<PAGE>
As filed with the Securities and Exchange Commission on May 23, 1996
Registration No. 333-3458
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
PERRY'S MAJESTIC BEER, INC.
(Name of small business issuer in its charter)
Delaware 2082 11-3314168
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
134 Morgan Avenue
Brooklyn, New York 11237
(718) 894-4300
(Address and telephone number
of principal executive offices and principal place of business)
Robert Sipper
Chief Executive Officer
134 Morgan Avenue
Brooklyn, New York 11237
(718) 894-4300
(Name, address and telephone number of agent for service)
Copies to:
Steven F. Wasserman, Esq. Michael F. Mulpeter, Esq.
Bernstein & Wasserman, LLP Cohn & Birnbaum P.C.
950 Third Avenue 100 Pearl Street
New York, NY 10022 Hartford, CT 06103
(212) 826-0730 (203) 493-2200
(212) 371-4730 (Fax) (203) 727-0361 (Fax)
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box: | X |
continued overleaf
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Each Class of Securities to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered (1) Offering Price Per Aggregate Offering Price Registration
Security (2) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units, consisting of two (2) shares of
Common Stock, par value $.0001 and one
(1) Class A Warrant (3) 345,000 $10.00 $3,450,000 $1,189.66
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.0001 per
share 690,000 ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Warrants (4) 345,000 ----- ------ ----
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock (4)(5) par value $.0001 per
share underlying the Class A Warrants (5) 345,000 $4.00 $1,380,000 $475.14
- ------------------------------------------------------------------------------------------------------------------------------------
Underwriter's Unit Purchase Option 30,000 $.001 $30.00 $0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Units, each Unit consists of two (2) shares
of Common Stock, par value $.0001 per
share and one (1) Class A Warrant (6) 30,000 $12.00 $360,000 $124.14
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.0001 per
share, underlying Underwriter's Unit
Purchase Option 60,000 ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Warrants, underlying
Underwriter's Unit Purchase Option 30,000 ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.0001 per
share, underlying Class A Warrants in
Underwriter's Unit Purchase Option (7) 30,000 $4.00 $120,000 $41.38
- ------------------------------------------------------------------------------------------------------------------------------------
Selling Securityholders
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Warrants (8) 3,000,000 ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.0001 per
share underlying Class A Warrants
issuable upon conversion of the
Convertible Bridge Notes 3,000,000 $4.00 $12,000,000 $4,137.93
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.0001 per
share (9) 1,850,000 $5.00 $9,250,000 $3,189.65
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ----- ------ $9,157.91
====================================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933 (the "Act"), this
Registration Statement covers such additional indeterminate number of
shares of Common Stock and Class A Redeemable Common Stock Purchase
Warrants (the "Class A Warrants") as may be issued by reason of adjustments
in the number of shares of Common Stock and Class A Warrants pursuant to
anti-dilution provisions contained in the Class A Warrants and
Underwriter's Warrant. Because such additional shares of Common Stock and
Class A Warrants will, if issued, be issued for no additional
consideration, no registration fee is required.
(2) Estimated solely for purposes of calculating registration fee.
(3) Includes 45,000 Units subject to the Underwriter's over-allotment option
(the "Over-Allotment Option"), consisting of 90,000 shares of Common Stock,
45,000 Class A Warrants and 45,000 shares of Common Stock underlying the
Class A Warrants.
<PAGE>
(4) The Class A Warrants are exercisable over a four (4) year period commencing
one (1) year following the effective date of this Offering into one (1)
share of Common Stock per Class A Warrant at an exercise price of $4.00 per
share.
(5) The number of shares of Common Stock specified is the number which may be
acquired by the holders of the Units upon exercise of the Class A
Redeemable Common Stock Purchase Warrants ("Class A Warrants") at the
maximum exercise price thereof.
(6) The Underwriter's unit purchase option entitles the Underwriter to purchase
up to 30,000 Units at 120% of the offering price (the "Underwriter's Unit
Purchase Option").
(7) Issuable upon exercise of the Class A Warrants included in the
Underwriter's Unit Purchase Option.
(8) Represents 3,000,000 Class A Warrants issuable to the Bridge Lenders
(9) Shares of Common Stock held by certain Selling Securityholders.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PERRY'S MAJESTIC BEER, INC.
CROSS REFERENCE SHEET
(Showing Location in the Prospectus of Information
Required by Items 1 through 23, Part I, of Form SB-2)
Item in Form SB-2 Prospectus Caption
----------------- ------------------
1. Front of Registration
Statement and Outside Front
Cover of Prospectus................ Facing Page of Registration
Statement; Outside Front
Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.......... Inside Front Cover Page of
Prospectus; Outside Back Cover
Page of Prospectus
3. Summary Information and Risk
Factors............................ Prospectus Summary; Risk Factors
4. Use of Proceeds.................... Use of Proceeds
5. Determination of Offering Price.... Outside Front Cover Page of
Prospectus; Underwriting;
Risk Factors
6. Dilution........................... Dilution; Risk Factors
7. Selling Securityholders........... Description of Securities; Selling
Securityholders
8. Plan of Distribution............... Outside Front Cover Page of
Prospectus; Risk Factors;
Underwriting
9. Legal Proceedings.................. Business-Litigation
10. Directors, Executive Officers,
Promoters and Control Persons...... Management
11. Security Ownership of Certain
Beneficial Owners and Management... Principal Stockholders
i
<PAGE>
Item in Form SB-2 Prospectus Caption
----------------- ------------------
12. Description of Securities.......... Description of Securities;
Underwriting
13. Interest of Named Experts and
Counsel............................ Experts; Legal Matters
14. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities......... Underwriting; Certain Transactions
15. Organization Within Last 5 Years... Prospectus Summary; The Company;
Business
16. Description of Business............ Business; Risk Factors
17. Management's Discussion and Analysis
or Plan of Operation............... Management's Discussion and
Analysis of Financial Condition
and Results of Operations
18. Description of Property............ Business - Facilities
19. Certain Relationships and
Related Transactions............... Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters........ Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Securities;
Underwriting
21. Executive Compensation............. Management - Executive
Compensation
22. Financial Statements............... Selected Financial Data;
Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosures.......... *
- ----------
* Omitted because Item is not applicable.
ii
<PAGE>
Explanatory Note
This registration statement covers the primary offering ("Offering") of
Units consisting of two (2) shares of Common Stock and one Class A Warrant by
Perry's Majestic Beer, Inc. (the "Company") and the concurrent offering of
securities by certain selling securityholders ("Selling Securityholders"). The
Company is registering, under the primary prospectus ("Primary Prospectus"),
345,000 Units (including 45,000 Units subject to the over-allotment option),
690,000 shares of Common Stock, 345,000 Class A Warrants and 345,000 shares of
Common Stock issuable upon the exercise of the Class A Warrants. The Company is
registering on behalf of the Selling Securityholders, under an alternate
prospectus ("Alternate Prospectus"), (i) 1,850,000 shares of Common Stock, and
(ii) 3,000,000 Class A Warrants issuable upon conversion of the Convertible
Bridge Notes. See "Bridge Financing." The Alternate Prospectus pages, which
follow the Primary Prospectus, are to be combined with all of the sections
contained in the Primary Prospectus, with the following exceptions: the front
and back cover pages and the sections entitled "Concurrent Sales," "Selling
Securityholders," and "Plan of Distribution." Such sections from the Alternate
Prospectus pages will be added to the Primary Prospectus. The "Underwriting"
section contained in the Primary Prospectus will not be included in the
Alternate Prospectus. Furthermore, all references contained in the Alternate
Prospectus to "the Offering" or "this Offering" shall refer to the Company's
Offering under the Primary Prospectus.
iii
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH AN OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED __________ __, 1996
PERRY'S MAJESTIC BEER, INC.
300,000 Units, Each Unit Consists of Two (2) Shares of Common Stock,
par value $.0001 per share, and
One (1) Class A Redeemable Common Stock Purchase Warrant
Offering Price Per Unit - $10.00
----------
Each unit ("Unit") consists of two (2) shares of common stock, par value
$.0001 per share (the "Common Stock"), and one (1) Class A Redeemable Common
Stock Purchase Warrant (the "Class A Warrants") of Perry's Majestic Beer, Inc.,
a Delaware corporation (the "Company" or "Perry's"). The securities comprising
the Units will be separately transferable immediately upon the date of this
offering (the "Offering"). See "Risk Factors" and "Description of Securities."
The Risk Factor section begins on page __ of this Prospectus.
The Class A Warrants shall be exercisable commencing one (1) year after the
date hereof (the "Effective Date"). Each Class A Warrant entitles the holder to
purchase one (1) share of Common Stock at a price of $4.00 per share during the
four (4) year period commencing one (1) year from the Effective Date. The Class
A Warrants are redeemable by the Company for $.05 per Warrant, at any time after
________ __, 1997, upon thirty (30) days' prior written notice, if the average
closing price or bid price of the Common Stock, as reported by the principal
exchange on which the Common Stock is traded, Nasdaq or the National Quotation
Bureau Incorporated, as the case may be, equals or exceeds $_____ per share, for
any twenty (20) trading days within a period of thirty (30) consecutive trading
days ending five (5) days prior to the date of the notice of redemption. Upon
thirty (30) days' written notice to all holders of the Class A Warrants, the
Company shall have the right to reduce the exercise price and/or extend the term
of the Class A Warrants. See "Description of Securities." Although the Company
has no current plans to reduce the exercise price and/or extend the term of the
Class A Warrants, it may consider taking such action depending upon the
Company's financial condition, its financial needs and based upon general market
conditions.
On April 13, 1996, the Company applied for inclusion of the Units, the
Common Stock and the Class A Warrants on The Nasdaq Small Cap Market, although
there can be no assurances that an active trading market will develop even if
the securities are accepted for quotation. That application is presently
pending. Additionally, even if an active trading market develops, the Company is
still required to maintain certain minimum criteria
<PAGE>
established by Nasdaq, of which there can be no assurance. See "Risk Factors -
Lack of Prior Market for Units, Common Stock and Class A Warrants; No Assurance
of Public Trading Market" and "Penny Stock Regulations May Impose Certain
Restrictions on Marketability of Securities."
Prior to this Offering, there has been no public market for the Units, the
Common Stock or the Class A Warrants. It is currently anticipated that the
initial public offering price will be $10.00 per Unit. The price of the Units,
as well as the exercise price of the Class A Warrants, have been determined by
negotiations between the Company and VTR Capital, Inc., the underwriter of this
Offering (the "Underwriter"), and do not necessarily bear any relationship to
the Company's assets, book value, net worth or results of operations or any
other established criteria of value. The Underwriter may enter into arrangements
with one or more broker-dealers to act as co-underwriters of this Offering. For
additional information regarding the factors considered in determining the
initial public offering price of the Units and the exercise price of the Class A
Warrants, see "Risk Factors - No Prior Public Market; Possible Volatility of
Stock Price," "Description of Securities" and "Underwriting."
The registration statement of which this Prospectus forms a part also
covers the sale of (a) 3,000,000 Class A Warrants issuable to certain bridge
lenders (the "Bridge Lenders") in connection with the Company's recent bridge
financings (the "Bridge Loans") and 3,000,000 shares of Common Stock issuable
upon exercise of the Class A Warrants and (b) 1,850,000 shares of Common Stock.
These securities may be sold from time to time directly by the Selling
Securityholders or, alternatively, through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that take place in the over-the-counter market, including
ordinary broker's transactions, privately negotiated transactions or through
sales to one or more broker-dealers for resale of such shares as principals, at
prices prevailing at the time of such sales, at prices related to such
prevailing market price or at negotiated prices. The Company will not receive
any of the proceeds on the sale of the securities by the Selling
Securityholders. The resale of the securities of the Selling Securityholders are
subject to Prospectus delivery and other requirements of the Securities Act of
1933, as amended (the "Act"). Sales of such securities or the potential of such
sales at any time may have an adverse effect on the market prices of the
securities offered hereby. See "Selling Securityholders" and "Risk Factors -
Shares Eligible for Future Sale May Adversely Affect the Market."
----------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
INCLUDED IN THE UNITS OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "DILUTION" and "RISK
FACTORS."
2
<PAGE>
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Price Proceeds
To Underwriting Discounts To
Public And Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Unit..... $10.00 $1.00 $9.00
Total (3).... $3,000,000 $300,000 $2,700,000
- --------------------------------------------------------------------------------
The date of this Prospectus is _________, 1996
VTR CAPITAL, INC.
Investment Bankers
(Notes to Cover)
- --------
(1) Does not reflect additional compensation to be received by the Underwriter
in the form of: (i) a non-accountable expense allowance of $90,000
($103,500 if the Over-Allotment Option (as hereinafter defined) is
exercised in full) (ii) a two (2) year financial advisory and investment
banking agreement providing for fees of $3,000 per month payable in advance
at the closing of this Offering, and (iii) an option to purchase 30,000
Units at $12.00 per Unit (the "Underwriter's Unit Purchase Option"),
exercisable for a period of four (4) years, commencing one (1) year from
the effective date of this Offering. The Company and the Underwriter have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Act"). The
Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy and is
therefore unenforceable. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $587,000, including the Underwriter's non-accountable expense allowance
and the financial advisory fee referred to in Footnote (1) (not assuming
exercise of the Over-Allotment Option (as hereinafter defined),
registration fees, transfer agent fees, NASD fees, Blue Sky filing fees and
expenses, legal fees and expenses, and accounting fees and expenses. See
"Use of
3
<PAGE>
Proceeds" and "Underwriting."
(3) Does not include 45,000 additional Units to cover over-allotments which the
Underwriter has an option to purchase for thirty (30) days from the date of
this Prospectus at the initial public offering price, less the
Underwriter's discount (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions and the estimated expenses including the
Underwriter's non- accountable expense allowance will be $3,450,000,
$345,000, and $600,500, respectively, and the total proceeds to the Company
will be $3,105,000. See "Underwriting."
The Units are offered by the Underwriter on a "firm commitment" basis,
when, as and if delivered to and accepted by the Underwriter, and subject to
prior sale, allotment and withdrawal, modification of the offer with notice,
receipt and acceptance by the Underwriter named herein and subject to its right
to reject orders in whole or in part and to certain other conditions. It is
expected that the delivery of the certificates representing the securities and
payment therefor will be made at the offices of the Underwriter on or about
, 1996.
4
<PAGE>
AVAILABLE INFORMATION
The Company does not presently file reports and other information with the
Securities and Exchange Commission (the "Commission"). However, following
completion of this Offering, the Company intends to furnish its stockholders
with annual reports containing audited financial statements examined and
reported upon by its independent public accounting firm and such interim
reports, in each case as it may determine to furnish or as may be required by
law. After the effective date of this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and in accordance therewith will file reports, proxy
statements and other information with the Commission.
Reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained at the Commission at Room
1024, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can
be obtained upon written request addressed to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement on Form SB-2
(herein together with all amendments and exhibits referred to as the
"Registration Statement") under the Act of which this Prospectus forms a part.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information
reference is made to the Registration Statement.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK AND/OR THE CLASS A WARRANTS CONTAINED THEREIN AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED IN THE NASDAQ SMALL CAP MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
A SIGNIFICANT AMOUNT OF THE UNITS TO BE SOLD IN THIS OFFERING (WHICH AMOUNT
MAY BE ALL, OR SUBSTANTIALLY ALL, OF THE UNITS) MAY BE SOLD TO CUSTOMERS OF THE
UNDERWRITER WHICH MAY AFFECT THE MARKET FOR AND LIQUIDITY OF THE COMPANY'S
SECURITIES IN THE EVENT THAT ADDITIONAL BROKER-DEALERS DO NOT MAKE A MARKET IN
THE COMPANY'S SECURITIES, OF WHICH THERE CAN NO ASSURANCE. SUCH CUSTOMERS
SUBSEQUENTLY MAY ENGAGE IN TRANSACTIONS FOR THE SALE OR PURCHASE OF THE UNITS OR
THE COMMON STOCK AND/OR THE CLASS A WARRANTS CONTAINED THEREIN THROUGH AND/OR
WITH THE UNDERWRITER.
ALTHOUGH IT HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY FROM TIME TO
TIME ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE COMPANY'S
SECURITIES. THE UNDERWRITER, IF IT
5
<PAGE>
PARTICIPATES IN THE MARKET, MAY BECOME A DOMINATING INFLUENCE IN THE MARKET FOR
THE UNITS OR THE COMMON STOCK AND CLASS A WARRANTS CONTAINED THEREIN. HOWEVER,
THERE IS NO ASSURANCE THAT THE UNDERWRITER WILL OR WILL NOT CONTINUE TO BE A
DOMINATING INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED
HEREUNDER MAY BE SIGNIFICANTLY AFFECTED BY THE DEGREE, IF ANY, OF THE
UNDERWRITER'S PARTICIPATION IN SUCH MARKET. SEE "RISK FACTORS - LACK OF PRIOR
MARKET FOR UNITS, COMMON STOCK AND CLASS A WARRANTS; NO ASSURANCE OF PUBLIC
TRADING MARKET." THE UNDERWRITER MAY DISCONTINUE SUCH ACTIVITIES AT ANY TIME OR
FROM TIME TO TIME.
6
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. In
addition, unless otherwise indicated to the contrary, all information appearing
herein (i) does not give effect to (a) 300,000 shares of Common Stock issuable
upon exercise of the Class A Warrants; (b) 90,000 shares of Common Stock
issuable upon exercise of the Over-Allotment Option; (c) 45,000 shares of Common
Stock issuable upon exercise of the Class A Warrants included in the
Over-Allotment Option; (d) 60,000 shares of Common Stock issuable upon exercise
of the Underwriter's Unit Purchase Option; (e) 30,000 shares of Common Stock
issuable upon exercise of the Class A Warrants included in the Underwriter's
Unit Purchase Option; (f) 3,000,000 Series A Warrants issuable to the Bridge
Lenders, and (g) employee stock options. See "Description of Securities,"
"Certain Transactions" "Underwriting," and "Management - Stock Option Plans and
Agreements." Each prospective investor is urged to read this Prospectus in its
entirety.
THE COMPANY
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"), was
formed in December, 1995. On March 29, 1996, the Company entered into an
agreement to acquire Riverosa Company, Inc. ("Riverosa"), a New York corporation
which was formed in November 1993. (References to the Company includes the
operations of Riverosa). The Company is engaged in the marketing and sale of
microbrewed beers and ales. Since June 1993, the Company has sold and marketed
its flagship brand, Perry's Majestic Beer ("Perry's"), which is distinguished by
its use of organically grown barley and hops. The Company's business strategy is
to establish presence in the craft-brewed beer market by creating and offering
high quality full-flavored all organic beers and other beers and/or ales.
Presently, the Company's products are produced under contract with Frankenmuth
Brewers, Inc., a brewery located in Frankenmuth, Michigan, which produces,
bottles and labels Perry's using the Company's name and logo. The Company's
products are distributed in the New York metropolitan area under an exclusive
distribution agreement with Mootch & Muck, Inc. ("Mootch & Muck"), a subsidiary
of the Company's parent company, Bev-Tyme, Inc. ("Bev-Tyme"), a distributor of
various beverages, beers and related products. Perry's is presently distributed
to distributors in 10 states and sold in restaurants, supermarkets, beer and
soda stores and retail outlets.
On October 26, 1995, Bev-Tyme, Inc. entered into a letter of intent to
acquire Riverosa for the sum of $250,000. The letter of intent followed several
months of preliminary discussions. In January 1996, Bev-Tyme, Inc. assigned its
rights under the letter of intent to the Company, which entered into a
definitive agreement with Riverosa on March 29, 1996, pursuant to which the
Company agreed to pay the sum of $250,000 to acquire Riverosa. An initial
payment of $150,000 was made by the Company on March 21, 1996, with the balance
payable pursuant to the terms of a promissory note issued March 29, 1996 and
payable upon the earlier of (i) one year or (ii) the closing of this offering.
As of April 4, 1996, the Company entered into a three (3) year employment
agreement with Mark Butler, pursuant to which Mr. Butler serves as President of
the Company and will receive an annual salary of $25,000 per year, to be
increased to $50,000 per year upon completion of the Company's initial public
offering. The Agreement provides further
7
<PAGE>
that, as additional consideration, on each of March 31, 1997, March 31, 1998 and
March 31, 1999, the Company shall deliver to Mr. Butler options to purchase
100,000 shares of the Company's Common Stock at fair market value on the date of
issuance. Further, the agreement provides that the Company will pay Butler an
additional annual bonus at the sole discretion of the Board of Directors.
Perry's Majestic Beer is brewed with organically grown barley imported from
Canada and organically grown hops imported from Germany. It is a Vienna style
lager beer whose characteristics showcase the quality aspects of superior barley
flavor, distinguished by deep copper color and a malt flavor. In keeping with
its organic character, Perry's utilizes a 10-12 week brewing process that
introduces no herbicides, chemical pesticides or inorganic fertilizers in the
growing of the barley or hops. No additives, artificial ingredients or
preservatives are added during the brewing or bottling stages.
The Company anticipates that it will utilize proceeds from this offering to
expand the market for Perry's, develop new beers and ales and to establish and
operate a brewpub/restaurant and microbrewery in the New York metropolitan area.
The Company maintains its executive offices at 134 Morgan Avenue, Brooklyn,
New York 11237 telephone number (718) 894-4300.
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating the Company and its business.
8
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered
by the Company...................... 300,000 Units at a price of $10.00
per Unit. Each Unit consists of two
(2) shares of Common Stock and one
(1) Class A Warrant. The securities
comprising the Units are separately
transferable immediately upon the
Effective Date of this Offering. The
Class A Warrants shall be
exercisable commencing one (1) year
from the Effective Date. Each Class
A Warrant entitles the holder to
purchase one (1) share of Common
Stock at a price of $4.00 per share
during the four (4) year period
commencing one (1) year from the
Effective Date of this Offering. See
"Description of Securities."
Concurrently with this Offering, the
Company is registering (i) 1,850,000
shares of Common Stock on behalf of
certain Selling Securityholders, and
(ii) 3,000,000 Class A Warrants
issuable in connection with the
Bridge Notes. See "Selling
Securityholders" and "Certain
Transactions."
Terms of Redemption of
Class A Warrants.................... The Class A Warrants are each
redeemable by the Company for $.05
per Warrant, at any time after
_______, 1997, upon thirty (30)
days' prior written notice, if the
average closing price or bid price
of the Common Stock, as reported by
the principal exchange on which the
Common Stock is quoted, The Nasdaq
Small Cap Market or the National
Quotation Bureau Incorporated, as
the case may be, equals or exceeds
$_____ per share for any twenty (20)
trading days within a period of
thirty (30) consecutive trading days
ending five (5) days prior to the
date of the notice of redemption.
Upon thirty (30) days' written
notice to all holders of the Class A
Warrants, the Company shall have the
right to reduce the exercise price
and/or extend the term of the Class
A Warrants. See "Description of
Securities."
Securities Outstanding Prior
to the Offering:
Common Stock........................ 2,500,000 Shares
Series A Preferred Stock............ 500,000 Shares
Series B Preferred Stock............ 7,000,000 Shares
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Securities Outstanding
Subsequent to
the Offering:
Common Stock.......................... 3,100,000 Shares
Series A Preferred Stock.............. 500,000 Shares
Series B Preferred Stock 7,000,000 Shares
Class A Warrants...................... 3,300,000 Warrants
Use of Proceeds....................... The net proceeds to the Company from
the sale of the 300,000 Units
offered hereby, after deducting
Offering expenses including the
$72,000 financial advisory fee, are
estimated to be $2,113,000. The net
proceeds are expected to be applied
for the following purposes:
repayment of certain indebtedness,
establishment and operation of
brewpub/restaurant and microbrewery,
expansion of the Company's product
development, distribution, marketing
and advertising efforts and working
capital. See "Use of Proceeds."
Risk Factors................... Establishment of Company's
Operations; Limited Operating
History; Dependence on Offering
Proceeds; Competition; Product
Concentration; Dependence on Recent
Product Introductions; Dependence on
Distributors; Consumer
Concentration; Development of New
Products; Need to Manage Product
Introductions; Construction of
Brewpub/Restaurant; Dependence on
Certain Suppliers; Trends in
Consumer Preferences and Spending;
Public Protection of Trademarks,
Copyrights and Other Proprietary
Information; Risk of Third Party
Claims of Infringement; Government
Regulation; Public Attitudes Toward
Alcohol Consumption; Growth of the
Microbrewery Industry; Lack of
Demand for Microbrewed Beer;
Dependence on Contract Beer; Product
Liability; Shortages of Supply;
Seasonality; Possible Adverse Effect
on the Market of Shares owned by
Bev-Tyme, Inc. and Eligible for
Future Resale; Dependence on
Bev-Tyme, Inc.; Dependence on Key
Personnel; Control by Bev-Tyme,
Inc.; Broad Discretion in
Application of Proceeds; No Prior
Public Market; Possible Volatility
of Stock Price; Lack of Prior Market
for Units, Common Stock
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
and Class A Warrants; No Assurance
of Public Trading Market; Current
Prospectus and State Blue Sky
Registration in Connection with the
Exercise of Warrants; Impact on
Market of Warrant Exercise;
Underwriter's Unit Purchase Option;
Possible Adverse Effects of
Ownership of Preferred Stock by
Bev-Tyme, Inc.; Penny Stock
Regulations May Impose Certain
Restrictions on Marketability of
Securities; Dilution; Equity
Securities Sold Previously at Below
Offering Price; Redemption of
Redeemable Warrants; No Dividends;
Shares Eligible for Future Sale May
Adversely Affect the Market;
Conflicts of Interest, Anti-Takeover
Effect of General Corporation Law of
Delaware. An investment in the
securities offered hereby involves a
high degree of risk and immediate
substantial dilution of the book
value of the Common Stock included
in the Units and should be
considered only by persons who can
afford the loss of their entire
investment. See "Dilution" and "Risk
Factors."
