Latteno Food Corp - FORM 10-K

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EX-31.1 - Latteno Food Corp	v218744_ex31-1.htm
EX-31.2 - Latteno Food Corp	v218744_ex31-2.htm
EX-32.1 - Latteno Food Corp	v218744_ex32-1.htm
EX-32.2 - Latteno Food Corp	v218744_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended December 31, 2010

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

For the transition period from _____________ to __________

Commission File Number: 000-21247

LATTENO FOOD CORP.

(FORMERLY B & D FOOD CORP.)

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

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

8953 Woodbine Avenue

Markham, Ontario, Canada L3R 0J9

(Address of Principal Executive Offices)

(905) 474-5593

(Registrant’s Telephone Number)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of December 31, 2010, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1,688,000.

As of December 31, 2010, there were 34,418,840 shares of Common Stock, par value $0.001 per share issued and outstanding.

TABLE OF CONTENTS

PART I

Item 1.	Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments
Item 2.	Properties	3
Item 3.	Legal Proceedings	3
Item 4.	Removed and Reserved	3

PART II

Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4
Item 6.	Selected Financial Data	5
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 8.	Financial Statements and Supplementary Data	15
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A.	Controls and Procedures	36
Item 9B.	Other Information	37

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13.	Certain Relationships and Related Transactions, and Director Independence	40
Item 14.	Principal Accounting Fees and Services	40

PART IV

Item 15.	Exhibits and Financial Statement Schedules	41

References in this annual report to “we,” “us,” or “our” are to Latteno Food Corp. and its direct and indirect subsidiaries, unless the context specifies or requires otherwise.

SOURCES OF INFORMATION

Information contained in this annual report concerning the coffee and dairy markets and industries, our general expectations concerning these industries and markets, and our position within these industries are based on market research, industry publications, other publicly available information and on assumptions made by us based on this information and our knowledge of these industries and these markets, which we believe to be reasonable. Although we believe that the market research, industry publications and other publicly available information are reliable, including the sources that we cite in this annual report, they have not been independently verified by us and, accordingly, we cannot assure you that such information is accurate in all material respects. Our estimates, involve risks and uncertainties and are subject to change based on various factors.

All dollar amounts are in U.S. dollars unless otherwise noted.

FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with the financial statements and notes thereto set forth in Item 8 of this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as "anticipates", "believes", "estimates", "expects", "hopes", "targets", "should", “will", "will likely result", "forecast", "outlook", "projects" or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from those expressed or implied in the forward-looking statements.

PART I

Item 1. Business

Company Vision

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

Business Summary

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

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

We are continuing to apply the Company strategy to seek growth through the acquisition of plantations, processing and distribution of companies across the world.

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

History and Nature of Operations

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

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

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

On May 13, 2009, the Company entered into a purchase and sale agreement to purchase 60% of the outstanding shares of Global Milk Businesses and Administration of Private Properties Ltda. ("Global Milk"), a limited liability company, incorporated in the State of Sao Paulo, Brazil. Global Milk holds the rights of certain intellectual property of the brand name products manufactured and sold under the brand name Teixeira, a very strong dairy product brand name and distribution system throughout Brazil. A copy of the Share Purchase and Sales Agreement, Shareholders Agreement of Global Milk, Agreement for the Surrender and Transfer of Trademarks, and the Alteration of Social Contract of Global Milk, are filed as Exhibits to this Form 10-K, as Exhibit 2.1, 10.1, 10.2 and 10.3 respectively. On February 10, 2010 Latteno completed the payment and capital contributions required of the acquisition of Global Milk.

Latteno first acquired land located in Brazil from AES Comercial Ltda through the issuance of a convertible debenture totaling $8,446,421 (15,000,000 Reals). The note bears interest at 2.27% per annum and matures on February 9, 2015. This land was transferred to Global Milk, as part of the required capital contribution. Latteno issued an additional convertible debenture to Global Milk for $2,815,474 (5,000,000 Reals). The note bears interest at 2.27% per annum and matures on February 9, 2015.

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

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

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

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

As at December 31, 2010, the Company is currently a party to litigation relating to claims the Company commenced in January 2010 against the predecessor owners of the Teixeira brand name, for breach of non-compete terms of the purchase agreement and for theft of company property and records. The other party has counter claimed against Global Milk and has received an injunction preventing the use of the brand names acquired by Global Milk. The outcome of this litigation is uncertain and expected to take considerable time to resolve, as the courts in Brazil move slowly.

Keys to Success

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

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

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

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

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

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

Item 1A. Risk Factors

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

Item 2. Properties

Our principal executive offices are located at 8953 Woodbine Ave , Markham, Ontario L3R 0J9, which we pay rent on a monthly basis for $2,500. We also have executive offices located at Rua Luis Coelho 223, 8th Floor, Conjunto 81, Cerqueira Cesar, Sao Paulo, S.P. - Brazil CEP: 01309-901 which we rent on a monthly basis for $987. We also lease a coffee plant located at Avenida Engenheiro, Penido 1142, Cruzeiro, S.P., Brazil, which consists of 16,620 square meters. We pay a yearly payment of $802,909 for this factory. We believe that our properties are adequate for our current and immediately foreseeable operating needs. We do not have any policies regarding investments in real estate, securities or other forms of property.

Item 3. Legal Proceedings

As of December 31, 2010, we were currently in litigation with the previous owners of Teixiera brand, Castrol Inc. over the rights to the Teixiera brand. The outcome of this matter is uncertain..

Item 4. Removed and Reserved

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted on the Bulletin Board under the symbol “LATF.” The following quotations, which were obtained from siliconinvestor.com, reflect the high and low bids for our common stock for the periods indicated, based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

The high and low bid prices of our common stock for the periods indicated below are as follows:

OTC Bulletin Board (1)

Quarter Ended	High		Low

December 31, 2010	$	0.10	$	0.10
September 30, 2010	$	0.60	$	0.60
June 30, 2010	$	0.72	$	0.72
March 31, 2010	$	0.04	$	0.04
December 31, 2009	$	0.80	$	0.01
September 30, 2009	$	0.88	$	0.04
June 30, 2009	$	0.12	$	0.02
March 31, 2009	$	0.20	$	0.02

(1)	Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.

Our common stock is issued in registered form. OTR Transfer, Inc., 1000 SW Broadway Street, Suite 920, Portland, Oregon 97205 (Telephone: 503.225.0626; Facsimile: 503.273.9168) is the registrar and transfer agent for our common stock.

Holders

On December 31, 2010 the stockholders’ list of our common stock showed 1,345 registered stockholders and 34,418,840 shares outstanding. On December 31, 2010, the last reported sale price of our common stock on the National Association of Securities Dealers OTC Bulletin Board was $0.10 per share.

Dividends

We declared no dividends in the fiscal year ended December 31, 2010 and we do not intend to pay any cash dividends in the foreseeable future. Although there are no restrictions that limit our ability to pay dividends on our Common Stock other than as described below, we intend to retain future earnings for use in our operations and the expansion of our business.

