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, 2003

                         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.)

                     710 W. 24th St., Kansas City, MO 64108.
             -------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (877) 667-9377
                                 --------------
              (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  number of shares  of  Registrant's  Common  Stock  outstanding  on
December 31, 2003, was 9,896,679.

         The  Registrant's  total revenues for the year ended December 31, 2003,
were $0.00.







<PAGE>

                                TABLE OF CONTENTS

             PART I                                                        PAGE
                                                                           ----

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...................................................  6

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

ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH
             ACCOUNTANTS..................................................  7

             PART III

ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
             AND CONTROL PERSONS;  COMPLIANCE WITH
             SECTION 16(a) OF THE EXCHANGE ACT............................  7

ITEM 10.     EXECUTIVE COMPENSATION.......................................  8

ITEM 11.     SECURITY OWNERSHIP OF BENEFICIAL OWNERS......................  9

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED
             TRANSACTIONS.................................................  9

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K............................. 10

ITEM 14.     CONTROLS AND PROCEDURES...................................... 10

ITEM 15.     PRINCIPAL ACCOUNTANT FEES AND SERVICES....................... 10

SIGNATURES................................................................ 11











                                       -2-

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Business Development:

         China Food and Beverage  Company,  a Nevada  corporation (the "Company"
or, "we"), has executive offices at: 710 W. 24th St., Kansas City, MO 64108. The
Company  was  incorporated  in Nevada on  November  6, 1981 under the name Logos
Scientific  Inc.  On  May 5,  1992,  the  Company  changed  its  name  to  Logos
International,  Inc. On October 23, 1995,  the Company  changed its name to OMAP
Holdings Incorporated.  On March 31, 1997, we changed our name to China Food and
Beverage Company.

         On December 30, 1998, we closed on an 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's 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,  we 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.

         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.

         In May 2000, the sellers claimed that the Company was in default of its
obligations  to  repurchase  or cause to be  repurchased  from  the  sellers,  a
significant majority of the shares of the common stock issued upon conversion of
the debentures  or, to provide  additional  capital.  As a result of the alleged
default,  they  refused to provide the Company  with any  financial  information
concerning the operations of the brewery and assumed control of the brewery.

         We believe  that the claims  made by the  sellers  are  without  merit.
However,  as the assets of the brewery are in the Peoples' Republic of China and
the Company has no effective control over the business or the financial concerns
of the brewery, the Company has fully reserved against all of its assets located
in China.

         It is possible that, in addition to taking  control of the assets,  the
sellers may commence an action against the Company alleging, among other claims,
breach of contract.  Conversely,  continue to explore our options, including but
not limited to, initiating legal action of our own to recover what we believe to
be a wrongful conversion of the Company's assets by the on Which

                                      -3-
<PAGE>

         Unless the Company is able to resolve  this dispute and because it does
not  presently  have the financial  ability to continue in operation,  we may be
obligated to secure additional debt or equity financing to enable the Company to
continue as an on-going entity.

         Accordingly,  the Company  cancelled  2,100,000 shares of the 4,200,000
shares  previously  issued.  We have  placed a  stop-transfer  on the  remaining
2,100,000  shares pending  resolution of this issue between the sellers of Anhui
Hao Dun Brewery and the Company.  On April 15, 2003, the Company repurchased and
intends to cancel 525,000 shares of the  aforementioned  2,100,000 shares common
stock in exchange for $3,246.


         On September  2001,  the Company's  wholly owned  subsidiary,  Victoria
Beverage Company, was dissolved.  The only asset of the subsidiary was 6,000,000
shares of Gourmet's Choice Coffee Co., Inc. These shares were transferred to the
Company.  The  Company  will  carry  the  shares  at  Victoria's  cost of $0.00.
Gourmet's Choice is a related entity.

Business of Issuer:

         Since the disposition of Annu Hui Brewery, the Company will continue to
seek to acquire businesses both in China and other countries.

         On March 4, 2001, the Company entered into an investment agreement with
Tritradex,  Inc., a US based parent corporation of Shanghai Tritradex Machinery,
Inc., a  manufacturer  and  distributor  of gasoline  assemblies in the People's
Republic of China,  under  license  from the Wayne  Division  of Houston-  based
Dresser, Inc.

         Tritradex  was  incorporated  in the  state  of New  York in  1994  and
established a Sino-foreign venture in Pudong, Shanghai, the People's Republic of
China, named Shanghai Tritradex  Machinery,  Inc. ("STM").  The main business of
STM is designing  manufacturing and selling electronic fuel dispensing pumps and
related products for use in gasoline stations in China. In 1995 STM entered into
a license and technical  agreement  with Wayne  Division of Dresser  Industries,
Inc.  The  agreement  allowed  STM to  manufacture,  assemble,  sell and service
Wayne's products in China.

