Plan,  valued at $0.35 per share to
each  of the  following  individuals:  Stanley  Merdinger,  who  presently  is a
director of the Corporation,  as compensation for services rendered on behalf of
the Corporation; Kitty Chow, who presently is a director of the Corporation, for
services  rendered on behalf of the Corporation;  Ms. Deanne Ofsink, an attorney
who rendered legal services to the Corporation;  Jane Zheng, as an inducement to
remain as an officer and  director of the  Corporation;  and,  500 shares of its
Common Stock to James Tilton,  as payment for services rendered on behalf of the
Company.  The proposed  maximum  offering  price of the  Company's  Common Stock
issued to each  party in this  paragraph  was  $0.35 per share for an  aggregate
offering price of $17,500.  Each individual's stock issuance was issued pursuant
to a Form S-8  registration  and was  accompanied  by a Letter of Consent and an
Opinion  Letter  prepared by Herbert M. Jacobi,  Esq.,  counsel for the Company,
regarding the legality of the  securities  being  registered  under the Form S-8
registration  and,  Consent  of  Jones,  Jensen  and  Co.,   independent  public
accountants  for  the  Registrant.  The  formal  filing  of the  applicable  S-8
registration forms was on July 9, 1998.  Subsequently the shares issued to James
Tilton, Jane Zheng and Stanley Merdinger were returned and canceled

--------------------------------------------------------------------------------

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

--------------------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners
-----------------------------------------------

      The following  table sets forth certain  information  concerning the stock
ownership as of December 31, 1998, with respect to: (i) each person who is known
to the Company to beneficially  own more than 5% of the Company's  Common Stock;
(ii) all directors;  and (iii) directors and executive  officers as a group (the
notes below are necessary  for a complete  understanding  of the  figures).  The
Company  calculated  the owners of 5% of the Common  Stock  using the  4,273,987
shares of Common Stock issued on December 31, 1998.

Changes in Control
------------------

         On December 31, 1998, the Company issued a total of 4,200,000 shares of
its common stock to the following  persons and entities in the following amounts
pursuant to Debentures which were converted on December 30, 1998;

         Calder Investments Limited          1,050,000 shares of common stock
         Li, Lin Hu                          1,050,000 shares of common stock
         Anhui Liu An Beer Company Ltd.      2,100,000 shares of common stock

         This issuance caused the three individuals and entities above set forth
to become the control persons of the Registrant.

--------------------------------------------------------------------------------

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

--------------------------------------------------------------------------------

Li, Lin Hu, who has Master in  Business  Administration  from China  Economy and
Management  College is a senior economist and was appointed as a director of the
Company on or about January 6, 1999.  Li is also  executive  Vice-  President of
Tiancheng Group, as referenced to throughout herein.


                                       13

<PAGE>

--------------------------------------------------------------------------------

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

--------------------------------------------------------------------------------

(a)   Index  to  Exhibits.  Exhibits  required  to be  attached  by  Item  601of
      Regulation S-B are listed in the Index to Exhibits beginning on page _____
      of this Form 10-KSB, which is incorporated herein by this reference.

(b)   Reports on Form 8-K.  The  Company  filed a Form 8-K on  November  6, 1998
      regarding  the  recission  of  its  March  15,  1997Agreement  with  Dizon
      Investments,  Ltd, as referred to in Item 6 herein.. On December 18, 1998,
      the Company filed a Form8-K regarding the Company's 1 to 100 reverse split
      enacted December 8, 1998 and effective December 21, 1998.


                                       14

<PAGE>

                                   SIGNATURES
                                   ----------

      In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this __TH day of April, 1999.

      China Food and Beverage Company

      -------------------------------
        James Tilton, President

      In accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities and on
the dates indicated.


      Signature                              Title                     Date
      ---------                              -----                     ----

/s/ James Tilton
------------------------     President, Chief Executive Officer,  April 15, 1999
  James Tilton               Treasurer and Director

/s/ Jane Zheng
------------------------     Secretary and Director               April 15, 1999
  Jane Zheng

/s/ Stanley Merdinger
------------------------     Director                             April 15, 1999
  Stanley Merdinger

/s/ Kitty Chow
------------------------     Director                             April 15, 1999
  Kitty Chow


------------------------     Director                             April   , 1999
  Lin Hu Li


                                       15

<PAGE>

<TABLE>
                                LIST OF EXHIBITS
                                ----------------
<CAPTION>
 Exhibit No.                        Exhibit                                               Page #:
 -----------                        -------                                               -------

<S>    <C>                                                                                   <C>
A(1)   Agreement between the Company and Dizon Investments Limited,  dated March
       15, 1997.                                                                             17

A(2)   Recission  Agreement  between the Company  and Dizon  Investments,  Ltd.,
       dated November 6, 1998.                                                               19

B      Agreement  between  Anhui Liu An Beer Company Ltd. and Victoria  Beverage
       Company Limited dated April 22, 1998.                                                 20

C      Agreement  between  China Food &  Beverage  Company,  Calder  Investments
       Limited and Li, Lin Hu dated April 27, 1998.                                          21

D(1)   Addendum  Agreement  between  Anhui Liu An Beer Company Ltd. and Victoria
       Beverage  Company Limited,  AND,  between China Food & Beverage  Company,
       Calder Investments Limited and Li, Lin Hu, dated April 27, 1998.                      23

D(2)   10,500,000 Debenture from Company to Calder Investments, Ltd.                         25

D(3)   10,500,000 Debenture from Company to Li, Lin Hu                                       26

E(1)   Trust  Agreement  dated  December 17, 1997 between  China Food & Beverage
       Company and Tiancheng (China) Co., Ltd.                                               27

E(2)   Modification  Agreement  dated  December  31, 1998  between  China Food &
       Beverage Company and Tiancheng (China) Co., Ltd.                                      29
</TABLE>


                                       16