Item 6. Selected Financial Data

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

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Summary of Current Operations

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

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

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

Dairy

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

About Teixeira

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

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

In 1989, Teixeira revised its corporate base and reorganized its operations in preparation for the global economy that it envisioned. This effort spawned S. Teixeira Food Products Ltda.

With a modern view of the market, Teixeira outsources certain stages of production, specializing in the areas of: finishing, packaging, sales and marketing, distribution, logistics, customer service, delivery and quality control. Teixeira aims to meet the diverse needs of the market and consumer, consistent with an international market approach. Teixeira aimed to meet the diverse needs of the market and consumer, consistent with an international market approach. The Teixeira brand received numerous national and international awards quality of their products.

To maintain the brand at this level, we plan to maintain a consistent philosophy, following three keys to success:

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

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

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

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

Current Plans for the Teixeira Brand Name

The Company is currently in litigation with previous owners of Teixiera brand, Castrol Inc. Latteno took action against the previous owners for breach of the terms of the joint venture agreement and the result was to exclude Castrol as a partner. Castrol filed a counter litigation, the Company has suspended use of the Teixiera brand in its product sales. The recent strikes of the courts in Brazil have delayed the closing of this litigation, however Latteno still controls the sales force, customer lists and distribution chain acquired from Teixiera and therefore management will recommence operations after litigation.

Current Plans for Other Brand Names

Management has negotiated with two other food producers of diary and cheese products, whereby it has received certain exclusive distribution rights. In addition, the Company has supplier lines of credit secured for these products. Management plans to continue with these brands and add the Teixiera brand back into the product mix, once litigation is settled. The Company also has an option to buy these brands if certain targets are met in the future.

As a component of the launch of these new branded products, on July 28, 2010, the Company held its first sales convention in Alphaville, Sao Paulo. More than 40 sales teams attended from the Sao Paulo Area, to introduce the new brands and products. The convention was a success, with sales starting the next day and receiving positive customer feedback.

Continuing with these new brands will require additional working capital, which the Company is currently seeking.

Coffee

Brazil

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

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

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

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

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

Currently the company has no plans to continue with the factory and is unable to estimate the costs of doing so.

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

Distribution

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

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

Competition

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

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

Results of Operations for the Year Ended December 31, 2010

Hiring of Staff and Contractors

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

In July 2010, we hired a sales manager and other administrative staff for our Global Milk division..

We engaged the following service companies to assist with our operations:

Log-Frio Ltda. - a company that as of August will be in charge of the storage and the distribution logistics of our products. They are specialized in “cold loads” and at present they handle a daily average of 4,000 deliveries using their own vehicles, which allows for fully servicing our customer portfolio, including more frequent visits to the points of sale.

SigaSolutions Ltda. - to set up our IT base. This company has specialized in IT solutions for over fifteen years and at present they have also been rendering services for S. Teixeira, our leading supplier, which will bring in a speedy transfer of the whole data base and customers portfolio.

Microsiga Ltda. - a member of the ToTVS group, to be our supplier of the Protheus10 system software with an eye toward the change to take place as of September 2009 when the Electronic Invoicing System shall be implemented. The choice was also due to this supplier’s using tools that will facilitate the whole transfer of data.

Varistão Transportes Ltda. - a transportation company that has been delivering products since July, 22 2009 as a test period for retail operations. Following the incorporation of LogFrio’s services Varistão will account both for the FoodService specific market - whose deliveries are of a differentiated nature – and for the Customer Service (SAC in Brazil).

We have developed and implemented a sales force, made up of four sales supervisors and 48 salespeople, who will be servicing around 8,000 customers.

Branding and Name Registrations

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

We have commenced negotiations with Latco Laticinios (Cruzeiro do Oeste-PR) to develop the private label line with our “Teixeira” brand name. This association shall take a little longer to be concluded because Latco Laticinios is not interested in commercializing semi-finished products jointly with other producers and moreover, we will need authorization from the Ministry of Agriculture for our brand name.

Royalties Earned and Receivable

According to the agreement for use of the trade name, we are owed royalties on any sales of the trade name by Teixiera, until such time as the operations have been transferred. Since commencement of operations in June 2009, we have earned and have royalties receivable from S.Teixeira Industria de Laticinios Ltda (“Teixeira”) in excess of $600,000. The amount refers to the percentage on Teixeira gross sales in excess of $12,000,000 in the period from May 15, 2009 to March 31, 2010. The Company receivable from Teixeira products as a transitional remedy until such time as Global Milk was transacting the purchase and sales directly. If there is any remaining balance owing after the resolution of the current dispute, this will be offset against the final payment of the balance owing to Teixiera for the acquisition of their intangible assets, once settled by the courts.

Customers and Sales

For the year ended December 2010, we grossed billings of $39,269

In August 2010, we commenced sales and operations with 40 sales reps covering the state of Sao Paulo (46% of Brazilian GDP). Sales are being improved slowly, we hope to introduce these new brands to many of our customers.

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

Structure

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

Inflation

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

Seasonality

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

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Principles of Consolidation—The consolidated financial statements include the accounts of the Company, it's wholly owned subsidiary BDFC Brazil Alimentos Ltda (“BDFC”). All material intercompany accounts, transactions and profits have been eliminated in consolidation.

Use of 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. Significant estimates include accrued warranty costs, as well as revenue and costs recorded under the percentage-of-completion method. Actual results could differ from those estimates.

Cash Equivalents—The Company classifies any highly liquid investments purchased with a maturity of three months or less as cash equivalents.

Accounts Receivable—Accounts receivable are carried at original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

Property and Equipment—Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets, usually five years.

Share-Based Payments— Accounting Standards Codefication (“ASC”) ASC No. 718, Compensation Stock Compensation ("ASC No. 718") establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC No. 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share based payment transactions. ASC No. 718 requires that the compensation cost relating to share based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued.

Income Taxes—Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established against deferred tax assets if it is more likely than not that all, or some portion, of such assets will not be realized.

The Company accounts for income taxes pursuant to ASC No. 740, Income Taxes ("ASC No. 740"). Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

Impairment of Long-Lived Assets— In accordance with ASC No. 360, Property, Plant and Equipment ("ASC No. 360"), long lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates annually at year end whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in note 2, the long lived assets have been valued on a going concern basis. However, substantial doubt exists as to the ability of the Company to continue as a going concern. If the Company ceases operations, the asset values may be materially impaired.

Issuance of Shares by Subsidiaries—Sales of stock by a subsidiary is accounted for in accordance with Staff Accounting Bulletin Topic 5H, “Accounting for Sales of Stock by a Subsidiary.” The Company has adopted the capital transaction method to account for subsidiary stock sales. Accordingly, increases and decreases in the Company’s share of its subsidiary’s net equity resulting from subsidiary stock transactions are recorded on the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity as increases or decreases to Additional paid-in capital.