         Wayne is the  technological  leader in the  manufacture  and  supply of
retail petrol fuel  dispensers;  dispenser  control systems,  credit/debit  card
processing terminals and point-of-sale  systems for petroleum markets worldwide.
They are also the  industry  leader  in  developing  new  technologies.  Over 75
countries use their products.

         On September 17, 2001,  Tridradex,  Inc. re-paid an $80,000  investment
which the Company had previously  proffered on March 4, 2001.  The  negotiations
for the acquisition of Tritradex, Inc. have been discontinued.

         On November  11, 2003,  we entered  into an agreement in principle  and
Letter of Intent with "Fairest  Enterprises,  Ltd.",  for the  acquisition  of a
majority  interest  and  operating  control of the China  Xuzhou  Leader  Cement
Company, Limited ("China Cement") in Da Miao Town, Jiangsu Province, Peoples'

                                      -4-
<PAGE>

Republic of China. The non-binding  Letter of Intent is pending upon the parties
pursuing the standard and customary  due  diligence.  The specific  terms of the
acquisition  were not announced,  as they have yet to be negotiated  between the
parties.  China  Cement is a modern  state-of-the  art  cement  plant  producing
various types of concrete products for the rapidly developing  building industry
in Jiangsu Province of China. The Company announced that the unaudited financial
documents,  preliminarily  supplied by China Cement,  indicated  total assets of
approximately  $2,000,000  as of December  31, 2002 with total  revenues for the
calendar  year 2002 of  $1,600,000  resulting  in a net income of  $170,000.  It
should be noted that the foregoing preliminary  financials are supplied by China
Cement on an  unaudited  basis and have not been  verified  or  reviewed  by the
Company or its agents. The Company is enthused about the prospects for acquiring
this threshold  industry within this rapid  developing  region and the potential
establishment of a substantial material working asset for the company.

         We  intend  to  continue  to  attempt  to  locate   target   investment
opportunities  in China and Southeast Asia. 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.

         Since the Company does not have significant liquid assets, we intend to
continue an attempt to acquire  business  opportunities  through the issuance of
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, there can be
no assurance that we 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.


ITEM 2.  DESCRIPTION OF PROPERTY

         The Company presently occupies office space, free of charge, at: 710 W.
24th St., Kansas City, MO 64108.

ITEM 3.  LEGAL PROCEEDINGS

         None

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

         None.


                                      -5-
<PAGE>



                                     PART II

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 2002 and 2003.  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.

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

Quarter Ended December 30, 2002             $ .04                     $ .01

Quarter Ended September 30, 2002            $ .03                     $ .01

Quarter Ended June 30, 2002                 $ .07                     $ .01

Quarter Ended March 30, 2002                $ .16                     $ .06

Quarter Ending December 30, 2003            $ .25                     $ .25

Quarter Ending September 30, 2003           $ .17                     $ .17

Quarter Ended June 30, 2003                 $ .07                     $ .07

Quarter Ended March 30, 2003                $ .02                     $ .02


Shareholders:

         There  were  approximately  193 record  holders  of Common  Stock as of
December 31, 2003,  holding a total of  9,896,679  outstanding  shares of Common
Stock.

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.

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

         The Company  generated no revenues  for the year ended 2003.  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

                                      -6-
<PAGE>

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.

Results of Operations:

         The Company had no revenues as a result from business operations during
the year ended 2003.  It  continued  to incur  operating  expenses,  general and
administrative  expenses in the amount of $212,831  for the year ended 2003,  as
opposed to $274,037 for the year ended 2002,  of which  $150,000 was for officer
salaries.

         Our "Total  Liabilities and Stockholder's  Equity" for year ending 2003
was $39,599 of which, as set forth on Page F-4 of the attached  Financials.  The
"Statement  of  Operations"  set  forth  on Page F-5 of the  attached  Financial
Statements,  the Net  Sales,  the Cost of Sales  and the Gross  Margin  were all
$0.00.


Capital Resources and Liquidity:

         On November 5, 2003,  the Company issued 500,891 shares of common stock
as a cashless  exercise of an outstanding  warrant to purchase 550,000 shares of
common stock.  The negative cash flow reflected on the "Statements of Cash Flow"
Page F-8 of the attached Financials,  is a result of funds used to pay costs and
other accrued expenses.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         There are no changes or disagreements with our accountants who are HJ &
Associates, LLC., 50 S. Main St., Ste. 1450, Salt Lake City, Utah 84144.

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 A. Tilton          42                President, Chief Executive
                                                 Officer, Treasurer & Director

      Jane Zheng               41                Secretary, Director

      Gordon Wilson            61                Director


                                      -7-
<PAGE>

         James A. 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.

         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 A. 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.

         Gordon Wilson has been a successful senior  executive,  team leader and
trouble shooter having set up, developed and turned around UK and  International
trading  operations for major banking,  financial services and trading groups in
East and Western Europe,  Middle East, Africa and North America. He presently is
a director of a number of UK  companies  including  Wilton  Corporate  Finance a
member of the Wilton Group.

