SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
Commission File Number: 000-24965
U.S.A. SUNRISE BEVERAGES, INC.
(Exact name of registrant as specified in its charter)
South Dakota 46-0439668
(State of Incorporation) (I.R.S. Employer I.D. Number)
P.O. Box 938, Spearfish, SD 57783
Address of principal executive offices and Zip Code)
(605-642-5560)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements or the past 90 days: [X] YES [ ] NO
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of Registrant's knowledge,
In definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB: [X]
Registrant's revenues for its most recent fiscal year
(ended December 31, 1999): N/A
Aggregate market value of voting stock held by non-affiliates: N/A
Indicate the number of shares outstanding of each of the registrant's classes of
common stock:
4,460,809 common shares were outstanding as of December 31, 1999.
<PAGE>
I. PART
1. ITEM DESCRIPTION OF BUSINESS.
U.S.A. Sunrise Beverages, Inc.(the "Company")was incorporated in August 13, 1990
in the State of South Dakota under the name Papaya U.S.A. Corporation.
U.S.A. Sunrise Beverages, Inc., (the "Company") was incorporated under the laws
of the state of South Dakota August 13,1990. The Company intends to restart its
production of exotic soft drinks and spring water. The Company owns the rights
to produce and distribute ten beverage flavors including Papaya Sunrise and its
slogans "The Drink of Paradise". These rights were acquired by the Company at a
value of technology transfer at $1,144,500, or $7.50 per share. For financial
statement purposes, the shares have been recorded at $0.01 per share
representing the par value at the time of transfer. The Company also owns the
rights to purchase, in bulk, water from a spring located in the Black Hills, in
Spearfish, South Dakota. This water is planned to be marketed under the names of
Dakota Springs and Rushmore Springs, under the slogan "Water of Presidents".
Although there are no recent distribution agreements in place, management has
kept its contacts and familiarity within the soft drink industry and with the
experience and support of the Company's strong management and sales force,
management believes it can re-establish channels for the distribution of its
products through distributors and manufactures. Past contracts and agreements
include Shasta, McLane, McLane International and Full Service Beverages.
The operations of the Company will be dependent entirely upon the Company
obtaining sufficient capital to conduct its business. There are no assurances
that the Company will be able to obtain the necessary capital to commence its
operations. As noted in the financial statements incorporated herein, should the
Company not be able to implement its business plan, there exists doubt about the
Company continuing to exist as a going concern. See Note 2 to Financial
Statements.
The Company anticipates that it will be required to borrow additional money and
may be required to issue additional debt or equity securities. There is no
assurance that available investors or lenders can be found or that the terms of
any financing which may be available to the Company would become available on
suitable terms.
The Company is not presently producing, selling or otherwise marketing any
product, and does not intend to do so until after capitalization. The current
business activities of the Company consist of solicitation of bids on equipment,
negotiation of leases and pre-contacts with former and prospective distributors
of the Company's products, including generation of sales plans and incentives by
geographic area including freight areas and rates of
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rebates. The Company believes that it will be able to commence manufacturing
operations within three months following the receipt of $250,000 and completion
of modifications to its proposed facility. There are no assurances that the
Company will be able to secure such funds or that the Company will be able to
start manufacturing.
The Company's ability to successfully implement its business plan will also
depend upon attracting and retaining competent employees and management
personnel. The Company's ability to attract competent personnel will be
dependent on the ability of the Company to provide competitive salaries,
benefits, support, and opportunity. The Company's primary key employee is its
President, Omar Barrientos. If the Company should lose the services of Mr.
Barrientos, there are no assurances that the Company would be able to obtain an
acceptable replacement on suitable terms. There are no assurances that Company
will be able to provide suitable compensation and/or benefits to attract and
retain such personnel as are necessary to conduct its business.
Presently the Company has no full time employees. The Company has taken initial
steps concerning its human resources plans. The Company's president, Omar
Barrientos does not currently have an employment contract with the Company, but
he devotes 100% of his time to the Company's business. The Company intends to
enter into an employment agreement with Omar Barrientos, the Company's president
upon capitalization of the Company.
2. ITEM DESCRIPTION OF PROPERTY
The Company intends to move its proposed operations to a 5,000 square foot
facility located in an industrial park in Spearfish, South Dakota. The Company
intends to lease a building at 3150 4th Avenue, Spearfish, South Dakota from the
Paul Miller Sr. Trust. The annual cost is $17,500 for the first three (3) years,
$17,844 annually for the fourth through sixth years, $18,744 for the seventh
through ninth years and $19,680 for the tenth year.
The Company's current business address is Box 938, Spearfish, SD, 57783 and its
phone number is (605) 642-5560. The Company has temporarily stored miscellaneous
office and equipment and supplies at the 3150 4th Avenue location. This building
has office space in addition to potential production space. The Company
currently has temporary office space in a segregated basement area at 719 Cedar
Lane, Spearfish, SD. The Company's permanent mailing address is 719 Cedar Lane
P.O. Box 938 Spearfish, SD 57783. The Company is currently conducting its
business from these locations. The Company's registered agent upon whom service
of process may be made is Omar Barrientos whose physical address is 719 Cedar
Lane, Spearfish, SD 57783.
3. ITEM LEGAL PROCEEDINGS.
To the best of its knowledge, Registrant is not party to, nor is any of its
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property the subject of, any pending material legal proceedings, except a
certain note payable to a stockholder, currently in default and subject to a
June, 1997 judgment for $72,564 plus statutory interest at 5%.
4. ITEM SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted for shareholder approval during the fourth
quarter of the fiscal year covered by this Report.
PART II.
5. ITEM MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market information.
A limited public market for the Company's Common Stock exists on the NASDAQ
Bulletin Board under the symbol "USBV."
The Company's Common Stock was listed on the Nasdaq O-T-C Bulletin Board on
October 14, 1999. There was no trading of the Common Stock, however, during the
year ended December 31, 1999.
As of March 31, 2000, there were approximately 85 record holders of the
Company's Common Stock.