Concentrations of Credit Risk—Financial instruments that subject the Company to credit risk consist primarily of accounts receivable, which are concentrated in a small number of customers in the Chinese governments. The Company performs ongoing credit evaluations of its customers. To date, there has been no bad debt incurred.

Statement of Cash Flows—In accordance with ASC No. 230, "Statement of Cash Flows", cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Translation Adjustment—The Brazilian Real ("Real"), the national currency of Brazil, is the primary currency of the economic environment in which the operations of BDFC are conducted. The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes.

The Company translates BDFC's assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date, and the statement of income is translated at average rates during the reporting period. Adjustments resulting from the translation of BDFC's financial statements from Real into U.S. dollars are recorded in stockholders' equity as part of accumulated comprehensive gain - translation adjustments. Gains or losses resulting from transactions in currencies other than Real are reflected in income for the reporting period.

Comprehensive Income—Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’ equity.

Fair Value of Financial Instruments— The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments.

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

FINANCIAL CONDITION AND LIQUIDITY

Financing

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

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

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

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

This fiscal year to date, we have raised over $200,00 in the form of loans and convertible debentures to provide necessary working capital funding. We are continuing to seek similar financing until such time as our Global Milk operations reach a profitable stage. This is expected to be in 2011.

Capital Restructuring

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

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

On or about September 1, 2009, the Company received written consents in lieu of a meeting of Stockholders from holders of 72,654,538 shares representing approximately 46% of the 154,986,955 shares of the total issued and outstanding shares of voting stock of the Company and shareholders holding 3,373,956 Series A Convertible Preferred shares which represent 337,395,600 voting shares of common stock. The holders of the Series A Convertible Preferred shares, have the right to vote 100 times the number of shares of common stock that the Series A Convertible Preferred is convertible into on all matters submitted to the shareholders. The Series A Convertible Preferred shares are each convertible into one hundred shares of common stock.

Therefore the 3,373,956 Series A Convertible Preferred shares are convertible into 337,395,600 common shares and the shareholders have the right to vote one hundred times the number of shares pursuant to the rights designated to the Series A Convertible Preferred Shares and has voted such amount in favor of approving of the Company (the “Majority Stockholders”) to effect a 20-for-1 reverse stock split (pro-rata reduction of outstanding shares) of our issued and outstanding shares of Common Stock (the “Reverse Stock Split”) authorizing the Company's Board of Directors, to effect a reverse split of the Company’s common stock of 20:1 (pursuant to which the number of authorized shares of common stock will remain 400,000,000 following such reverse stock split); any fractional shares post-split will be rounded up to the next whole share. Additionally the Reverse Stock Split will affect the conversion ratio for all instruments convertible into shares of the Company’s Common Stock including its convertible notes, warrants and outstanding preferred stock.

On December 14, 2009 the 3,735,956 Series A Convertible Preferred shares were converted into 16,869,781 shares of the Company's common stock.

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

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

The final phase of restructuring was completed on May 31, 2010, whereby the Company converted $3,470,000 into common stock. In addition, the Global Milk subsidiary has negotiated the necessary supplier lines of credit for its Brazilian dairy division.

The board of directors believe these actions have structured the debt and equity of the Company to enable the effective implementation of its plan of operations in Brazil.

FISCAL YEAR ENDED DECEMBER 31, 2010 COMPARED TO THE FISCAL YEAR ENDED DECEMBER 31, 2009

Net Income (Loss)

The Company’s consolidated net loss for the fiscal year ended December 31, 2010 amounted to $11,776,519 compared to a consolidated net income of $3,091,041 for the year ended December 31, 2009. The difference arose primarily from the stock based compensation and impairment of intangible assets for the year..

Revenue

For the fiscal year ended December 31, 2010, the Company generated $32,188 in revenue, compared to $1,300,353 for the previous year. Due to the litigation with Teixiera, the operation was suspended and have had minimal sales activity.

The revenue from coffee production through the fiscal year ended December 31, 2010 and 2009 was nil in light of the Company’s management strategy to make sales through a targeted marketing arm to be acquired in the near future. The Company’s operations are suspended at this moment due to changes in the structure of its operations, including the refurbishment of its factory in Brazil, which is expected to be completed in 2010.

Cost of Revenues

The cost of revenues through the fiscal year ended December 31, 2010 was $78,163, compared to the cost of revenue for the previous year $1,183,927.

General and Administrative Expenses

The consolidated general and administrative expenses for through the fiscal year ended December 31, 2010 amounted to $653,790, compared to consolidated general and administrative expenses of $598,053 for the previous year.

The increase in general and administrative expenses was attributable primarily to the increase in professional services and legal expenses of the Company.

Financial Expenses

The consolidated financial expenses for the fiscal year ended December 31, 2010 amounted to $542,559, compared to consolidated financial expenses of $348,481 for the previous year.

The increase in financial expenses through the fiscal year ended December 31, 2010 results from increased interest and financing charges related to the convertible notes incurred over the past 12 months.

MARKET RISK AND CONTINGENT LIABILITIES

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

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	18
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as at September 30, 2010 and December 31, 2009	19 - 20
Consolidated Statements of Loss and Comprehensive Loss	21
Consolidated Statements of Stockholders' Deficit	22
Consolidated Statements of Cash Flows	23
Notes to the Consolidated Financial Statements	24 - 36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Latteno Food Corp. and subsidiary

We have audited the accompanying consolidated balance sheets of Latteno Food Corp. (a Delaware corporation) and subsidiary as of December 31, 2010 and 2009 and the related consolidated statements of loss and comprehensive loss, stockholders' deficit and cash flows for the two years in the period ended December 31, 2010. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 financial position of Latteno Food Corp. and subsidiary as of December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the company has suffered losses from operations since inception that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Fazzari + Partners LLP, Chartered Accountants

Licensed Public Accountants

Vaughan, Ontario, Canada

14 April 2011

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31

(Expressed in United States Dollars)

	Note	2010		2009

ASSETS
Current Assets
Cash and cash equivalents		$	6,789	$	64,409
Accounts receivable, net of allowance for doubtful accounts of $871,942 (2009 - $Nil)			4,029		612,606
Note receivable-current portion	5		202,416		148,491

Total Current Assets			213,234		825,506

Long-Term Assets
Note receivable	5		5,247,808		5,450,224
Property, plant and equipment, net	6		8,962,489		6,542

Total Long-Term Assets			14,210,297		5,456,766

Other Assets
Intangible assets	7		1		9,987,200

Total Other Assets			1		9,987,200

Total Assets		$	14,423,532	$	16,269,472

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

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Continued)

AS AT DECEMBER 31

(Expressed in United States Dollars)

	Note	2010			2009

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank indebtedness		$	14,353		$	-
Accounts payable	8		1,474,576			1,315,266
Due on acquisition of intangible assets	9		3,839,782			12,108,600
Accrued liabilities and other payables	10		1,582,679			1,244,961
Convertible debentures and promissory notes - current portion	11		812,377			3,043,183