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, 2003,  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 A.  Tilton,  the current  chief  executive  officer,  earned or
received annual compensation exceeding $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
                                       Annual Compensation         Long Term Compensation
                                       -------------------        -------------------------
                                                                     Other       Restricted
                                                                     Annual       Stock              Other
                                                                  Compensation     Awards         Compensation
                                                                  ------------   ----------       ------------
Name and principal position          Year    Salary   Bonus
---------------------------          ----    ------   -----
<S>                                  <C>     <C>         <C>            <C>              <C>              <C>
James A. Tilton, President           2002    $75,000     $0             $0               $0               $0
         "                           2003    $75,000     $0             $0               $0               $0


Jane Zheng, Secretary                2002    $75,000     $0             $0               $0               $0
         "                           2003    $75,000     $0             $0               $0               $0
</TABLE>

                                      -8-
<PAGE>


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, 2003, 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  9,896,679
shares of Common Stock issued on December 31, 2003.
<TABLE>
<CAPTION>

                                                      Name and Address
         Title of Class                               Amount and Nature of
         of Beneficial Owner                          Beneficial Ownership                Percentage of Class
       ---------------------                          --------------------                -------------------

<S>                                                  <C>                                   <C>
Common Stock Par Value $0.001                        Korkor Holdings, Ltd.                       32%
                                                     3 Athol St.
                                                     Douglas Isle of Man
                                                     3,172,400

Common Stock Par Value $0.001                        Calder Investments Limited                  30%
                                                     Omar Hodge Bldg.
                                                     Wicken Cay Road Town
                                                     Tortula, BVI
                                                     3,000,000

Common Stock Par Value $0.001                        Anhui Liu An Beer Company                   10%
                                                     1,050,000

Common Stock Par Value $0.001                        Tiancheng China Corp, Ltd.(a)                6%
                                                     530,000

Common Stock Par Value $0.001                        Jane Zheng, Director &                       3%
                                                     Secretary (c)
                                                     82-66 Austin Street
                                                     Kew Gardens, NY 11415
                                                     281,586

Common Stock Par Value $0.001                        James A. Tilton, Director,          less than 1%
                                                     President & Treasurer(b)
                                                     82-66 Austin Street
                                                     Kew Gardens, NY 11415
                                                     57,251
</TABLE>
(a) Includes 211 shares of common stock owned by ATJ,  Incorporated,  a Delaware
holding  company,  of which  James  A.  Tilton  is sole  officer,  director  and
shareholder.

(b)  Includes 185 shares of common  stock owned by ZJ,  Incorporated  a Delaware
holding company, of which Jane Zheng is sole officer, director and shareholder.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

                                      -9-
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         On November 11, 2003, the Company filed an 8-K announcing a non-binding
agreement  in  principle  to acquire a majority  interest  in a cement  plant in
Jiangsu Province, People's Republic of China. The company proposes to acquire an
unspecified  majority  position in the Xuzhou Leader Cement Company from Fairest
Enterprises, Ltd. of China.

ITEM 14. CONTROLS AND PROCEDURES

         Within 90 days  prior to the date if this  report,  we  carried  out an
evaluation under the supervision and with the participation of our President and
Secretary/Treasurer,  of the  effectiveness  of the design and  operation of our
disclosure controls and procedures.  Based on this evaluation, our President and
Secretary/Treasurer  concluded that our  disclosure  controls and procedures are
effective  in  timely  alerting  them to  material  information  required  to be
included in our periodic SEC reports.  It should be noted that the design of any
systems of controls is based in part upon certain  assumptions of the likelihood
of future events, and there can be no assurances that any design will succeed in
achieving it stated goals under all potential future  conditions,  regardless of
how remote. In addition we have reviewed our internal  controls,  and there have
been no  significant  changes in our internal  controls or in any other  factors
that could  significantly  affect those control  subsequent to the date of their
last evaluation.

ITEM 15.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

     The aggregate fees billed through April 12, 2004 by HJ & Associates LLC for
professional  services rendered for the audit of our annual financial statements
and review of the financial statements included in the quarterly reports on Form
10-QSB for fiscal year 2003 were $11,671.

     The aggregate fees billed by HJ & Associates LLC for professional  services
rendered  for the audit of our  annual  financial  statements  and review of the
financial statements included in the quarterly reports on Form 10-QSB for fiscal
year 2002 were $14,485.

AUDIT RELATED FEES

     For the fiscal years ended  December 31, 2003 and 2002,  there were no fees
billed for the audit or review of the financial statements that are not reported
above Audit Fees.

TAX FEES

     For the fiscal years ended 2003 and 2002 the fees billed for tax compliance
services and tax-planning advice provided were $1,990.