Proposed Nasdaq Small-Cap
Market Symbol (1)............. Units - BEERU
Common Stock - BEER
Class A Warrants - BEERA
</TABLE>
- ----------
(1) Although the Company intends to apply for inclusion of the Units, the
Common Stock and the Class A Warrants on The Nasdaq Small Cap Market, there
can be no assurance that the Company's securities will be included for
quotation, or if so included that the Company will be able to continue to
meet the requirements for continued quotation, or that a public trading
market will develop or that if such market develops, it will be sustained.
See "Risk Factors - Lack of Prior Market for Units, Common Stock and Class
A Warrants; No Assurance of Public Trading Market."
11
<PAGE>
SUMMARY FINANCIAL INFORMATION
The selected historical balance sheet data presented below are derived from
financial statements of the Company, which have been audited by Mortenson &
Associates, P.C. independent accountants, whose reports are included elsewhere
herein. There have been no revenue or expense activities through March 31, 1996.
The data set forth below should be read in conjunction with and is qualified in
its entirety by the Company's financial statements, related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. See "Financial Statements," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The following
summary balance sheet data has been summarized from the Company's financial
statements included elsewhere in this Prospectus. The information should be read
in conjunction with the financial statements and the related notes thereto. See
"Financial Statements."
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
March 31, 1996
Historical (1)(2)(3) Pro Forma
-------------------- ---------
<S> <C> <C>
Working Capital (Deficit) $ (50,000) 2,063,000
Total Assets $3,950,000 5,813,000
Total Liabilities $ 250,000 ----
Retained Earnings(5) ---- (1,500,000)
Stockholders' $3,700,000 4,313,000
Equity(5)
</TABLE>
(1) Does not include the sale of 600,000 shares of Common Stock, included in
the Units offered hereby.
(2) Gives effect to issuance of 7,500,000 shares of Series B Preferred Stock
(including 500,000 shares of Series A Preferred Stock and 7,000,000 shares
of Series B Preferred Stock) to Bev-Tyme, Inc. ("Bev-Tyme") in exchange for
400,000 shares of Preferred Stock of Bev-Tyme and $150,000.
(3) Gives effect to the bridge loan of $150,000 in March, 1996.
(4) Reflects approximate net proceeds of the 300,000 Units offered hereby of
$2,113,000 at the assumed initial public offering price of $10.00 per Unit
and the repayment of indebtedness totaling $250,000.
(5) The pro forma column gives effect to the charge off of the $1,500,000
deferred financing cost associated with the bridge loans.
12
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and substantial dilution and should only be purchased by
investors who can afford to lose their entire investment. Prospective
purchasers, prior to making an investment, should carefully consider the
following risks and speculative factors, as well as other information set forth
elsewhere in this Prospectus, associated with this Offering, including the
information contained in the Financial Statements herein.
1. Limited Operating History; Qualified Independent Auditor's Report. As a
result of the Company's current financial condition, the Company's independent
auditors have qualified their report on the Company's financial statement for
the period December 1995 (inception) to March 31, 1995. The Company is in the
development stage and the Company's ability to continue in the normal course of
business is dependent upon successful completion of its planned public offering
of securities to raise capital and the success of future operations. These
uncertainties raise substantial doubt about its ability to continue as a going
concern. There can be no assurance that the Company will not incur net losses in
the future. The Company was organized in December of 1995 and on March 25, 1996
entered into a contract to acquire Riverosa. Riverosa has marketed Perry's
Majestic Beer since July 1993. The Company's prospects must be considered in
light of the risks, expenses, and difficulties frequently encountered by a small
business in a highly competitive industry. As of March 31, 1996, the Company had
stockholder's equity of $3,700,000 and a working capital deficit of $(50,000).
In addition, the sales for Riverosa for the years ended December 31, 1994 and
1995 were $195,095 and $81,185, respectively representing a decrease of
$113,214. Sales for the three months ended March 31, 1996 and 1995 were $24,136
and $19,430 respectively. Like any relatively new business enterprise operating
in a specialized and intensely competitive market, the Company is subject to
many business risks which include, but are not limited to, unforeseen marketing
and promotional expenses, unforeseen negative publicity, competition, product
liability and lack of operating experience. Many of the risks may be
unforeseeable or beyond the control of the Company. There can be no assurance
that the Company will successfully implement its business plan in a timely or
effective manner, or that management of the Company will be able to market and
sell enough beer to generate sufficient revenues and continue as a going
concern. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business," Use of Proceeds", "Certain Transactions" and
"Financial Statements."
2. Establishment of Company's Operations. The Company has devoted
substantially all its efforts since inception to establishing its business and
has generated minimal revenues. The Company is dependent upon the proceeds of
this Offering in order for it to expand its operations and establish its own
brewing facility. The likelihood of success must be considered in light of the
problems, experiences, difficulties, complications and delays frequently
encountered in various degrees in connection with the operation and development
of new businesses. The Company has one product which has achieved only limited
sales and must surmount a number of hurdles before it can expand its operations.
The most significant of these are obtaining financing,
13
<PAGE>
which is expected to be satisfied through the Offering, identifying a location
for its brewpub/restaurant, establishing and equipping the brewpub, establishing
a market for its products, implementing the Company's advertising and marketing
campaigns and repaying indebtedness owed to the Bridge Lenders. See "Use of
Proceeds." The Company must also develop and implement systems, standards and
procedures for every aspect of its operation. There can be no assurance that the
Company will be able to complete all of these items in a timely manner, or at
all, in order to allow the Company to commence operations. See "Business."
3. Dependence on Offering Proceeds; Possible Need for Additional Financing.
The Company is dependent on the proceeds from this Offering to generate cash for
the establishment of a brewpub/restaurant, which is estimated to be
approximately $1,000,000 and expansion of its product lines and marketing
efforts, which is estimated to be approximately $600,000. The Company
anticipates, based on its currently proposed plans, that the proceeds of this
Offering, together with funds generated from operations, will be sufficient to
satisfy its anticipated cash requirements for approximately twelve (12) months
following the consummation of this Offering. In the event that these plans
change, or the costs of development of operations prove greater than
anticipated, the Company could be required to modify its operations, curtail its
expansion or seek additional financing sooner than currently anticipated. The
Company has no current arrangements with respect to such additional financing
and there can be no assurance that such additional financing, if available, will
be on terms acceptable to the Company. See "Use Of Proceeds."
4. Competition. The beer industry, in general, and the craft brewing
segment of the beer industry, in particular, is highly competitive. The Company
expects competition and the number of competitors in the craft brewing segment
to increase. The principal competitive factors affecting the market for the
Company's beers include product quality and taste, packaging, brand recognition,
price and distribution capabilities. There can be no assurance that the Company
will be able to compete successfully against current and future competitors
based on these and other factors. The Company competes with a variety of
domestic and international brewers, many of whom have substantially greater
financial, production, distribution and marketing resources and have achieved a
higher level of brand recognition than the Company. The Company anticipates
increased competition in the specialty beer segment from the major domestic
brewers such as Anheuser-Busch Companies, Inc., Miller Brewing Co. and Adolph
Coors Co., each of whom has introduced and is marketing fuller flavored beers
designed to compete directly in the specialty beer segment. These large domestic
brewers dominate the overall domestic beer market and the Company expects that
certain of these companies, with their superior financial resources and
established distribution networks, will seek further participation in the
speciality beer segment through the acquisition of equity positions in, or the
formation of distribution alliances with, small specialty brewers. The Company
also faces and will face increasing competition from import specialty beer
companies such as Bass PLC, Cerveceria Modelo, S.A. (brewer of Corona Extra),
Guinness PLC, Cerveceria Moctezuma, S.A. (brewer of Dos Equis) and Heineken N.V.
and existing domestic specialty brewers such as The Boston Beer Company, Inc.,
Redhook Ale Brewery, Incorporated, Sierra Nevada Brewing Co. and Anchor Brewing
Co. Recent growth in
14
<PAGE>
the sales of specialty beers is expected to result in increased competition in
the segment, including a continuing proliferation of microbrewers and efforts by
micro and regional brewers to expand their production capacity. Increased
competition could result in price reductions, reduced profit margins and loss of
market share, all of which would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's products
also compete generally with other alcoholic beverages, including products
offered in other segments of the beer industry and low alcohol products. The
Company competes with other beer and beverage companies not only for consumer
acceptance and loyalty but also for shelf and tap space in retail establishments
and for marketing focus by the Company's distributors and their customers, all
of which also distribute and sell other beers and alcoholic beverage products.
Finally, there can be no assurance that the recent growth in consumer demand for
speciality beers will continue, or even if such growth continues, that consumers
will choose the Company's beer.
See "Business -- Competition."
5. Product Concentration; Dependence on Recent Product Introductions;
Dependence Upon Single Product. The sale of Perry's Majestic Beer has accounted
for all of the Company's sales since inception. The Company believes that the
sale of Perry's Majestic Beer will continue to account for most sales for the
foreseeable future. Therefore, the Company's future operating results,
particularly in the near term, are significantly dependent upon the continued
market acceptance of Perry's Majestic Beer. There can be no assurance that
Perry's Majestic Beer or other beers developed by the Company will achieve
market acceptance. The Company has not test marketed any new products so it is
unable to anticipate any level of public acceptance. Initial sales for a new
beer may be caused by the interest of distributors and retailers to have the
latest product on hand for potential future sale to consumers. As a result,
initial stocking orders for, or sales of, a newly introduced beer may not be
indicative of market acceptance and long term consumer demand. A decline in the
demand for any of the Company's beers as a result of competition, changes in
consumer tastes and preferences, government regulation or other factors would
have a material adverse effect on the Company's business, operating results and
financial condition. In addition, there can be no assurance that the Company
will be successful in developing, introducing and marketing additional new beers
that will sustain sales growth in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
6. Dependence on Distributors, Consumer Concentration. The Company
distributes its products primarily through wholesale distributors, including
Mootch & Muck, for resale to retailers. Accordingly, the Company is dependent
upon these distributors to sell the Company's products and to assist the Company
in promoting market acceptance of, and creating demand for, the Company's
products. There can be no assurance that the Company's distributors will devote
the resources necessary to provide effective sales and promotion support to the
Company. The Company believes that its future growth and success will continue
to depend in large part upon its ability to expand distribution and enter into
distribution agreements. If any of the Company's distributors were to
discontinue selling, or decrease the level of orders for, the Company's
products, the Company's business would be adversely affected in the areas
serviced
15
<PAGE>
by such distributors until the Company retained replacements. There can be no
assurance, however, that the Company would be able to replace a significant
distributor in a timely manner or at all in the event it were to discontinue
selling the Company's products. In addition, there is always a risk that the
Company's distributors will give higher priority to the products of other
beverage companies, including products directly competitive with the Company's
beers, thus reducing their efforts to sell the Company's products. If any of the
Company's significant distributors were to experience financial difficulties, or
otherwise become unable or unwilling to promote or sell the Company's beers, the
Company's results of operations would be adversely affected. In addition, in
some states, the Company's relationship with its distributors may be affected by
laws that restrict enforceability of some contract terms, especially those
related to the Company's right to terminate the services of its distributors.
Accordingly, the Company's ability to change distributors in certain states may
be adversely impacted by such laws. See "Business Sales, Distribution and
Marketing."
7. Control by Bev-Tyme, Inc. Prior to this Offering, Bev-Tyme, Inc. owned
500,000 shares of the Company's issued and outstanding Convertible Series A
Preferred Stock and 7,000,000 shares of the Company's Non-Convertible Series B
Preferred Stock, representing 75% of the Company's outstanding securities. Each
share of Series A Preferred Stock may be convertible by the holder into one (1)
share of Common Stock. Each share of Series A Preferred Stock and Series B
Preferred Stock possesses one vote on all matters submitted to the Company's
shareholders for their vote. After this offering, Bev-Tyme, Inc. will own 100%
of the outstanding preferred stock. See "Principal Stockholders." Since holders
of Common Stock do not have any cumulative voting rights and directors are
elected by a majority vote, Bev-Tyme, Inc. is in a position to control the
election of directors as well as the affairs of the Company. In the event
Bev-Tyme, Inc. were to convert and sell all of its shares of the Company's
Series A Preferred Stock, Bev-Tyme would continue to own one hundred (100%)
percent of the Series B Preferred Stock, representing 66% of the voting shares
of the Company, and would thereby be in a position to continue to control the
election of directors and officers of the Company. Consequently, Bev-Tyme could
affect the ability of the Company to sell assets, engage in a merger or business
combination or enter into other transactions without the approval of minority
shareholders. In addition, Robert Sipper, one of the Company's Board of
Directors, is also a member of Bev-Tyme's Board of Directors. Such control could
also preclude an unsolicited acquisition of the Company and consequently,
adversely affect the market price of the Common Stock. See "Description of
Securities."
8. Development of New Products; Need to Manage Product Introductions. The
specialty beer market is highly competitive and characterized by changing
consumer preferences and continuous introduction of new products. The Company's
goal is to introduce new products on a timely and regular basis to maintain
distributor and retailer interest and to appeal to varying consumer preferences.
The Company believes that its future growth will depend, in part, on its ability
to anticipate changes in consumer preferences and develop and introduce, in a
timely manner, new beers that adequately address such changes. There can be no
assurance that the Company will be successful in developing, introducing and
marketing new products on a timely
16
<PAGE>
and regular basis. If the Company is unable to introduce new products or if the
Company's new products are not successful, the Company's sales may be adversely
affected as consumer seek competitive products. In addition, the introduction or
announcement of new beers by the Company could result in reduction of sales of
the Company's existing beers, requiring the Company to manage carefully product
introductions in order to minimize disruption in sales of existing beers. There
can be no assurance that the introduction of new product offerings by the
Company will not cause distributors, retailers and consumers to reduce purchases
or consumption of existing Company products. Such reduction of purchases or
consumption could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business."
9. Construction of Brewpub/Restaurant. The Company intends to use a
substantial portion of the proceeds of this offering to construct a
brewpub/restaurant in the New York metropolitan area. The Company has never
constructed or operated its own brewery or brewpub and will face various
organizational challenges typically associated with commissioning a new brewery
and initiating production. The construction of a new brewery could place
significant strain on the Company's management, operations and resources and
result in diversion of management attention from the day to day operation of the
Company's business. The successful construction of such a brewery will require
careful management of various factors associated with the construction of a new
brewery, including site selection, zoning, environmental uncertainties,
receiving governmental permits, possible cost estimation errors or overruns,
construction delays, equipment delays or shortages, production start-up problems
and other factors, many of which are beyond the Company's control. Furthermore,
the Company's construction of its own brewery will result in new fixed and
operating expenses. If revenue levels do not increase sufficiently, or if
sufficient transportation and other cost savings do not result to offset these
new expenses, the Company's operating results will be materially adversely
impacted in future periods. There can be no assurance that the Company will not
encounter unforeseen difficulties as construction and production begin at the
brewpub facility, which could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Brewpub."
10. Dependence upon Certain Suppliers. Under the Company's custom brewing
contract with Frankenmuth, the Company relies upon Frankenmuth to source and
purchase the ingredients and raw materials used to make and package the
Company's beers. Although to date adequate supplies of these ingredients and
materials have been available, delays or reductions in product shipments could
occur which would have a material adverse effect on the Company's business,
financial condition and results of operations. As with most agricultural
products, the supply and price of raw materials used to produce the Company's
beers can be affected by a number of factors beyond the control of the Company,
such as frosts, droughts, other weather conditions, economic factors affecting
growing decisions, import tariffs, various plant diseases, pests and acts of
God. To the extent that any of the foregoing affects the ingredients used to
produce the Company's beers, the Company's results of operations would be
materially and adversely affected. In addition, the Company's results of
operations are dependent upon its ability to accurately forecast its need for
ingredients which may be perishable. Any failure by the
17
<PAGE>
Company to accurately forecast its requirements of raw materials could result in
the Company either being unable to meet higher than anticipated demand for its
products or producing excess inventory, either of which may adversely affect the
Company's results of operations. See "Business - Custom Brewing."
11. Trends in Consumer Preferences and Spending. The speciality beer
segment of the domestic beer market has grown dramatically over the past decade.
The Company believes that one factor in such growth has been consumer demand for
more flavorful beers offered in a wider variety of styles. No assurance can be
given however that consumer demand for specialty beers will continue in the
future. The Company's success also depends upon a number of factors related to
the level of discretionary consumer spending, including the general state of the
economy, federal and state tax laws and consumer confidence in future economic
conditions. Changes in consumer spending can affect both the quantity and the
price of the Company's products and may therefore affect the Company's operating
results. For example, reduced consumer confidence and spending may result in
reduced demand for the Company's products, limitations on its ability to
increase or maintain prices and increases in required levels of selling,
advertising and promotional expenses.
12. Protection of Trademarks, Copyrights and Other Proprietary Information;
Risk of Third Party Claims of Infringement. The Company considers its
trademarks, particularly the Perry's Majestic Beer brand name, beer recipes and
product package, advertising and promotion design and artwork to be of
considerable value and critical to its business. The Company relies on a
combination of trade secret, copyright and trademark laws and nondisclosure and
other arrangements to protect its proprietary rights. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy or obtain and use information that the Company regards as proprietary.
There can be no assurance that the steps taken by the Company to protect its
proprietary information will prevent misappropriation of such information and
such protections may not preclude competitors from developing confusing similar
brand names or promotional materials or developing products with taste and other
qualities similar to the Company's beers. While the Company believes that its
trademarks, copyrights and recipes do not infringe upon the proprietary rights
of third parties, there can be no assurance that the Company will not receive
future communications from third parties asserting that the Company's
trademarks, copyrights and recipes infringe, or may infringe, the proprietary
rights of third parties. The potential for such claims will increase as the
Company introduces new beers or increases distribution in recently entered
geographic areas. Any such claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of management
personnel, cause product distribution delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all. In
the event of a successful claim of infringement against the Company and failure
or inability of the Company to license the infringed or similar proprietary
information, the Company's business, operating results and financial condition
could be materially adversely affected. See "Business - Trademarks."
18
<PAGE>
13. Government Regulation. The Company's business is highly regulated by
federal, state and local laws and regulations. The Company must comply with
extensive laws and regulations regarding such matters as state and regulatory
approval and licensing requirements, trade and pricing practices, permitted and
required labeling, advertising, promotion and marketing practices, relationships
with distributors and related matters. For example, federal and state regulators
require warning labels and signage on the Company's products. The Company
believes that it has obtained all regulatory permits and licenses necessary to
operate its business in states where the Company's products are currently being
distributed. Riverosa maintains a Federal Basic Wholesalers Permit with the U.S.
Bureau of Alcohol, Tobacco and Firearms. The Company has made application to
assume such permit in the Company's name. Failure on the part of the Company to
comply with federal, state or local regulations could result in the loss or
revocation or suspension of the Company's licenses, permits or approvals and
accordingly could have a material adverse effect on the Company's business. In
addition, changes to federal and state excise taxes on beer production, federal
and state environmental regulations, including laws relating to packaging and
waste discharge, or any other laws or results of operations. The federal
government and each of the states levy excise taxes on alcoholic beverages,
including beer. The federal government currently imposes an excise tax of $18.00
per barrel on every barrel of beer produced for consumption in the United
States. There is, however, a small brewers excise tax credit that grants each
brewing company with annual production under 2,000,000 barrels an $11.00 credit
per barrel on its first 60,000 barrels produced annually. The Company has not
yet applied for the required state permits, licenses and bonds to operate the
proposed brewpub/restaurant. The Company does not intend to apply for these
necessary licenses and permits until after the completion of the facility (of
which there can be no assurance). Although the Company does not expect to
encounter any difficulties in obtaining the necessary permits, licenses and
bonds, the application and approval process to obtain these items will not
commence until after the facility is operational (of which there can be no
assurance). Failure to obtain such permits, licenses and bonds would prevent the
Company from engaging in any brewing operations. In addition, there can be no
assurance that the Company's future brewery operations will not become subject
to more restrictive regulation or increased taxation by Federal or state
agencies, which may adversely affect the future operations, revenues and
potential profitability of the Company. Additionally, from time to time,
Congress and many state legislatures may consider proposals to impose additional
excise taxes on the production and sale of alcoholic beverages, including beer.
Any increase in the taxes imposed upon beer can be expected to have an adverse
impact on overall sales of such products. See "Business -- Governmental
Regulation."
14. Public Attitudes Toward Alcohol Consumption. In recent years, there has
been an increase in the level of health-consciousness in the United States and
considerable debate has occurred concerning alcohol related social problems,
such as alcoholism and drunk driving. In addition, a number of anti-alcohol
groups are advocating increased governmental action on a variety of fronts
unfavorable to the beer industry, including the legislation of new labeling or
packaging requirements and restrictions on advertising and promotion that could
adversely affect the sale of the Company's products. Restrictions on the sale
and consumption of beer or increases in the retail cost of beer due to increased
government regulations, taxes or otherwise,
19
<PAGE>
could materially adversely affect the Company's business, financial condition
and results of operations. Congress and many state legislatures are considering
various proposals to impose additional excise taxes on the production and sale
of alcoholic beverages, including beer. Some of the excise tax rates being
considered are substantial. Any increase in the taxes imposed on beer can be
expected to have an adverse impact on overall sales of such products, and may
materially adversely affect the Company's result of operations. See "Business --
Governmental Regulation."
15. Growth of the Microbrewery Industry; Lack of Demand for Microbrewed
Beer. There can be no assurance that the demand for microbrewed beer will
continue to grow at the present rate or at all. To meet the increasing demand
for microbrewed beer, new microbreweries, like the Company, are being developed
and existing microbreweries are significantly increasing their production
capacities. If the demand for microbrewed beer does not keep up with increases
in supply, the Company will face heightened competition. See "Business --
Industry Overview."
16. Dependence on Contract Beer; Absence of Manufacturing Facilities. The
Company anticipates having its products produced by a contract brewery for the
foreseeable future and will continue to utilize a contract brewery after the
Company's brewpub becomes operational. Although the Company's beer is presently
brewed at Frankenmuth, there can be no assurance that this brewery will continue
to provide services to the Company. The principals of Riverosa entered into a
written agreement with Frankenmuth pursuant to which Frankenmuth brews Perry's
Majestic Beer. The Frankenmuth agreement provides, in pertinent part, that the
customer will provide certain ingredients and labels and Frankenmuth will
provide brewing, filling and packaging services, together with certain necessary
ingredients. The agreement runs on a year to year basis, and may be terminated
by either party on four (4) months written notice. In the event the Company is
unable to continue its relationship with Frankenmuth for any reason, the Company
would have to enter into a relationship with another brewery which is able to
produce organic beer to the Company's standards. See "Business -- Contract
Brewing."
17. Product Liability. The Company's future brewing and brewpub/restaurant
operations could subject the Company to the risk of product liability claims.
The Company currently does not have product liability insurance. There can be no
assurance that the Company will be able to obtain product liability insurance on
terms acceptable to the Company or at all and once obtained there can be no
assurance that the Company will be able maintain such insurance coverage.
Moreover, the amount and scope of any coverage may be inadequate to protect the
Company in the event that a product liability claim is successfully asserted
against the Company. See "Business."
18. Shortages of Supply. Shortages or increased costs of fuel, water, raw
materials (certain of which will be obtained from foreign suppliers) or power,
or allocations by suppliers or governmental authorities could restrict the
operations of the Company's proposed brewpub, or otherwise materially and
adversely affect the ability of the Company to produce and market its proposed
beer products. The Company does not anticipate entering into any long-term
contracts for its suppliers of foreign malt. See "Business."
20
<PAGE>
19. Seasonality. Sales of beer in general are seasonal in nature and are at
their highest level in the second and third calendar quarters and at their
lowest in the first and fourth calendar quarters. This seasonality is expected
to have a significant impact on the Company's operations on a quarter to quarter
basis, particularly if delays in the Offering or construction of the proposed
brewpub result in delays to brewery operations. See "Business -- Sales and
Distribution."
20. Dependence on Bev-Tyme, Inc. and Mootch & Muck The Company is dependent
upon its parent, Bev-Tyme, Inc., and Mootch & Muck for distribution of the
Company's beers in the New York metropolitan area. Distribution by Mootch & Muck
presently accounts for approximately three and seven tenths percent (3.7%) of
the Company's revenues. Historically, Mootch & Muck has been responsible for
approximately three to four percent (3% to 4%) of Riverosa's revenues. Although
the Company believes that other avenues of distribution will be available, there
can be no assurance that the Company would be able to obtain new suppliers in
the event that Mootch & Muck was no longer able to distribute products for the
Company. Even if the Company is able to develop alternative distribution
sources, there can be no assurance that it can do so without material delay or
on a cost effective basis at prices similar to those paid to Mootch & Muck. As a
result, any interruption or discontinuance of distribution by Mootch & Muck
could result in considerable expense, delay the Company's operations and ability
to deliver products, and have a material adverse effect on the Company.
21. Dependence on Key Personnel. The Company is substantially dependent on
the continued services of Robert Sipper, the Company's Chief Executive Officer,
and Mark Butler, the Company's President. The Company has entered into a five
(5) year employment agreement with Mr. Sipper and a three (3) year employment
agreement with Mr. Butler. Mr. Sipper will devote such time as is necessary to
the discharge of his responsibilities to the Company, consistent with his
continuing obligations to Bev-Tyme. Mr. Butler will devote full time to the
business of the Company. Should Mr. Sipper and Mr. Butler not be able to
continue as officers of the Company, its prospects could be adversely affected
and, as a result, the loss of either Mr. Sipper or Mr. Butler could materially
adversely affect the Company's operations. The Company currently does not
maintain key personnel life insurance for any of its employees. See
"Management."
22. Limited Personnel. At present the Company employs only two (2) full
time personnel. There can be no assurance that the Company will be able to
identify suitable additional employees, or do so in a timely economically
acceptable basis in the future.