Total Current Liabilities			7,723,767			17,712,010

Long-Term Liabilities
Convertible debentures and promissory notes	11		10,205,772			912,047

Total Liabilities			17,929,539			18,624,057

Minority Interest in Consolidated Subsidiary			-			121,381

Commitments and Contingencies	12

Going Concern	2

Stockholders' Deficit	13
Common shares of $0.001 par value; Authorized: 400,000,000 shares; Issued and outstanding: 34,418,840 (2009 - 28,222,524)			34,419			28,222
Additional paid-in capital			29,337,278			18,666,131
Stock to be issued			110,000			110,000
Deferred stock based compensation			(178,593	)		(247,727	)
Accumulated other comprehensive loss			709,134			(908,225	)
Accumulated deficit			(33,518,245	)		(20,124,367	)

Total Stockholders' Deficit			(3,506,007	)		(2,475,966	)

Total Liabilities and Stockholders' Deficit		$	14,423,532		$	16,269,472

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

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

FOR THE YEAR ENDED DECEMBER 31

(Expressed in United States Dollars)

	2010			2009

REVENUES	$	32,188		$	1,300,353

COST OF GOODS SOLD		78,163			1,183,927

GROSS (LOSS) PROFIT		(45,975	)		116,426

ROYALTIES		-			439,428

EXPENSES
Rent and occupancy costs		813,787			808,152
Management and directors fees		210,000			252,916
General and administrative		653,790			598,053
Bad debts		871,942			-
Stock based compensation		2,539,133			-
Amortization		947			227

TOTAL OPERATING EXPENSES		5,089,599			1,659,348

LOSS FROM OPERATIONS		(5,135,574	)		(1,103,494	)
Interest, net		(542,559	)		(348,481	)
Foreign exchange		333,703			(1,181,746	)
Other income, net		554,418			572,286
Impairment of intangible assets (Note 7)		(8,657,599	)		-

NET LOSS FROM OPERATIONS BEFORE INCOME TAXES		(13,447,611	)		(2,061,435	)
Provision for income taxes		-			-

NET LOSS FROM OPERATIONS BEFORE MINORITY INTEREST		(13,447,611	)		(2,061,435	)

Minority interest in loss of subsidiaries		53,733			121,381

NET LOSS	$	(13,393,878	)	$	(2,182,816	)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT		1,617,359			(908,225	)

COMPREHENSIVE LOSS	$	(11,776,519	)	$	(3,091,041	)

LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED	$	(0.46	)	$	(0.24	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED		29,249,537			8,947,726

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

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed in United States Dollars)

	Preferred Stock									Common Stock															Accumulated
	Number			Amount			Additional Paid-In Capital			Number			Amount			Additional Paid-In Capital			Treasury Stock			Deferred stock based compensation			Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Deficit
Balance January 1, 2009		3,753,956		$	373,596		$	4,570,228			7,499,676			7,499		$	2,854,257		$	145,000		$	-		$	-		$	(17,941,551	)	$	9,029
Issuance of shares for services		-			-			-			1,001,857			1,002			422,529			-			(247,727	)		-			-			175,804
Common stock issued for accrued interest		-			-			-			676,210			676			134,566			-			-			-			-			135,242
Warrants exercised		-			-			-			1,500,000			1,500			298,500			-			-			-			-			300,000
Common stock to be issued for cash		-			-			-			925,000			925			184,075			-			-			-			-			185,000
Common stock repurchased		-			-			-			(500,000	)		(500	)		(299,500	)		-			-			-			-			(300,000	)
Common stock to be issued		-			-			-			250,000			250			144,750			(35,000	)		-			-			-			110,000
Preferred stock converted to common shares		(3,753,956	)		(373,596	)		(14,570,228	)		16,869,781			16,870			14,926,954			-			-			-			-			-
Foreign currency translation		-			-			-			-			-			-			-			-			(908,225	)		-			(908,225	)
Net loss for the year		-			-			-			-			-			-			-			-			-			(2,182,816	)		(2,182,816	)

Balance, December 31, 2009		-		$	-		$	-			28,222,524		$	28,222		$	18,666,131		$	110,000		$	(247,727	)	$	(908,225	)	$	(20,124,367	)	$	(2,475,966	)
Issuance of shares for services		-			-			-			2,718,862			2,719			2,467,282			-			-			-			-			2,470,001
Issuance of shares for debt		-			-			-			900,200			901			1,035,733			-			-			-			-			1,036,634
Issuance of shares on conversion of notes		-			-			-			2,577,254			2,577			2,400,883			-			-			-			-			2,403,460
Exclusion of Global Milk joint venture partner		-			-			-			-			-			4,767,249			-			-			-			-			4,767,249
Amortization of stock compensation		-			-			-			-			-			-			-			69,134			-			-			69,134
Foreign currency translation		-			-			-			-			-			-			-			-			1,617,359			-			1,617,359
Net loss for the year		-			-			-			-			-			-			-			-			-			(13,393,878	)		(13,393,878	)

Balance, December 31, 2010		-		$	-		$	-			34,418,840			34,419		$	29,337,278		$	110,000		$	(178,593	)	$	709,134		$	(33,518,245	)	$	(3,506,007	)

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

LATTENO FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31

(Expressed in United States Dollars)

	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(13,393,878	)	$	(2,182,816	)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization		947			227
Write down impairment loss of intangible assets		8,657,599			-
Minority interest		(53,733	)		121,381
Interest due to convertible notes and bank debts		588,224			335,388
Stock based compensation		2,539,133			175,804
Allowance for doubtful debt		678,445			-
Acquisition of subsidiary		-			2,121,400
Interest on note receivable		(554,418	)		(568,383	)

Changes in operating assets and liabilities:
Accounts receivable		(69,868	)		(612,606	)
Prepaid and sundry assets		-			12,885
Current portion - note receivable		(53,925	)		(22,067	)
Note receivable		756,834			724,976
Accounts payable		322,510			935,399
Accrued liabilities and other payables		337,718			(801,334	)

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(244,412	)		240,254

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment		(3,917	)		(4,751	)

NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES		(3,917	)		(4,751	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank loans		14,353			(669	)
Proceeds from convertible debentures		460,733			-
Repayment of advances to related party		-			442,800
Proceeds from the issuance of common stock		-			295,000

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		475,086			737,131

EFFECT OF FOREIGN CURRENCY TRANSLATION		(284,377	)		(908,225	)

NET (DECREASE) INCREASE IN CASH		(57,620	)		64,409

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		64,409			-

CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,789		$	64,409

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

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

1.	NATURE OF OPERATIONS AND BUSINESS COMBINATION

Latteno Food Corp. (formerly B&D Food Corp.) (“Latteno” or “the Company”) is a US corporation that concentrates in acquiring, organizing, developing and upgrading companies in the food industry, and more specifically in the dairy and coffee industry. Currently the Company's operations are on hold, but has plans to recommence operations through its subsidiary in Brazil and is developing a plan of operations for its leased facilities in Brazil.