OTHER FEES

     For the fiscal  years  ended 2003 and 2002 there were no other fees  billed
for services other than services described above.

                                      -10-
<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 13th day of April, 2004.

         CHINA FOOD AND BEVERAGE COMPANY


         /s/James A. Tilton
         -------------------------------
         James A. 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 A. Tilton
------------------------             President,              April 13, 2004
James Tilton                         CEO, Treasurer
                                     and Director
/s/ Jane Zheng
------------------------             Secretary and           April 13, 2004
Jane Zheng                           Director

/S/ Gordon Wilson                    Director                April 13, 2004
------------------------
Gordon Wilson


                                      -11-
<PAGE>

                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)

                              FINANCIAL STATEMENTS

                                December 31, 2003






                                      F-1
<PAGE>




<PAGE>







                                 C O N T E N T S


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

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

Statements of Operations...................................................F-5

Statements of Stockholders' Equity (Deficit)...............................F-6

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

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



                                      F-2
<PAGE>


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


To the Board of Directors
China Food and Beverage Company
(A Development Stage Company)
Kew Gardens, New York

We have  audited  the  accompanying  balance  sheet of China  Food and  Beverage
Company (a  development  stage  company) as of December 31, 2003 and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years ended  December 31, 2003 and 2002 and from  inception  of the  development
stage on January 1, 2000 through December 31, 2003.  These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the 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 financial  statements  referred to above present fairly, in
all material respects, the financial position of China Food and Beverage Company
(a  development  stage  company) as of December  31, 2003 and the results of its
operations and its cash flows for the years ended December 31, 2003 and 2002 and
from the inception of the development  stage on January 1, 2000 through December
31, 2003 in conformity  with  accounting  principles  generally  accepted in the
United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 4 to the
financial  statements,  the  Company's  recurring  losses and lack of operations
raises  substantial  doubt about its  ability to  continue  as a going  concern.
Management's  plans  concerning  these matters are also described in Note 4. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



/s/ HJ & Associates, LLC
----------------------------
Salt Lake City, Utah
April 5, 2004


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                                  Balance Sheet

                                     ASSETS
                                     ------
                                                                                   December 31,
                                                                                        2003
                                                                                   -----------
CURRENT ASSETS
<S>                                                                                <C>
   Cash                                                                            $     3,789
   Accounts receivable - related party (Note 6)                                         20,000
   Interest receivable                                                                   4,194
   Prepaid expenses                                                                     11,473
                                                                                   -----------

     Total Current Assets                                                               39,456
                                                                                   -----------
PROPERTY AND FIXED ASSETS (Note 3)

   Equipment                                                                             2,149
   Accumulated depreciation                                                             (2,006)
                                                                                   -----------

     Total Fixed Assets                                                                    143
                                                                                   -----------

     TOTAL ASSETS                                                                  $    39,599
                                                                                   ===========
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

CURRENT LIABILITIES

   Accounts payable and accrued expenses                                           $    70,070
   Accounts payable - related party                                                     29,475
                                                                                   -----------

     Total Current Liabilities                                                          99,545
                                                                                   -----------

     TOTAL LIABILITIES                                                                  99,545
                                                                                   -----------
STOCKHOLDERS' EQUITY (DEFICIT)

   Common stock; 100,000,000 preferred shares at $0.001
      par value; 9,896,679 shares issued and outstanding                                 9,897
   Additional paid-in capital                                                        2,110,278
   Retained earnings accumulated prior to the development stage                        633,605
   Deficit accumulated during the development stage                                 (2,813,726)
                                                                                   -----------

     Total Stockholders' Equity (Deficit)                                              (59,946)
                                                                                   -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                          $    39,599
                                                                                   ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                            Statements of Operations
                                                                        From
                                                                    Inception of
                                                                    Development
                                                                     Stage on
                                                                    January 1,
                                         For the Years ended        2000 Through
                                             December 31,           December 31,
--------------------------------------------------------------------------------
                                         2003            2002           2003
                                      -----------    -----------    -----------

NET SALES                             $      --      $      --      $      --

COSTS AND EXPENSES

   General and administrative             212,831        274,037      1,072,080
                                      -----------    -----------    -----------

     Total Costs and Expenses             212,831        274,037      1,072,080
                                      -----------    -----------    -----------

LOSS BEFORE OTHER EXPENSE                (212,831)      (274,037)    (1,072,080)
                                      -----------    -----------    -----------

OTHER INCOME (EXPENSE)

   Refund of tax penalties                   --             --           16,237
   Interest expense                          --             (533)       (16,296)
   Interest income                          2,061          2,274         11,564
                                      -----------    -----------    -----------

     Total Other Income (Expense)           2,061          1,741         11,505
                                      -----------    -----------    -----------

LOSS BEFORE TAX, EXTRAORDINARY
   ITEM AND DISCONTINUED OPERATIONS      (210,770)      (272,296)    (1,060,575)