23. Broad Discretion in Application of Proceeds. While the Company
presently intends to use the net proceeds of this Offering as described in the
"Use of Proceeds" section of this Prospectus, management of the Company has
broad discretion to adjust the application and allocation of the net proceeds of
this Offering as well as any proceeds received upon any exercise of the Class A
Warrants in order to address changed circumstances and opportunities. As
reflected in the "Use of Proceeds" section approximately $1,000,000 or 47.3% of
the net proceeds will be allocated to construction of the Company's brewpub,
$613,000 or 79.1% will be allocated to
21
<PAGE>
marketing or advertising, $250,000 or 11.8% will be used to repay certain
indebtedness and the balance for working capital. These expenditures are subject
to reallocation at the discretion of the Company's Board of Directors. As a
result of the foregoing, the success of the Company will be substantially
dependent upon the discretion and judgment of the management of the Company with
respect to the application and allocation of the net proceeds hereof. Pending
use of such proceeds, the net proceeds of this Offering will be invested by the
Company in short-term, low risk marketable securities. See "Use of Proceeds."
24. No Prior Public Market; Possible Volatility of Stock Price. Prior to
this Offering, there has been no public market for the Units, Common Stock or
Class A Warrants. The initial public offering price of the Units, as well as the
exercise price for the Class A Warrants, was determined by negotiation between
the Company and the representatives of the Underwriter, and may not be
indicative of the market price for such securities in the future, and does not
necessarily bear any relationship to the Company's assets, book value, net worth
or results of operations of the Company or any other established criteria of
value. Among the factors considered in determining the price of the Units were
the history of and prospects for the industry in which the Company competes,
estimates of the business potential of the Company, the present state of the
development of the Company's business, the Company's financial condition, an
assessment of the Company's management, the general condition of the securities
markets at the time of this Offering, and the demand for similar securities of
comparable companies. There is, however, no relationship whatsoever between the
offering price of the Units and the Company's net worth, projected earnings,
book value, or any other objective criteria of value on the other. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. See "Underwriting - Determination of Public
Offering Price," "Description of Securities" and "Financial Statements."
25. Lack of Prior Market for Units, Common Stock and Class A Warrants; No
Assurance of Public Trading Market. Prior to this Offering, no public trading
market existed for the Units, Common Stock and Warrants. There can be no
assurances that a public trading market for the Units, Common Stock and Warrants
will develop or that a public trading market, if developed, will be sustained.
Although the Company anticipates that upon completion of this Offering, the
Units, Common Stock and Warrants will be eligible for inclusion on The Nasdaq
Small Cap Market, no assurance can be given that the Units, Common Stock and
Warrants will be listed on The Nasdaq Small Cap Market as of the Effective Date.
Consequently, there can be no assurance that a regular trading market for the
Units, Common Stock and Warrants, other than the pink sheets, will develop after
the completion of this Offering. If a trading market does in fact develop for
the Units, Common Stock and Class A Warrants offered hereby, there can be no
assurance that it will be maintained. If for any reason the Units, Common Stock
and Warrants are not listed on The Nasdaq Small Cap Market or a public trading
market does not develop, purchasers of the Units, Common Stock and Warrants may
have difficulty in selling their securities should they desire to do so. In any
event, because certain restrictions may be placed upon the sale of securities at
prices under $5.00, unless such securities qualify for an exemption from the
"penny stock" rules, such as a listing on The Nasdaq Small Cap Market, some
brokerage
22
<PAGE>
firms will not effect transactions in the Company's securities and it is
unlikely that any bank or financial institution will accept such securities as
collateral, which could have an adverse effect in developing or sustaining any
market for the Units, Common Stock and Warrants. See "Risk Factors - Penny Stock
Regulations May Impose Certain Restrictions on Marketability of
Securities."
Although it has no legal obligation to do so, the Underwriter from time to
time may act as a market maker and may otherwise effect and influence
transactions in the Company's securities. However, there is no assurance that
the Underwriter will continue to effect and influence transactions in the
Company's securities. The prices and liquidity of the Company's securities may
be significantly affected by the degree, if any, of the Underwriter's
participation in the market. The Underwriter may voluntarily discontinue such
participation at any time. Further, the market for, and liquidity of, the
Company's securities may be adversely affected by the fact that a significant
amount of the Units may be sold to customers of the Underwriter.
Pursuant to an alternate prospectus certain Selling Shareholders may offer
for sale 3,000,000 Class A Warrants underlying certain Bridge Notes and
1,850,000 shares of Common Stock. (See "Selling Stockholders"). None of these
securities are subject to any lockup or restriction upon their sale after
registration. Consequently, such securities may be sold by the holders thereof
at any time subsequent to their registration pursuant to a then current
prospectus.
Under prevailing rules of the National Association of Securities Dealers,
Inc ("NASD"), in order to qualify for initial quotation of securities on The
Nasdaq Small Cap Market, a company, among other things, must have at least
$4,000,000 in total assets, $2,000,000 in total capital and surplus, $1,000,000
in market value of public float and a minimum bid price of $3.00 per share.
Although the Company may upon the completion of this Offering qualify for
initial quotation of its securities on The Nasdaq Small Cap Market, for
continued listing on The Nasdaq Small Cap Market, a company, among other things,
must have $2,000,000 in total assets, $1,000,000 in total capital and surplus,
$1,000,000 in market value of public float and a minimum bid price of $1.00 per
share. If the Company is unable to satisfy the requirements for quotation on The
Nasdaq Small Cap Market, trading, if any, in the Units, Common Stock and Class A
Warrants offered hereby would be conducted in the over-the-counter market in
what are commonly referred to as the "pink sheets" or on the NASD OTC Electronic
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the securities offered
hereby. The above-described rules may materially adversely affect the liquidity
of the market for the Company's securities. See "Underwriting."
26. Current Prospectus and State Blue Sky Registration in Connection with
the Exercise of the Warrants. The Company will be able to issue the securities
offered hereby, shares of its Common Stock upon the exercise of the Class A
Warrants and Underwriter's Unit Purchase Option only if (i) there is a current
prospectus relating to the Common Stock issuable upon the exercise of the
Warrants under an effective registration statement filed with the Securities
23
<PAGE>
and Exchange Commission, and (ii) such Common Stock is then qualified for sale
or exempt therefrom under applicable state securities laws of the jurisdictions
in which the various holders of Warrants reside. There can be no assurance,
however, that the Company will be successful in maintaining a current
registration statement. After a registration statement becomes effective, it may
require updating by the filing of a post-effective amendment. A post-effective
amendment is required (i) anytime after nine (9) months subsequent to the
Effective Date when any information contained in the prospectus is over sixteen
(16) months old, (ii) when facts or events have occurred which represent a
fundamental change in the information contained in the registration statement,
or (iii) when any material change occurs in the information relating to the plan
or distribution of the securities registered by such registration statement. The
Company anticipates that this Registration Statement will remain effective for
at least nine (9) months following the date of this Prospectus or until _______
__, 1996, assuming a post-effective amendment is not filed by the Company. The
Company intends to qualify the sale of Units in a limited number of states,
although certain exemptions under certain state securities ("blue sky") laws may
permit the Warrants to be transferred to purchasers in states other than those
in which the Warrants were initially qualified. The Company will be prevented,
however, from issuing Common Stock upon exercise of the Warrants in those states
where exemptions are unavailable and the Company has failed to qualify the
Common Stock issuable upon exercise of the Warrants. The Company may decide not
to seek, or may not be able to obtain qualification of the issuance of such
Common Stock in all of the states in which the ultimate purchasers of the
Warrants reside. In such a case, the Warrants of those purchasers will expire
and have no value if such Warrants cannot be exercised or sold. Accordingly, the
market for the Warrants may be limited because of the Company's obligation to
fulfill both of the foregoing requirements. See "Description of Securities."
27. Impact on Market of Warrant Exercise. In the event of the exercise of a
substantial number of Class A Warrants offered as part of the Units within a
reasonably short period of time after their right to exercise commences, the
resulting increase in the amount of Common Stock of the Company in the trading
market could substantially affect the market price of the Common Stock. See
"Description of Securities - Class A Warrants."
28. Underwriter's Unit Purchase Option. In connection with this Offering,
the Company will sell to the Underwriter, for nominal consideration, an option
to purchase an aggregate of 30,000 Units (the "Underwriter's Unit Purchase
Option"). The Underwriter's Unit Purchase Option will be exercisable commencing
one year from the Effective Date of this Offering and ending four (4) years from
such date, at an exercise price of $12.00 per Underwriter's unit (the
"Underwriter's Units"), subject to certain adjustment, with the underlying
warrants (the "Underwriter's Warrants") exercisable at $4.00 per share. The
holders of the Underwriter's Unit Purchase Option will have the opportunity to
profit from a rise in the market price of the Units, Warrants and/or the Common
Stock, if any, without assuming the risk of ownership. The Company may find it
more difficult to raise additional equity capital if it should be needed for the
business of the Company while the Underwriter's Unit Purchase Option is
outstanding. At any time when the holders thereof might be expected to exercise
them, the Company would probably
24
<PAGE>
be able to obtain additional capital on terms more favorable than those provided
by the Underwriter's Unit Purchase Option. See "Dilution" and "Underwriting."
29. Possible Adverse Effects of Ownership of Preferred Stock by Bev-Tyme.
The Company's Certificate of Incorporation, as amended, authorizes the issuance
of a maximum of 10,000,000 shares of Preferred Stock on terms that may be fixed
by the Company's Board of Directors without further stockholder action. 500,000
shares of Class A Preferred Stock and 7,000,000 shares of Class B Preferred
Stock have been issued by the Company to Bev-Tyme. Pursuant to the Certificate
of Designation, each share of preferred stock possesses one vote on all matters
upon which common shareholders are entitled to vote. Although the Preferred
Stock does not possess any dividend rights, ownership of the Preferred Stock
will continue to afford Bev-Tyme voting control over the affairs of the Company
since Bev-Tyme will hold a majority of all outstanding voting shares of the
Company. Any transfer of the Preferred Stock by Bev-Tyme could result in a
change of control of the Company. See "Description of Securities - Preferred
Stock."
30. "Penny Stock" Regulations May Impose Certain Restrictions on
Marketability of Securities. The Securities and Exchange Commission (the
"Commission") has adopted regulations which generally define"penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Since it is intended that the securities offered hereby will be
authorized for quotation on The Nasdaq Small Cap Market, such securities will
initially be exempt from the definition of "penny stock." If the securities
offered hereby are removed from listing by The Nasdaq Small Cap Market at any
time following the Effective Date, the Company's securities may become subject
to rules that impose additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in this Offering to sell the Company's
securities in the secondary market and the price at which such purchasers can
sell any such securities.
25
<PAGE>
31. Dilution; Equity Securities Sold Previously at Below Offering Price;
Bridge Loans. Upon completion of this Offering, assuming no exercise of the
Over-Allotment Option and without giving effect to the exercise of the
Underwriter's Unit Purchase Option, the net tangible book value per share of the
Company's Common Stock will be $1.39. At the initial public offering price of
$10.00 per Unit, investors in this Offering will experience an immediate
dilution of approximately $3.61 or 72% in net tangible book value per share and
existing investors will experience an increase of approximately $.51 per share.
The exercise of the Class A Warrants sold to the public will result in future
dilution to the public investors. See "Dilution." The present stockholders of
the Company have acquired their respective equity interest at costs
substantially below the public offering price. Accordingly, to the extent that
the Company incurs losses, the public investors will bear a disproportionate
risk of such losses. In March, 1996, the Company borrowed an aggregate of
$150,000 from seven (7) unaffiliated lenders (the "Bridge Lenders"). In exchange
for making loans to the Company, each Bridge Lender received a promissory note
(the "Bridge Note"). Each of the Bridge Notes bears interest at the rate of
eight percent (8%) per annum. The Bridge Notes are due and payable upon the
earlier of (i) July 31, 1996 or (ii) the closing of an initial underwritten
public offering of the Company's securities. The Company intends to use a
portion of the proceeds of this Offering to repay the Bridge Lenders. See "Use
of Proceeds." The Bridge Lenders have the right to receive a total of 3,000,000
Class A Warrants. The Company has recorded a deferred financing cost of
$1,500,000 for the warrants and will charge to operations as a non-cash
financing cost $1,500,000 over the life of the bridge loan. Assuming the loan
will be repaid in July of 1996 this would represent an APR of 3,000% to the
bridge lenders in addition to the 8% interest charged on the bridge loans. The
Company entered into the bridge financing transactions because it required
additional financing and no other sources of financing were available to the
Company at that time. Further, the Company agreed to register the Class A
Warrants issuable in connection with the Bridge Loans and the shares of Common
Stock underlying the Class A Warrants in the first registration statement filed
by the Company following the date of the loan. Therefore, the Registration
Statement, of which this Prospectus forms a part, relates to the 3,000,000 Class
A Warrants issuable in connection with the Bridge Notes. The underwriter has not
required the Bridge Lenders to enter into any lockup agreement with respect to
the shares or Class A Warrants. Consequently, upon registration such securities
will become eligible for sale. See "Selling Securityholders" "Bridge Financings"
and "Underwriting."
32. Redemption of Redeemable Warrants. The Class A Warrants and the
Underwriter's Unit Purchase Option are subject to redemption by the Company, at
any time, commencing one (1) year following the date of this Prospectus, at a
price of $.05 per Warrant if the closing bid price for the Common Stock equals
or exceeds $____ per share for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. In the event that the Class A Warrants are
called for redemption by the Company, Warrantholders will have thirty (30) days
during which they may exercise their rights to purchase shares of Common Stock.
If holders of the Class A Warrants elect not to exercise them upon notice of
redemption thereof, and the Class A Warrants are subsequently redeemed prior to
exercise, the holders thereof would lose the benefit of the
26
<PAGE>
difference between the market price of the underlying Common Stock as of such
date and the exercise price of such Class A Warrants, as well as any possible
future price appreciation in the Common Stock. As a result of an exercise of the
Class A Warrants, existing stockholders would be diluted and the market price of
the Common Stock may be adversely affected. If a Warrantholder fails to exercise
his rights under the Warrants prior to the date set for redemption, the
Warrantholder will be entitled to receive only the redemption price, or $.05 per
Class A Warrant. In addition, the Class A Warrants may only be exercised when a
Prospectus is current and meets the requirements of Section 10 of the Securities
Act of 1933. See "Description of Securities - Class A Warrants."
33. No Dividends. The Company has never paid any dividends on its Common
Stock since its inception and does not intend to pay dividends on its Common
Stock in the foreseeable future. Any earnings which the Company may realize in
the foreseeable future will be retained to finance the growth of the Company.
See "Dividend Policy."
34. Shares Eligible for Future Sale May Adversely Affect the Market. All of
the Company's currently outstanding shares of Common Stock are "restricted
securities" and, in the future, may be sold upon compliance with Rule 144,
adopted under the Securities Act of 1933, as amended. Rule 144 provides, in
essence, that a person holding "restricted securities" for a period of two (2)
years may sell only an amount every three (3) months equal to the greater of (a)
one percent (1%) of the Company's issued and outstanding shares, or (b) the
average weekly volume of sales during the four (4) calendar weeks preceding the
sale. The amount of "restricted securities" which a person who is not an
affiliate of the Company may sell is not so limited, since non-affiliates may
sell without volume limitation their shares held for three (3) years if there is
adequate current public information available concerning the Company. It should
be noted, however, that the Commission is currently considering changing the two
(2) year holding period to one (1) year and the three (3) year holding period to
two (2) years. In such an event, "restricted securities" would be eligible for
sale to the public at an earlier date. Immediately prior to the Effective Date,
the Company will have 2,500,000 shares of its Common Stock issued and
outstanding, of which 1,850,000 shares are being registered under the
Registration Statement of which this Prospectus forms a part. Those shares which
are not registered hereunder will be eligible for sale beginning in January
1998, unless they are registered prior to such time or become subject to a
shorter holding period as a result of a revision to Rule 144.
Prospective investors should be aware that the possibility of sales may, in
the future, have a depressive effect on the price of the Company's Common Stock
in any market which may develop, and therefore, the ability of any investor to
market his shares may be dependent directly upon the number of shares that are
offered and sold. Affiliates of the Company may sell their shares during a
favorable movement in the market price of the Company's Common Stock which may
have a depressive effect on its price per share. See "Description of
Securities."
35. Federal Income Tax Consequences. The Company has obtained no ruling
from the Internal Revenue Service and no opinion of counsel with respect to the
federal income tax
27
<PAGE>
consequences of this offering. Consequently, investors must evaluate for
themselves the income tax implications which attach to their purchase and
subsequent sale of the securities offered hereunder. In that regard, a holder of
Units must allocate the cost of each unit between each of its elements (two
shares of Common Stock and one Class A Warrant) in accordance with their
relative fair market value on the date of purchase for the purpose of
determining the adjusted tax basis of each such element. The Company's
allocation of the $10.00 per Unit purchase price, equally between the two
shares, without allocating any portion to the Warrant component of the Unit, is
not necessarily indicative of the proper allocation for tax purposes.
36. Conflicts of Interest. After this Offering, Bev-Tyme will continue to
own 100% of the outstanding Preferred Stock. In addition, at present, Bev-Tyme
distributes the Company's products. It is anticipated that Bev-Tyme will
continue to distribute a significant percentage of the Company's products, at or
near present levels as well as provide administrative and support services, and
that the Company will continue to operate its executive offices and distribution
at facilities leased and managed by Bev-Tyme. In addition, Bev-Tyme's director
and President, Robert Sipper, is a member of the Company's Board of Directors
and Chief Executive Officer of the Company. Because of Bev-Tyme's ownership
interest in the Company, the identity of certain management and Bev-Tyme's role
as a significant distributor for the Company, certain conflicts of interest may
occur between the Company and Bev-Tyme. In such instances, members of the Board
of Directors who are also members of the Bev-Tyme Board of Directors, or the
entire Bev-Tyme Board of Directors, may be precluded from participating in
corporate decisions. Although the Board of Directors of the Company has not
adopted any written policy on this matter, the Delaware Corporation Law contains
specific provisions governing such conflicts.
37. Anti-Takeover Effect of General Corporation Law of Delaware. The
Company is governed by the provisions of Section 203 of the General Corporation
Law of Delaware, an anti-takeover law enacted in 1988. As a result of Section
203, potential acquirors of the company may be discouraged from attempting to
effect acquisition transactions with the Company, thereby possibly depriving
holders of the Company's securities of certain opportunities to sell or
otherwise dispose of such securities at above-market prices pursuant to such
transactions. See "Description of Securities."
28
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 300,000 Units offered
hereby, are estimated to be $2,113,000 (after deducting approximately $300,000
in underwriting discounts, other expenses of this Offering estimated to be
$587,000, which includes the Underwriter's non-accountable expense allowance of
$90,000 and a $72,000 financial consulting fee payable to the Underwriter at the
closing) (but not considering any exercise of the Over-Allotment Option, or the
Underwriter's Unit Purchase Option). The Company based upon all currently
available information, intends to utilize such proceeds approximately as
follows:
Approximate
Approximate Percentage(%)
Amount of of Net
Net Proceeds Proceeds
------------ --------
Construction of Brewpub(1) 1,000,000 47.3%
Marketing and Advertising(2) 613,000 29.1%
Repayment of Certain Indebtedness(3) $250,000 11.8%
Working Capital(4) 250,000 11.8%
--------- -----
Total.................. 2,113,000 100%
- ----------
(1) The Company will lease and build-out suitable space in the New York
metropolitan area to be developed and operated as a brewpub/restaurant and
microbrewery.
(2) New marketing and advertising materials and a marketing campaign will be
created to promote the Company's products.
(3) Represents the repayment of Bridge Loans in the aggregate principal amount
of $150,000 and the payment of the promissory note in the principal amount
of $100,000 to Riverosa. The Bridge Loans were made by seven (7)
unaffiliated parties. The Bridge Loans are due and payable upon the earlier
of July 31, 1996 or the closing of the Company's initial public offering
and bear interest at the rate of 8% per annum. The proceeds of the Bridge
Loans were used for working capital and as a source of funds to pay
expenses associated with this Offering. See "Bridge Financing." See
"Certain Transactions."
(4) To be used for general operating and overhead expenses and the funding of
inventory.
The amounts set forth above are estimates. Should a reapportionment or
redirection of funds be determined to be in the best interests of the Company,
the actual amount expended to finance any category of expenses may be increased
or decreased by the Company's Board of Directors, at its discretion.
The Company believes that the proceeds of this Offering will enable the
Company to increase its annual revenues through the expansion of its business
and development of product lines. As a result, the Company believes that the net
proceeds of this Offering, together with
29
<PAGE>
increased revenues generated from operations, will be sufficient to conduct the
Company's operations for at least twelve (12) months. The terms of the
underwriting agreement between the Company and the Underwriter restrict the
Company from entering into any acquisition or merger of the Company or obtaining
additional capital financing without the prior approval of the Underwriter, for
the issuance of additional equity securities for a period of one (1) year, in
either public or private offerings, which approval may not be unreasonably
withheld. The underwriting agreement does not prevent the Company from seeking
bank financing, although there can be no assurance that such financing will be
available on commercially reasonable terms. See "Risk Factors - Dependence on
Offering Proceeds; Possible Need for Additional Financing."
To the extent that the Company's expenditures are less than projected
and/or the proceeds of this Offering increase as a result of the exercise by the
Underwriter of its Over-Allotment Option, the resulting balances will be
retained and used for general working capital purposes. Conversely, to the
extent that such expenditures require the utilization of funds in excess of the
amounts anticipated, additional financing may be sought from other sources, such
as debt financing from financial institutions, although there can be no
assurance that such additional financing, if available, will be on terms
acceptable to the Company. See "Risk Factors Dependence on Offering Proceeds;
Possible Need For Additional Financing." The net proceeds of this Offering that
are not expended immediately may be deposited in interest bearing accounts or
invested in government obligations or certificates of deposit.
30
<PAGE>
DILUTION
At March 31, 1996, the Company had outstanding an aggregate of 2,500,000
shares of Common Stock having an aggregate net tangible book value of $2,200,000
or $.88 per share, giving effect to the issuance of 7,500,000 Preferred Shares
for $2,150,000. Net tangible book value per share consists of total assets less
intangible assets and liabilities, divided by the total number of shares of
Common Stock outstanding. The shares of capital stock described above do not
include any securities subject to any outstanding warrants or options.
After giving effect to the sale of 300,000 Units, consisting of 600,000
shares of Common Stock and 300,000 Class A Warrants by the Company (assuming no
value is attributable to the Class A Warrants) with net proceeds of $2,113,000,
the pro forma net tangible book value of the Common Stock would have been
$4,313,000 or approximately $1.39 per share. This represents an immediate
increase in pro forma net tangible book value of $.51 per share to the present
stockholders and an immediate dilution of $3.61 per share (72%) to the public
purchasers. The following table illustrates the dilution which investors
participating in this Offering will incur and the benefit to current
stockholders as a result of this Offering:
Public offering price of Shares of Common Stock
offered hereby (1) $5.00
Net tangible value per
share ......................................... $.88
Increase per share attributable
to Units offered hereby........................ $.51
Pro Forma net tangible book value
per share after Offering(3).................... $1.39
Dilution of net tangible book
value per share to purchasers
in this Offering (2)(3)...................... $3.61
- -------------
(1) Before deduction of underwriting discounts, commissions, fees and Offering
expenses.
(2) Assuming no exercise of the Over-Allotment Option, the Underwriter's Unit
Purchase Option or Class A Warrants. See "Underwriting" and "Description of
Securities."
(3) Assuming no exercise of the 3,000,000 Class A Warrants issuable in
connection with Bridge Loans. See "Selling Securityholders" and "Certain
Transactions."
31
<PAGE>
The following table shows the number and percentage of shares of Common
Stock purchased and acquired and the amount and percentage of consideration and
average price per share paid by existing stockholders as of March 31, 1996 and
to be paid by purchasers pursuant to this Offering (based upon the anticipated
public offering price of $10.00 per Unit before deducting underwriting discounts
and commissions and estimated Offering expenses).
Shares of Aggregate
Common Percent Cash Percent of Average
Stock of Equity Consideration Total Cash Price Per
Purchased Owned Paid Consideration Share
--------- --------- ------------- ------------- ---------
New
Stockholders 600,000 19% $3,000,000 98% $5.00
Existing
Stockholders 2,500,000 81% $ 50,000 2% .02
- --------------------------------------------------------------------------------
TOTAL 3,100,000 100% $3,050,000 100% $1.02
The foregoing table gives effect to the sale of the Common Stock and Class
A Warrants underlying the Units offered hereby but without giving effect to the
exercise of the Underwriter's Unit Purchase Option, or any securities issuable
upon the exercise of the Over-Allotment Option or any outstanding options or
warrants, including those held by the Bridge Lenders.
32
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 and as adjusted gives effect to the sale of 300,000 Units
consisting of Common Stock and Class A Warrants offered hereby and the
application of net proceeds therefrom. The table is not adjusted to give effect
to the exercise of the Over-Allotment Option, the Class A Warrants, the
Underwriter's Unit Purchase Option or any other outstanding warrants or options.