The Company has not paid any cash or other dividends on its Common Stock
since its inception and does not anticipate paying any such dividends in the
foreseeable future. The Company intends to retain any earnings for use in the
Company's operations and to finance the expansion of its business.
6. ITEM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this document. The discussion of results, causes and trends should
not be construed to imply any conclusion that such results or trends will
necessarily continue in the future.
U.S.A. Sunrise Beverages, Inc., (the "Company") was incorporated under the
laws of the state of South Dakota August 13,1990. The Company intends to restart
its production of exotic soft drinks and spring water. The Company owns the
rights to produce and distribute ten beverage flavors including Papaya Sunrise
and its slogans "The Drink of Paradise". These rights were acquired by the
Company at a value of technology transfer at $1,144,500, or $7.50 per share. For
financial statement purposes, the shares have been registered at $0.01 per share
representing the par value at the time of transfer. The Company also owns the
rights to purchase, in bulk, water from a spring located in the Black Hills, in
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Spearfish, South Dakota. This water is planned to be marketed under the names of
Dakota Springs and Rushmore Springs, under the slogan "Water of Presidents".
Although there are no recent distribution agreements in place, management
has kept its contacts and familiarity within the soft drink industry and with
the experience and support of the Company's strong management and sales force,
management believes it can re-establish channels for the distribution of its
products through distributors and manufactures. Past contracts and agreements
include Shasta, McLane, McLane International and Full Service Beverages.
7. ITEM FINANCIAL STATEMENTS.
The consolidated financial statements of U.S.A Sunrise Beverages, Inc.
including the notes thereto and the report of independent accountants thereon,
commence at page F-1 of this Report.
8. ITEM CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
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PART III.
9. ITEM DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(a) Identification of Directors
Directors are elected by the shareholders to hold office for a one year term or
until a successor is elected and qualified.
<TABLE>
<CAPTION>
Name Age Position Served From
- - ---- --- -------- -----------
<S> <C> <C> <C>
Omar Barrientos 58 CEO, Chairman, Treasurer, August, 1990
President
Robert Westerfield 58 Vice-President, Director October, 1993
Gene Fairchild 52 Vice-President, Director P.R., March, 1996
Secretary
Louis J. Twiss 59 Director October, 1993
William S. Brewster 58 Director October, 1993
Carlos Caceres 51 Advisory Board Director Nov., 1993
Donald L. Antle 57 Advisory Board Director October, 1993
Ing. Jaime Aponte Issa 58 Advisory Board Director October, 1993
Jose Ezzidin Eid Montano 52 Advisory Board Director October, 1993
</TABLE>
(b) Identification of Executive Officers.
Executive Officers serve in their capacities at the pleasure of the Board of
Directors of the Company.
(c) Identification of Certain Significant Employees.
The Company's only significant employee at the present time is its President,
Omar Barrientos. Mr. Barrientos presently commits 100% of his time to the
Company and is not involved in any other business pursuits.
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(d) Family Relationships.
At present, no directors, officers or employees of the Company are related.
However, the controlling shareholders of Tesoro Corporation are immediate family
members of Omar Barrientos, the Company's president.
The controlling shareholders of Tesoro and their relationship to Mr. Barrientos
are as follows: Isabel Barrientos (wife), Elizabeth Barrientos Shroeder
(daughter), Hugo Barrientos (son), and Omar A. Barrientos (son).
Pursuant to the contractual arrangements between Tesoro and the Company, Tesoro
has given the Company access to Tesoro's water rights and conversely, the
Company has agreed to purchase water from Tesoro at a mutually agreed price. The
mutually agreed price to be paid by the Company to Tesoro is the identical
purchase price paid by Tesoro to the Trust. Under the current agreement, Tesoro
will not realize any profit in its dealings with the Company. However, the
Company may lose its source of spring water should Tesoro or the Company default
on their respective obligations to each other and/or the Trust, or if a hostile
management takeover occurs on the part of the Company.
The hauling agreement between Tesoro and the Company has nearly identical terms
and conditions regarding the respective obligations between the parties, and the
potential impact of default upon the Company's business.
(e) Business Experience.
Omar Barrientos
Mr. Barrientos has been the president, treasurer and a director of the Company
since August 13, 1990. During the last seven years, he has researched all
aspects of the beverage industry, including concentrate components, production
and sales, cost calculations, distribution systems, and bottling requirements.
Mr. Barrientos' contacts enabled the Company to acquire the rights to its
Sunrise product line and its domestic and imported waters.
Mr. Barrientos is not currently employed in any capacity or position outside the
Company and devotes 100% of his time and effort to the Company's business. As to
Mr. Barrientos' business experience outside of the Company, since 1981, Mr.
Barrientos has held a license as a Real Estate Mortgage Broker under the South
Dakota Banking Commission. From 1986 to 1990, Mr. Barrientos was president of
Mexico U.S.A. (Mexican restaurants) located in Rapid City SD From 1981 to
present, Mr. Barrientos has been the owner of Ombar Financial Services, Rapid
City SD.
Robert Westerfield
Mr. Westerfield has been the vice president and a director of the Company since
October 23, 1993. Mr. Westerfield has over 30 years of beverage industry
experience. His background within the industry covers many major bottling plants
including All American. Mr. Westerfield is the former president and COO of Full
Service Beverage (1982 to 1995), and a member of the Board of Directors of the
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Royal Crown Bottlers Association. From 1995 to the present, he has been the
owner of Bob Westerfield Equipment Co., Wichita, KS.
Gene Fairchild
Mr. Fairchild has been the vice president, secretary and a director of the
Company since March 1996. Mr. Fairchild has extensive background in marketing,
management, news media, and the insurance field. From 1986 to the present, Mr.
Fairchild has been the vice president, treasurer and a stockholder of Agents of
Insurance, Rapid City SD one of the largest insurance agencies in South Dakota.