INCOME TAX EXPENSE                           --             --             --
                                      -----------    -----------    -----------

LOSS BEFORE DISCONTINUED OPERATIONS      (210,770)      (272,296)    (1,060,575)

LOSS ON DISCONTINUED OPERATIONS              --             --       (1,990,314)
                                      -----------    -----------    -----------

LOSS BEFORE  EXTRAORDINARY ITEM          (210,770)      (272,296)    (3,050,889)

GAIN ON DISPOSITION OF DEBT                  --             --          237,163
                                      -----------    -----------    -----------

NET LOSS                              $  (210,770)   $  (272,296)   $(2,813,726)
                                      ===========    ===========    ===========

BASIC LOSS PER SHARE                  $     (0.02)   $     (0.03)
                                      ===========    ===========

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                   9,472,637      9,395,788
                                      ===========    ===========

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

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

                                                        Common Stock
                                            ---------------------------------      Additional         Other           Retained
                                                                                     Paid-In      Comprehensive       Earnings
                                                  Shares           Amount            Capital          Income          (Deficit)
                                            ----------------  ---------------   ---------------  ---------------   ---------------
<S>                                       <C>          <C>            <C>           <C>            <C>
Balance, December 31, 1999                5,546,505    $     5,547    $   872,070   $     8,421    $   633,605

Common stock issued for cash
   at $1.00 per share                        50,000             50         49,950          --             --

Common stock issued for cash
   at $1.00 per share                       200,000            200        199,800          --             --

Common stock issued for cash
   at $0.50 per share                       200,000            200         99,800          --             --

Common stock issued for cash
   at $0.25 per share                       400,000            400         99,600          --             --

Common stock issued for cash
   at $0.25 per share                       800,000            800        199,200          --             --

Common stock issued for cash
   at $0.25 per share                       800,000            800        199,200          --             --

Common stock issued for cash
   at $0.10 per share                     2,000,000          2,000        198,000          --             --

Common stock issued for cash
   at $0.10 per share                     1,000,000          1,000         99,000          --             --

Related party forgiveness of interest          --             --           11,244          --             --

Change in currency translation                 --             --             --          (8,421)          --

Net loss for the year ended
   December 31, 2000                           --             --             --            --       (2,039,898)
                                        -----------    -----------    -----------   -----------    -----------

Balance, December 31, 2000               10,996,505         10,997      2,027,864          --       (1,406,293)

Cancelled shares (Note 5)                      (717)            (1)          --            --             --

Common stock issued for cash
   At $0.10 per share                       500,000            500         49,500          --             --

Cancelled shares (Note 5)                (2,100,000)        (2,100)         2,100          --             --

Net loss for the year  ended
   December 31, 2001                           --             --             --            --         (290,762)
                                        -----------    -----------    -----------   -----------    -----------

Balance, December 31, 2001                9,395,788    $     9,396    $ 2,079,464          --      $(1,697,055)
                                        ===========    ===========    ===========   ===========    ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                                          CHINA FOOD AND BEVERAGE COMPANY
                                           (A Development Stage Company)
                             Statements of Stockholders' Equity (Deficit) (Continued)


                                               Common Stock          Additional      Other      Retained
                                        -------------------------     Paid-In    Comprehensive  Earnings
                                           Shares       Amount         Capital      Income      (Deficit)
                                        -----------   -----------    ----------    ---------   -----------

<S>                                       <C>         <C>           <C>            <C>         <C>
Balance, December 31, 2001                9,395,788   $     9,396   $ 2,079,464    $    --     $(1,697,055)


Warrants granted at fair market value          --            --          31,315         --             --

Net loss for the year ended
 December 31, 2002                             --            --            --           --         (272,296)
                                        -----------   -----------    ----------    ---------   ------------

Balance, December 31, 2002                9,395,788         9,396     2,110,779    $    --       (1,969,351)

November  5, 2003, common
  stock issued upon cashless
  exercise of warrants                      500,891           501          (501)        --            --

Net loss for the year ended
  December 31, 2003                            --            --            --           --       (210,770)
                                        -----------   -----------    ----------    ---------   -----------

Balance, December 31, 2003                9,896,679   $     9,897   $ 2,110,278    $    --     $(2,180,121)
                                        ===========   ===========   ===========    =========   ===========



Retained earnings accumulated prior to the development stage                                   $   633,605
Deficit accumulated during the development stage                                                (2,813,726)
                                                                                               -------------

                                                                                               $  (2,180,121)
                                                                                               =============
</TABLE>