The Company was incorporated on August 24, 1994 under the laws of the state of Delaware. Until October 2004, the principal business activity of the Company was ownership, management, and sale of residential real estate. This activity was carried on through the wholly owned subsidiary Rickets Enterprises International, Inc. In October 2004, the Company sold all of its remaining revenue producing assets and in December 2004 ceased all its active operations.

On July 11, 2005, the Company entered into a Share Purchase Agreement (the “Agreement”) with BDFC Brasil Alimentos Ltda., a company formed pursuant to the laws of Brazil (“BDFC”) and the stockholders of BDFC (the “BDFC stockholders”) dated as July 8, 2005. Pursuant to the Agreement, the Company acquired effectively 100% of the outstanding equity stock of BDFC from the BDFC stockholders. As consideration for the acquisition of BDFC, the Company agreed to issue 4,767,234 shares of the Company’s common stock to the BDFC stockholders. As additional consideration, the Company issued an 8% convertible promissory note, in the amount of $10,000,000 to the BDFC stockholders in consideration for the entire preferred stock of BDFC. The note is payable (principal plus accumulated interest) on July 8, 2008 and may be converted, at the option of the holder, at any time, prior to or at the time of repayment by the Company, to the Company’s common stock at the rate of $4.00 per share. At the date of the agreement, BDFC stockholders were also the controlling shareholder of the Company.

BDFC was originally incorporated under the name Eastco Corporation do Brasil Ltda (“Eastco), under the laws of Brazil on June 2, 1995. In May 2004, the name of Eastco was changed to Eastco de Alimentos Ltda., as registered with the Junta Comercial de Sao Paolo (Commercial Council) and on June 28, 2005 the name was changed to BDFC Brasil Alimentos Ltda. BDFC has been in the coffee manufacturing business since 1997. The Company manufactures and purchases coffee grains, toasted and milled coffee, soluble coffee and related products, for sale, import and export.

On November 1, 2000, due to adverse financial conditions, BDFC filed a Judicial Creditor’s Agreement called “Concordata Preventiva”. This agreement consolidates the Company’s debts and postpones all obligations to suppliers and banks for a period of time. The creditor’s agreement under “Concordata Preventiva” provided for payment in two installments, the first installment of 40% to be paid in one year and the remaining 60% to be paid in two years. BDFC made the full payments of $144,000 and $216,000 on October 30, 2001 and November 25, 2002, respectively. On March 8, 2005, BDFC paid an additional $15,562 as required by the courts. To generate sufficient cash flows, in January 21, 2003 management leased its manufacturing facility and equipment to Comercio e Industrias Brasileiras Coimbre S/A (“Coimbra”), an unrelated party. Rents received from the lease were used by BDFC to pay its debts.

On July 1, 2008, the Company completed execution of a stock purchase agreement with SBKF Investments, Ltd. (the “Purchaser”) for the sale of 100% of the issued and outstanding common stock of BDFC Brasil Alimentos Ltda. a subsidiary of the Latteno. The purchase price was $5,764,847 and in consideration the Company received a note bearing annual interest of 10% repayable in equal annual payments of principal and interest of $702,909. The net liabilities of BDFC at the time of the sale was $6,204,539, resulting in a gain on sale of $11,969,386.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

1.	NATURE OF OPERATIONS AND BUSINESS COMBINATION (Continued)

Pursuant to the agreement, Latteno acquired 300 common shares of Global Milk from Castrol, LLC ("Castrol"), a Delaware corporation, representing 60% of the outstanding shares of Global Milk, for consideration of 13,000,000 Brazilian Reals ($6,312,800). Latteno and Castrol are then required to contribute 20,000,000 Brazilian Reals to the company based on their ownership. Latteno must make the capital contribution of 12,000,000 Brazilian Reals ($5,880,000) and complete payment for the acquired shares of 13,000,000 Brazilian Reals ($6,312,800) by December 10, 2009 or the shares issued will be cancelled. On October 22, 2009 the deadline for completing the purchase payments was agreed by both parties to be extended to February 10, 2010. Latteno funded the purchase and contribution requirements on February 10, 2010.

Latteno has determined that it is the accounting acquirer and has obtained control of Global Milk. Latteno has therefore consolidated 100% of Global Milks assets and liabilities. The net assets of Global Milk on the date of acquisition consisted of trademarks and patents valued at $9,987,200 and liabilities of $3,674,400.

On September 1, 2009, our Board of Directors approved, subject to receiving the approval of the holder of a majority of our outstanding capital stock, an amendment and restatement of our Articles of Incorporation (the “Restated Articles”), to change our name to “Latteno Food Corp.” to more accurately reflect our business operations. The majority stockholders approved the Restated Articles pursuant to a written consent dated as of September 1, 2009.

On February 10, 2010 Latteno completed the payment and capital contributions required of the acquisition of Global Milk. Latteno first acquired land located in Brazil from AES Comercial Ltda through the issuance of a convertible debenture totaling $8,446,421 (15,000,000 Reals). The note bears interest at 2.27% per annum and matures on February 9, 2015. This land was then transferred to Global Milk, as part of the required capital contribution. Latteno issued an additional convertible debenture to Global Milk for $2,815,474 (5,000,000 Reals). The note bears interest at 2.27% per annum and matures on February 9, 2015.

In February 2010, Castrol, the 40% non-controlling interest of Global Milk, was notified by Latteno that they were in violation of the shareholders agreement, due to breach of the non-compete clause. The remaining 5,000,000 Reals ($2,815,474) payable to Castrol for the GM shares acquired was therefore no longer payable.

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

On March 11, 2010, as a result of the non-compete and other violations by Castrol, a special meeting of the shareholders of Global Milk was held and majority shareholders voted to exclude the partner, Castrol. As a result, Global Milk effectively became a wholly-owned subsidiary of the Company. The transaction was accounted for as a change in the ownership interests of the Company with an entity under common control, in accordance with ASC 810-10-65-1, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51. As a result, the value of the shares transferred to consummate the exclusion of the partner was $4,767,249, which represented the historical cost basis of the balance of the net assets transferred. The following disclosure provides details regarding the change in the noncontrolling ownership interests of the Company’s subsidiaries, in accordance with ASC 810-10-55-4.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

	2010			2009

Net loss Attributable to Latteno Food Corp.	$	(13,447,611	)	$	(2,061,435	)
Transfers (to) from the Noncontroling Interest:		53,733			(121,381	)
Increase in Latteno’s Additional Paid in Capital for the exclusion of the Shareholders of the Noncontrolling Interest		4,767,249			-
Change from Net Income Attributable to Latteno and Transfers (to) from the Noncontrolling Interest	$	(8,626,629	)	$	(2,182,816	)

2.	GOING CONCERN

The Company's consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has raised capital and financing to cover all of its losses from operations since inception but the Company's ability to continue as a going concern is contingent upon its ability to attain and sustain profitable operations and to generate sufficient capital and financing from external investors and lenders. For the year ended December 31 2010 the Company experienced a net loss of $13,393,878 (December 31, 2009 - $2,182,816) and has a working capital deficiency of $7,510,533 (December 31, 2009 - $16,886,504).