Mr. Fairchild has been in the insurance field since 1973, starting as a co-owner
of McKinney-Weddell Insurance, predecessor of Agents of Insurance.
Louis J. Twiss
Mr. Twiss has been a director of the company since october, 1993. From 1982 to
1991, mr. Twiss was the owner of discount batteries, inc., Rapid city sd from
1991 to the present, he has been the owner of twiss ranch involved in ranching
and consulting. Mr. Twiss is involved in developing special programs of
distribution to indian casinos and reservations. Mr. Twiss, a native american
has prior experience as a consultant for native americans as well as for
companies dealing with native americans. Mr. Twiss provides consulting services
regarding government programs and opportunities to various companies and native
americans regarding leases, equipment, minority issues and marketing in indian
casinos.
William S. Brewster
From 1982 to the present, Mr. Brewster has been president of Brewster Marketing
Company, Brewster Associates, a consulting firm, East Hampton, CT, Brewster
Financial group and BCP Marketing Group. Mr. Brewster has over 30 years of
marketing experience. He has been consulting manager to several companies and
has been a member of professional organizations such as the American Society of
Training and the New England Association of Advertising. Mr. Brewster has
lectured at seminars for the State of Connecticut, the University of Hartford,
and University Health Center.
Advisory Board Directors
Carlos Caceres
Mr. Caceres has been an advisory director of the Company since November 30,
1993. From 1991 to 1993, Mr. Caceres was the President of McLane International,
an affiliate of McLane, Inc. and Wal-Mart. Mr. Caceres has substantial knowledge
of, and contacts in, the food and beverage industries. Mr. Caceres will assist
in the Company's efforts to place its product in national markets and in the
Caribbean Basin. Mr. Caceres is a native of Peru.
Donald L. Antle
Mr. Antle began his career in the soft drink industry in 1958 at the Seven-Up
Bottling Company and continued in management position until joining the Dr
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Pepper Company a Zone Manager in 1962. From 1964 - 1973 Mr. Antle was the
Division Manager of Dr. Pepper, responsible for all sales, marketing and
franchising for the eight mid-western states. From 1973- to 1986 he served as
Vice-president and Senior Vice-president of Dr Pepper and President of Premier
Beverages (Welch's)
Mr. Antle is the founder and President of Antle Enterprises, Inc., a consulting
and service entity to the beverage industry. He is also a Director of the
Equitable Bank, Dallas, Texas. Mr. Antle has 30 years experience in the beverage
industry and specific experience concerning mergers and acquisitions within that
industry. Mr. Antle has successfully completed a variety of beverage company
mergers, acquisitions, corporate financing and special consulting projects.
Ing. Jaime Aponte Issa
Mr. Aponte is the General Manager of Embotelladora La Cascada and the President
of the Bolivian National Association of Bottlers.
Jose Ezzidin Eid Montano
Mr. Ezzidin Eid Montano is the President and principal owner of Grupo Industrial
"La Cascada". His company has grown to become the largest independent bottling
company in South America with eleven bottling plants.
The dates of service for present and prior employment of the Company's officers
and directors are as follows:
Omar Barrientos (president, treasurer), prior employment; (1986 to 1990)
president of Mexico U.S.A. (restaurants) Rapid City SD; (1981 to present) Ombar
Financial Services, Rapid City SD; (1990 to present) president of the Company.
Robert Westerfield (vice president, director), prior employment; (1982 to 1995),
COO of Full Service Beverage Co.; (1995 to present) owner of Bob Westerfield
Equipment Co., Wichita, KS.
Gene Fairchild (vice president, director, secretary) prior employment; (1986 to
present) vice president, treasurer of Agents of Insurance, Rapid City SD.
Louis Twiss (director) prior employment; (1982 to 1991) owner of Discount
Batteries, Inc., Rapid City SD; (1991 to present) 0wner of Twiss Ranch
(ranching/consulting).
William Brewster (director) prior employment; (1982 to present) president of
Brewster Associates, East Hampton, CT (consulting).
There are no assurances that the Company will be able to retain the services of
the current members of the Board of Directors, or that it will be able to
attract other members to serve as directors should vacancies develop.
(f) Involvement in Certain Legal Proceedings.
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The Company has conducted due diligence and has no record of existing officers
or directors that currently have, and does not believe that they been involved
in, any legal proceedings material to an evaluation of the ability or integrity
of any director or officer.
10. ITEM EXECUTIVE COMPENSATION.
(a) Cash Compensation, Bonus, and Deferred Compensation.
The following table sets certain information with respect to annual compensation
paid in 1997, 1998 and 1999 to the Company's only executive officer.
<TABLE>
<CAPTION>
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation Compensation
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Omar Barrientos, 1999 None None N/A N/A
President 1998 None None N/A N/A
1997 None None N/A N/A
</TABLE>
(b) Compensation Pursuant to Plans.
Company currently has no plans for compensation, key man insurance, pension, or
stock options stock appreciation rights plans.
11. ITEM SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners.
The following tables set forth as of June 1, 1998 the number and percentage of
outstanding Shares of the Company beneficially owned by all persons known by the
Company to be the owners of more than 5% of the Company's outstanding voting
securities.
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<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of of Beneficial of Beneficial Percent of
Class Owner Ownership Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Voting Isabel & Elizabeth Barrientos 400,000 shares 100%
Preferred (3) 719 Cedar Lane
Spearfish, SD 57783
Voting Omar Barrientos 400,000 shares 100%
Preferred (5) P.O. Box 938
Spearfish, SD 57783
Common (2) Hugo Barrientos 285,000 shares 6.39%
937 Herman Place
Rapid City, SD 57701
Common (1) Omar A. Barrientos 283,000 shares 6.34%
1512 Marston
Ames, IA 50010
Common (6) Birchwood Cptl. Advisors 450,000 shares 10.09%
4 Dogwood Court
West Paterson, NJ 07424
Common Paul Miller Sr. Trust 271,169 shares 6.08%
967 Main
Deadwood, SD 57732
Common (4) Elizabeth Schroeder 285,000 shares 6.39%
6778 Rosefield Dr.
San Diego, CA 92115
Common (3) Elizabeth Schroeder and 769,809 shares 17.26%
Isabel Barrientos
719 Cedar Lane
Spearfish, SD 57783
</TABLE>
- ----------
(1) Omar A. Barrientos is the son of Omar Barrientos, the Company's President.