This table should be read in conjunction with the Financial Statements of the
Company, including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Actual Pro Forma Adjusted(1)
------ ---------------------
<S> <C> <C>
Bridge and Notes Payable $250,000 ---
-------- ----
Stockholders' Equity:
Common Stock, $.0001 par value
per share, 25,000,000 shares
authorized, ,500,000 issued and
outstanding and (3,100,000 shares
outstanding as adjusted)............. 250 310
Additional paid in capital common 1,549,750 3,662,690
Preferred Stock, $.0001 par value
per share, 15,000,000 shares
authorized, 7,500,000 issued and
outstanding.......................... 7,500 7,500
Additional paid-in capital:.......... 2,142,500 2,142,500
PREFERRED
Retained Earnings.................... -- (1,500,000)
----
TOTAL STOCKHOLDERS'
EQUITY............................... 3,700,000 4,313,000
--------- ---------
TOTAL CAPITALIZATION................. 3,950,000 4,313,000
========= =========
</TABLE>
- ----------
(1) As Adjusted balance sheet reflects the sale of 300,000 Units offered hereby
and the anticipated application of the net proceeds of $2,113,000
therefrom, after deducting estimated Offering expenses of $587,000 and the
repayment of the Riverosa acquisition note of $100,000 and the bridge notes
of $150,000 payable with the proceeds of the Offering with a deferred
financing cost of $1,500,000.
33
<PAGE>
DIVIDEND POLICY
Holders of the Company's Preferred Stock or Common Stock are entitled to
dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. The Company has not in the past and does not
currently anticipate the declaration or payment of any dividends in the
foreseeable future. The Company intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors, such as general
economic conditions. Therefore, there can be no assurance that any dividends of
any kind will ever be paid.
BRIDGE FINANCING
In March 1996, the Company borrowed an aggregate of $150,000 from seven (7)
unaffiliated lenders (the "Bridge Lenders"); Ulster Investments, Ltd.; First
National Fund Corp., Michael Yordy, Harold Yordy, Dune Holdings, Inc., MD
Funding, Inc. and John Pasquale. In exchange for making loans to the Company,
each Bridge Lender received a promissory note (the "Bridge Notes") in the amount
of the loan. Each of the Bridge Notes bears interest at the rate of eight
percent (8%) per annum. The Bridge Notes are due and payable upon the earlier of
(i) July 31, 1996 or (ii) the closing of an initial underwritten public offering
of the Company's securities. The Company intends to use a portion of the
proceeds of this Offering to repay the Bridge Lenders. See "Use of Proceeds." In
addition, the Bridge Lenders have the right to receive an aggregate of 3,000,000
Class A Warrants. The Company entered into the bridge financing transactions
because it required additional financing and no other sources of financing were
available to the Company at that time. There are no arrangements, agreements or
undertakings between Bridge Lenders and management under which the Bridge
Lenders may directly or indirectly participate in or influence the management of
the Company's affairs. Further, the Company agreed to register the Class A
Warrants issuable in connection with the Bridge Notes, as well as the shares of
Common Stock issuable upon exercise of the Class A Warrants in the first
registration statement filed by the Company following the date of the loan.
Therefore, the Registration Statement, of which this Prospectus forms a part,
relates to the 3,000,000 Class A Warrants issuable in connection with the Bridge
Notes. See "Selling Securityholders," "Certain Transactions" and "Underwriting."
34
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected historical balance sheet data presented below are derived from
financial statements of the Company, which have been audited by Mortenson &
Associates, P.C. independent accountants, whose reports are included elsewhere
herein. There have been no revenue or expense activities through March 31, 1996.
The data set forth below should be read in conjunction with, and is qualified in
its entirety by, the Company's financial statements, related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. See "Financial Statements" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The following summary balance
sheet data has been summarized from the Company's financial statements included
elsewhere in this Prospectus. The information should be read in conjunction with
the financial statements and the related notes thereto. See "Financial
Statements."
SUMMARY BALANCE SHEET DATA
<TABLE>
<CAPTION>
March 31, 1996
Historical (1)(2)(3) Pro Forma
-------------------- ---------
<S> <C> <C>
Working Capital (Deficit) $ (50,000) 2,063,000
Total Assets $3,950,000 5,813,000
Total Liabilities $ 250,000 ----
Retained Earnings(5) ---- (1,500,000)
Stockholders' $3,700,000 4,313,000
Equity(5)
</TABLE>
- ----------
(1) Does not include the sale of 600,000 shares of Common Stock included in the
Units offered hereby.
(2) Gives effect to issuance of 7,500,000 shares of Series B Preferred Stock
(including 500,000 shares of Series A Preferred Stock and 7,000,000 shares
of Series B Preferred Stock) to Bev Tyme, Inc. ("Bev Tyme") in exchange for
400,000 shares of Preferred Stock of Bev Tyme.
(3) Gives effect to the bridge loan of $150,000 in March 1996.
(4) Reflects approximate net proceeds of the 300,000 Units offered hereby of
2,113,000 at the assumed initial public offering price of $10.00 per Unit
and the repayment of indebtedness totaling $250,000.
(5) The pro forma column gives effect to the charge off of the $1,500,000
deferred financing charge associated with the bridge loans.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Perry's Majestic Beer, Inc. [the "Company" or "Perry's"] was formed in
December of 1995. There have been no operations prior to the formation of
Perry's for the period December 1995 to March 1996 nor any revenue or expense
activities for Perry's through March 31, 1996. The primary activities for
Perry's prior to the acquisition of Riverosa Company, Inc. ["Riverosa"] have
been investing and financing activities [See "Liquidity and Capital Resources"].
In March of 1996, the Company entered into an agreement to acquire Riverosa,
which was formed in November of 1993. Riverosa is engaged in the manufacture and
distribution of microbrewed beers and ales.
PERRY'S MAJESTIC BEER, INC.
Perry's had a working capital deficit at March 31, 1996 of $50,000. Perry's
had no operations prior to the formation of Perry's for the period December 1995
to March 1996 nor any revenue or expense activities for Perry's through March
31, 1996. Therefore, no cash was generated or utilized for operating activities.
The Company utilized $150,000 in investing activities for the acquisition of
Riverosa as of March 31, 1996 and will expend another $100,000 in the next few
months for the balance owed on the note resulting from the acquisition. The
Company generated $210,000 in cash from financing activities for the period
ended March 31, 1996 resulting from the sale of preferred stock to Bev-Tyme,
Inc. with cash proceeds of $75,000 [balance of $75,000 received in April of
1996], the sale of common stock with cash proceeds of $45,200 [balance of $4,800
received in April of 1996] and proceeds from bridge loans of $90,000 [the
balance of $60,000 received in April of 1996]. The $150,000 bridge loans from
the seven unaffiliated lenders have an interest rate of 8% per annum. These
loans are to be repaid the earlier of July 31, 1996 or the close of the proposed
public offering. The bridge lenders have the right to receive a total of
3,000,000 warrants for which the Company recorded a non-cash financing cost of
$1,500,000 that will be charged to operations over the life of the bridge loan.
The cash balance at March 31, 1996 was $60,200.
The Company anticipates that the net proceeds from the proposed public
offering will generate approximately $2,113,000. The Company anticipates that
along with cash generated from Riverosa's operating activities, the net proceeds
from the proposed public offering will be sufficient to satisfy its cash
requirements for the next twelve [12] months and enable it to market and
advertise its products, expand the market as well as to develop a
brewpub/restaurant and microbrewery in the New York metropolitan area [See "Use
of Proceeds"].
36
<PAGE>
PERRY'S MAJESTIC BEER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RIVEROSA COMPANY, INC.
Results of Operations
For the three months ended March 31, 1996 compared to the three months ended
March 31, 1995
Riverosa had a net [loss] of $(7,351) for the three months ended March 31,
1996 as compared to net income of $138 for the three months ended March 31,
1995. This is primarily the result of an increase in selling, general and
administrative expenses.
Riverosa's sales increased for the three months ended March 31, 1996 to
$24,136 as compared to sales of $19,430 for the three months ended March 31,
1995. This increase of $4,706, or 24%, represents the affect of the Company's
1995 efforts to expand its distribution base.
Riverosa's gross profit, however, decreased for the three months ended
March 31, 1996 to $4,746 or 20% from $4,484 or 23% for the three months ended
March 31, 1995. This is primarily attributable to the increase in the pricing of
the cost of ingredients to manufacture the products and not being able to buy
the ingredients at bulk prices.
Selling, general and administrative expenses for the three months ended
March 31, 1996 and 1995 were $11,347 and $2,535, respectively. This represents
an increase of approximately $9,000 which is primarily attributable to the sales
incentive contest, beer festivals and trade shows, and the design incentive
programs incurred in 1996 in an attempt to increase sales.
For the three months ended March 31, 1996 compared to the three months ended
March 31, 1995
Results of Operations [Continued]
Interest expense on the officers' loan payable decreased from $2,320 to $750 for
the three months ended March 31, 1996 compared to the three months ended March
31, 1995 as a result of the pay down of the officers loans by approximately
$72,000 in 1995. No payments have been made in 1996 on these loans with a
balance of $29,634.
37
<PAGE>
For the year ended December 31, 1995 compared to the year ended December 31,
1994
Riverosa had a net [loss] of $(4,724) for the year ended December 31, 1995
as compared to a net income of $14,861 for the year ended December 31, 1994.
This is primarily the result of a decrease in sales and gross profit in 1995.
The sales for Riverosa Company, Inc. for the years ended December 31, 1995
and 1994 were $81,185 and $195,095, respectively, a decrease of approximately
$114,000 or 58% in 1995. During 1993 and the early part of 1994, Riverosa had an
intensive marketing campaign to enter the marketplace for acceptance of its
products. Despite such efforts, sales decreased in 1994 and again in 1995
because the marketing efforts had not yet achieved the hoped for results within
that time period. The Company does not anticipate this trend in decreasing sales
to continue because it believes its marketing efforts have now enabled the
Company's product to achieve greater recognition and acceptance, and its
customers base is increasing in 1996. The Company intends to introduce at least
one new style beer within the next twelve months and explore changing the label
of the bottle. Emphasis will be placed on building businesses in bars and
restaurants as well as retail and supermarket outlets. The Company will attempt
to increase its distribution base by adding new distributors and design
incentive and price promotion programs.
Riverosa experienced a decline in the gross profit from 31% to 25% for 1995
from 1994. The reason for this decrease of 6% in gross profit is primarily the
result of an increase in the costs of the ingredients to manufacture the
products and the Company's inability to purchase ingredients at bulk prices. The
Company believes it will not be able to improve its gross profit until
sufficient working capital is available.
Riverosa's selling, general and administrative expenses for the years ended
December 31, 1995 and 1994 were approximately $17,500 and $31,400, respectively,
a decrease of approximately $14,000 or 44%. The reason for the decrease in these
expenses was that 1994 included start up costs of approximately $12,000 for the
marketing and distributing campaign of its products which were not repeated in
1995. The Company plans on hiring an advertising public relations firm in 1996
to build upon the uniqueness of an organic beer.
Riverosa's interest expense for the years ended December 31, 1995 and 1994
were approximately $8,500 and $10,200, respectively. The decrease of $1,700 in
interest expense was attributable to the repayment of officers loans during the
year ended December 31, 1995 of approximately $72,000.
Liquidity and Capital Resources
For the three months ended March 31, 1996 compared to the three months ended
March 31, 1995
At March 31, 1996, Riverosa had working capital of approximately $3,000.
This
38
<PAGE>
PERRY'S MAJESTIC BEER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
represents a decrease of approximately $7,000 in working capital from December
of 1995. This is primarily attributable to the net loss of $7,351 and cash of
$5,213 used for operations for the three months ended March 31, 1996. Riverosa's
cash balance at March 31,1 996 was approximately $44,000.
At March 31, 1995, Riverosa had cash of approximately $52,000 after
generating approximately $10,000 from operations and utilizing $15,500 in
repayment of officers loans.
For the year ended December 31, 1995 compared to the year ended December 31,
1994
The Riverosa Company, Inc. at December 31, 1995 had working capital of
approximately $15,000. During the years ended December 31, 1995 and 1994, the
Company generated cash of approximately $52,000 and $29,000, respectively, from
operations. During the year ended December 31, 1995, the Company repaid
officers' loans of approximately $72,000. The two officers of Riverosa, Ronald
Zagha and Marc Butler, each contributed in 1993 approximately $51,000 to be
utilized for working capital purposes. These monies were evidenced by notes with
interest of 10% per annum. The balance of these notes at December 31, 1995 and
March 31, 1996 were $29,634. At December 31, 1995, Riverosa's cash balance was
$28,782.
39
<PAGE>
BUSINESS
General
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"), was
formed in December, 1995. On March 29, 1996, the Company entered into an
agreement to acquire Riverosa Company, Inc. ("Riverosa"), a New York corporation
which was formed in November 1993. (References to the Company includes the
operations of Riverosa). See "Certain Transactions." The Company is engaged in
the marketing and sale of microbrewed beers and ales. Since June 1993, the
Company has sold and marketed its flagship brand, Perry's Majestic Beer
("Perry's"), which is distinguished by its use of organically grown barley and
hops. The Company's business strategy is to establish presence in the
craft-brewed beer market by creating and offering high quality full-flavored all
organic beers and other beers and/or ales. Presently, the Company's products are
produced under contract with Frankenmuth Brewers, Inc., a brewery located in
Frankenmuth, Michigan, which produces, bottles and labels Perry's using the
Company's name and logo. The Company's products are distributed in the New York
metropolitan area under an exclusive distribution agreement with Mootch & Muck,
Inc. ("Mootch & Muck") a subsidiary of the Company's parent company, Bev-Tyme,
Inc. ("Bev-Tyme"), a distributor of various beverages, beers and related
products. Perry's is presently distributed to retailers in ten stores and sold
in restaurants, supermarkets, beer and soda sales and retail outlets.
Perry's Majestic Beer is brewed with organically grown barley imported from
Canada and organically grown hops imported from Germany. It is a Vienna style
lager beer whose characteristics showcase the quality aspects of superior barley
flavor, distinguished by deep copper color and a big malt palette. In keeping
with its organic character, Perry's utilizes a 10-12 week brewing process that
introduces no herbicides, chemical pesticides or inorganic fertilizers in the
growing of the barley or hops. No additives, artificial ingredients or
preservatives are added during the brewing or bottling stages.
The Company anticipates that it will utilize proceeds from this offering to
expand the market for Perry's, develop new beers and ales and to establish and
operate a brewpub/ restaurant and microbrewery in the New York metropolitan
area.
Industry Overview
According to the Institute for Brewery Studies ("IBS"), total beer
consumption in the United States in 1994 was approximately 6.2 billion gallons.
The production and sale of beer in the United States is dominated by major
domestic breweries, such as Adolph Coors Co., Anheuser-Busch, Inc . and Miller
Brewing Co. The major domestic breweries accounted for approximately 94% of the
beer consumed in the United States in 1994, imported beer accounted for
approximately 5% of consumption with domestic craft breweries (including
regional specialty
40
<PAGE>
breweries, contract brewing companies, microbreweries and brewpubs) accounting
for approximately 1%.
The Company participates in the specialty beer segment of the $50 billion
domestic beer market. Specialty beers are generally brewed according to
traditional German or English recipes and tend to be more full-bodied and more
bitter or tart in taste than massed produced domestic beers. As a result, these
amber lagers and ales, stouts, porters, bocks, German recipe wheat beers and
seasonal brews tend to be more flavorful and fresher tasting. The domestic
specialty beer segment grew at a compound annual rate of approximately 37% in
the five years ended December 31, 1994, while volume in the overall domestic
beer market has remained relatively flat. The Company believes that this growth
in the specialty beer segment has resulted from several factors. Specialty beer
"made in small batches" from "all natural ingredients" is better than mass
produced domestic and imported products, particularly powerful in light of the
trend among large brewers to minimize costs through the use of lower cost
adjuncts. The increased consumer demand for specialty beers allows for a price
premium relative to mass produced beers. This price premium results in high
profit margins throughout the distribution channel motivating distributors and
retailers to carry and promote products of the specialty beer segments.
The Microbrewery Industry.
The revival of small local breweries, commonly known as microbreweries,
began in the late 1970s and early 1980s. Several national trends have combined
to create favorable conditions permitting the microbrewery industry to emerge
and grow. First, domestic breweries consolidated into the remaining industrial
breweries which resulted in a narrowing of the types of domestically-produced
beer available to consumers. This trend has benefited the microbrewery industry
which produces many different types of beer representing an expansion of beer
choices. Second, consumers have placed increasing emphasis on health and
nutrition as a principal element of contemporary lifestyle and have become more
focused on the health concerns and abuse relating to the consumption of alcohol.
As a result, consumers are reducing their level of consumption of alcoholic
beverages but are increasing the quality of alcoholic beverages they consume.
Due in part to its growth, the microbrewing industry has undergone
significant change and is now more accurately referred to as the "craft beer"
industry. The craft beer industry has been broken into four industry subgroups -
regional specialty breweries, contract brewing companies, microbreweries and
brewpubs. Together there four subgroups comprise what was previously described
as the microbrewing industry. The IBS defines each of these subgroups as
follows:
Regional Specialty Brewery. A brewery which produces between 15,000 and
1,000,000 barrels of beer per year.
Contract Brewing Company. A business that does not brew its own beer, but
markets and sells beer brewed to its specifications by an existing brewery.
41
<PAGE>
Microbrewery. A brewery that produces less than 15,000 barrels of
hand-crafted beer per year principally for distribution to restaurants, taverns
and retail stores, and in some cases for direct sale to consumers for on-site
consumption or take-out in small containers.
Brewpub. A restaurant/brewery that sells at least 50% of its beer
production to consumers for on-site consumption or take-out in small containers.
The microbrewing industry is currently experiencing growth. According to
the IBS, the amount of beer produced by microbreweries in the United States in
1994 grew by 50% from the amount produced in 1993 for a total of 2.5 million
barrel sales. Microbrewed beers' share of the total United States beer market
increased from approximately 0.9% in 1993 to approximately 1.3% in 1994.
Product Diversity and Quality
The Company intends to continue to expand its product line with additional
beers designed to appeal to varying consumer preferences. The Company currently
markets its organically brewed Perry's Majestic Beer. The Company intends to
establish a selection of year-round and seasonal beers that will attract
consumers to specialty beers and allow them to explore new tastes. In this
regard, the Company intends to introduce an ale and/or non-alcoholic beer within
one year after the completion of this offering. In the future the Company may
also explore the development of non-organic beers. Perry's Majestic Beer is
brewed for the Company, under contract with a non-affiliated third party, using
organic ingredients, and uses no additives, adjuncts or preservatives in the
brewing process. Perry's Majestic Beer presently utilizes organic barley
imported from Canada and organic hops from Germany. The Organic Growers and
Buyers Association and Organic Crop Improvement Association regularly inspect
and certify growers, storage silos, transport companies, malting houses, and
breweries to assure purity of ingredients. Before farms are certified as organic
they must not have used any herbicides or pesticides for three years.
Brewpub
The Company has initiated efforts to identify a suitable location for its
brewpub in the City of New York. The Company's efforts are focused at present in
Manhattan, although no specific location has yet been identified. The size of
that facility will depend in significant part upon its location, the proposed
lease terms and the nature of the restaurant facility which it will include.
Once a specific location is identified the Company will be able to project the
brewing capacity of that location as well as itemized costs. The Company has not
begun the design of its brewery facility and has not entered into any contract
or commitment in connection with its construction. The Company anticipates that
the brewpub will utilize up-to-date brewery and packaging technology.
42
<PAGE>
Competition.
The beer industry is highly competitive and the Company expects competition
in the craft beer segment of the industry to increase. The Company will compete
with large domestic and foreign industrial breweries, as well as microbreweries
and brewpubs that produce high quality ale and lager beers. All industrial
breweries and many microbreweries have significantly greater resources than the
Company.
Domestic beer production is dominated by large American industrial
breweries, such as Anheuser-Busch, Inc., Miller Brewing Company, Stroh Brewery
Co., G. Heilman Brewing Co., Pabst Brewing Co. and Adolph Coors Co. all of which
have greater financial, production, distribution and marketing resources than
the Company. The major domestic breweries accounted for approximately 94% of the
beer produced in the United States in 1994. The large domestic beer producers
generally offer a homogeneous selection of beers designed for mass appeal. These
beers, principally light-bodied lagers and pilsners, are brewed using low cost
mass production techniques, lower cost adjuncts, such as rice and corn, and
relatively less hops. In contrast to the substantial growth in the specialty
beer segment in recent years, over the last ten (10) years, overall growth in
the domestic beer market has been relatively low, with volume growing at an
annual rate of less than 1% since 1984. Adult per capita annual beer consumption
in the United States has declined from 36 gallons in 1978 to 32 gallons in 1994.
The Company believes that this low growth rate and reduced beer consumption can
be attributed to a variety of factors, including increased concern about health
consequences of consuming alcoholic beverages; safety consciousness and concerns
about drinking and driving; a trend toward a diet including lighter, lower
caloric beverages such as diet soft drinks, juices and sparkling water products;
the increased activity of anti-alcohol consumer protection groups; an increase
in the minimum drinking age from 18 to 21 years in all states; the general aging
of the population; and increased federal and state excise taxes. The growing
consumer trend towards moderation in alcohol consumption has benefitted
specialty beers by resulting in beer drinkers' selective consumption of one or
two better tasting beers per sitting.
In response to the recent significant growth in the craft-beer industry,
several domestic industrial breweries are currently producing products to
compete with microbrewery products, such as Anheuser-Busch Elk Mountain and Red
Wolf beers and Miller - Red Dog beer and Miller Reserve Amber Ale 100% Barley
Draft. The Company believes that consumers will be attracted to locally produced
craft beers more so than industrial beers "dressed-up" to look like local
craftbeers, because "imitation" craft-beers generally lack the freshness and a
distinctive taste of a craftbeer.
Within the microbrewing industry, the Company believes that its principal
competitors will be microbreweries located in the Northeast Region of the United
States, such as Boston Beer Company, the producer of Samuel Adams Beers, and
brewpubs that produce high quality products. According to the IBS, there are at
least seven (7) brewpubs in the New York, New Jersey, Connecticut Tri-State area
and approximately forty (40) microbreweries in the Northeast
43
<PAGE>
Region (including fifteen (15) which commenced operations in 1994), all of which
will be in competition with the Company.
The terms craft brewer and micro-brewer are usually used interchangeably by
consumer and within the industry to mean a small, independent brewer whose
predominant product is brewed with only traditional brewing processes and
ingredients. Craft brewers include contract brewers, small regional brewers and
brewpubs. Craft beers are full-flavored beers brewed with quality hops, malted
barley, yeast and water without adjuncts such as rice, corn or stabilizers or
water dilution used to lighten beer for mass production and consumption. In
response to increased consumer demand for more flavorful beers, the number of
craft brewed beers has increased dramatically. Currently there are more than 500
craft brewers. In addition to the many independent brewers and contract brewers,
the three major brewers (Anheuser-Busch, Incorporated, Miller Brewing Co. and
Coors Brewing Co.) have all entered this fast-growing market, either through
developing their own specialty beers or by acquiring or forming partnerships
with existing craft brewers.
The Company competes directly with regional craft brewers such as The
Boston Beer Company, Sierra Nevada Brewing Company, Redhook Ale Brewery,
Incorporated and Anchor Brewing Company, other contract brewers such as Pete's
Brewing Company, foreign brewers such as Heineken, Molson, Corona, Amstel and
Becks, and other regional craft brewers and brewpubs. The Company also expects
competition by niche beers produced by affiliates of certain major domestic
brewers such as Anheuser-Busch, Incorporated, Miller Brewing Co. and Coors
Brewing Co. See "Risk Factors -- Competition."
Government Regulation
The Company's business is highly regulated by federal, state and local laws
and regulations, federal and state laws and regulations govern licensing
requirements, trade and pricing practices, permitted and required labeling,
advertising, promotion and marketing practices, relationships with distributors
and related matters. For example, federal and state regulators require warning
labels and signage on the Company's products. The Company believes that is has
obtained all regulatory permits and licenses necessary to operate its business
in the states where the Company's products are currently being distributed.
Failure on the part of the Company to comply with federal, state or local
regulations could result in the loss or revocation or suspension of the
Company's licenses, permits or approvals and accordingly could have a material
adverse effect on the Company's business. Governmental entities also levy
various taxes, license fees and other similar charges and may require bonds to
ensure compliance with applicable laws and regulations. The Company must also
comply with numerous federal, state and local environmental protection laws. The
Company is operating within existing laws and regulations or is taking action
aimed at assuring compliance therewith. The Company does not expect compliance
with such laws and regulations to materially affect the company's capital
expenditures, earnings or competitive position.
44
<PAGE>
The federal government and each of the states levy excise taxes on
alcoholic beverages, including beer. The federal excise tax is currently $18.00
per barrel ($1.30 per case of 24-12 oz. containers) and the state excise taxes
range from $23.80 per barrel to $1.24 per barrel. Federal excise taxes are
typically included in the price charged to retailer by the distributors. All
excise taxes are ultimately passed on to the consumer. It is possible that in
the future the rate of excise taxation could be increased by both the federal
government and a number of state governments. Further increases in excise taxes
on beer, if enacted, could materially and adversely affect the Company's
financial condition and results of operations. There is a small brewers federal
excise tax credit that grants each brewing company with production under
2,000,000 barrels a year an $11.00 credit per barrel on its first 60,000 barrels
produced annually. The Company is currently able to take advantage of a $660,000
annual credit pursuant to this exemption. Although the Company is not aware if
any plans by the federal government to reduce or eliminate this small brewer's
credit or by federal or state authorities to increase the excise tax rate, and
such change could have a material adverse effect on the Company.
Certain states, including California, Connecticut, Delaware, Iowa, Maine,
Massachusetts, Michigan, New York, Oregon and Vermont, and a small number of
local jurisdictions, have adopted restrictive beverage packaging laws and
regulations that require deposits on beverage containers. Congress and a number
of additional state or local jurisdictions may adopt a similar legislation in
the future, and in such event, the Company may be required to incur significant
expenditures in order to comply with such legislation. Changes to federal and
state excise taxes on beer production, federal and state environmental
regulations, including laws relating to packaging and waste discharge, or any
other federal and state laws or regulations which affect the Company's products
could materially adversely affect the Company's results of operations.
Sales, Distribution and Marketing.