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

                                      F-7
<PAGE>
<TABLE>
<CAPTION>
                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                            Statements of Cash Flows
                                                                                           From
                                                                                       Inception of
                                                                                        Development
                                                                                         Stage on
                                                                                        January 1,
                                                           For the Years Ended         2000 Through
                                                               December 31,            December 31,
-------------------------------------------------------------------------------------------------------
                                                            2003            2002           2003
                                                         -----------    -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                      <C>            <C>            <C>
   Net loss                                              $  (210,770)   $  (272,296)   $(2,813,726)
   Adjustments to reconcile net loss to net cash
     used by operating activities:
       Depreciation                                              430            430          2,006
       Discontinued operations                                  --             --        1,990,314
       Gain on settlement of debt                               --             --         (237,163)
       Warrants issued below market                             --           31,315         31,315
   Changes in assets and liabilities:
     (Increase) in prepaid expenses                          160,968       (172,441)       (11,473)
     (Increase) in accounts receivable - related party          --             (502)        (1,602)
     (Increase) Decrease in exchange credits                  19,819           (983)        19,594
     Increase (Decrease) in accounts payable and
      accrued expenses                                         3,192         (3,368)      (506,765)

     Decrease in related party payable                          --             --           (4,077)
                                                         -----------    -----------    -----------

       Net Cash Used by Operating Activities                 (26,361)      (417,845)    (1,531,577)
                                                         -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES

     Increase in note receivable - related party                --          (20,000)       (20,000)
     Increase in note receivable                              (2,592)          --          (82,592)
     Receipt of payment on note receivable                      --             --           80,000
     Sales of exchange credits                                  --          419,980        419,980
                                                         -----------    -----------    -----------

       Net Cash Provided by Investing Activities              (2,592)       399,980        397,388
                                                         -----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Loss of cash from discontinued operations                    --             --         (424,757)
   Common stock issued for cash                                 --             --        1,200,000
   Proceeds from related party                                29,474           --          129,474
   Payments on notes payable                                    --             --         (323,011)
                                                         -----------    -----------    -----------

       Net Cash Provided by Financing Activities              29,474           --          581,706
                                                         -----------    -----------    -----------

NET DECREASE IN CASH                                             521        (17,865)      (552,483)

CASH AT BEGINNING OF PERIOD                                    3,268         21,133        556,272
                                                         -----------    -----------    -----------

CASH AT END OF PERIOD                                    $     3,789    $     3,268    $     3,789
                                                         ===========    ===========    ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                      F-8
<PAGE>
<TABLE>
<CAPTION>
                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)



                                                                                From
                                                                             Inception of
                                                                             Development
                                                                              Stage on
                                                                              January 1,
                                               For the Years Ended          2000 Through
                                                   December 31,             December 31,
----------------------------------------------------------------------------------------
                                                2003          2002              2003
                                             -----------   -----------      -----------

SUPPLEMENTAL SCHEDULE OF CASH FLOW
   ACTIVITIES:

Cash Paid For:
<S>                                          <C>           <C>              <C>
   Income taxes                              $      --     $      --        $      --
   Interest                                  $      --     $       533      $     3,000

SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

   Warrants issued at fair market            $      --     $    31,315      $    31,315
                                             -----------   -----------      -----------
</TABLE>

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

                                      F-9
<PAGE>

                         CHINA FOOD AND BEVERAGE COMPANY
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2003 and 2002



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

              The Company  reentered the development stage on January 1, 2000 as
              a result of the discontinued operations of Anhui (Note 7), and, as
              discussed  in  Note  8,  Victoria  was  completely   dissolved  in
              September 2001.

              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.

                                      F-10
<PAGE>


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

              d.   Estimates

              The  preparation  of  financial   statements  in  conformity  with
              accounting  principles  generally accepted in the United States of
              America 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.

e.            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:

                           Equipment                            5 years


              f.  Revenue Recognition

              The  Company   currently  has  no  source  of  revenues.   Revenue
              recognition  policies will be determined when principal operations
              begin.

              g.  New Accounting Pronouncements

              During the year ended December 31, 2003,  the Company  adopted the
              following  accounting  pronouncements  which  had no impact on the
              financial statements or results of operations:

              o    SFAS No. 143, Accounting for Asset Retirement Obligations;
              o    SFAS  No.145,  Recision  of FASB  Statements  4, 44,  and 64,
                   amendment of Statement 13, and Technical Corrections;
              o    SFAS No. 146, Accounting for Exit or Disposal Activities;
              o    SFAS No. 147, Acquisitions of certain Financial Institutions;
                   and
              o    SFAS No. 148, Accounting for Stock Based Compensation.
              o    SFAS  No.149,   Amendment  of  Statement  133  on  Derivative
                   Instruments and Hedging Activities;
              o    SFAS No.150,  Accounting  for Certain  Financial  Instruments
                   with Characteristics of both Liabilities and Equity

              In  addition,  during  the year  ended  December  31,  2003,  FASB
              Interpretations  No. 45 and No. 46,  along with  various  Emerging
              Issues  Task Force  Consensuses  (EITF) were issued and adopted by
              the Company and had no impact on its financial statements.