(2) Hugo Barrientos is the son of Omar Barrientos, the Company's President.
(3) Isabel and Elizabeth (Schroeder) Barrientos are the wife and daughter
respectively of Omar Barrientos, the Company's President.
The aforementioned parties live at separate addresses and Mr. Barrientos
disclaims any beneficial ownership in such shares owned by his sons, daughter or
wife.
(b) Security Ownership of Management.
The following table sets forth as of the date of this Registration Statement the
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number and percentage of outstanding voting securities of the Company
beneficially owned by Management.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of of Beneficial of Beneficial Percent of
Class Owner Ownership Class
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Voting Omar Barrientos 400,000 shares 100%
Preferred (2) P.O. Box 938
Spearfish, SD 57783
Commons (2) Omar Barrientos 16,015 shares 0.36%
P.O. Box 938
Spearfish, SD 57783
Common Robert Westerfield 10,000 shares 0.22%
814 Dayton St.
Wichita, KS 67213
Common Gene Fairchild 51,000 shares 1.14%
1807 Spade Ct.
Rapid City, SD 57701
Common Louis J. Twiss 10,000 shares 0.22%
HC 57, Box 12
Buffalo Gap, SD 57722
All directors and officers as 87,015 shares (Common) 1.95%
a group (9 persons) 400,000 shares (Preferred) 100.00%
</TABLE>
- ----------
(1) Director William S. Brewster, and Advisory Directors Carlos Caceres, Donald
L. Antle, Ing. Jaime Aponte Issa and Jose Ezzidin Eid Montano do not own
any shares of the Company.
(2) Beneficial ownership.
(c) Changes in Control.
No shares of the Company are presently delivered as security to third parties.
There are no outstanding options or agreements which would affect control of the
Company.
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12. ITEM CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others.
On January 1, 1994, the Company entered into a loan agreement in the original
amount of $50,967.00 with its president, Omar Barrientos. Pursuant to the
agreement, the president periodically pays expenses on behalf of the Company, or
advances money to the Company to pay its expenses. The note payable bears
interest at 7% and is calculated each December 31 to include all amounts due,
including interest accrued at 7% thorough December 31. The balance due as of
12/31/99 was approximately $116,626.
On November 16, 1995, the Company entered into a note agreement with Dr. Neil
Kurti, a Shareholder of the Company. The $50,000 note payable bears interest at
10% and carries a due date of February 1, 1996.
On or about April 4, 1995, the Company entered a loan agreement in the amount of
$66,000 with Dr. Vincent Eilers, a shareholder of the Company, such loan being
due and payable July 11, 1995. Dr. Vincent Eilers, filed a complaint against the
Company on or about November 15, 1996. A judgment was entered on February 18,
1997. See Note 3 to Financial Statements. See also Legal Proceedings.
During 1997 and 1998, the Company received loans from a shareholder, Mr. Paul
Miller, in the principal amount of $31,060, plus interest at 12%.
(b) Certain Business Relationships.
Omar Barrientos is the President and a minority shareholder of Tesoro
Corporation ("Tesoro"). The balance of the controlling shareholders are Mr.
Barriento's family members. The Company has entered into an agreement with
Tesoro whereby the Company acquired the exclusive right (except for certain
areas of Illinois and California) to distribute the Viscachani Water ("Aqua from
the Andes") in the U.S. Tesoro is the exclusive licensee of these rights and it
has sub-licensed these rights to the Company.
Tesoro and the Company entered into the imported water agreement on or about
October 1, 1993. The consideration for that agreement is One Dollar and the
agreement of the Company to pay Tesoro a mutually agreed price per gallon, which
is currently $0.07 per gallon. Except for public offerings on the part of the
Company, any change in the controlling interest of the Company may be grounds
for Tesoro to terminate the agreement.
The Company has also entered into a separate agreement with Tesoro whereby the
Company has acquired the rights to the source of the spring water from which the
Company intends to bottle its Rushmore Springs product. Tesoro and the Company
entered into the spring water agreement on or about November 1, 1994. The
consideration for that agreement is One Dollar and the agreement by Sunrise to
pay Tesoro a mutually agreed price per gallon, which is currently $0.07 per
gallon. Except for public offerings on the part of the Company, any change in
the controlling interest of the Company may be grounds for Tesoro to terminate
the agreement.
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On September 30, 1993, the Company entered into an agreement with Cascada
wherein the Company acquired the formulas, trademarks, technologies, and the
exclusive right to produce and distribute ten beverage flavors in North America,
Central America, the Caribbean, and all U.S. military installations, except
those located in South America. The Company acquired these rights in exchange
for the issuance of 152,600 Common Shares of the Company. The term of the
technology agreement is "continuous with revisions every ten years or when the
parties, by mutual accordance, find it pertinent."
(c) Indebtedness of Management.
There is no indebtedness of officers or directors to the Company.