The Company intends to distribute and sell its products directly to beer
distributors who will sell directly to retail establishments such as grocery
stores and convenience stores and to bars and restaurants. The Company also
intends to market its products through a brewpub/restaurant it intends to
construct.
The Company has initiated efforts to identify a suitable location for its
brewpub in the City of New York. The Company's efforts are focused at present in
Manhattan, although no specific location has yet been identified. The size of
that facility will depend in significant part upon its location, the proposed
lease terms and the nature of the restaurant facility which it will include.
Once a specific location is identified the Company will be able to project the
brewing capacity of that location as well as itemized costs. The Company has not
begun the design of its brewery facility and has not entered into any contract
or commitment in connection with its construction. The Company anticipates that
the brewpub will utilize up-to-date brewery and packaging technology.
The Company distributes its products in the New York metropolitan area
through Mootch
45
<PAGE>
& Muck, a subsidiary of the Company's parent, Bev-Tyme, Inc. The Company intends
to enter into similar regional distribution arrangements covering other areas of
the United States. The Company has not entered into any other written
distribution arrangements and there can be no assurance that the Company will be
able to enter into distribution arrangements with other local distributors on
terms satisfactory to the Company or at all.
The Company's beers are presently distributed in 14 states: New York, New
Jersey, Massachusetts, Rhode Island, California, Arizona, Ohio, Michigan,
Florida, Georgia, North Carolina, Maryland, Virginia and Illinois.
The Company's marketing efforts will include advertising in regional and
national craftbeer publications, local media outlets (i.e. newspapers) and at
local craft-beer conventions and microbrew tasting events.
Suppliers
The Company purchases its barley and hops from Briess Malting and Hop
Union. The Company has no written agreement with the suppliers.
Contract Brewing
The Company believes that contract brewing gives it economic advantages
through lower capital and overhead costs per barrel and through lower
transportation costs than if it owned a single brewery to produce its beer.
Presently, the Company's products are produced under contract with Frankenmuth
Brewers, Inc., a brewery located in Frankenmuth, Michigan, which produces,
bottles and labels Perry's using the Company's name and logo. Although the
Company's beer is presently brewed at Frankenmuth, there can be no assurance
that this brewery will continue to provide services to the Company. In the event
the Company is unable to continue its relationship with Frankenmuth for any
reason, the Company would have to enter into a relationship with another brewery
which is able to produce organic beer to the Company's standards. Although the
Company believes that there are other such brewing facilities which would be
available, and the Company anticipates brewing a portion of its products at its
proposed brewpub facility, there can be no assurance that the Company will be
able to enter into such an agreement with another brewing facility, or to do so
on terms which are similarly favorable.
Distribution
The Company distributes its Perry's beers in ten (10) states in the United
States. The Company distributes its beer through a network of over ten (10)
distributors.
46
<PAGE>
Alcohol Beverage Regulation and Taxation
The manufacture and sale of alcoholic beverages is a highly regulated and
taxed business.
The Company's operations may be subject to more restrictive regulations and
increased taxation by federal, state and local governmental entities than are
those of non-alcohol related businesses. Federal, state and local laws and
regulations govern the production and distribution of beer. These laws and
regulations govern permitting, licensing, trade practices, labeling,
advertising, marketing, distributor relationships and related matters. Federal,
state and local governmental entities also levy various taxes, license fees and
other similar charges and may require bonds to ensure compliance with applicable
laws and regulations. Failure by the Company to comply with applicable federal,
state or local laws and regulations could result in penalties, fees, suspension
or revocation of permits, licenses or approvals. There can be no assurances that
other or more restrictive laws or regulations will not be enacted in the future.
See "Risk Factors--Government Regulation; Taxation."
Licenses and Permits
The Company purchases beer from one or more contract brewers and sells it
to distributors or retailers pursuant to a federal wholesaler's basic permit
issued to Riverosa. The Company has made application to have that permit issued
in the name of the Company. Brewery and wholesale operations require various
federal, state and local licenses, permits and approvals. In addition, some
states prohibit wholesalers and/or retailers from holding an interest in any
supplier such as the Company. Violation of such regulations can result in the
loss or revocation of existing licenses by the wholesale, retailer and/or
suppliers. The loss or revocation of any existing licenses, permits or
approvals, failure to obtain any additional or new licenses, permits or
approvals or the failure to obtain approval for the transfer of any existing
permits or licenses, including those required as a result of the
recapitalization, could have a material adverse effect on the ability of the
Company to conduct its business. On the federal level, brewers are required to
file with the Bureau of Alcohol, Tobacco and Firearms ("ATF") an amended
Brewer's Notice every time there is a material change in the brewing process or
brewing equipment, change in the brewery's location, change in the brewery's
management or a material change in the brewery's ownership. Brewers must seek
ATF approval of an amended Brewer's Notice prior to the change taking place.
Wholesalers must notify ATF within 30 days of any change in the wholesaler's
operations, change in the wholesalers's location, change in the wholesaler's
management or a material change in the wholesaler's ownership. The Company's
operations are subject to audit and inspection by ATF at any time. The Company
has never been audited or inspected by ATF.
On the state and local level, some jurisdictions merely require notice of
any material change in the operations, management or ownership of a permittee or
licensee. Some jurisdictions require advance approvals and require that new
licenses, permits or approvals must be applied for and obtained in the event of
a change in the management or ownership of the permittee or licensees. State and
local laws and regulations governing the sale of beer within a particular state
by an out of state brewer or wholesaler vary from locale to locale.
ATF permits and brewer's registrations can be suspended, revoked or
otherwise adversely
47
<PAGE>
affected for failure to pay tax, to keep proper accounts, to pay fees, to bond
premises, to abide by federal alcohol beverage production and distribution
regulations and to notify ATF of any change (as described above), or if holders
of 10% or more of the Company's equity securities are found to be of
questionable character. Permits, licenses and approvals from state regulatory
agencies can be revoked for many of the same reasons.
Because of the many and various state and federal licensing and permitting
requirements, there is a risk that one or more regulatory authorities could
determine that the Company has not complied with applicable licensing or
permitting regulations or does not maintain the approvals necessary for it to
conduct business within their jurisdictions. There can be no assurance that any
such regulatory action would not have a material adverse effect upon the Company
or its operating results.
Taxation
The federal government and each of the states levy excise taxes on
alcoholic beverages, including beer. The federal excise tax is $18.00 per
barrel. For brewers producing no more than 2,000,000 barrels of beer per
calendar year the federal excise tax is $7.00 per barrel on the first 60,000
barrels of beer removed for consumption or sale during a calendar year. As the
brewer of record of its beers, the Company has been able to take advantage of
this reduced tax on the first 60,000 barrels of its beer produced. Individual
states also impose excise taxes on alcoholic beverages in varying amounts, which
have also been subject to change. The state excise taxes are usually paid by the
Company's distributors.
Congress and state legislatures routinely consider various proposals to
impose additional excise taxes on the production and distribution of alcoholic
beverages, including beer, in connection with various governmental budget
balancing or funding proposals. Further increases in excise taxes on beer, if
enacted, could result in a general reduction of malt beverage sales.
Trademarks
The Company has obtained U.S. Trademark Registration for Perry's Majestic.
The Company regards its trademark as having substantial value and as being an
important factor in the marketing of its products. The Company is not aware of
any infringing uses that could materially affect its current business or any
prior claim to the trademarks that would prevent the Company from using such
trademarks in its business. The Company's policy is to pursue registration of
its marks whenever possible and to oppose vigorously any infringements on its
marks.
Management and Employees
As of April 10, 1996, the Company employed a total of 2 employees on a full
time basis.
The Company has experienced no work stoppages and considers its employee
relations to
48
<PAGE>
be satisfactory. The Company's employees are not represented by a labor union.
Conflict of Interests
After this Offering, Bev-Tyme will continue to own 100% of the Company's
outstanding shares of Preferred Stock. It is anticipated that Mootch & Muck will
continue to distribute a significant percentage of the Company's products, at or
near present levels and that the Company will continue to operate its executive
offices and distribution facilities leased and managed by Bev-Tyme. In addition,
Robert Sipper, Bev-Tyme's President and a Bev-Tyme director, is Chief Executive
Officer of the Company and a member of the Company's Board of Directors. Because
of Bev-Tyme's ownership interest in the Company and the identity of certain
management, certain conflicts of interest may occur between the Company and
Bev-Tyme. In such instances, any member of the Board of Directors who is also a
member of the Bev-Tyme Board of Directors may be precluded from participating in
corporate decisions. Although the Board of Directors of the company has not
adopted any written policy on this matter, the Delaware Corporation Law contains
specific provisions governing such conflicts.
Liability Insurance
The Company, like other manufacturers of products that are ingested, faces
inherent risk of exposure to product liability claims if, among other things,
the use of its products results in an injury. The Company currently does not
have any product liability insurance. There can be no assurance that the Company
will be able to obtain product liability insurance on terms acceptable to the
Company or at all and once obtained there can be no assurance that the Company
will be able maintain such insurance coverage. Moreover, the amount and scope of
any coverage may be inadequate to protect the Company in the event that a
product liability claim is successfully asserted against the Company.
Litigation
There is no material litigation pending or threatened against the Company
nor are there any such proceedings to which the Company is a party.
49
<PAGE>
MANAGEMENT
Directors and Executive Officers
The names and ages of the directors, executive officers and significant
employees, and promoters of the Company are set forth below.
Name Age Position Held
---- --- -------------
Robert Sipper 42 President, Chief Executive Officer, Chief
Financial Officer, Principal Accounting Officer
and Director
Mark Butler 44 Vice President-Sales and Secretary and Director
Matthew Harriton 31 Director
Background of Executive Officers and Directors
Robert Sipper has been Chief Executive Officer and Chief Financial officer
of the Company since March 1, 1996. He has served as a director of Bev-Tyme,
Inc. since November 1993 and Chief Executive Officer and President of Bev-Tyme,
Inc. since January, 1994. He graduated with a J.D. degree from Vermont Law
School in 1978 and entered private practice, He was associated with Dubbs,
Leopold, Davis & DePodwin, Attorneys at Law from 1979-1981. He became a partner
in the law firm of Leopold & Sipper, Attorneys at Law, from 1981 to March 1989.
In March, 1989, Mr. Sipper left the private practice of law and became Chief
Operating Officer/Executive Vice President of Mootch & Muck, a position he holds
today, which was the master Evian distributor for the Metropolitan New York -
New Jersey territory as well as the distributor of many other beverages and
selected specialty foods. Mr. Sipper established a subdistributor network for
Evian and other products in this territory. In 1990, Mr. Sipper negotiated the
sale of Mootch & Muck's Evian Master Distributor Agreement to Canada Dry
Bottling Company of New York.
Mark Butler has been President, Vice President - Sales and Secretary of
Riverosa since January 1990. Mr. Butler was appointed to the Company's Board of
Directors on April 4, 1996. Mr. Butler is also President of Mill Hill
Associates, a company which brokers various beverages to wholesaler and
distributor networks. From April 1988 to January 1990, Mr. Butler was National
Sales Manager for Snapple Beverage Co. From February 1986 to March 1988, he was
National Sales Manager for Glenville Importers. From November 1984 to January
1986, Mr. Butler was National Sales Manager of American Natural Beverage Corp.
From September 1980 to October 1984, he was president of Newport-Cambridge
Provisions which distributed beverages, including exclusive distribution of Soho
Natural Soda in New England. Mr. Butler received a degree in English / Business
Administration and Economics from Western State College of Colorado.
50
<PAGE>
Matthew L. Harriton, age 31, has served on the Company's Board of Directors
since January 3, 1996. Mr. Harriton is the Chief Financial Officer of Embryo
Development Corporation. Embryo Development Corporation is a public company
which trades on NASDAQ and which specializes in developing and distributing
medical devices. Prior to joining Embryo Development Corporation, Mr. Harriton's
professional experience included positions at CIBC Wood Gundy Securities
Corporation from June 1994 to December 1995, Coopers & Lybrand from September
1990 to May 1994, and The First Boston Corporation from June 1986 to June 1988.
Through private investments Mr. Harriton has been involved with the start-up and
development of several restaurants located in Manhattan. Mr. Harriton also
serves as a director of Decor Group, Inc., a privately held company involved in
the home decorating industry. He is a graduate of Lehigh University and received
his M.B.A. from Duke University's Fuqua School of Business
Executive Compensation
No cash or other compensation was paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer or any of the other executive
officers of the Company since its formation. Each director of the Company is
entitled to receive reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors of the Company. The members of the Board of
Directors intend to meet at least quarterly during the Company's fiscal year,
and at such other times duly called.
Employment Agreements
As of April 4, 1996, the Company entered into a three (3) year employment
agreement with Mark Butler pursuant to which Mr. Butler serves as the Company's
Vice President of Sales. The agreement provides for Mr. Butler to receive a
salary of $25,000 per annum until the closing of this offering and thereafter
$50,000 per annum. In addition, on each of March 31, 1997, March 31, 1998, and
March 31, 1999, the Company has agreed to grant Mr. Butler an option to purchase
100,000 shares of Common Stock exercisable at fair market value on the date of
issuance.
As of April 1996, the Company entered into a five (5) year employment
agreement with Robert Sipper pursuant to which Mr. Sipper serves as the
Company's President. The agreement provides for Mr. Sipper to receive a salary
of $50,000 per annum.
1996 Stock Plan
In March 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of, the 1996 Stock Plan
(hereinafter called the "1996 Plan"). The purpose of the 1996 Plan is to provide
an incentive and reward for those executive officers and other key employees in
a position to contribute substantially to the progress and success of the
Company, to closely align the interests of such employees with the interests of
stockholders of the Company by linking benefits to stock performance and to
retain the services of such employees, as well as to
51
<PAGE>
attract new key employees. In furtherance of that purpose, the 1996 Plan
authorizes the grant to executives and other key employees of the Company and
its subsidiaries of stock options, restricted stock, deferred stock, bonus
shares, performance awards, dividend equivalent rights, limited stock
appreciation rights and other stock-based awards, or any combination thereof.
The 1996 Plan is expected to provide flexibility to the Company's compensation
methods, after giving due consideration to competitive conditions and the impact
of federal tax laws. The Company anticipates that the Stockholders will be
requested to approve the adoption of the 1996 Plan in the near future.
The maximum number of shares of Common Stock with respect to which awards
may be granted pursuant to the 1996 Plan is initially 2,000,000 shares. Shares
issuable under the 1996 Plan may be either treasury shares or authorized but
unissued shares. The number of shares available for issuance will be subject to
adjustment to prevent dilution in the event of stock splits, stock dividends or
other changes in the capitalization of the Company.
The 1996 Plan will be administered by a committee consisting of not less
than two (2) members of the Board of Directors who are "disinterested" within
the meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code (including persons
who may be deemed outside directors by virtue of any transitional rule which may
be adopted by the Internal Revenue Service implementing such Section). The Board
will determine the persons to whom awards will be granted, the type of award
and, if applicable, the number of shares to be covered by the award. During any
calendar year, no person may be granted under the 1996 Plan awards aggregating
more than 100,000 shares (which number shall be subject to adjustment to prevent
dilution in the event of stock splits, stock dividends or other changes in
capitalization of the Company).
Types of Awards
Stock Options. Options granted under the 1996 Plan may be "incentive stock
options" ("Incentive Options") within the meaning of Section 422 of the Code or
stock options which are not incentive stock options ("Non-Incentive Options"
and, collectively with Incentive Options, hereinafter referred to as "Options").
The persons to whom Options will be granted, the number of shares subject to
each Option granted, the prices at which Options may be exercised (which shall
not be less than the fair market value of shares of Common Stock on the date of
grant), whether an Option will be an Incentive Option or a Non-Incentive Option,
the time or times and the extent to which Options may be exercised and all other
terms and conditions of Options will be determined by the Committee.
Each Incentive Option shall terminate no later than ten (10) years from the
date of grant, except as provided below with respect to Incentive Options
granted to 10% Stockholders (as hereinafter defined). No Incentive Option may be
granted at any time after October 2006. Each Non-Incentive Option shall
terminate not later than fifteen (15) years from the date of grant. The exercise
price at which the shares may be purchased may not be less than the Fair Market
Value of shares of Common Stock at the time the Option is granted, except as
provided below with respect
52
<PAGE>
to Incentive Options granted to 10% Stockholders. Options granted to executive
officers may not be exercised at any time prior to six (6) months after the date
of grant.
The exercise price of an Incentive Option granted to a person possessing
more than 10% of the total combined voting power of all shares of stock of the
Company or a parent or subsidiary of the Company ("10% Stockholder") shall in no
event be less than 110% of the Fair Market Value of the shares of the Common
Stock at the time the Incentive Option is granted. The term of an Incentive
Option granted to a 10% Stockholder shall not exceed five (5) years from the
date of grant.
The exercise price of the shares to be purchased pursuant to each Option
shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of shares
of the Company's Common Stock owned by the optionee at the time of the exercise
of the Option, (iii) in installments, payable in cash, if permitted by the
Committee or (iv) any combination of the foregoing. The stock-for-stock payment
method permits an optionee to deliver one (1) or more shares of previously owned
Common Stock of the Company in satisfaction of the exercise price of subsequent
Options. The optionee may use the shares obtained on each exercise to purchase a
larger number of shares on the next exercise. (The foregoing assumes an
appreciation in value of previously acquired shares). The result of the
stock-for-stock payment method is that the optionee can generally avoid
immediate tax liability with respect to any appreciation in the value of the
stock utilized to exercise the Option.
Shares received by an optionee upon exercise of a Non-Incentive Option may
not be sold or otherwise disposed of for a period determined by the Board upon
grant of the Option, which period shall be not less than six (6) months nor more
than three (3) years from the date of acquisition of the shares (the "Restricted
Period"), except that, during the Restricted Period (i) the optionee may offer
the shares to the Company and the Company may, in its discretion, purchase up to
all the shares offered at the exercise price and (ii) if the optionee's
employment terminates during the Restricted Period (except in limited
instances), the optionee, upon written request of the Company, must offer to
sell the shares to the Company at the exercise price within seven (7) business
days. The Restricted Period shall terminate in the event of a Change in Control
of the Company (as defined), or at the discretion of the Board. After the
Restricted Period, an optionee wishing to sell must first offer such shares to
the Company at the Fair Market Value.
Limited Stock Appreciation Rights. The Committee is authorized, in
connection with any Option granted under the 1996 Plan, to grant the holder of
such Option a limited stock appreciation right ("LSAR"), entitling the holder to
receive, within sixty (60) days following a Change in Control, an amount in cash
equal to the difference between the exercise price of the Option and the market
value of the Common Stock on the effective date of the Change in Control. The
LSAR may be granted in tandem with an Option or subsequent to grant of the
Option. The LSAR will only be exercisable to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.
Restricted and Deferred Stock. An award of restricted stock or deferred
stock may be granted under the 1996 Plan. Restricted stock is subject to
restrictions on transferability and other restrictions as may be imposed by the
Committee at the time of grant. In the event that the holder
53
<PAGE>
of restricted stock ceases to be employed by the Company during the applicable
restrictive period, restricted stock that is at the time subject to restrictions
shall be forfeited and reacquired by the Company. Except as otherwise provided
by the Committee at the time of grant, a holder of restricted stock shall have
all the rights of a stockholder including, without limitation, the right to vote
restricted stock and the right to recover dividends thereon. An award of
deferred stock is an award that provides for the issuance of stock upon
expiration of a deferral period established by the Committee. Except as
otherwise determined by the Committee, upon termination of employment of the
recipient of the award during the applicable deferral period, all stock that is
at the time subject to deferral shall be forfeited. Until such time as the stock
which is the subject of the award is issued, the recipient of the award has no
rights as a stockholder.
Dividend Equivalent Awards. A dividend equivalent gives the recipient the
right to receive cash or other property equal in value to the dividends that
would be paid if the recipient held a specified number of shares of Common
Stock. A dividend equivalent right may be granted as a component of another
award or as a free standing award.
Bonus Shares and other Share Based Awards. The 1996 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of obligations of the Company to pay cash under other plans or compensatory
arrangements, upon such terms as shall be determined by the Committee. The 1996
Plan also authorizes the Committee to grant other forms of awards based upon,
payable in, or otherwise related in whole or in part to, Common Stock,
including, without limitation, convertible or exchangeable debentures or other
debt securities, other rights convertible or exchangeable into shares, purchase
rights for shares, awards contingent upon performance of the Company, and awards
valued by reference to the book value of shares of Common Stock or awards
determined by reference to the value of securities of, or the performance of,
specified subsidiaries.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date of this
Prospectus with respect to the beneficial ownership of the outstanding shares of
the Company's Common Stock by (i) any holder of more than five percent (5%) of
the outstanding shares; (ii) the Company's officers and directors; and (iii) the
directors and officers of the Company as a group:
- --------------------------------------------------------------------------------
Percentage Percentage Percentage
(%) of (%) of (%) of
Shares of Common Common Shares of Total
Name and Common Stock Stock After Preferred Combined
Address of Stock Before Offering Stock Vote
Beneficial Owner(1) Owned Offering Before
Offering
- --------------------------------------------------------------------------------
Robert Sipper 120,000 4.8 3.9 0 1.2
- --------------------------------------------------------------------------------
Marketing
Specialities, Inc. 1,470,000 58.8 47.4 0 14.7
- --------------------------------------------------------------------------------
Hartley T. 500,000 20.0 16.1 0 5.0
Bernstein(2)
- --------------------------------------------------------------------------------
Bev-Tyme, Inc.(3) 0.0 0 0 7,500,000 75.0
- --------------------------------------------------------------------------------
Matthew Harriton 50,000 2.0 1.6 0.0 0.0
- --------------------------------------------------------------------------------
Mark Butler 0.0 0.0 0.0 0.0 0.0
- --------------------------------------------------------------------------------
All officers and
directors as a
group (three (3) 170,000 6.8 5.5 0 0
persons)
- --------------------------------------------------------------------------------
- ----------
(1) The address of each Stockholder shown above except as otherwise indicated
is c/o Perry's Majestic Beer, Inc., 134 Morgan Avenue, Brooklyn, New York.
(2) The address of Hartley T. Bernstein is 950 Third Avenue, New York, New York
10022. Mr. Bernstein is a partner in the firm of Bernstein & Wasserman,
LLP, which firm is passing upon certain legal matters in connection with
this offering for the Company.
(3) Includes 500,000 shares of Series A Preferred Stock and 7,000,000 shares of
Series B Preferred Stock .
55
<PAGE>
CERTAIN TRANSACTIONS
On October 26, 1995, Bev-Tyme, Inc. entered into a letter of intent to
acquire Riverosa for the sum of $250,000. As part of that understanding,
Bev-Tyme agreed that Riverosa or its successors would enter into a three (3)
year employment agreement with Mark Butler at an annual salary of $25,000 year,
subject to appropriate increase in the event Riverosa (or it successors)
successfully completed an initial public offering of its securities resulting in
net proceeds in excess of $2,000,000. The Employment Agreement would also
provide for an annual bonus as well as stock options based upon performance. In
January 1996, Bev-Tyme, Inc. assigned its rights under the letter of intent to
the Company, which entered into a definitive agreement with Riverosa on March
29, 1996, pursuant to which the Company agreed to pay the sum of $250,000 to
acquire Riverosa. As of April 4, 1996 , the Company entered into a three (3)
year employment agreement with Mr. Butler pursuant to which he will receive an
annual salary of $25,000 per year to be increased to $50,000 per year upon
completion of the Company's initial public offering. The Agreement also provides
for payment of an annual bonus based at the sole discretion of the Company's
Board of Directors. Further, the Agreement provides that Mr. Butler will receive
options to purchase 100,000 shares of the Company's stock on each of March 31,
1997, March 31, 1998 and March 31, 1999, at fair market value as of the date of
issuance. The Agreement provides further that Mark Butler, one of the principal
shareholders of Riverosa was appointed to the Company's board of directors on
April 1, 1996. A contract deposit of $150,000 was paid into escrow upon
execution of the agreement and the balance of $100,000 is payable pursuant to a
promissory note bearing interest at a rate of 12 percent (12%) per year. The
promissory note is payable upon the earlier of (i) one year from the date of
issuance or (ii) the closing of the Company's initial public offering.
Prior to the acquisition, Bev-Tyme, through its subsidiary, acted as a
distributor of Perry's Majestic Beer. In January 1996, the Company issued an
aggregate of 2,500,000 shares of its common stock to seven (7) parties for total
consideration of $50,000. These shareholders are Robert Sipper, Hartley
Bernstein, Matthew Harriton, Marketing Specialities, Inc., Ulster Investments
and Judith Pace. Robert Sipper is a Director and President of the Company and of
Bev-Tyme. Matthew Harriton is a director of the Company. Hartley Bernstein is a
Director of Bev-Tyme and a member of Bernstein & Wasserman, counsel to the
Company. In March 1996, the Company issued to Bev-Tyme 500,000 shares of
convertible Series A Preferred Stock and 7,000,000 shares of Series B Preferred
Stock for $150,000 and 400,000 shares of Series C Preferred Stock of Bev-Tyme.
The Company issued these shares in January 1996 and March 1996 in order to
generate funds to acquire Riverosa, produce and market its product prior to this
offering, and pay the expenses of this offering. Each share of the Company's
Class A Preferred Stock issued to Bev-Tyme is convertible into one (1) share of
Common Stock and is entitled to one vote on all corporate matters. The Class B
Preferred Stock issued to Bev-Tyme is not convertible. Each share of Class B
Preferred Stock is entitled to one vote on all corporate matters. Each share of
the Bev-Tyme Series C Preferred Stock issued to the Company is convertible into
18 shares of common stock and possesses one vote on all corporate matters. As a
result of the foregoing transactions, Bev-Tyme currently owns seventy-five
percent (75%) of the Company's voting stock.