The operations of Latteno are currently on hold due to the pending litigation relating to the acquisition of the Teixiera brand through its Global Milk subsidiary, further described in Note 1 and 7. The results of this litigation are unknown and the Company is unable to continue use of the brand name until such time as the matter is resolved in the Company's favor. Management is currently reviewing the Company's options to continue in the dairy industry. In addition, Management will seek the necessary financing to fund overhead costs until a detailed plan is in place.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

3.	BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its effectively wholly owned subsidiary, Global Milk.

All significant inter-company accounts and transactions are eliminated on consolidation.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of 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 the 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. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. Amounts that require significant management estimates include the expected life of equipment, the provision for bad debts, assets impairment (including intangible assets) and the fair value of stock based compensation.

Revenue Recognition

The Company recognizes revenue in accordance with the U.S. Securities and Exchange Commission (the "SEC") Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition ("SAB No. 104"). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.

Revenues from coffee and dairy products are recognized upon delivery of goods and transfer of title to the customers and when collection is reasonably assumed.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on account and short-term investments with remaining maturities at acquisition of three months or less.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation, based on the estimated useful lives of the assets, is provided using the under noted annual rates and methods:

Computers, furniture and machinery	3-16 year straight line
Motor vehicles	7 year straight line

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation

The functional currency of BDFC is the Brazilian Real. Transactions and balances of BDFC have been translated into U.S. dollars in accordance with the principles set forth in the Statement of Financial Accounting Standards (“SFAS”) No. 52, Foreign Currency Translation. All balance sheet accounts, except shareholders’ deficiency accounts, have been translated using the exchange rates in effect at the balance sheet date. Shareholders’ deficiency accounts were translated at the historical exchange rates. Revenues and costs have been translated at the average exchange rates prevailing during the year. The resulting aggregate translation adjustments are reported as a component of accumulated other comprehensive loss in shareholders’ deficit.

Lease Commitments

The Company recognizes the lease payments of an operating lease pursuant to SFAS 13, Accounting for Leases. When the lease agreement includes rent abatements and escalation in lease payments, the Company recognizes the total cost of the lease on a straight line basis over the entire term of the lease.

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes ("SFAS No. 109"). Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

Financial Instruments

Interest rate risk exists from the bank indebtedness and term loans which are exposed to fluctuations in interest rates.

Unless otherwise noted, it is management's opinion that the Company is not exposed to significant currency or credit risks arising from the financial instruments. The fair value of the financial instruments approximates their carrying values, unless otherwise noted.

Comprehensive Loss

The Company has adopted SFAS No. 130, Reporting Comprehensive Income ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive loss is presented in the statement of loss and comprehensive loss, and consists of net loss and unrealized gains (losses) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments recognized in accordance with SFAS 87, Employers' Accounting for Pensions. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company's financial position or results of operations.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings or Loss Per Share

The Company accounts for earnings per share pursuant to SFAS No. 128, Earnings per Share, which requires disclosure in the financial statements of basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.

There were no dilutive financial instruments for the years ended 31 December 2010 and 2009. The Company had stock warrants which, due to the losses incurred, are considered anti-dilutive equity instruments, accordingly, the effect of these instruments have not been reflected in loss per share for the years ended 31 December 2010 and 2009.

Stock-based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, Share-Based Payment ("SFAS No. 123R"). SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued.

Impairment of Long-lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates annually at year end whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in note 2, the long-lived assets have been valued on a going concern basis. However, substantial doubt exists as to the ability of the Company to continue as a going concern. As the Company ceased operations, the asset values been materially impaired, see Note 7.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets

The Company accounts for purchased intangible assets in accordance with Statement of Financial Accounting Standards ASC No. 350 "Intangibles - Goodwill and Other Intangible Assets". Under ASC No. 350, goodwill and any other intangible assets deemed to have indefinite lives are not subject to amortization; however, goodwill is subject to impairment reviews, which must be performed at least annually, or more frequently if events or circumstances indicate that goodwill or other indefinite lived intangibles might be impaired. The Company performs its annual assessment of impairment in the fourth fiscal quarter. For goodwill the first step compares the fair value of a reporting unit to its carrying amount, including goodwill. The Company has determined that it has one reporting unit. The estimated fair value is determined utilizing the expected present value of the future cash flows of the unit. If the carrying amount of the reporting unit exceeds its fair value, no further analysis is necessary. If the carrying amount of the reporting unit exceeds its fair value, the second step is performed. The second step compares the carrying amount of the goodwill to the fair value of the goodwill. If fair value is less than the carrying amount, an impairment loss is reported as a reduction to the asset and a charge to operating expense.

Included in intangible assets are trademarks, patents and completed technology.

The Company tested goodwill and other intangibles deemed to have indefinite lives for impairment at December 31, 2010 and because its carrying amount exceeds the estimated fair value of the Company's reporting unit, management casts substantial doubts on the recoverability of these intangibles and determined that an impairment loss of its full carrying amount of $8,657,000 has been recorded at year end.

Concentrations

SFAS No. 105, Disclosure of Information About Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentration of Credit Risk, requires disclosure of any significant off-balance-sheet risk and credit risk concentration. The Company does not have significant off-balance-sheet risk or credit concentration. The Company maintains cash with major financial institutions. From time to time, the Company has funds on deposit with commercial banks that exceed federally insured limits. Management does not consider this to be a significant risk. Trade receivables are derived from sales to major customers located primarily in Brazil. The Company’s subsidiary performs ongoing credit evaluations of its customers and obtains letters of credit and bank guarantees for certain receivables. An allowance for doubtful accounts is determined with respect to those amounts that were determined to be doubtful of collection and a general allowance is provided to cover additional potential exposures.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) ratified Accounting Statement Update (ASU) 2009-13 (ASU 2009-13), Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements, which eliminates the residual method of allocation, and instead requires companies to use the relative selling price method when allocating revenue in a multiple deliverable arrangement. When applying the relative selling price method, the selling price for each deliverable shall be determined using vendor specific objective evidence of selling price, if it exists and otherwise using third-party evidence of selling price. If neither vendor specific objective evidence nor third-party evidence of selling price exists for a deliverable, companies shall use their best estimate of the selling price for that deliverable when applying the relative selling price method. ASU 2009-13 shall be effective in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Companies may elect to adopt this guidance prospectively for all revenue arrangements entered into or materially modified after the date of adoption, or retrospectively for all periods presented. The Company will adopt this standard effective January 1, 2011. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), "Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition." The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

5.	NOTE RECEIVABLE

On July 1, 2008, the Company completed execution of a stock purchase agreement with SBKF Investments, Ltd. (the “Purchaser”) for the sale of 100% of the issued and outstanding common stock of BDFC Brasil Alimentos Ltda. a subsidiary of the Latteno. The purchase price totalled $5,764,847 and in consideration the Company received a note bearing annual interest of 10% repayable in equal annual payments of principal and interest of $702,909. The balance payable at December 31, 2010 including accrued interest is $5,450,224.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

6.	PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment were as follows:

	2010			2009

Land	$	8,949,000		$	-
Computers, machinery & equipment		12,558			5,357
Furniture & fixtures		2,156			1,416

		8,963,714			6,773
Accumulated depreciation		(1,225	)		(231	)

Net book value	$	8,962,489		$	6,542

On February 10, 2010 Latteno completed the payment and capital contributions required of the acquisition of Global Milk. Latteno first acquired land located in Brazil from AES Comercial Ltda through the issuance of a convertible debenture totaling $8,446,421 (15,000,000 Reals). The note bears interest at 2.27% per annum and matures on February 9, 2015. This land was transferred to Global Milk, as part of the required capital contribution.