13. ITEM EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit
Number Description
- ------- -----------
3(i) Articles of Incorporation
of Papaya U.S.A. Corporation*
Articles of Amendment
Filed November 4, 1993*
Articles of Amendment
Filed December 26, 1995*
Articles of Amendment
Filed August 13, 1997*
Letter of Amendment
Filed July 28, 1997*
3(ii) Bylaws*
4.1 Description of Securities*
4.2 Resolution of Board of Directors dated
May 31, 1997 re: rights of Preferred Stock*
10.1 Technology Transfer Agreement & Addendum
between Cascada and Tesoro dated
September 30, 1993*
10.2 Viscachani Contract between
Cascada and Tesoro dated
September 30, 1993*
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10.3 Viscachani Contract between
Tesoro and the Company dated
October 1, 1993*
10.4 Water Contract between Paul
Miller Sr. Trust and Tesoro dated
October 22, 1995*
10.5 Addendums to Water Contract
between Paul Miller Sr. Trust and
Tesoro dated January 10, 1997*
10.6 Quit Claim Deed and Release dated
August 18, 1998 between Dakota Mining
and Construction, Inc. and the Company*
10.7 Letter of Intent between Paul Miller Sr.
Trust, Tesoro and Company dated July 13,
1998*
10.8 Loan Agreement between Omar Barrientos
and the Company dated January 1, 1994*
10.9 Note Agreement between Dr. Neil Kurti
and the Company dated November 11, 1995*
* Incorporated by reference from the Company's Registration Statement on Form
10-SB dated April 28, 1999 (File #000-24965).
REPORTS ON FORM 8-K: NONE
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SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
U.S.A. SUNRISE BEVERAGES, INC.
/s/ Omar A. Barrientos
------------------------------------
Omar A. Barrientos
President
In accordance with the requirements of the Exchange Act, this report is
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
Name and Capacity Date
- ----------------- ----
/s/ Omar B. Barrientos Date: May 1, 2000
- -----------------------------
Omar Barrientos, Director
/s/ Robert Westerfield Date: May 1, 2000
- -----------------------------
Robert Westerfield, Director
/s/ Gene Fairchild Date: May 1, 2000
- -----------------------------
Gene Fairchild, Director
Louis J. Twiss Date: May 1, 2000
- -----------------------------
Louis J. Twiss, Director
/s/ William S. Brewster Date: May 1, 2000
- -----------------------------
William S. Brewster, Director
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U.S.A. SUNRISE BEVERAGES, INC.
Financial Statements
December 31, 1999 and 1998
<PAGE>
CONTENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
BALANCE SHEET 2
STATEMENT OF LOSS 3
STATEMENT OF CASH FLOWS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
NOTES TO FINANCIAL STATEMENTS 8-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
U.S.A. Sunrise Beverages, Inc.
We have audited the accompanying balance sheet of U.S.A. Sunrise Beverages, Inc.
(a development stage company) as of December 31, 1999 and the related statements
of loss, cash flows and stockholders' equity for each of the years ended
December 31, 1999 and 1998, and for the period from inception (August 13, 1990)
to December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U.S.A. Sunrise Beverages, Inc.
as of December 31, 1999, and the results of its operations, its cash flows, and
the changes in its stockholders' equity for each of the years ended December 31,
1999 and 1998, and for the period from inception (August 13, 1990) to December
31, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has deficits in working capital and equity,
and must obtain financing to meet its obligations and to commence operations.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding these matters are also discussed in
Note 2. The financial statements do not include any adjustments which might
result from the outcome of this uncertainty.
Denver, Colorado
March 21, 2000
/s/ Comiskey & Company
PROFESSIONAL CORPORATION
1
<PAGE>
U.S.A. Sunrise Beverages, Inc.
BALANCE SHEET
December 31, 1999
ASSETS
Current assets
Cash $ 3,216
-----------
Total current assets 3,216
Total assets $ 3,216
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 10,711
Notes payable 177,785
Notes payable - officers 116,626
Accrued interest 43,675
Dividends payable 180,000
-----------
Total current liabilities 528,797
Stockholders' equity
Preferred stock, $0.01 par value, 500,000 shares authorized,
400,000 shares issued and outstanding 4,000
Common stock, $0.01 par value, 10,000,000 shares authorized,
4,460,809 shares issued and outstanding 44,608
Additional paid in capital 1,157,801
Deficit accumulated during the development stage (1,731,990)
-----------
Total stockholders' equity (deficit) (525,581)
-----------
Total liabilities and stockholders' equity $ 3,216
===========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
U.S.A. Sunrise Beverages, Inc.
STATEMENT OF LOSS
For the years ended December 31, 1999 and 1998, and for
the period from inception (August 13, 1990) to December 31, 1999
<TABLE>
<CAPTION>
Inception to For the year ended
December 31, December 31,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 247,066 $ -- $ --
Cost of sales 177,901 1,350 --
----------- ----------- -----------
Gross profit 69,165 (1,350) --
Selling, general and administrative expenses 1,526,221 83,157 108,663
----------- ----------- -----------
Net loss from operations (1,457,056) (84,507) (108,663)
Other expense
Interest expense (164,943) (19,896) (52,047)
Loss on disposal of assets (2,143) (2,143)
----------- ----------- -----------
Net loss before taxes and extraordinary item (1,624,142) (106,546) (160,710)
Income tax benefit 24,500 -- 24,500
----------- ----------- -----------
Net loss before extraordinary item (1,599,642) (106,546) (136,210)
Extraordinary item
Foreclosure gain, net of tax of $24,500 47,652 -- 47,652
----------- ----------- -----------
Net loss $(1,551,990) $ (106,546) $ (88,558)
=========== =========== ===========
Basic net loss per share before extraordinary item $ (0.40) $ (0.03) $ (0.04)
Basic net income from extraordinary item 0.01 -- 0.01
----------- ----------- -----------
Basic net loss per share $ (0.39) $ (0.03) $ (0.02)
=========== =========== ===========
Weighted average shares outstanding 4,029,745 3,958,374 3,732,635
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
U.S.A. Sunrise Beverages, Inc.