56
<PAGE>
In March, 1996, the Company borrowed an aggregate of $150,000 from seven
(7) unaffiliated lenders (the "Bridge Lenders"). In exchange for making loans to
the Company, each Bridge Lender received a promissory note (the "Bridge Note").
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Bridge Notes are due and payable upon the earlier of (i) July 31,
1996 or (ii) the closing of an initial underwritten public offering of the
Company's securities. The Company intends to use a portion of the proceeds of
this Offering to repay the Bridge Lenders. See "Use of Proceeds." The Bridge
Lenders have the right to receive a total of 3,000,000 Class A Warrants. The
Company has recorded a deferred financing cost of $1,500,000 for the warrants
and will charge to operations as a non-cash financing cost $1,500,000 over the
life of the bridge loan. Assuming the loan will be repaid in July of 1996 this
would represent an APR of 3,000% to the bridge lenders in addition to the 8%
interest charged on the bridge loans. The Company entered into the bridge
financing transactions because it required additional financing and no other
sources of financing were available to the Company at that time. Further, the
Company agreed to register the Class A Warrants issuable in connection with the
Bridge Loans and the shares of Common Stock underlying the Class A Warrants in
the first registration statement filed by the Company following the date of the
loan. Therefore, the Registration Statement, of which this Prospectus forms a
part, relates to the 3,000,000 Class A Warrants issuable in connection with the
Bridge Notes. See "Selling Securityholders" "Bridge Financings" and
"Underwriting."
57
<PAGE>
DESCRIPTION OF SECURITIES
The Company is offering 300,000 Units, each Unit consisting of two (2)
shares of Common Stock, par value $.0001 per share and one (1) Class A Warrant.
Upon completion of this Offering, the securities comprising the Units will be
separately transferable.
Common Stock
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
of which 2,500,000 shares will be issued and outstanding as of the date of this
Prospectus. All of the issued and outstanding shares of Common Stock will be
fully paid, validly issued and non-assessable.
Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividend Policy."
Upon liquidation, dissolution or winding up of the Company, after payment of
creditors and the holders of any senior securities of the Company, including
Preferred Stock, if any, the assets of the Company will be divided pro rata on a
per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one (1) vote for
each share held at all stockholders' meetings including the annual meeting, for
all purposes, including the election of directors. The Common Stock does not
have cumulative voting rights.
Preferred Stock
The Company's Certificate of Incorporation authorizes 15,000,000 shares of
"blank check" Preferred Stock, whereby the Board of Directors of the Company
shall have the authority, without further action by the holders of the
outstanding Common Stock, to issue shares of Preferred Stock from time to time
in one or more classes or series, to fix the number of shares constituting any
class or series and the stated value thereof, if different from the par value,
and to fix the term of any such series or class, including dividend rights,
dividend rates, conversion or exchange rights, voting rights, rights and terms
of redemption (including sinking fund provisions), the redemption price and the
liquidation preference of such class or series. As of the date of this
Prospectus, there are 500,000 shares of Series A Preferred Stock and 7,000,000
shares of Series B Preferred Stock issued and outstanding. The Company has
agreed with the Underwriter that it will not issue any additional shares of
preferred stock for a period of twelve (12) months from the date of this
58
<PAGE>
Prospectus without the prior written consent of the Underwriter.
Series A Preferred Stock
Designation and Amount; Par Value. The shares of such series are designated
as Series A Preferred Stock and the number of shares constituting such series is
500,000, 500,000 of which are issued and outstanding prior to the Effective Date
of the Offering. The Series A Preferred Stock has $.0001 par value per share.
Dividends. Holders of the Series A Preferred Stock do not have any right to
the payment of any dividend.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, each share
of Series A Preferred Stock shall have a liquidation preference of $.20 plus
unpaid annual dividends that have accrued to date of payment, if any.
Voting Rights. Each holder of Series A Preferred Stock shall be entitled to
one (1) vote per share on all matters presented to the stockholders of the
Company.
Conversion Rights. Each share of Series A Preferred Stock may be converted
into one (1) share of the Company's Common Stock at the option of the holder.
Rank. The shares of Series A Preferred Stock rank senior to all series of
preferred stock and the Common Stock in all respects.
Series B Preferred Stock
Designation and Amount; Par Value. The shares of such series are designated
as Series B Preferred Stock and the number of shares constituting such series is
7,000,000, 7,000,000 of which are issued and outstanding prior to the Effective
Date of the Offering. The Series B Preferred Stock has $.0001 par value per
share.
Dividends. Holders of the Series B Preferred Stock do not have any right to
the payment of any dividend.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, each share
of Series B Preferred Stock shall have a liquidation preference of $.01 plus
unpaid annual dividends that have accrued to date of payment, if any.
Voting Rights. Each holder of Series B Preferred Stock shall be entitled to
one (1) vote per share on all matters presented to the stockholders of the
Company.
59
<PAGE>
Rank. The shares of Series B Preferred Stock rank senior to all series of
preferred stock and the Common Stock in all respects except to the Series A
Preferred Stock.
Class A Warrants
Each Class A Warrant entitles the holder to purchase one (1) share of
Common Stock at a price of $4.00 per share for a period of four (4) years
commencing one (1) year from the Effective Date of this Offering. Each Class A
Warrant is redeemable by the Company for $.05 per Class A Warrant, at any time
after ____, 1997, upon thirty (30) days' prior written notice, if the closing
price of the Common Stock, as reported by the principal exchange on which the
Common Stock is traded, The Nasdaq Small Cap Market or the National Quotation
Bureau Incorporated, as the case may be, exceeds $______ per share for twenty
(20) consecutive trading days prior to the date of the notice of redemption.
Upon thirty (30) days' written notice to all holders of Class A Warrants, the
Company shall have the right, subject to compliance with Rule 13E-4 under the
Securities Exchange Act of 1934 and the filing of Schedule 13E-4 and, if
required, a post-effective amendment to this registration statement, to reduce
the exercise price and/or extend the term of the Class A Warrants.
The Class A Warrants can only be exercised when there is a current
effective registration statement covering the shares of Common Stock underlying
the Class A Warrants. If the Company does not or is unable to maintain a current
effective registration statement, the holders of Class A Warrant certificates
will be unable to exercise the Class A Warrants and the Class A Warrants may
become valueless. Moreover, if the shares of Common Stock underlying the Class A
Warrants are not registered or qualified for sale in the state in which a holder
of Class A Warrant certificates resides, such holder might not be permitted to
exercise the Warrants. See "Risk Factors - Current Prospectus and State Blue Sky
Registration in Connection with the Exercise of the Warrants."
Each Class A Warrant may be exercised by surrendering the Warrant
certificate, with the form of election to purchase on the reverse side of the
Class A Warrant certificate properly completed and executed, together with
payment of the exercise price, or $4.00 per share, to the Transfer Agent. The
Class A Warrants may be exercised in whole or from time to time in part. If less
than all of the Class A Warrants evidenced by a Warrant certificate are
exercised, a new Class A Warrant certificate will be issued by the Company's
Transfer Agent for the remaining number of Class A Warrants.
Holders of the Class A Warrants are protected against dilution of the
equity interest represented by the underlying shares of Common Stock upon the
occurrence of certain events, including, but not limited to, issuance of stock
dividends. If the Company merges, reorganizes or is acquired in such a way as to
terminate the Class A Warrants, the Class A Warrants may be exercised
immediately prior to such action. In the event of liquidation, dissolution or
winding up
60
<PAGE>
of the Company, holders of the Class A Warrants are not entitled to participate
in the Company's assets.
For the life of the Class A Warrants, the holders thereof are given the
opportunity, at nominal cost, to profit from a rise in the market price of the
Common Stock. The exercise of the Class A Warrants will result in the dilution
of the then book value of the Common Stock of the Company held by the public
investors and would result in a dilution of their percentage ownership of the
Company.
Warrantholders may not be able to exercise their warrants in any states
where the Company's securities are not qualified for sale pursuant to that
state's blue sky laws. As of the effective date of this offering, the Company's
securities had qualified for sale in the following states: [to be provided].
Delaware Anti-Takeover Law
The Company is governed by the provisions of Section 203 of the General
Corporation Law of Delaware, an anti-takeover law enacted in 1988. In general,
the law prohibits a Delaware public corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three (3) years
after the date of the transaction in which the person became an interested
stockholder, unless it is approved in a prescribed manner. As a result of
Section 203, potential acquirors of the Company may be discouraged from
attempting to effect acquisition transactions with the Company, thereby possibly
depriving holders of the Company's securities of certain opportunities to sell
or otherwise dispose of such securities at above-market prices pursuant to such
transactions.
61
<PAGE>
Limitation on Liability of Directors
In connection with the Offering, the Underwriter has agreed to indemnify
the Company, its directors, and each person who controls it within the meaning
of Section 15 of the Securities Act with respect to any statement in or omission
from the registration statement or the Prospectus or any amendment or supplement
thereto if such statement or omission was made in reliance upon information
furnished in writing to the Company by the Underwriter specifically for or in
connection with the preparation of the registration statement, the prospectus,
or any such amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
62
<PAGE>
Commission Policy
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and other agents of the Company, the Company
has been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Transfer Agent & Registrar
The transfer agent and registrar for the Company's securities is American
Stock Transfer & Trust Company (the "Transfer Agent").
FEDERAL INCOME TAX CONSEQUENCES
The Company has obtained no ruling from the Internal Revenue Service (the
"IRS") with respect to these consequences, and there can be no assurance that
the IRS will agree with the conclusions herein or that a challenge, if made,
will not be successful. This discussion does not address all aspects of U.S.
federal income taxation, and does not discuss considerations applicable to a
holder who is, with respect to the United States, a nonresident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, but does discuss all material federal income tax consequences. This
discussion also does not consider specific facts and circumstances that may be
relevant to a particular holder's tax position. The information is based on
provisions of the Code, existing regulations thereunder and judicial decisions,
and the IRS's current administrative rules, practices and interpretations of
law, all as in effect on the date hereof and all of which are subject to change
or modification. Each prospective investor is urged to consult such investor's
own tax advisor with respect to the individual U.S. federal, state, local and
foreign tax consequences of holding and disposing of the Common Stock and the
Class A Warrant, as well as any tax consequences arising under the laws of any
other taxing jurisdiction.
Allocation of Basis Between Common Stock and Class A Warrants
A holder must allocate the cost of each Unit between each of its elements
(two shares of Common Stock and one Class A Warrant) in accordance with their
relative fair market values on the date of purchase for the purpose of
determining the adjusted tax basis of each such element. The Company's
allocation of the $10.00 per Unit price equally between the two (2) shares of
Common Stock without allocating any portion to the Warrants component of the
Unit is not necessarily indicative of the proper allocation for tax purposes. In
making such allocation, the Company took into account the fact that the Units
are not exercisable during the twelve month period after the effective date of
this offering.
63
<PAGE>
Consequences to Holders of Common Stock
Sale. Upon the sale of Common Stock to an unrelated party other than the
Company, the holder will recognize gain or loss measured by the difference
between the amount realized and the holder's adjusted tax basis in the share.
Such gain or loss generally will be capital gain or loss if the share of Common
Stock is a capital asset in the hands of the holder (i.e. property generally
held for investment). This gain or loss will be a long-term capital gain or loss
if the shares of Common Stock were held for more than one year. An individual
holder's capital gains are potentially subject to a reduced tax rate if the
share of Common Stock were held for more than one year, while his other capital
losses are deductible annually only to the extent of the capital gains plus
$3,000. If a share of Common Stock is redeemed by the Company, the holder will
generally recognize income or loss equal to the difference between the holder's
tax basis in the share of Common Stock and the redemption price; provided that
the receipt of cash from the Company is not treated under the Internal Revenue
Code as a dividend.
Under Section 1202 of the Code, certain noncorporate holders who hold
(either directly or through a partnership, "S" corporation or regulated
investment company) certain stock that is acquired directly from an issuing
corporation for more than five years may exclude from gross income 50%(subject
to certain maximum exclusions) of any gain realized on the sale or exchange of
such stock, However, this exclusion is available only if the stock is"qualified
small business stock." In order to be qualified small business stock, the
company issuing stock must have "aggregate gross assets" of less than
$50,000,000 immediately after the issuance of the stock and otherwise be
classified as a "qualified small business" throughout the period the stock is
held by a shareholder. The Company has represented that its aggregate gross
assets will be less than $50,000,000 at the time the Units are issued.
Nonetheless, it is not possible to determine whether the Common Stock issued
hereunder will be qualified small business stock at the time of its sale or
exchange by a holder.
This uncertainty is due in part to the lack of Treasury Regulations or IRS
authority interpreting the qualified small business stock rules, including the
requirement that 80% of the Company's assets (by value) be used in the "active
conduct of a qualified trade or business." This requirement is violated if,
among other things, (i) the Company's business "involves the performance of
services in the field of health" or has as its principal asset the reputation or
skill of its employees, (ii) more than 10% of the value of the Company's net
assets are attributable to corporate stock or securities held for investment
other than to finance research and experimentation in a qualified trade or
business or to meet the Company's reasonable working capital needs within the
next two years, or (iii) the total value of the corporate stock or securities
owned by the Company exceeds 50% of the total value of its assets (regardless of
whether such stock or securities are required for present or future research and
experimentation or working capital needs). The Company believes that it meets
these requirements.
Furthermore, certain parts of the qualified small business stock rules
(including the "active
64
<PAGE>
conduct of a qualified trade or business" requirement, but not including, the
$50,000,000 aggregate gross asset requirement) apply throughout the holding
period of the Common Stock. Subsequent actions or events (such as an increase in
the Company's overall percentage of investment assets, a decline in the value of
its other assets, or the Company's redemption of shares of stock within two
years of the issuance of the Common Stock) may prevent the Common Stock from
qualifying. Finally, it is possible that Congress will eliminate the qualified
small business stock at the time of its sale or other disposition, and holders
should consult their tax advisors at that time to determine to what extent this
is the case.
Consequences to Holders of Class A Warrants
Sale. Upon the sale of a Class A Warrant other than to the Company, the
holder will recognize gain or loss measured by the difference between the amount
realized and the holders' tax basis in the Class A Warrant. The resulting gain
or loss from the sale of the Class A Warrant generally will be treated as a
capital gain or loss if the Class A Warrant is a capital asset in the hands of
the holder and the shares of Common Stock underlying the Class A Warrants would
be capital assets in the hands of the holder, and will be long-term capital gain
or loss if the Class A Warrant was held for more than one year. A sale of a
Class A Warrant to the Company could, under certain circumstances, be treated as
a dividend for federal income tax purposes.
Exercise. Upon exercise of a Class A Warrant, the holder generally will not
recognize gain or loss for federal income tax purposes, except with respect to
cash, if any, paid in lieu of the issuance of a fractional share of Common
Stock. A holder's tax basis in a Class A Warrant prior to the exercise,
increased by the amount paid to exercise the Class A Warrant, will constitute
the holder's tax basis in the share of Common Stock received upon exercise. The
holding period of such shares of Common Stock for capital gain or loss
characterization and other purposes, however, will not include the period during
which the Class A Warrant was held. Thus, the sale of a share of Common Stock
received upon exercise within one year of exercise will be taxed as short-term
capital gain or loss if the share is a capital asset in the hands of the holder.
Provided that the receipt of cash in lieu of a fractional share of Common Stick
is not treated as a dividend because it is essentially equivalent to a dividend
or because it is not a substantially disproportionate redemption with respect to
the holder, the receipt of such cash will cause a holder to recognize gain or
loss, if any, equal to the difference between the cash received and the holder's
tax basis in the exercised Class A Warrant allocated to such fractional share.
This gain or loss will generally be a capital gain or capital loss if the share
of Common Stock received upon the exercise of the Class A Warrant is a capital
asset in the hold of the holder. If the Class A Warrant lapses without exercise,
the Class A Warrant will be deemed to have been sold or exchanged, and the
holder generally will recognize a capital loss (assuming the Common Stock to be
acquired upon exercise would have been a capital asset in the hands of such
holder) equal to the holder's adjusted tax basis in the Class A Warrant. Any
such capital loss will be long-term if the holding period for the Class A
Warrant exceeds one year. Although counsel is unable to opine to this issue, the
Common Stock received upon the exercise of a Class A Warrant might qualify for
the 50% capital gains reduction discussed above, provided that the Company meets
the
65
<PAGE>
test described above under Section 1020 of the Code. See "Federal Income Tax
Consequences- Consequences to Holders of Common Stock-Sale."
Deemed Dividend Income. The Class A Warrant term provide for anti dilution
adjustments to the exercise price of the Class Warrants or the number of shares
of Common Stock purchasable upon exercise of the Class A Warrants under certain
circumstances. Certain of these adjustments, including an adjustment to reflect
a distribution in cash or property made to holders of Common Stock, may result
in a deemed dividend to holders of the Class A Warrants under Section 305(d) of
the Code.
The Company. No gain or loss will be recognized by the Company upon the
exercise or expiration of any Class A Warrants. Under rules limiting trafficking
in tax net operating losses and credit carryforwards, changes in a corporation's
capital structure, including changes caused by the issuance of common stock and
the issuance or exercise of warrants, any limit or prevent the corporation's
subsequent use of its tax net operating loss and credit carryforwards.
Accordingly, the issuance of the Units or subsequent exercise of the Class A
Warrants may, when considered in conjunction with other transactions involving
the Common Stock, limit or prevent the Company's use of its tax net operating
loss or credit carryforwards.
The Company believes that the foregoing discussion considers all the
material tax issues applicable to any investment in the Units (other than any
such issues that arise out of an investor's particular circumstances, and that
do not apply to all investors, such as, for example, the ownership by an
investor of other shares of Common Stock) and that, in the event of a challenge
by the IRS it is more likely than not (i.e. the likelihood is greater than 50%)
that the tax consequences will be determined as described herein.
66
<PAGE>
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the sale of (i) 3,000,000 Class A Warrants issuable upon conversion of
the Convertible Bridge Notes and (ii) 1,850,000 shares of Common Stock, 120,000
of which are held by Robert Sipper, hereinafter collectively referred to as the
"Selling Securityholders." The shares of Common Stock being registered on behalf
of Selling Securityholders constitute 74% of such outstanding shares prior to
the Offering and 59.7% of the outstanding shares of Common Stock upon completion
of the Offering. The Company will not receive any of the proceeds on the sale of
the securities by the Selling Securityholders. The resale of the securities of
the Selling Securityholders are subject to Prospectus delivery and other
requirements of the Securities Act of 1933, as amended (the "Act"). Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See "Risk Factors
- - Shares Eligible for Future Sale May Adversely Affect the Market."
67
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name Shares of Class A Shares of Class A Shares of Class A Percent of Percent of
Common Warrants Common Warrants Stock Owned Warrants Common Class A
Stock Owned Owned Stock Offered After Owned After Stock After Warrants
Before Before Offered Hereby Offering Offering Offering After
Offering Offering Hereby Offering
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Sipper 120,000 0 50,000 0 70,000 0 2.3 0
- ------------------------------------------------------------------------------------------------------------------------------------
Ulster Investments 120,000 100,000 120,000 100,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Hartley Bernstein 500,000 0 100,000 0 400,000 0 12.9 0
- ------------------------------------------------------------------------------------------------------------------------------------
First National Fund 120,000 100,000 120,000 100,000 0 0 0 0
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Harriton 50,000 0 40,000 0 10,000 0 .3 0
- ------------------------------------------------------------------------------------------------------------------------------------
Marketing
Specialities, Inc. 1,470,000 0 1,300,000 0 170,000 0 5.5 0
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Yordy 0 50,000 0 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Harold Yordy 0 50,000 0 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Judith Pace 120,000 0 120,000 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Dune Holdings, Inc. 0 1,000,000 0 1,000,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
MD Funding, Inc. 0 700,000 0 700,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
John Pasquale 0 1,000,000 0 1,000,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total 2,500,000 3,000,000 1,850,000 3,000,000 650,000 0 21.0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The securities
offered by the Selling Securityholders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
Sales of securities by the Selling Securityholder or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby.
69
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy
of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Underwriter has agreed to purchase from the Company
300,000 Units offered hereby from the Company on a "firm commitment" basis, if
any are purchased. The Underwriter has advised the Company that it proposes to
offer the Units to the public at $10.00 per Unit as set forth on the cover page
of this Prospectus and that it may allow to certain dealers who are NASD members
concessions not to exceed $____ per Unit, of which not in excess of $____ per
Unit may be reallowed to other dealers who are members of the NASD. After the
initial public offering, the public offering price, concession and reallowance
may be changed by the Underwriter.
The public offering price of the Units and the exercise price and other
terms of the Class A Warrants was arbitrarily determined by negotiations between
the Company and the Underwriter and do not necessarily relate to the assets,
book value or results of operations of the Company or any other established
criteria of value.
The Company has granted an option to the Underwriter, exercisable during
the thirty (30) day period from the date of this Prospectus, to purchase up to a
maximum of 45,000 additional Units at the Offering price, less the underwriting
discount, to cover over-allotments, if any.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
the Registration Statement, including liabilities arising under the Act. Insofar
as indemnification for liabilities arising under the Act may be provided to
officers, directors or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is therefore unenforceable.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance of three percent (3%) of the aggregate Offering price of the Units
offered hereby, including any Units purchased pursuant to the Over-Allotment
Option.
The Company has agreed to sell to the Underwriter, or its designees, for an
aggregate purchase price of $30, an option (the "Underwriter's Unit Purchase
Option") to purchase up to an aggregate of 30,000 Units. The Underwriter's Unit
Purchase Option shall be exercisable during a four (4) year period commencing
one (1) year from the Effective Date. The Underwriter's Unit Purchase Option may
not be assigned, transferred, sold or hypothecated by the Underwriter until
twelve (12) months after the Effective Date of this Prospectus, except to
officers or directors of the Underwriter or to selling group members in this
Offering. Any profits realized upon the sale of the Units issuable upon exercise
of the Underwriter's Unit Purchase Option may be deemed to be additional
underwriting compensation. The exercise price of the Units issuable upon
exercise of the Underwriter's Unit Purchase Option during the period of
70
<PAGE>
exercisability shall be one hundred twenty percent (120%) of the initial public
offering price of the Units. The exercise of the Underwriter's Unit Purchase
Option and the number of shares covered thereby are subject to adjustment in
certain events to prevent dilution. For the life of the Underwriter's Unit
Purchase Option, the holders thereof are given, at a nominal cost, the
opportunity to profit from a rise in the market price of the Company's Units,
Common Stock and Class A Warrants with a resulting dilution in the interest of
other stockholders. The Company may find it more difficult to raise capital for
its business if the need should arise while the Underwriter's Unit Purchase
Option is outstanding. At any time when the holders of the Underwriter's Unit
Purchase Option might be expected to exercise it, the Company would probably be
able to obtain additional capital on more favorable terms.
If the Company enters into a transaction (including a merger, joint
venture, equity financing, debt financing, or the acquisition of another entity)
introduced to the Company by the Underwriter, the Company has agreed to pay the
Underwriter a finder's fee equal to five percent (5%) of the first $4,000,000 of
consideration involved in the transaction, ranging in $1,000,000 increments down
to two percent (2%) of the excess, if any, over $6,000,000.
Upon the closing of the sale of the Units offered hereby, the Company will
enter into a two (2) year financial advisory and investment banking agreement
with the Underwriter, pursuant to which the Company will be obligated to pay the
Underwriter $72,000 in advance upon the closing of the Offering, for financial
and investment advisory services to the Company.
The Company has agreed with the Underwriter that the Company will pay to
the Underwriter a warrant solicitation fee (the "Warrant Solicitation Fee")
equal to four percent (4%) of the exercise price of the Class A Warrants
exercised beginning one (1) year after the Effective Date and to the extent not
inconsistent with the guidelines of the NASD and the rules and regulations of
the Commission. Such Warrant Solicitation Fee will be paid to the Underwriter if
(a) the market price of the Common Stock on the date that any Class A Warrants
is exercised is greater than the exercise price of the Class A Warrant; (b) the
exercise of such Class A Warrant was solicited by the Underwriter; (c) prior
specific written approval for exercise is received from the customer if the
Class A Warrant is held in a discretionary account; (d) disclosure of this
compensation agreement is made prior to or upon the exercise of such Class A
Warrant; (e) solicitation of the exercise is not in violation of Rule 10b-6 of
the Exchange Act; and (f) solicitation of the exercise is in compliance with
NASD Notice to Member 81-38. In addition, unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, the Underwriter will be
prohibited from engaging in any market making activities or solicited brokerage
activities with respect to the Company's securities for the period from nine (9)
business days prior to any solicitation of the exercise of any Class A Warrant
or nine (9) business days prior to the exercise of any Class A Warrant based on
a prior solicitation until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right the
Underwriter may have to receive such a fee for the exercise of Class A Warrants
following such solicitation. As a result, the Underwriter may be unable to
continue to provide a market for the Company's securities during that certain
period while the Class A Warrants are exercisable.
71
<PAGE>
See "Risk Factors - Lack of Prior Market for Units, Common Stock and Class A
Warrants; No Assurance of Public Trading Market."
The Company has agreed not to issue any securities for a period of twelve
(12) months from the Effective Date, without the prior written consent of the
Underwriter.
The foregoing is a summary of certain provisions of the Underwriting
Agreement and Underwriter's Unit Purchase Option which have been filed as
exhibits hereto.
Determination of Public Offering Price
Prior to this Offering, there has been no public market for the Units, the
Common Stock and the Class A Warrants. The initial public offering price for the
Units and the exercise price of the Class A Warrants have been determined by
negotiations between the Company and the Underwriter. Among the factors
considered in the negotiations were the market price of the Company's Common
Stock, an analysis of the areas of activity in which the Company is engaged, the
present state of the Company's business, the Company's financial condition, the
Company's prospects, an assessment of management, the general condition of the
securities market at the time of this Offering and the demand for similar
securities of comparable companies. The public offering price of the Units and
the exercise price of the Class A Warrants does not necessarily bear any
relationship to assets, earnings, book value or other criteria of value
applicable to the Company.