              These newly issued accounting  pronouncements had no effect on the
              Company's  current  financial  statements  and did not  impact the
              Company.


                                      F-11
<PAGE>
NOTE 1 -      ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
              (Continued)

              h.  Income Taxes

              Deferred taxes are provided on a liability method whereby deferred
              tax assets are recognized for deductible temporary differences and
              operating  loss and tax  credit  carryforwards  and  deferred  tax
              liabilities  are  recognized  for taxable  temporary  differences.
              Temporary  differences  are the  differences  between the reported
              amounts of assets and  liabilities  and their tax bases.  Deferred
              tax  assets are  reduced by a  valuation  allowance  when,  in the
              opinion  of  management,  it is more  likely  that not  that  some
              portion or all of the  deferred  tax assets will not be  realized.
              Deferred tax assets and  liabilities  are adjusted for the effects
              of changes in tax laws and rates on the date of enactment.

              Net deferred tax assets consist of the following  components as of
              December 31, 2003 and 2002:

                                             2003            2002
                                          -----------    -----------

              Deferred tax assets
                  NOL Carryover           $ 1,885,300    $ 1,815,527
              Deferred tax liabilities:          --             --

              Valuation allowance          (1,885,300)   $(1,815,527)
                                          -----------    -----------

              Net deferred tax asset      $      --      $      --
                                          ===========    ===========


              The income  tax  provision  differs  from the amount of income tax
              determined by applying the U.S.  federal income tax rate of 39% to
              pretax  income  from  continuing  operations  for the years  ended
              December 31, 2003 and 2002 due to the following:

                                              2003          2002
                                           ---------    ----------

              Book loss                    $ (82,200)    (106,195)
              Valuation allowance             82,200      106,195
                                           ---------    ---------

                                           $    --      $    --
                                           =========    =========


              At  December  31,  2003,   the  Company  had  net  operating  loss
              carryforwards  of  approximately  $4,833,000  that  may be  offset
              against  future taxable income from the year 2003 through 2023. No
              tax  benefit  has  been   reported  in  the   December   31,  2003
              consolidated  financial statements since the potential tax benefit
              is offset by a valuation allowance of the same amount.

              Due to the change in ownership provisions of the Tax Reform Act of
              1986,  net operating  loss  carryforwards  for Federal  income tax
              reporting  purposes  are subject to annual  limitations.  Should a
              change in ownership occur, net operating loss carryforwards may be
              limited as to use in the future.

                                      F-12
<PAGE>

NOTE 2 -      PROPERTY AND FIXED ASSETS
<TABLE>
<CAPTION>

                                                                                         2003
                                                                 Accumulated          Net Book
                                                Cost            Depreciation            Amount
                                        ------------------  -------------------  -----------------
<S>                                     <C>                 <C>                  <C>
              Equipment                 $            2,149  $          (2,006)   $             143
                                        ==================  =================    =================
</TABLE>


              During the years ended  December  31,  2003 and 2002,  the Company
              expensed $430 and $430 in depreciation, respectively.

NOTE 3 -      CONCENTRATIONS OF RISK

              a.  Barter Exchange Credits

              The Company has owned certain  barter  exchange  credits held with
              ITEX  Corporation.  This  balance is not  insured  by the  Federal
              Deposit  Insurance  Corporation.  Value of the credits is $0 as of
              December 31, 2003.

NOTE 4 -      GOING CONCERN

              The Company's  financial  statements are prepared using accounting
              principles  generally  accepted  in the  United  States of America
              applicable to a going concern which  contemplates  the realization
              of assets and  liquidation  of liabilities in the normal course of
              business.  However,  the Company does not have significant cash or
              other material assets,  nor does it have an established  source of
              revenues  sufficient to cover its operating  costs and to allow it
              to continue as a going concern. It is the intent of the Company to
              seek a merger  with an  existing,  operating  company.  Until that
              time,  the  stockholders  have committed to covering the operating
              costs of the Company.

NOTE 5 -      COMMON STOCK TRANSACTIONS

              Common Stock Issuances and Cancellations

              On January  29,  2001,  the  Company  cancelled  717 shares of its
              common   stock   pursuant  to  a  settlement   agreement   with  a
              shareholder.

              On April 25, 2001, the Company issued 500,000 shares of its common
              stock at $0.10 per share for a total of $50,000.

              On May 11, 2001,  the Company  cancelled  2,100,000  shares of its
              common  stock.  These shares were part of the  original  4,200,000
              issued in the acquisition of the Anhui Brewery.

              On November 5, 2003,  the Company  issued 500,891 shares of common
              stock as a cashless exercise of an outstanding warrant to purchase
              550,000 shares of common stock.