7.	INTANGIBLES

Latteno has determined that it is the accounting acquirer and has obtained control of Global Milk. Latteno has therefore consolidated 100% of Global Milks assets and liabilities. Management has determined that the net assets of Global Milk on the date of acquisition consisted of trademarks and patents valued at $9,987,200.

Due to the pending litigation, further described in Note 11, the Company tested goodwill and other intangibles deemed to have indefinite lives for impairment at December 31, 2010 and because its carrying amount exceeds the estimated fair value of the Company's reporting unit, management casts substantial doubts on the recoverability of these intangibles and determined that an impairment loss of its full carrying amount of $8,657,599 has been recorded at year end.

8.	ACCOUNTS PAYABLE

	2010		2009

Trade payable	$	1,249,576	$	1,190,266
Rent payable		225,000		125,000

	$	1,474,576	$	1,315,266

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

9. DUE ON ACQUISITION OF INTANGIBLE ASSETS

Due on acquisition of intangibles represents the Global Milk subsidiary’s balance owing on the acquisition of the Teixiera brand intellectual property. The balance of Reals$6,436,000 is non-interest bearing and due on demand.

10.	ACCRUED LIABILITIES AND OTHER PAYABLES

	2010		2009

Employees and related institutions	$	335,712	$	65,403
Amounts payable to stockholders of the Company, unsecured, non-interest bearing and payable on demand		1,234,967		1,169,558
Other accrued liabilities		12,000		10,000

	$	1,582,679	$	1,244,961

11.	CONVERTIBLE DEBENTURES AND PROMISSORY NOTES

Composed of:

	2010		2009

Convertible debentures	$	10,031,637	$	2,614,256
Promissory notes		986,512		1,340,974

	$	11,018,149	$	3,955,230

The convertible debentures and promissory notes are unsecured and mature and become due as follows:

	2010		2009

Amount due in 2010		812,377		2,712,572
Amount due in 2011		1,552,238		330,611
Amount due in 2013		-		912,047
Amount due in 2015		8,653,534		-

	$	11,018,149	$	3,955,230

On May 31, 2010 the Company, after receipt of signed conversion notices from its debtors, completed the conversion of 12 debentures, with principal and interest owing of $2,403,461, into 2,577,254 common shares.

On May 31, 2010 the Company renegotiated with certain convertible debenture holders to amend the maturity dates of debentures totaling $1,440,000, to July and August 2011, with interest at 7% and with conversion rights at the option of the holder at $1.00 per common share.

On August 31, 2010 the Company renegotiated with certain convertible debenture holders to amend the maturity dates of debentures totaling $40,000, to September 2011, with interest at 10% and with conversion rights at the option of the holder at $0.30 per common share.

During the year ended December 31, 2010, the Company issued various debentures totaling $496,900, convertible into common shares at prices ranging from $0.30 to $1.00 per share. The debentures bear interest at 4% to10% and mature in April, May and July 2011.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

12.	COMMITMENTS AND CONTINGENCIES

On September 26, 2008, the Company entered into a lease agreement with SBKF Investments, Ltd for a term of 18 years, whereby they would leaseback all of the land building and factory that was sold to them, as described in Note 1. The Company's remaining lease obligations, with future minimum annual payments (exclusive of taxes, insurance and maintenance costs) are as follows:

Year One		802,909
Year Two		802,909
Year Three		802,909
Year Four		802,909
Year Five and thereafter		10,237,090

	$	13,448,726

13.	CAPITAL STOCK AND WARRANTS

On July 17, 2009 the Company issued 925,000 and 250,000 shares of its common stock at a price of $0.20 per share. The 250,000 shares related to the May 2008 subscription agreement and have accordingly been reclassified from stock to be issued.

On October 2, 2009 the Company entered into a subscription agreement for 550,000 shares of its common stock at a price of $0.20 per share .

On December 14, 2009 the Company issued 569,354 shares of its common stock for services by a consultant valued at the market rate on the date of issuance at $28,805 and part for future services to be rendered by the consultant valued at $247,726.

On December 14, 2009 the Company issued 282,500 shares of its common stock as payment for accrued salaries in the amount of $117,000. The number of shares issued was determined by the market rate of the stock on the date of issuance.

On December 14, 2009 the Company issued 676,210 shares of its common stock to a convertible debt holder as payment towards $135,242 in accrued interest due on the convertible note.

On December 14, 2009 a holder of warrants granted in January 2008 exercised the 30,000,000 warrants at $0.20 and 1,500,000 shares were issued. The Company immediately repurchased 500,000 of the shares issued at the market price of $0.60 per share.

On December 14, 2009 the 3,735,956 preferred shares were converted into 16,869,781 shares of the Company's common stock.

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

On May 31, 2010 the Company paid for $163,200 outstanding payables, with the issuance of 203,200 shares of common stock.

On May 31, 2010 the Company issued 2,718,862 common shares for services rendered and to be rendered in the future. The issuances were to several individuals as payment for services relating to commissions on business transactions, guarantee fees, legal services and other professional services. Total compensation related to these services for the six months ended June 30, 2010 was $2,504,566.

On May 31, 2010 the Company issued 697,000 common shares as payment for supplier debts which the Company had assumed as partial consideration for acquisition of the Teixiera brand.

On May 31, 2010 the Company agreed to extend the maturity date on warrants for 925,000 common stock, exercisable at $2.00, to June 30, 2012.

14.	INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109. SFAS No. 109 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated.

Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

The components of deferred income taxes, have been determined at the Brazilian statutory rate of 24% (2009 - 24%) and the combined U.S. federal and state statutory rate of 35% (2009 - 35%) and are as follows:

	2010			2009

Deferred income tax assets (liabilities):
Net operating loss carryforwards	$	8,840,000		$	4,921,000
Capital loss carryforwards		3,496,000			3,496,000
Valuation allowance		(12,336,000	)		(8,417,000	)

Deferred income taxes	$	-		$	-

LATTENO FOOD CORP. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 and 2009

(Expressed in United States Dollars)

The Company has net operating tax losses and capital losses available to be applied against future year’s income totaling approximately $24,868,000 and $23,304,000 respectively.