The Company anticipates that the Units, the Common Stock and the Class A
Warrants will be listed for quotation on The Nasdaq Small Cap Market under the
symbols, BEERU, BEER and BEERA, respectively, but there can be no assurances
that an active trading market will develop, even if the securities are accepted
for quotation. The Underwriter intends to make a market in all of the
publicly-traded securities of the Company.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022.
Bernstein & Wasserman, LLP, has served, and continues to serve, as counsel to
the Underwriter in matters unrelated to this Offering. Certain legal matters
will be passed upon for the Underwriter by Cohn & Birnbaum P.C., 100 Pearl
Street, Hartford, CT 06103. See "Management" and "Principal Stockholders."
EXPERTS
Certain of the financial statements of the Company included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Mortenson &
Associates, PC independent certified public accountants,
72
<PAGE>
whose reports thereon appear elsewhere herein and in the Registration Statement.
ADDITIONAL INFORMATION
This Prospectus constitutes part of a Registration Statement on Form SB-2
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act and omits certain information contained
in the Registration Statement. Reference is hereby made to the Registration
Statement and to its exhibits for further information with respect to the
Company and the Units, the Common Stock and Class A Warrants offered hereby.
Statements contained herein concerning provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.
The Registration Statement, including the exhibits thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at: 450 Fifth Street, Washington, D.C. 20549; and at the offices of
the Commission located at 7 World Trade Center, New York, NY 10048; and copies
of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549 at prescribed rates.
73
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page to Page
------------
<S> <C> <C>
Pro Forma Combined Financial Statements
Introduction......................................................................................... A-1 ..
Notes to the Pro Forma Financial Statements.......................................................... A-2 ..
Balance Sheet - March 31, 1996....................................................................... A-3 .. A-4
Statement of Operations - For the Year Ended December 31, 1995....................................... A-5 ..
Statement of Operations - For the Three Months Ended March 31, 1996.................................. A-6 ..
Perry's Majestic Beer, Inc.
Independent Auditor's Report......................................................................... B-1 ..
Balance Sheet as of March 31, 1996................................................................... B-2 ..
Statement of Stockholders' Equity from Inception [December 1995]
through the Period ended March 31, 1996.............................................................. B-3 ..
Statement of Cash Flows from Inception [December 1995] through
the Period ended March 31, 1996...................................................................... B-4 ..
Notes to Financial Statements........................................................................ B-5 .. B-7
Riverosa Company, Inc.
Independent Auditor's Report......................................................................... C-1 ..
Balance Sheet as of December 31, 1995 [Audited] and March 31, 1996
[Unaudited].......................................................................................... C-2 ..
Statements of Operations for the years ended December 31, 1995 and 1994
[Audited] and the three month ended March 31, 1996 and 1995 [Unaudited].............................. C-3 ..
Statements of Stockholders' Equity for the two years ended December 31, 1995
[Audited] and for the three months ended March 31, 1996 and 1995 [Unaudited]......................... C-4 ..
Statements of Cash Flows for the years ended December 31, 1995 and 1994
[Audited] and for the three months ended March 31, 1996 and 1995 [Unaudited]......................... C-5 ..
Notes to Financial Statements........................................................................ C-6 .. C-8
</TABLE>
. . . . . . . . . . . . . . .
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
- --------------------------------------------------------------------------------
The following pro forma combined balance sheet as of March 31, 1996, and the pro
forma combined statements of operations for the year ended December 31, 1995 and
for the three months ended March 31, 1996 give effect to Perry's Majestic Beer,
Inc. [the "Company"] acquiring the stock of a beverage business, Riverosa
Company, Inc. ["Riverosa"] on March 31, 1996.
The pro forma information is based on the historical financial statements of
Perry's Majestic Beer, Inc. and Riverosa Company, Inc. giving effect to the
transaction under the purchase method of accounting and the assumptions and
adjustments in the accompanying notes to the pro forma financial statements.
The acquisition will be accounted for using the purchase method. The pro forma
balance sheet assumes the transaction was effective on the balance sheet date.
The pro forma statements of operations give effect to these transactions as if
they had occurred at the beginning of the fiscal year presented. The historical
statements of operations will reflect the effects of these transactions from the
date on which they occurred. There were no revenue or expense activities for the
period ended March 31, 1996 for Perry's Majestic Beer, Inc. The pro forma
combined statements are based on the historical financial statements of Perry's
Majestic Beer, Inc. and Riverosa Company, Inc. Financial statements of Riverosa,
Inc. are presented for the same periods that Perry's would be required to
furnish.
A-1
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
- --------------------------------------------------------------------------------
[A] To reflect allocation for the acquisition of Riverosa Company, Inc. with
annual amortization of goodwill of approximately $50,000 [quarterly amount
of $12,500].
Goodwill will be amortized over five years.
Goodwill is computed as follows:
<TABLE>
<S> <C>
Cash $ 150,000
Notes Payable 100,000
---------------
Cost of Acquisition 250,000
Estimated Value of Riverosa Net Assets Acquired 3,576
---------------
Goodwill $ 246,424
===============
</TABLE>
[B] To record annual employment contract of $25,000 [three months of $6,250].
[C] To record annual interest expense of $8,000 on $100,000 note payable at 8%
[three months of $2,000].
[D] On March 31, 1996, the Company borrowed $150,000 whereby the lenders
received the right to receive a total of 3,000,000 Class A Warrants. The
Company recorded a deferred financing cost of $1,500,000 for these
warrants. This cost will be charged to expense over the life of the loan,
that is the earlier of July 31, 1996 or the close of the proposed public
offering.
A-2
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 1996.
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Financial Statements
-------------------------------
Perry's
Majestic Riverosa
Beer, Inc. Company, Inc.
March 31, March 31, Pro Forma
1 9 9 6 1 9 9 6 Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Assets:
Current Assets:
Cash $ 60,200 $ 43,995 $ -- $ 104,195
Accounts Receivable -- 4,941 -- 4,941
Stock Subscription Receivable 4,800 -- -- 4,800
Notes Receivable 135,000 -- -- 135,000
Inventory -- 9,460 -- 9,460
----------------- -------------- --------------- --------------
Total Current Assets 200,000 58,396 -- 258,396
----------------- -------------- --------------- --------------
Investments 2,250,000 -- (250,000) [A] 2,000,000
----------------- -------------- --------------- --------------
Other Assets:
Goodwill -- -- 246,424 [A] 246,424
Surety Bonds -- 575 -- 575
Deferred Financing Costs 1,500,000 -- -- [D] 1,500,000
----------------- -------------- --------------- -------------
Total Other Assets 1,500,000 575 246,424 1,746,999
----------------- -------------- --------------- --------------
Total Assets $ 3,950,000 $ 58,971 $ (3,576) $ 4,005,395
================= ============== =============== ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
A-3
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED BALANCE SHEETS AS OF MARCH 31, 1996
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Financial Statements
-------------------------------
Perry's
Majestic Riverosa
Beer, Inc. Company, Inc.
March 31, March 31, Pro Forma
1 9 9 6 1 9 9 6 Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and
Accrued Expenses $ -- $ 20,361 $ -- $ 20,361
Notes Payable 250,000 -- -- 250,000
Officers' Loan Payable -- 29,634 -- 29,634
Income Taxes Payable -- 5,400 -- 5,400
----------------- -------------- --------------- --------------
Total Current Liabilities 250,000 55,395 -- 305,395
----------------- -------------- --------------- --------------
Stockholders' Equity:
Common Stock 250 1,000 (1,000) [A] 250
Preferred Stock 7,500 -- -- 7,500
Additional Paid-in Capital 3,692,250 -- -- 3,692,250
Retained Earnings -- 2,576 (2,576) [A] --
----------------- -------------- --------------- --------------
Total Stockholders' Equity 3,700,000 3,576 (3,576) 3,700,000
----------------- -------------- --------------- --------------
Total Liabilities and
Stockholders' Equity $ 3,950,000 $ 58,971 $ (3,576) $ 4,005,395
================= ============== =============== ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
A-4
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1995
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Financial Statements
----------------------------------
Perry's Majestic
Beer, Inc.
For the Period
December Riverosa
1995 [Date of Company, Inc.
Inception] For the
Through Year ended
March 31, December 31, Pro Forma
1 9 9 6 1 9 9 5 Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales - Net $ -- $ 81,185 $ -- $ 81,185
Cost of Goods Sold -- 61,057 -- 61,057
----------------- -------------- -------------- --------------
Gross Profit -- 20,128 -- 20,128
----------------- -------------- -------------- --------------
Selling, General and 50,000 [A]
Administrative Expenses -- 17,494 25,000 [B] 92,494
----------------- -------------- -------------- ----------------
Income [Loss] from Operations -- 2,634 (75,000) (72,366)
----------------- -------------- -------------- --------------
Other [Income] Expense:
Interest Expense -- 8,499 8,000 [C] 16,499
Interest Income -- (1,141) -- (1,141)
----------------- -------------- -------------- --------------
Other Expense - Net -- 7,358 8,000 15,358
----------------- -------------- -------------- --------------
[Loss] Before Income Taxes -- (4,724) (83,000) (87,724)
Provision for Income Taxes -- -- -- --
----------------- -------------- -------------- --------------
Net [Loss] $ -- $ (4,724) $ (83,000) $ (87,724)
================= ============== ============== ==============
Number of Shares 5,500,000 5,500,000
================= ==============
Net [Loss] Per Share $ -- $ (.02)
================= ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
A-5
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1996.
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical Financial Statements
-------------------------------
Perry's Majestic
Beer, Inc.
For the Period
December Riverosa
1995 [Date of Company, Inc.
Inception] For the Three
Through Months Ended
March 31, March 31, Pro Forma
1 9 9 6 1 9 9 6 Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales - Net $ -- $ 24,136 $ -- $ 24,136
Cost of Goods Sold -- 19,390 -- 19,390
----------------- -------------- -------------- --------------
Gross Profit -- 4,746 -- 4,746
----------------- -------------- -------------- --------------
Selling, General and 12,500 [A]
Administrative Expenses -- 11,347 6,250 [B] 30,097
----------------- -------------- -------------- ----------------
Income [Loss] from Operations -- (6,601) (18,750) (25,351)
----------------- -------------- -------------- --------------
Other [Income] Expense:
Interest Expense -- 750 2,000 [C] 2,750
Interest Income -- -- -- --
----------------- -------------- -------------- --------------
Other Expense - Net -- 750 2,000 2,750
----------------- -------------- -------------- --------------
[Loss] Before Income Taxes -- (7,351) (20,750) (28,101)
Provision for Income Taxes -- -- -- --
----------------- -------------- -------------- --------------
Net [Loss] $ -- $ (7,351) $ (20,750) $ (28,101)
================= ============== ============== ==============
Number of Shares 5,500,000 5,500,000
================= ==============
Net [Loss] Per Share $ -- $ (.01)
================= ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
A-6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Perry's Majestic Beer, Inc.
New York, New York
We have audited the accompanying balance sheet of Perry's Majestic
Beer, Inc. as of March 31, 1996, and the related statements of stockholders'
equity, and cash flows for the period from inception [December 1995] through
March 31, 1996. 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 audit 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 audit provides 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 Perry's Majestic
Beer, Inc. as of March 31, 1996, and its cash flows for the period from
inception to March 31, 1996, 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 7 to the
financial statements, the Company had no revenue or expense operations and has
negative working capital. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
April 4, 1996
B-1
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
BALANCE SHEET AS OF MARCH 31, 1996.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Current Assets:
Cash $ 60,200
Subscription Receivable [1B] 4,800
Note Receivable - Related Party [3] 75,000
Note Receivable - Bridge Loan [6] 60,000
----------
Total Current Assets 200,000
----------
Non-Current Assets:
Investment in Riverosa [2] 250,000
Investment in Bev-Tyme, Inc. - Preferred Stock -
Related Party [3] 2,000,000
Deferred Financing Costs [6] 1,500,000
----------
Total Non-Current Assets 3,750,000
----------
Total Assets $3,950,000
==========
Liabilities and Stockholders' Equity:
Current Liabilities:
Bridge Loan Payable [6] $ 150,000
Note Payable Acquisition [2] 100,000
----------
Total Current Liabilities 250,000
----------
Commitments and Contingencies --
----------
Stockholders' Equity:
Preferred Stock, $.001 Par Value Per Share, 15,000,000
Blank Check Shares Authorized, Convertible Class A -
Issued and Outstanding, 500,000 Shares;
Non-Convertible Class B - Issued and Outstanding,
7,000,000 Shares [3] 7,500
Additional Paid-in Capital - Preferred Stock [3] 2,142,500
Common Stock - $.0001 Par Value, Authorized 25,000,000
Shares, Issued and Outstanding, 2,500,000 Shares [1B] 250
Additional Paid-in Capital - Common Stock [1B] [6] 1,549,750
Retained Earnings --
----------
Total Stockholders' Equity 3,700,000
----------
Total Liabilities and Stockholders' Equity $3,950,000
==========
</TABLE>
See Notes to Financial Statements.
B-2
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Total
------------------- ------------------ Paid-in Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
------ ------ ------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1996 -- $ -- -- $ -- $ -- $ $ --
Common Stock Issued for Cash -- -- 2,500,000 250 49,750 -- 50,000
500,000 Shares of Series A and
7,000,000 Shares of Series B
Preferred Stock Issued for Cash
and Investment in Bev-Tyme,
Inc. [Series C Preferred] 7,500,000 7,500 -- -- 2,142,500 -- 2,150,000
Bridge Financing Warrants -- -- -- -- 1,500,000 -- 1,500,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance - March 31, 1996 7,500,000 $ 7,500 2,500,000 $ 250 $ 3,692,250 $ -- $ 3,700,000
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
B-3
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM INCEPTION [DECEMBER 1995]
THROUGH MARCH 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net Cash - Operating Activities $ --
---------
Investing Activities:
Partial Payment on Acquisition of Riverosa Company (150,000)
---------
Financing Activities:
Proceeds from Sale of Preferred Stock to Bev-Tyme, Inc. 75,000
Proceeds from Sale of Common Stock 45,200
Proceeds from Bridge Loans 90,000
---------
Net Cash - Financing Activities 210,200
---------
Net Increase in Cash 60,200
Cash - Beginning of Period --
---------
Cash - End of Period $ 60,200
=========
Supplemental Disclosures of Cash Flow Information:
Cash paid for the period for:
Interest $ --
Income Taxes $ --
</TABLE>
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
During the period, the Company incurred deferred financing costs of
$1,500,000 resulting from the issuance of warrants for a bridge loan.
See Notes to Financial Statements.
B-4
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
[A] Nature of Operations - Perry's Majestic Beer, Inc., a Delaware corporation
[the "Company" or "Perry's"], was formed in December 1995. There have been no
revenue or expense activities through March 31, 1996. The Company became a
subsidiary of Bev-Tyme, Inc. as of March 29, 1996 [See Note 3].
[B] Capital Stock - In January 1996, the Company issued 2,500,000 shares of
common stock to seven [7] parties for a total consideration of $50,000. At March
31, 1996, $45,200 was collected and the balance of $4,800, received April 4,
1996, is reflected as a stock subscription receivable.
[C] Earnings Per Share - The number of shares to be used for earnings per share
calculation purposes will be based on the 2,500,000 common shares issued in the
initial capitalization and on the 3,000,000 common shares assumed issued from
the warrants in connection with the bridge loan, as if they were outstanding
since inception [See Note 6]. Convertible Preferred Stock shares are not
included because their effect is anti-dilutive.
[D] Cash Equivalents - The Company's policy is to classify all highly liquid
debt instruments purchased with an initial maturity of three months or less to
be cash equivalents. There were no cash equivalents at March 31, 1996.
[E] Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
[F] Goodwill - Amounts paid in excess of the estimated value of net assets
acquired of Riverosa have been charged to goodwill. Goodwill is related to
revenues the Company anticipates realizing in future years. The Company has
decided to amortize its goodwill over a period of up to five years under the
straight-line method. The Company's policy is to evaluate the periods of
goodwill amortization to determine whether later events and circumstances
warrant revised estimates of useful lives. The Company also evaluates whether
the carrying value of goodwill has become impaired by comparing the carrying
value of goodwill to the value of projected undiscounted cash flows from
acquired assets or businesses. Impairment is recognized if the carrying value of
goodwill is less than the projected undiscounted cash flow from the acquired
assets or business.
[2] Business Combination
On March 29, 1996, the Company entered into an agreement to acquire all of the
stock of Riverosa Company, Inc. for $250,000 of which $150,000 in cash was put
into escrow as of March 31, 1996 and a note payable was issued for $100,000. The
note is payable with interest of 8% and is due upon the earlier of one year from
the date of issuance or the closing of the Company's initial public offering.
[3] Investment - Related Party
On March 29, 1996, the Company issued to Bev-Tyme, Inc. [a public corporation]
500,000 shares of convertible Class A Preferred Stock and 7,000,000 shares of
non-convertible Class B Preferred Stock for 400,000 shares of Series C Preferred
Stock of Bev-Tyme, Inc. [valued at $2,000,000] and $150,000. As of March 31,
1996, $75,000 of cash was collected and the balance of $75,000, which was
received on April 4, 1996, is reflected as a note receivable on the financial
statements as of March 31, 1996. Each share of Class A Preferred Stock may be
convertible by the holder into one [1] share of Common Stock. Each share of
Class A Preferred Stock and Class B Preferred Stock has attached to it the right
to vote on all matters submitted to the Company.
B-5
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
- --------------------------------------------------------------------------------
[3] Investments - Related Party [Continued]
The investment in Bev-Tyme, Inc. is classified as "available for sale" and is
presented at estimated fair value.
[4] 1996 Stock Option Plan
In March 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of the 1996 Stock Option Plan.
The maximum number of shares of common stock with respect to which awards may be
granted pursuant to the 1996 Plan is initially 2,000,000 shares.
[5] Proposed Public Offering
The Company is filing a registration statement for 300,000 units at $10.00 per
unit. Each unit consists of two shares of common stock and one Class A
Redeemable Common Stock purchase warrant exercisable at $4.00 per share for a
four year period commencing one year from the effective date. The anticipated
net proceeds from this offering are approximately $2,113,000.
[6] Bridge Loan
On March 31, 1996, the Company borrowed an aggregate of $150,000 from seven [7]
unaffiliated lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received a promissory note [the "Bridge Note"]. Each
of the Bridge Notes bears interest at the rate of eight percent [8%] per annum.
The Bridge Notes are due an payable upon the earlier of (i) July 31, 1996 and
(ii) the closing of an initial underwritten public offering of the Company's
securities. The Company intends to use a portion of the proceeds of this
offering to repay the Bridge Lenders. As of March 31, 1996, $90,000 was received
in cash from the bridge loan and $60,000, received April 4, 1996, is reflected
on the financial statements as a note receivable at March 31, 1996. The Bridge
Lenders have the right to receive a total of 3,000,000 Class A Warrants. The
Company has agreed to register the Class A Warrants as well as the shares of
common stock issuable upon exercise of the Class A Warrants in the registration
statement [See Note 5]. The Company has recorded a deferred financing cost of
$1,500,000, which will be amortized over the life of the bridge loan.
[7] Going Concern
As shown in the accompanying financial statements, the Company did not generate
cash from operations and had negative working capital for the period ended March
31, 1996. These factors create an uncertainty about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern. The Company acquired Riverosa Company, Inc. for $250,000 [See
Note 2], and is pursuing a public offering of common stock as a vehicle for
financing future operations [See Note 5]. The continuation of the Company as a
going concern is dependent upon the success of these plans.
[8] New Authoritative Pronouncements
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 123, "Accounting for Stock-Based
Compensation," in October 1995. SFAS No. 123 uses a fair value based method of
accounting for stock options and similar equity instruments as contrasted to the
intrinsic valued based method of accounting prescribed by Accounting Principles
Board ["APB"] Opinion No. 25, "Accounting for Stock Issued to Employees." The
Company has not decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial reporting purposes. SFAS No. 123 will have to be
adopted for financial note disclosure purposes in any event. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.
[9] Financial Instruments
The carrying amount of cash, notes receivable and payable approximates fair
value because of their short maturities.
B-6
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
- --------------------------------------------------------------------------------
[10] Subsequent Events [Unaudited]
On April 5, 1996, the Company entered into a one [1] year employment agreement
with Mark Butler pursuant to which Mr. Butler serves as the Company's Vice
President of Sales. The agreement provides for Mr. Butler to receive a salary of
$25,000 per annum and upon the close of the proposed public offering, a salary
of $50,000 per annum. The employment agreement also provides for an annual bonus
as well as stock options based upon performance.
On April 19, 1996, Perry's Majestic Beer, Inc. lent $75,000 to Bev-Tyme, Inc.
. . . . . . . . . . . . . . . . . . .
B-7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Riverosa Company, Inc.
New York, New York
We have audited the accompanying balance sheet of Riverosa Company,
Inc. as of December 31, 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 1995. 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 Riverosa Company,
Inc. as of December 31, 1995, and the consolidated results of their operations
and their cash flows for each of the two years in the period ended December 31,
1995, 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 7 to the
financial statements, the Company has incurred a net loss as a result of a
significant decrease in sales. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
April 1, 1996
C-1
<PAGE>
RIVEROSA COMPANY, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1 9 9 6 1 9 9 5
------- -------
[Unaudited]
<S> <C> <C>
Assets:
Current Assets:
Cash $43,995 $38,782
Accounts Receivable 4,941 --
Inventory 9,460 11,175
------- -------
Total Current Assets 58,396 49,957
Other Asset:
Surety Bonds 575 575
------- -------
Total Assets $58,971 $50,532
======= =======
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $20,361 $ 4,571
Officers' Loan Payable 29,634 29,634
Income Taxes Payable 5,400 5,400
------- -------
Total Current Liabilities 55,395 39,605
------- -------
Commitments and Contingencies [5] -- --
------- -------
Stockholders' Equity:
Common Stock - 200 Shares, Authorized Issued and
Outstanding; No Par Value, $5.00 Stated Value 1,000 1,000
Retained Earnings 2,576 9,927
------- -------
Total Stockholders' Equity 3,576 10,927
------- -------
Total Liabilities and Stockholders' Equity $58,971 $50,532
======= =======
</TABLE>
See Notes to Financial Statements.
C-2
<PAGE>
RIVEROSA COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
-------------------- --------------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
-------- -------- -------- --------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Sales - Net $ 24,136 $ 19,430 $ 81,185 $195,095
Cost of Goods Sold 19,390 14,946 61,057 133,250
-------- -------- -------- --------
Gross Profit 4,746 4,484 20,128 61,845
-------- -------- -------- --------
Selling, General and Administrative
Expenses:
Selling, Advertising and Promotion 7,283 530 3,187 8,023
General and Administrative Expenses 4,064 2,005 14,307 23,347
-------- -------- -------- --------
Total Selling, General and
Administrative Expenses 11,347 2,535 17,494 31,370
-------- -------- -------- --------
[Loss] Income from Operations (6,601) 1,949 2,634 30,475
-------- -------- -------- --------
Other [Income] Expense:
Interest Expense - Related Party 750 2,320 8,499 10,214
Interest Income -- (509) (1,141) --
-------- -------- -------- --------
Other Expenses - Net 750 1,811 7,358 10,214
-------- -------- -------- --------
[Loss] Income Before Provision for
Income Taxes (7,351) 138 (4,724) 20,261
Provision for Income Taxes -- -- -- 5,400
-------- -------- -------- --------
Net [Loss] Income $ (7,351) $ 138 $ (4,724) $ 14,861
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
C-3
<PAGE>
RIVEROSA COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Total
------------------- Retained Stockholders'
Shares Amount Earnings Equity
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 200 $ 1,000 $ (210) $ 790
Net Income for the year ended
December 31, 1994 -- -- 14,861 14,861
-------- -------- -------- --------
Balance at December 31, 1994 200 1,000 14,651 15,651
Net [Loss] for the year ended
December 31, 1995 -- -- (4,724) (4,724)
-------- -------- -------- --------
Balance at December 31, 1995 200 1,000 9,927 10,927
Net [Loss] for the three months ended
March 31, 1996 [Unaudited] -- -- (7,351) (7,351)
-------- -------- -------- --------
Balance at March 31, 1996 [Unaudited] 200 $ 1,000 $ 2,576 $ 3,576
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
C-4
<PAGE>
RIVEROSA COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
------------------- --------------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
-------- -------- -------- --------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Operating Activities:
Net [Loss] Income $ (7,351) $ 138 $ (4,724) $ 14,861
-------- -------- -------- --------
Adjustments to Reconcile Net [Loss]
Income to Net Cash Provided by
Operating Activities:
Bad Debt Expense -- 400 1,500 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (4,941) 10,400 40,420 9,898
Inventory 1,715 6,003 18,539 5,870
Other Assets -- -- -- (100)
Increase [Decrease] in:
Accounts Payable and Accrued
Expenses 15,790 (7,000) (3,391) (7,295)
Income Taxes Payable -- -- 5,400
-------- -------- -------- --------
Total Adjustments 12,564 9,803 57,068 13,773
-------- -------- -------- --------
Net Cash - Operating Activities 5,213 9,941 52,344 28,634
-------- -------- -------- --------
Financing Activities:
Repayment of Officers' Loan Payable -- (15,500) (71,502) --
-------- -------- -------- --------
Net Increase [Decrease] in Cash and
Cash Equivalents 5,213 (5,559) (19,158) 28,634
Cash and Cash Equivalents -
Beginning of Period 38,782 57,940 57,940 29,306
-------- -------- -------- --------
Cash and Cash Equivalents -
End of Period $ 43,995 $ 52,381 $ 38,782 $ 57,940
======== ======== ======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid for the period for:
Interest $ -- $ -- $ 8,499 $ 10,214
Income Taxes $ -- $ -- $ -- $ --
</TABLE>
See Notes to Financial Statements.