STATEMENT OF CASH FLOWS
For the years ended December 31, 1999 and 1998, and for
the period from inception (August 13, 1990) to December 31, 1999
<TABLE>
<CAPTION>
Inception to Year ended
December 31, December 31,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,551,990) $ (106,546) $ (88,558)
Adjustments to reconcile net loss to net cash flows
from operations
Depreciation and amortization 66,672 1,841 9,750
Stock issued for services 224,498 2,100 --
Services provided at no charge to the company 560,047 60,000 60,000
Interest rolled into notes 12,681 -- 6,127
Writeoff of formulas and technology 3,669 2,143
Gain on foreclosure, before tax effect (53,214) -- (53,214)
Changes in items of working capital:
Supplies inventory -- 1,350 13,048
Accounts payable 24,175 (722) 3,235
Accrued interest 43,675 19,646 28,107
----------- ----------- -----------
Net cash used by operations (669,787) (20,188) (21,505)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets for cash (10,140) -- --
----------- ----------- -----------
Net cash used by investing activities (10,140) -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of promissory notes 167,730 8,730 14,500
Notes payable - officer 251,781 23,740 17,850
Payments on notes payable (107,630) (11,940) (8,000)
Common stock 371,262 --
----------- ----------- -----------
Net cash provided by financing activities 683,143 20,530 24,350
----------- ----------- -----------
Net increase in cash 3,216 342 2,845
Cash, beginning of period -- 2,874 29
----------- ----------- -----------
Cash, end of period $ 3,216 $ 3,216 $ 2,874
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
U.S.A. Sunrise Beverages, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (August 13, 1990) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional in the Total
Number of Number of Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock for cash, August
`1990, $0.005 per share 2,850,000 28,500 65,798 94,298
Services rendered by a shareholder
at no charge to the company 20,047 20,047
Net loss (20,047) (20,047)
-----------------------------------------------------------------------------------------
Balance, December 31, 1990 2,850,000 28,500 85,845 (20,047) 94,298
Issuance of stock for cash, January
through November 1991, at an
average price per share of $0.35 64,000 640 21,625 22,265
Services rendered by shareholder
at no charge to the company 60,000 60,000
Net loss (60,026) (60,026)
-----------------------------------------------------------------------------------------
Balance, December 31, 1991 2,914,000 29,140 167,470 (80,073) 116,537
Services rendered by shareholder
at no charge to the company 60,000 60,000
Net loss (185,756) (185,756)
-----------------------------------------------------------------------------------------
Balance, December 31, 1992 2,914,000 29,140 227,470 (265,829) (9,219)
Issuance of stock for cash, January
1993, $2.21 per share 89,000 890 195,360 196,250
Issuance of stock in settlement of
account payable, February 1993,
$0.10 per share 300,000 3,000 -- 3,000
Issuance of stock for assignment
of land option, March, 1993,
$0.01 per share 10,000 100 -- 100
Issuance of stock for cash, April
through July 1993, $4.58 per share 12,000 120 54,880 55,000
Issuance of stock to acquire formulas
and brands, $0.01 per share 152,600 1,526 -- 1,526
Issuance of stock for cash, August
through November 1993, $6.33 per
share 7,670 77 48,442 48,519
Issuance of stock for cash and
services rendered, October 1993
$0.004 per share 2,029,239 20,292 13,708 34,000
Services rendered by shareholders
at no charge to the company 60,000 60,000
Net loss (247,991) (247,991)
-----------------------------------------------------------------------------------------
Balance, December 31, 1993 5,514,509 55,145 599,860 (513,820) 141,185
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional in the Total
Number of Number of Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock for reduction of
debt, December, 1994, $0.10 per
share 250,000 2,500 22,500 25,000
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Net loss (128,049) (128,049)
-----------------------------------------------------------------------------------------
Balance, December 31, 1994 5,764,509 57,645 682,360 (641,869) 98,136
Issuance of stock for debt reduction,
June 1995, $0.102 per share 201,460 2,015 18,579 20,594
Issuance of stock for financing
incentives and for services rendered,
August 1995, $1.00 per share 75,000 750 74,250 75,000
Surrender and cancellation of
shares, August 1995 (729,239) (7,292) 7,292 --
Issuance of stock for cash upon
exercise of warrants, December,
1995, $0.13 per share 101,900 1,019 12,227 13,246
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Net loss (217,505) (217,505)
-----------------------------------------------------------------------------------------
Balance, December 31, 1995 5,413,630 54,137 854,708 (859,374) 49,471
Issuance of stock for cash and
services upon exercise of warrants,
January 1996, $0.30 per share 89,422 894 26,088 26,982
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Net loss (322,213) (322,213)
-----------------------------------------------------------------------------------------
Balance, December 31, 1996 5,503,052 55,031 940,796 (1,181,587) (185,760)
Exchange of common stock for
preferred stock 400,000 4,000 (1,800,000) (18,000) 14,000 --
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Dividend on preferred stock (60,000) (60,000)
Net loss (175,299) (175,299)
-----------------------------------------------------------------------------------------
Balance, December 31, 1997 400,000 4,000 3,703,052 37,031 1,014,796 (1,416,886) (361,059)
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional in the Total
Number of Number of Paid-in Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock for debt reduction,
May, 1998, $0.50 per share 46,948 469 23,005 23,474
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Dividend on preferred stock (60,000) (60,000)
Net loss (88,558) (88,558)
-----------------------------------------------------------------------------------------
Balance, December 31, 1998 400,000 4,000 3,750,000 37,500 1,097,801 (1,565,444) (426,143)
Issuance of stock for debt reduction
and services performed,
September, 1999, $0.01 per share 710,809 7,108 7,108
Services rendered by a shareholder
at no charge to the company 60,000 60,000
Dividend on preferred stock (60,000) (60,000)
Net loss (106,546) (106,546)
-----------------------------------------------------------------------------------------
Balance, December 31, 1999 400,000 4,000 4,460,809 44,608 1,157,801 (1,731,990) (525,581)
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
U.S.A. Sunrise Beverages, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
1. Summary of Significant Accounting Policies
Description of Business
U.S.A. Sunrise Beverages, Inc. (the "Company") was incorporated under the
laws of the State of South Dakota August 13, 1990. The Company intends to
produce and distribute mineral water and soft drink products. From 1991 to
1993, the Company engaged in the test marketing of its papaya soft drink
product in several states, and ceased production and sales in 1993 due to
lack of financing. Pursuant to a 1993 agreement with Embotelladora La
Cascada Ltda.("Cascada"), a Bolivian beverage producer, the Company has the
right to produce and distribute ten beverage flavors (including a papaya
beverage) in North America. It also owns the rights to purchase, from a
related party, in bulk, water from a spring located in Spearfish, South
Dakota, as well as the rights to distribute and sell a mineral water
bottled by Cascada in the Andes.