                                      F-13
<PAGE>

NOTE 5 -      COMMON STOCK TRANSACTIONS (Continued)

              Issuance of Warrant

              On March 5, 2002, the Company issued a warrant to a  non-employee.
              The  warrant  allowed  the holder to  purchase  550,000  shares of
              common  stock at an exercise  price of $0.06 per share,  and would
              expire five years from the date of issuance.

              The  Company  applied  SFAS No.  123 for  warrants  issued,  which
              required  the Company to estimate  the fair value of each  warrant
              issued at the grant date by using the Black-Scholes  pricing model
              with the following assumptions:

                      Risk-free interest rate                   3.50%
                      Expected life                           3 Years
                      Expected volatility                        1.71
                      Dividend yield                              0.0

              As a result of  applying  SFAS No. 123,  the  Company  recorded an
              expense of $31,315  during the year ended  December 31, 2002.  The
              expense is included in general and  administrative  expense in the
              statement of operations.

              As of December  31,  2002,  this was the only  warrant  issued and
              outstanding. This warrant was exercised in November 2003.

NOTE 6 -      RELATED PARTY TRANSACTIONS

              Accounts Receivable

              On April 17, 2002, the Company  advanced  $20,000 to the president
              and CEO of the  Company.  The  advance  is  payable  on demand and
              accrues interest at 12% per annum.  During the year ended December
              31, 2003,  the Company has  recognized  $2,061 of interest  income
              related to the note.

              Prepaid Expenses

              During the first quarter of 2002, the Company prepaid two years of
              salaries  to two  employees  and  officers of the  Company.  As of
              December 31, 2002, one half of the  prepayment,  representing  one
              year of salaries and payroll taxes,  has been fully expensed.  The
              remaining  prepaid  salaries and taxes, of $157,532,  was expensed
              during the year ended  December 31, 2003.  Therefore,  the prepaid
              salaries and payroll taxes account balance as of December 31, 2003
              is $0.

                                      F-14
<PAGE>
NOTE 7 -      DISCONTINUED OPERATIONS

              Loss of Subsidiary

              The loss from discontinued  operations results from a dispute with
              the Anhui Liu An Beer Company  Ltd.  ("sellers")  who  represent a
              minority  interest  in the  entity  that  operated  the  Company's
              brewery in the Peoples'  Republic of China.  In December 1998, the
              Company  acquired a 55% interest in a Chinese brewery for which it
              issued 8% convertible  debentures in the total principal amount of
              $21 million. The debentures had a $5.00 conversion price. Pursuant
              to the  terms of the  debentures,  the  Company  had the  right to
              require  conversion of the debentures.  The Company  required said
              conversion and issued 4.2 million shares of its common stock, also
              in December 1998. The sellers, from whom the Company purchased its
              interest in the brewery, hold a 45% equity interest in the brewery
              and  agreed  to  maintain   responsibility   for  the   day-to-day
              operations of the brewery.

              The Company's Chinese asset, which was the brewery, was subject to
              liens which resulted in the borrowing of approximately $6 million,
              and the brewery had tax  liabilities  to the People's  Republic of
              China in excess of $4 million.

              In May 2000,  the sellers  claimed that the Company was in default
              of its  obligations to repurchase or cause to be repurchased  from
              the sellers,  a  significant  majority of the shares of the common
              stock  issued upon  conversion  of the  debentures  or, to provide
              additional  capital.  As a result  of the  alleged  default,  they
              refused to provide  the  Company  with any  financial  information
              concerning  the  operations of the brewery and assumed  control of
              the brewery.

              The  Company  believes  that the claims  made by the  sellers  are
              without  merit.  However,  as the assets of the brewery are in the
              Peoples'  Republic  of  China  and the  Company  has no  effective
              control  over  the  business  or  the  financial  concerns  of the
              brewery,  the Company has fully reserved against all of its assets
              allocated  in  China.  All  operations  have  been  classified  as
              discontinued  as they  relate to  activities  prior to  January 1,
              2000.

              It is possible  that, in addition to taking control of the assets,
              the sellers may commence an action  against the Company  alleging,
              among other claims, breach of contract. Conversely, the Company is
              exploring its options,  including  but not limited to,  initiating
              legal  action  of its  own to  recover  what it  believes  to be a
              wrongful conversion of its assets by the sellers.

              Since  there  is no  information  for  the  loss  on  discontinued
              operations  for the year ended  December 31, 2000,  the  remaining
              excess of net assets over  liabilities has been allowed for in the
              total loss on discontinued operations total of $1,990,314.

NOTE 8 -      DISSOLUTION OF SUBSIDIARY

              In September 2001, the Company's wholly owned subsidiary, Victoria
              Beverage,  was  dissolved.  The only asset of the  subsidiary  was
              6,000,000 shares of Gourmet's Choice Coffee Company.  These shares
              were transferred to the Company. The Company will carry the shares
              at Victoria's cost of $0.00. Gourmet's Choice is controlled by the
              President of the Company.

                                      F-15