Due to the losses incurred since inception and expected future operating results, management has determined that the Company does not meet the 'more likely than not' criteria that the deferred tax assets resulting from the tax losses available for carryforward and the differences in tax bases of assets will be realized through the reduction of future income tax payments, accordingly a 100% valuation allowance has been recorded for deferred income tax assets.

15.

WARRANTS

A summary of stock warrant activity is as follows:

	Shares Subject to Warrants			Weighted Average Exercise Price

Outstanding on 31 December 2008		2,475,000		$	1.00
Granted		7,708,333			0.02
Exercised / forfeited / expired		(1,500,000	)		0.20

Outstanding on 31 December 2009		8,683,333			0.25
Granted		-			-
Exercised / forfeited / expired		-			-

Outstanding and exercisable on 31 December 2010		8,683,333		$	0.25

The following transactions occurred from 1 January 2009 through 31 December 2010:

On July 17, 2009 the Company issued 925,000 shares of its common stock at a price of $0.20. In connection with this issuance the Company granted 4,625,000 warrants, exercisable at $0.02 and 3,083,333 exercisable at $0.03 per share for a total of 7,708,333 warrants.

On December 14, 2009 a holder of warrants granted in January 2008 exercised the 1,500,000 warrants at $0.20 and 1,500,000 shares were issued. The Company immediately repurchased 500,000 of the shares issued at the market price of $0.60 per share.

The warrants were valued using the Black-Scholes pricing model with the following assumptions: risk free interest rate of 3.03% - 5.08%, expected dividend yield of zero, expected life of two years and expected volatility of 62.67%.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

(a) Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of our 2010 fiscal year. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules 13a-15(e) and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2010.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Control over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) and has assessed its effectiveness using the components established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Management concluded that we maintained effective internal control over financial reporting as of December 31, 2010.

(b) Changes in internal control over financial reporting. There have been no changes in our internal control financial reporting that occurred during the year ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our management team will continue to evaluate our internal control over financial reporting in 2011.

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Item 9B. Other Information

As of December 31, 2010, the Company is currently in default on its interest obligations under the following Notes:

Avishay Karawan			110,245
Ilan Karawan			117,792
Ido Lavyan			34,828
Cinthia Roice			140,542
Hila Avisar			161,040
Avi Sagi			159,712
Galia Barr Wilf			261,528
David Fisher			258,451
Liebler Dan			33,174
Mordechai Yalin			13,219
Alona Hirsch			32,972
Seth Farbman
Maor Madar			10333
Eli Madar			10,333
Schmuel Madar			20,667
Eitan Forlite			13,267
Total:			1,378,103

The Company is in the process of negotiating such default with the relevant Noteholders, but no assurances may be given as to the outcome of such negotiations or any actions that the Noteholders may take to enforce their rights under the Notes.

Item 10. Directors, Executive Officers and Corporate Governance

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

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

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

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

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

	Position Held	Date First Elected or Appointed
Daniel Ollech	President and Chairman of the Board	April 29, 2005
Spence Walker	Chief Financial Officer	June 1, 2009
Daniel Ollech	Chief Executive Officer	January 12, 2006
Jacques Ollech	Executive Vice President and Director	July 12, 2006

Significant Employees

We do not currently have any other significant employees aside from the named executive officers (as defined under the caption “Executive Compensation” in Item 10 of this report).

Family Relationships

Daniel Ollech, our chairman, president, Chief Executive Officer, and Jacques Ollech, our Executive Vice President and a director, are brothers.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

(1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

(2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

(4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Committees

The company does not currently have a standing audit, nominating or compensation committee of the board of directors, or any committee performing similar functions. The company's board of directors currently performs the functions of audit, nominating and compensation committees.

Code Of Ethics

We have not adopted a code of ethics that applies to all of our directors, officers (including our chief executive officer and chief financial officer, and any person performing similar functions) and employees. We hoped to adopt such Code of Ethics during fiscal 2011.

Item 11. Executive Compensation

For the year ended December 31, 2010 members of management were paid as follows; Daniel Ollech and Jacques Ollech were each paid salaries of $90,000 for 2010, and Spence Walker was paid a total of $30,000 for his services.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.

Stock Incentive Plan

On September 19, 2006 the Board of Directors authorized the adoption of a global share and option plan for the company (the “Global Share and Option Plan”).

Option/ SAR Grants

There were no grants of options or grant of restricted stock to executive officers or employees in 2010.

Aggregated Option/ SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/ SAR Values

No stock options were exercised by the named executive officers in 2010.

Long-Term Incentive Plan

There were no awards made to the executive officers in 2010.

Directors’ Compensation

The directors currently receive no compensation for acting as directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Principal Stockholders

The following table sets forth, as of December 31, 2010, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

	Amount and Nature of Beneficial Ownership		Percentage of Class(2)
Name and Address of Beneficial Owner
5% Shareholders
MSM Nominees Ltd.		3,306,478		9.61	%
Directors and Executive Officers(1)
Daniel Ollech		5,057,441		14.69	%
Jacques Ollech		4,371,741		12.70	%
All Directors and Executive Officers as a Group (3 Persons)		9,620,849		27.95	%

(1)	Each of our directors and executive officers may be reached at 8953 Woodbine Ave, Markham, Ontario L3R 0J9

(2)

Based on 34,418,840 shares of common stock outstanding as at December 31, 2010. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

Equity Compensation Plan Information

Securities Authorized for Issuance under Equity Compensation Plans

We have established an Equity Compensation Plan. Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company.

Item 13. Certain Relationships, Related Transactions and Director Independence

There were no related party transactions, other than salaries and fees paid to officers of the Company.

Item 14. Principal Accounting Fees and Services

The following is a summary of the fees billed to the Company by the auditors for professional services rendered to our company for the fiscal years ended December 31, 2010 and 2009:

	2010		2009
Audit Fees	$	40,500	$	23,200
Audit Related Fees		-		-
Tax Fees		-		-
Total Fees		40,500		23,200

The Company does not have an audit committee and, as such, has not reviewed, considered or otherwise approved any such fees.

Item 15. Exhibits, Financial Statement Schedules

EXHIBITS

Number		Title
2.1		Share Purchase and Sale Agreement between B&D Food Corp. (now Latteno Food Corp.) and Global Milk, dated May 13. 2009. (1)
10.1		Shareholders Agreement of Global Milk, dated May 13, 2009. (1)
10.2		Agreement for the Surrender and Transfer of Trademarks, dated May 13, 2009. (1)
10.3		Alteration of Social Contract of Global Milk, dated May 13, 2009. (1)
31.1		Certification by Daniel Ollech, Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by Spence Walker, Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification by Daniel Ollech, Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification by Spence Walker, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)

Incorporated by reference to Current Report on Form 8-K filed with the SEC on May 15, 2009.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 15th day of April, 2011.

	Latteno Food Corp.

	By: /s/ Daniel Ollech
	Daniel Ollech
	Chief Executive Officer

Attached files

Latteno Food Corp Reports

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