Going Concern
As more fully discussed in Note 2, the accompanying financial statements
have been prepared assuming the Company will continue as a going concern.
As described elsewhere, due to deficiencies in working capital resulting
from operating losses sustained since inception, there exists substantial
doubt about the Company's ability to continue as a going concern.
Accounting Method
The Company records income and expense on the accrual method.
Loss per Share
Loss per share has been computed using the weighted average number of
shares outstanding. Common stock equivalents, consisting of a convertible
note held by the company's president, are considered antidilutive for
purposes of loss per share calculations.
Non-cash Equity Transactions
From time to time, the Company issues stock in exchange for services, in
satisfaction of obligations previously incurred, or for other non-cash
consideration. The shares are generally recorded at the fair market value
of the consideration received.
Services rendered at no charge to the Company by its founding shareholders
are recorded at their estimated fair value as a charge to income and an
increase in paid-in capital for the year in which the services are
rendered.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ
from those estimates.
2. Going Concern
The Company's financial statements have been prepared assuming the Company
will continue as a going concern; however, there exists substantial doubt
about the Company's ability to continue as a going concern.
Liabilities of $528,797 exceed assets of $3,216 by $525,581 at December 31,
1999. The Company has had no significant cash flows from operations to date
and must obtain additional funding to meet its obligations and to implement
its business plan. There can be no guarantee that such financing can be
obtained and that the Company will have sufficient resources to pursue its
business plan.
8
<PAGE>
U.S.A. Sunrise Beverages, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
2. Going Concern (continued)
Management plans to register its equity securities under Rule 12(g). Once
in a position as a public company, management intends to pursue equity
financing of up the $1,000,000 in a Regulation D private placement, or
through a similar equity issuance to accredited investors. Management
anticipates that funds generated through the private placement of its
equity securities will be applied first to the reduction of certain
outstanding obligations against the company. The remainder will be applied
to the pre-production costs of establishing national distribution of its
products. These costs include expenditures and working capital to fund
inventory purchases and receivables generated by operations.
Although there are no recent distribution agreements in place, management
believes that its familiarity and contacts within the soft drink industry
will allow it to establish channels for the distribution of its products,
possibly with a larger manufacturer.
Management intends to produce its soft drink line under contract with an
independent manufacturer, eliminating the requirement to purchase equipment
and plant facilities for the papaya product and others. With respect to its
planned bottled water line, the Company currently has a letter of intent
with a shareholder to lease and/or purchase bottling equipment and plant
facilities which it believes will be suitable to produce the amounts
contemplated in its business plan.
In February 1998, management entered into a letter of intent with a
consulting firm to conduct a capital raising initiative for the Company.
There can be no guarantee that such capital raising initiative will be
successful, or that the Company will have sufficient resources to pursue
its business plan.
3. Notes Payable
Notes payable consist of the following:
7% note payable to the Company's president, due on
demand and payable, at the option of the president, in
shares of the Company's common stock $116,626
7% note payable to Tesoro, a related party 1,661
Note payable to a stockholder, currently in default and
subject to a June, 1997 judgment for $72,564 plus
interest at 5% 72,564
10% unsecured note payable to a stockholder,
principal and interest due February 1996 50,000
Non-interest bearing obligation payable to a
former distributor, originally due April, 1992 22,500
12% unsecured demand notes payable to a stockholder 31,060
--------
$294,411
--------
The note payable to the Company's president is pursuant to a loan agreement
whereby the president periodically pays expenses on behalf of the Company,
or advances money to the Company for the Company to pay its expenses. The
note bears interest at 10% and is calculated each December 31 to include
all amounts due, including interest accrued at 10%, through December 31.
Interest expense for 1999 and 1998 under this note totaled $7,578 and
$5,004, respectively.
9
<PAGE>
U.S.A. Sunrise Beverages, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
3. Notes Payable (continued)
The judgment payable to a stockholder is the result of the Company being
unable to comply with the payment terms of a note payable, issued to a
shareholder, that was originally due in July 1995. The judgment payment was
due by June 1, 1998. The Company's president agreed to guarantee this debt
in the event that the Company did not pay the judgment amount by the June
1, 1998 due date.
The non-interest bearing debt was originally due in April 1992. The
agreement incurring the debt provides that, in the event the Company fails
to make payments required by the agreement, the Company and the other party
to the agreement will share equally all costs and profits from marketing
the Company's product in Florida until such time that the other party has
received all funds due under the agreement.
4. Stockholders' Equity
Rights and provisions of outstanding shares Each share of the Company's
common stock entitles the holder to one vote per share. Each share of the
preferred stock entitles the holder to ten votes per share.
The preferred stock provides for an annual dividend of 5% of its $3.00
stated value. The preferred stock dividend is cumulative and is to be paid
annually at the end of the Company's fiscal year. The holders of the
preferred stock may elect to take their dividend in either cash or common
stock. If the holder elects to take the dividend in stock, the per share
price of the common stock is either $1.50 per share or 50% of the last
transaction price which occurred in the month prior to the preferred stock
dividend declaration. At December 31, 1999, a total of $180,000 in
cumulative preferred dividends had accrued, and none had been paid.
Stock split
In February, 1993, the Company underwent a 1 for 2 reverse split of its
then outstanding common stock. All share and per share amounts have been
restated to reflect the split retroactively to inception.
Cascada agreement
In July 1993, the Company issued a total of 152,600 shares of common stock
pursuant to a ten year technology agreement with Embotteladora La Cascada
Ltda. ("Cascada") whereby the Company acquired the right to be the
exclusive producer and distributor of ten products in North America,
Central America, the Caribbean, and all U. S. military installations in the
world except those installations located in South America. The products
covered by the technology agreement are soft drinks, including a papaya
beverage, developed by a Bolivian concern.
The technology agreement with Cascada specifies the value of the
transferred technology at $1,144,500, or $7.50 per share. For financial
statement purposes, the shares have been recorded at $0.01 per share,
representing an estimate of the value of the shares at the time of
transfer. The term of the technology agreement is "continuous, with
revisions every 10 years or when the parties, by mutual accordance, find it
pertinent."
The agreement provides the Company with a first right of refusal should the
Bolivian company wish to sell their shares of stock prior to the time the
Company's stock is trading in the public market. The agreement also
provides that "in the event of any problem arising with the verification of
the correct number of shares that represent the number agreed, U.S.A.
Sunrise agrees to come forward and evict and sanitize the $1,144,500 that
must be paid" to the Bolivian company. Management anticipates that no
additional share issuances will be necessary under this provision of the
agreement.
10
<PAGE>
U.S.A. Sunrise Beverages, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
4. Stockholders' Equity (continued)
Shares issued and surrendered
In October 1993, the Company issued, in connection with a proposed private
placement of common stock, 2,029,239 shares of common stock for cash and
services valued at $34,000, or $0.017 per share. In August, 1995, by mutual
agreement of the Company and the shareholder, 729,239 of these shares were
returned to the Company for cancellation.
Warrant exercise
In April 1994, the Company issued warrants for the purchase of up to
172,960 shares of common stock at an exercise price of $3.00 per share to
all shareholders of record as of December 31, 1993. In December 1995,
management reduced the exercise price of the warrants, resulting in
additional sales of common stock in 1995 and 1996 for which the company
received a total of $40,228 in cash proceeds. All unexercised warrants
expired by their terms on January 15, 1996. As of December 31, 1999, no
warrants were outstanding.
Stock distributed to investors
In August 1995, the Company issued 9,000 shares of stock to certain common
shareholders as compensation for delays related to the planned registration
of the Company's securities. For financial reporting purposes, these shares
have been valued at $1.00 per share. In addition, the Company issued 66,000
shares of its common stock to two creditors as compensation for delays in
the repayment of note obligations totaling $50,000, as well as in
consideration for services rendered to the company. These shares have been
valued at $1.00 per share.
Common shares exchanged for preferred shares
During 1997, family members of the Company's president exchanged 1.8
million shares of common stock for 400,000 shares of preferred stock.
Services rendered at no charge to the Company
Since inception, the Company has had limited capitalization, and
consequently, its founding shareholders, primarily its president, have paid
expenses and rendered services on behalf of the Company for no
consideration. Management has estimated the fair value of the services
rendered by its founding shareholders to be $60,000 per year, and has
recorded paid-in capital of $560,047 since inception for these services.
5. Foreclosure gain
On August 18, 1998, the Company surrendered its investment in a warehouse
and all improvements pursuant to a foreclosure on the building for
non-payment of the associated mortgage loan with unpaid principal and
interest of $310,352. The Company's undepreciated basis in the building at
the time of foreclosure was $238,200. The accompanying financial statements
include an extraordinary item for gain on the foreclosure of $47,652, net
of income tax effect of $24,500.
6. Related Party Transactions
During 1997, family members of the Company's president exchanged 1.8
million Common Shares for 400,000 Preferred Shares. The Barrientos family
members exchanged their shares of common stock for preferred shares in a
restructuring of the Company's stock. The stock restructuring was in
connection with the Company's contemplated, but not consummated private
placement offering.
Omar Barrientos is the President and a minority shareholder of Tesoro
Corporation ("Tesoro"). The balance of the controlling shareholders are Mr.
Barrientos' family members. The Company has entered into an agreement with
Tesoro whereby the Company acquired the exclusive right (except for certain
areas of Illinois and California to distribute the Viscachani Water ("Aqua
from
11
<PAGE>
U.S.A. Sunrise Beverages, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
6. Related Party Transactions (continued)
the Andes") in the U.S. Tesoro is the exclusive licensee of these rights
and it has sub-licensed these rights to the Company.
Tesoro and the Company entered into the imported water agreement on or
about October 1, 1993. The consideration for the agreement is One Dollar
and the agreement of the Company to pay Tesoro a mutually agreed price per
gallon, which is currently $0.07 per gallon. Except for public offerings on
the part of the Company, any change in the controlling interest of the
Company may be grounds for Tesoro to terminate the agreement.
The Company has also entered into a separate agreement with Tesoro whereby
the Company has acquired the rights to the source of the spring water from
which the Company intends to bottle its Rushmore Springs product. Tesoro
and the company entered into the spring water agreement on or about
November 1, 1994. The consideration for that agreement is One Dollar and
the agreement by Sunrise to pay Tesoro a mutually agreed price per gallon,
which is currently $0.07 per gallon. Except for public offerings on the
part of the Company, any change in the controlling interest of the Company
may be grounds for Tesoro to terminate the agreement.
7. Royalty Commitment
The technology agreement with Cascada contains a royalty agreement whereby
the Company must pay a royalty equal to $0.30 for each 240 fluid ounces of
product which it sells.
8. Income Taxes
The Company has approximately $1,000,000 in net operating loss
carryforwards available to reduce federal taxable income in future periods
ranging from 2006 to 2019. The tax effect of these losses, with the
exception of $24,500 related to the extraordinary item for 1998, has been
offset by a full valuation allowance.
9. Supplemental disclosure of non-cash investing and financing activities and
other cash information
<TABLE>
<CAPTION>
Inception Year ended Year ended
To date Dec. 31, 1999 Dec. 31, 1998
--------- ------------- -------------
<S> <C> <C> <C>
Stock issued for formulas and technology 1,526 -- --
Debt issued for territories 130,000 -- --
Stock issued for assets 5,461 -- --
Debt issued in purchase of building 285,000 -- --
Stock issued for reduction of notes 77,168 28,482 --
Cash paid for interest -- -- --
Cash paid for income taxes -- -- --
</TABLE>
12