C-5
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
[Information as of and for the three months ended March 31, 1996 is Unaudited]
- --------------------------------------------------------------------------------
[1] General Information and Summary of Significant Accounting Policies
General and Organization - Riverosa Company, Inc. [the "Company"] a New York
Corporation, was founded in November of 1992. The Company coordinates the
manufacturing and distributing of microbrewed beers and ales to customers
throughout the United States, but primarily in the New York metropolitan area.
Cash and Cash Equivalents - The Company classifies all highly liquid debt
instruments purchased with an initial maturity of three months or less to be
cash equivalents.
Inventory - Inventory is stated at the lower of cost or market [net realizable
value]. Cost is comprised of packaging materials and includes purchases and
freight, and are determined on the first-in, first-out [FIFO] basis.
Risk Concentrations - Financial instruments that potentially subject the Company
to concentrations of credit risk include cash and cash equivalents and accounts
receivable arising from its normal business activities. The Company places its
cash and cash equivalents with a high credit quality financial institution. The
Company's cash and cash equivalents have not been subject to credit risk beyond
insured amounts.
The Company routinely assesses the financial strength of its customers, and
based upon factors surrounding the credit risk of its customers, has established
an allowance for uncollectible accounts amounting to $1,500 at December 31,
1995, and, as a consequence, believes that its accounts receivable credit risk
exposure beyond this allowance is limited.
The Company currently facilitates the manufacture and distribution of its
products from one contract brewery. Although there are a limited number of
breweries, management believes that other suppliers could provide similar beers
on comparable terms. A change in brewery, however, could cause delay in
distribution and a possible loss of sales, which would affect operating results
adversely.
The Company relies on other wholesale distributors for resale of its product to
retailers. As a result, the Company faces the risk that their distributors may
face financial hardship. In addition, the Company is dependent upon the
distributor to provide the resources necessary to promote the Company's product.
The Company currently is highly dependent upon Bev-Tyme, Inc. for distribution
of the Company's beers [See Note 8]. Although management believes that other
distributors are available, any material delays would affect operating results
adversely. To mitigate these risks, the Company continues to explore
opportunities to expand its distribution base.
The sale of Perry's Majestic Beer products have accounted for all of the
Company's sales since inception and the Company believes the sale of Perry's
products will continue to account for most of its sales in the foreseeable
future. As a result, the Company's future operating results are highly dependent
upon market acceptance of Perry's beer. In addition, as the sale of beer is
seasonal in nature, the results of the Company's operations may vary from
quarter to quarter.
Revenue Recognition - Revenue is recognized at the time products are shipped and
title passes.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
C-6
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the three months ended March 31, 1996 is Unaudited]
- --------------------------------------------------------------------------------
[2] Income Taxes
The components of the provisions for income tax are as follows:
December 31,
------------------
1 9 9 5 1 9 9 4
------- -------
Current:
Federal $ -- $ 2,800
State and Local -- 3,800
Benefit of Net Operating Loss Carryforward -- (1,200)
------- -------
Total Current -- 5,400
------- -------
Deferred:
Federal -- --
State -- --
------- -------
Total Deferred -- --
------- -------
Total Provision for Income Taxes $ -- $ 5,400
======= =======
The Company's effective income tax is different from what would be expected if
the federal statutory rate were applied to income from continuing operations
primarily because of state taxes and the use of operating loss benefits.
[3] Officers' Loan Payable
Loans to officers are payable on demand with interest payable at 10% per annum.
[4] Financial Instruments
The carrying amount of cash and cash equivalents and trade payables approximates
fair value because of their short maturities. The carrying amount of officers'
loan payable approximates its fair market value.
[5] Commitments and Contingencies
[A] Related Party - The Company operated in space owned by one of the Company's
shareholders and as a result has not incurred rent expense for the year ended
December 31, 1995 and 1994.
[B] The Company has minimum volume commitments on several of their distribution
contracts with vendors, whereby the vendor has the option to terminate an
agreement if certain volume targets are not met.
[C] Brewing Agreement - In November 1992, the Company's stockholders entered
into an agreement, on behalf of the Company, with a brewery to brew and bottle
beer under the private label of "Perry's Majestic." As part of the agreement,
the Company agrees to provides the brewery, at its own expense, all the
necessary packaging materials to allow the brewer to manufacture the product in
accordance with federal and state regulations.
The agreement automatically renews annually. Either party may terminate the
agreement by giving four month prior written notice to the other party.
C-7
<PAGE>
RIVEROSA COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the three months ended March 31, 1996 is Unaudited]
- --------------------------------------------------------------------------------
[5] Commitments and Contingencies [Continued]
[D] Significant Customer - In 1995, there were four customers who accounted for
64% of the revenues. These customers which included Bev-Tyme, Inc. [See Note 8]
and three other customers were 15%, 24%, 14% and 11% of 1995 revenues,
respectively.
In 1994, there were two customers who accounted for 44% of the Company's
revenues. These customers which included Bev-Tyme, Inc. [See Note 8] and one
other customer were 31% and 13% of 1994 revenues, respectively.
[6] New Authoritative Pronouncements
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of," in March of
1995. SFAS No. 121 established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
Adoption of SFAS No. 121 is not expected to have a material impact on the
Company's financial statements.
[7] Going Concern
As shown in the accompanying financial statements, the Company incurred a net
loss of approximately $5,000 for the year ended December 31, 1995 as a result of
a significant decrease in sales. These factors create an uncertainty about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company has been acquired by Perry's Majestic
Beer, Inc., which intends to pursue a public offering as a vehicle for financing
future operations to expand the distribution base of its products. The
continuation of the Company as a going concern is dependent upon the success of
these plans.
[8] Subsequent Events
On March 29, 1996, the Company entered into an agreement to be acquired by
Perry's Majestic Beer, Inc. for $250,000.
Also on March 29, 1996, Perry's Majestic Beer, Inc. issued preferred stock to
Bev-Tyme, Inc. [a public corporation] for 400,000 shares of Series C Preferred
Stock of Bev-Tyme, Inc. and $150,000.
. . . . . . . . . . . . . . . . . . .
C-8
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the heading "Experts"
and to the use of our report dated April 4, 1996, of Perry's Majestic Beer,
Inc., modified as to Perry's Majestic Beer, Inc.'s ability to continue as a
going concern, and our report dated April 1, 1996, of Riverosa Company, Inc.,
modified as to Riverosa Company, Inc's. ability to continue as a going concern,
in this Registration Statement and related Prospectus of Perry's Majestic Beer,
Inc.
/s/ Mortenson and Associates, P.C.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants.
Cranford, New Jersey
May 22, 1996
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
TABLE OF CONTENTS
Page
----
Available Information.........
Prospectus Summary............
The Company...................
The Offering..................
Summary Financial
Information.................
Risk Factors..................
Use of Proceeds...............
Dilution......................
Capitalization................
Dividend Policy...............
Selected Financial Data.......
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................
Business......................
Management....................
Principal Stockholders........
Certain Transactions..........
Description of
Securities...................
Selling Securityholders.......
Underwriting..................
Legal Matters.................
Experts.......................
Additional Information........
Financial Statements..........
----------
Until ______, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
300,000 Units
Each Unit Consists of Two (2) Shares of Common
Stock, par value $.0001 per share and One (1) Class
A Redeemable Common Stock Purchase Warrant
PERRY'S MAJESTIC BEER, INC.
----------
PROSPECTUS
----------
VTR Capital, Inc.
_________, 1996
----------
<PAGE>
SUBJECT TO COMPLETION, DATED ______________, 1996
ALTERNATE
PROSPECTUS
PERRY'S MAJESTIC BEER, INC.
1,850,000 shares of Common Stock
3,000,000 Class A Warrants
This Prospectus relates to the sale of (a) 3,000,000 Class A Redeemable
Common Stock Purchase Warrants ("Class A Warrants") issuable upon conversion of
certain Convertible Bridge Notes held by certain unaffiliated bridge lenders to
the Company (the "Bridge Lenders") and (b) 1,850,000 shares of Common Stock, (i)
1,490,000 of which are held by officers of the Company and (ii) 360,000 of which
are held by non-affiliates of the Company, hereinafter collectively referred to
as the "Selling Securityholders." The Company will not receive any of the
proceeds on the sale of the securities by the Selling Securityholders. The
shares being registered on behalf of the Selling Securityholders constitute 74%
of such outstanding shares prior to the Offering and 59.7% of the outstanding
shares of Common Stock upon completion of the Offering. The resale of the
securities of the Selling Securityholders are subject to Prospectus delivery and
other requirements of the Securities Act of 1933, as amended (the "Act"). Sales
of such securities or the potential of such sales at any time may have an
adverse effect on the market prices of the securities offered hereby. See
"Selling Securityholders" and "Risk Factors - Shares Eligible for Future Sale
May Adversely Affect the Market."
The Class A Warrants shall be exercisable commencing one (1) year after the
date hereof (the "Effective Date"). Each Class A Warrant entitles the holder to
purchase one (1) share of Common Stock at a price of $4.00 per share during the
four (4) year period commencing one (1) year from the Effective Date. The Class
A Warrants are redeemable by the Company for $.05 per Warrant, at any time after
, 1997, upon thirty (30) days' prior written notice, if the closing bid price of
the Common Stock, as reported by the principal exchange on which the Common
Stock is traded, The Nasdaq Small Cap Market or the National Quotation Bureau
Incorporated, as the case may be, equals or exceeds $____ per share, for any
twenty (20) consecutive trading days ending five (5) days prior to the date of
the notice of redemption. Upon thirty (30) days' written notice to all holders
of the Class A Warrants, the Company shall have the right to reduce the exercise
price and/or extend the term of the Class A Warrants. See "Description of
Securities."
The Company has applied for inclusion of the Units, the Common Stock and
the Class A Warrants on The Nasdaq Small Cap Market, although there can be no
assurances that an active trading market will develop even if the securities are
accepted for quotation. Additionally, even
<PAGE>
if the Company's securities are accepted for quotation and active trading
develops, the Company is still required to maintain certain minimum criteria
established by The Nasdaq Small Cap Market, of which there can be no assurance.
See "Risk Factors - Lack of Prior Market for Units, Common Stock and Class A
Warrants; No Assurance of Public Trading Market."
The Common Stock offered by this Prospectus may be sold from time to time
by the Selling Securityholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Securityholders. The
distribution of the securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of such securities.
The Selling Securityholders and intermediaries through whom such securities
may be sold may be deemed "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Act"), with respect to the securities offered and
any profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Securityholders
against certain liabilities, including liabilities under the Act.
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Securityholders. All costs incurred in the
registration of the securities of the Selling Securityholders are being borne by
the Company. See "Selling Securityholders."
----------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. SEE "DILUTION" and "RISK FACTORS."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1996
Alt - ii
<PAGE>
ALTERNATE
COMPANY OFFERING
On the date of this Prospectus, a Registration Statement under the Act with
respect to an underwritten public offering (the "Offering") of 300,000 Units
("Units") by the Company was declared effective by the Securities and Exchange
Commission ("SEC"), and the Company commenced the sale of Units offered thereby.
The Units are comprised of 600,000 shares of Common Stock and 300,000 Class A
Warrants to purchase an additional 300,000 shares of Common Stock (without
giving effect to the Over-Allotment Option granted to the Underwriter of the
Offering). Sales of securities under this Prospectus by the Selling
Securityholders or even the potential of such sales may have an adverse effect
on the market price of the Company's securities.
SELLING SECURITYHOLDERS
The registration statement of which this Prospectus forms a part also
covers the sale of (i) 3,000,000 Class A Warrants issuable upon conversion of
the Convertible Bridge Notes and (ii)1,850,000 shares of Common Stock, 50,000 of
which are held by an officer of the Company collectively referred to as the
"Selling Securityholders." The shares being registered on behalf of the Selling
Securityholders constitute 74% of such outstanding shares prior to the Offering
and 59,7% of the outstanding shares of Common Stock upon completion of the
Offering. The Company will not receive any of the proceeds on the sale of the
securities by the Selling Securityholders. The resale of the securities of the
Selling Securityholders are subject to Prospectus delivery and other
requirements of the Securities Act of 1933, as amended (the "Act"). Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See "Risk Factors
- - Shares Eligible for Future Sale May Adversely Affect the Market." The resale
of the securities by the Selling Securityholders is subject to Prospectus
delivery and other requirements of the Act. Accordingly, an additional 1,850,000
shares of Common Stock will become transferrable at such time.
The following table sets forth the holders of the shares of Common Stock
which are being offered by the Selling Securityholders and the number of shares
owned before the Offering, the number of shares being offered and the number of
shares and the percentage of the class to be owned after the Offering is
complete.
Alt - iii
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name Shares of Class A Shares of Class A Shares of Class A Percent of Percent of
Common Warrants Common Warrants Stock Owned Warrants Common Class A
Stock Owned Owned Stock Offered After Owned After Stock After Warrants
Before Before Offered Hereby Offering Offering Offering After
Offering Offering Hereby Offering
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Sipper 120,000 0 50,000 0 70,000 0 2.3 0
- ------------------------------------------------------------------------------------------------------------------------------------
Ulster Investments 120,000 100,000 120,000 100,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Hartley Bernstein 500,000 0 100,000 0 400,000 0 12.9 0
- ------------------------------------------------------------------------------------------------------------------------------------
First National Fund 120,000 100,000 120,000 100,000 0 0 0 0
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Harriton 50,000 0 40,000 0 10,000 0 .3 0
- ------------------------------------------------------------------------------------------------------------------------------------
Marketing
Specialities, Inc. 1,470,000 0 1,300,000 0 170,000 0 5.5 0
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Yordy 0 50,000 0 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Harold Yordy 0 50,000 0 50,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Judith Pace 120,000 0 120,000 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Dune Holdings, Inc. 0 1,000,000 0 1,000,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
MD Funding, Inc. 0 700,000 0 700,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
John Pasquale 0 1,000,000 0 1,000,000 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total 2,500,000 3,000,000 1,850,000 3,000,000 650,000 0 21.0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Alt - iv
<PAGE>
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The securities
offered by the Selling Securityholders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
Sales of securities by the Selling Securityholders or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby. See "Company Offering."
Alt - v
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
TABLE OF CONTENTS
Page
Available Information.........
Prospectus Summary............
The Company...................
The Offering..................
Summary Financial
Information.................
Risk Factors..................
Use of Proceeds...............
Dilution......................
Capitalization................
Dividend Policy...............
Selected Financial Data.......
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................
Business......................
Management....................
Principal Stockholders........
Certain Transactions..........
Description of
Securities...................
Selling Securityholders.......
Underwriting..................
Legal Matters.................
Experts.......................
Additional Information........
Financial Statements..........
----------
ALTERNATE
1,850,000 Shares of Common Stock
and
3,000,000Class A Warrants
PERRY'S MAJESTIC BEER, INC.
----------
PROSPECTUS
----------
VTR Capital, Inc.
____________, 1996
----------
Alt - vi
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
In connection with the Offering, the Underwriter agreed to indemnify the
Company, its directors, and each person who controls it within the meaning of
Section 15 of the Act with respect to any statement in or omission from the
registration statement or the Prospectus or any amendment or supplement thereto
if such statement or omission was made in reliance upon information furnished in
writing to the Company by the Underwriter specifically for or in connection with
the preparation of the registration statement, the prospectus, or any such
amendment or supplement thereto.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-i
<PAGE>
The Company does not currently have any liability insurance coverage for
its officers and directors.
Items 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this Offering are as follows:
SEC filing fee* ...................................... $ 10,000
The Nasdaq Small Cap Market
filing fee ......................................... $ 11,000
NASD filing fee ...................................... $ 2,000
Accounting fees and expenses* ........................ $ 75,000
Legal fees and expenses* ............................. $175,000
Blue Sky fees and expenses* .......................... $ 55,000
Printing and engraving* .............................. $ 65,000
Transfer Agent's and Registrar's fees* ............... $ 4,000
Miscellaneous expenses* .............................. $ 28,000
Total ................................................ $425,000
- -----------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended:
In January 1996, the Company issued 2,500,000 shares of Common Stock to
seven (7) parties for a total consideration of $50,000.
In March, 1996, the Company borrowed an aggregate of $150,000 from seven
(7) unaffiliated lenders (the "Bridge Lenders"). In exchange for making loans to
the Company, each Bridge Lender received a promissory note (the "Bridge Note").
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Bridge Notes are due and payable upon the earlier of (i) July 31,
1996 and (ii) the closing of an initial underwritten public offering of the
Company's securities. The Company intends to use a portion of the proceeds of
this Offering to repay the Bridge Lenders. See "Use of Proceeds." The Bridge
Lenders have the right to receive a total of 3,000,000 Class A Warrants. The
Company entered into the bridge financing transactions because it required
additional financing and no other sources of financing were available to the
Company at that time. Further, the Company agreed to register the Class A
Warrants issuable in connection with the Bridge Loans and the shares of Common
Stock underlying the Class A Warrants in the first registration statement filed
by the Company following the date of the loan. Therefore, the Registration
Statement, of
II-ii
<PAGE>
which this Prospectus forms a part, relates to the 3,000,000 Class A Warrants
issuable in connection with the Bridge Notes. See "Selling Securityholders"
"Bridge Financings" and "Underwriting."
In March, 1996, the Company issued 50,000 shares of Series A Preferred
Stock and 7,000,000 shares of Series B Preferred Stock to Bev-Tyme, Inc. for
consideration of $150,000 and 400,0000 shares of Series C Preferred Stock of
Bev-Tyme.
The Company has relied on Section 4(2) of the Securities Act of 1933, as
amended, for its private placement exemption, such that the sales of the
securities were transactions by an issuer not involving any public offering.
Reference is also made hereby to "Certain Transactions," "Dilution,"
"Principal Stockholders" and "Description of Securities" in the Prospectus for
more information with respect to the previous issuance and sale of the Company's
securities.
All of the aforesaid securities have been appropriately marked with a
restricted legend and are "restricted securities" as defined in Rule 144 of the
rules and the regulations of the Securities and Exchange Commission, Washington
D.C. 20549. All of the aforesaid securities were issued for investment purposes
only and not with a view to redistribution, absent registration. All of the
aforesaid persons have been fully informed and advised concerning the
Registrant, its business, financial and other matters. Transactions by the
Registrant involving the sales of these securities set forth above were issued
pursuant to the "private placement" exemptions under the Securities Act of 1933,
as amended, as transactions by an issuer not involving any public offering. The
Registrant has been informed that each person is able to bear the economic risk
of his investment and is aware that the securities were not registered under the
Securities Act of 1933, as amended, and cannot be re-offered or re-sold until
they have been so registered or until the availability of an exemption
therefrom. The Transfer Agent and registrar of the Registrant will be instructed
to mark "stop transfer" on its ledgers to assure that these securities will not
be transferred absent registration or until the availability of an exemption
therefrom is determined.
Item 27. Exhibits.
<TABLE>
<S> <C>
1.01* Form of Underwriting Agreement.
1.02* Form of Selected Dealers Agreement.
3.01* Certificate of Incorporation of the Company.
3.02* Amendment of Certificate of Incorporation.
3.03* By-Laws of the Company.
</TABLE>
II-iii
<PAGE>
<TABLE>
<S> <C>
3.04+ Form of Certificate of Designation of Series A Preferred Stock.
3.05+ Form of Certificate of Designation of Series B Preferred Stock.
4.01+ Specimen Certificate for shares of Common Stock.
4.02+ Specimen Certificate for Class A Redeemable Common Stock Purchase
Warrant.
4.03* Form of Warrant Agreement by and among the Company and American Stock
Transfer & Trust Company.
4.04* Form of Underwriter's Unit Purchase Option.
5.01+ Opinion of Bernstein & Wasserman, LLP, counsel to the Company.
10.01 Bridge Loan Agreements and Related Promissory Notes.
10.02+ 1996 Stock Plan.
10.03* Agreement by and between the Company and Riverosa dated March 31,1996.
10.04* Form of Financial Consulting Agreement by and between the Company and
VTR Capital, Inc.
10.05 Agreement by and between the Company and Frankenmuth Brewery.
23.01+ Consent of Bernstein & Wasserman, LLP (to be included in Exhibit 5.01).
23.02 Consent of Mortenson & Associates, P.C.
</TABLE>
- ----------
* Previously filed.
+ To be filed by amendment.
Item 28. Undertakings.
(a) Rule 415 Offering
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
II-iv
<PAGE>
(i) Include any prospectus required by Section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
in the aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) Include any additional or changed material information on the plan of
distribution.
2. For determining liability under the Act, treat each such post-effective
amendment as a new registration statement of the securities offered, and the
Offering of such securities at that time shall be deemed to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(c) Indemnification
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 22 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Rule 430A
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the small business issuer under Rule
II-v
<PAGE>
424(b)(1) or (4) or 497(h) under the Act as part of this Registration Statement
as of the time the Commission declared it effective.
2. For any liability under the Act, treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the
securities offered in the Registration Statement, and that the Offering of the
securities at that time as the initial bona fide Offering of those securities.
II-vi
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in New
York, New York on May 22, 1996.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
-------------------------------------
President, Chief Executive Officer,
Chief Financial Officer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert Sipper President, Chief Executive May 22, 1996
- ---------------------- Officer, Chief Financial Officer,
Robert Sipper Principal Accounting Officer and
Director
- ---------------------- Vice President-Sales, Secretary May 22, 1996
Mark Butler and Director
/s/ Matthew Harriton Director May 22, 1996
- ----------------------
Matthew Harriton
</TABLE>
<PAGE>
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM SB-2
FOR
PERRY'S MAJESTIC BEER, INC.
<PAGE>
1.01* Form of Underwriting Agreement.
1.02* Form of Selected Dealers Agreement.
3.01* Certificate of Incorporation of the Company.
3.02* Amendment of Certificate of Incorporation.
3.03* By-Laws of the Company.
3.04+ Form of Certificate of Designation of Series A Preferred Stock.
3.05+ Form of Certificate of Designation of Series B Preferred Stock.
4.01+ Specimen Certificate for shares of Common Stock.
4.02+ Specimen Certificate for Class A Redeemable Common Stock Purchase
Warrant.
4.03* Form of Warrant Agreement by and among the Company and American Stock
Transfer & Trust Company.
4.04* Form of Underwriter's Unit Purchase Option.
5.01+ Opinion of Bernstein & Wasserman, LLP, counsel to the Company.
10.01 Bridge Loan Agreements and Related Promissory Notes.
10.02+ 1996 Stock Plan.
10.03* Agreement by and between the Company and Riverosa dated March 31,1996.
10.04* Form of Financial Consulting Agreement by and between the Company and
VTR Capital, Inc.
10.05 Agreement by and between the Company and Frankenmuth Brewery.
23.01+ Consent of Bernstein & Wasserman, LLP (to be included in Exhibit 5.01).
23.02 Consent of Mortenson & Associates, P.C.
- ----------
* Previously filed.
+ To be filed by amendment.
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Five Thousand Dollars ($5,000) to Perry's
Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive One Hundred Thousand (100,000 ) Class A Redeemable Purchase Warrants
(the "Bridgeholder's Warrants") of the Company. The terms and conditions of the
Class A Warrants will be identical to the terms and conditions of the shares of
the Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
ULSTER INVESTMENTS, LTD.
By: /s/Roslyn Yearwood
----------------------------
Name: Roslyn Yearwood
Title: Secretary
For and on behalf of:
Antigua International Trust Ltd.
Director
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$ 5,000.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to Ulster Investments, Ltd.("Holder") at such place
as Holder may designate in writing, the entire principal sum of Five Thousand
Dollars ($5,000 ), together with interest at the rate of eight percent (8%) per
annum, on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Five Thousand Dollars ($5,000) to Perry's
Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive One Hundred Thousand (100,000 ) Class A Redeemable Purchase Warrants
(the "Bridgeholder's Warrants") of the Company. The terms and conditions of the
Class A Warrants will be identical to the terms and conditions of the shares of
the Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
FIRST NATIONAL FUND CORP.
By: /s/ Gregory D. Roberts
-----------------------------
Name: Gregory D. Roberts
Title:President
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By:/s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$ 5,000.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to First National Fund Corp.("Holder") at such place
as Holder may designate in writing, the entire principal sum of Five Thousand
Dollars ($5,000 ), together with interest at the rate of eight percent (8%) per
annum, on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Fifty Thousand Dollars ($50,000) to Perry's
Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive One Million (1,000,000 ) Class A Redeemable Purchase Warrants (the
"Bridgeholder's Warrants") of the Company. The terms and conditions of the Class
A Warrants will be identical to the terms and conditions of the shares of the
Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
DUNE HOLDINGS, INC.
By: /s/ Randolph K. Pace
---------------------------
Name: Randolph K. Pace
Title: President
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
-------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$ 50,000.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to Dune Holdings, Inc.("Holder") at such place as
Holder may designate in writing, the entire principal sum of Fifty Thousand
Dollars ($50,000), together with interest at the rate of eight percent (8%) per
annum, on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Thiry Five Thousand Dollars ($35,000) to
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to
the terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive Seven Hundred Thousand (700,000 ) Class A Redeemable Purchase Warrants
(the "Bridgeholder's Warrants") of the Company. The terms and conditions of the
Class A Warrants will be identical to the terms and conditions of the shares of
the Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
M.D. FUNDING, INC.
By: /s/ Donna Field
-------------------------
Name: Donna Field
Title:President
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
----------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$ 35,000.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to M.D. Funding, Inc.("Holder") at such place as
Holder may designate in writing, the entire principal sum of Thirty Five
Thousand Dollars ($35,000), together with interest at the rate of eight percent
(8%) per annum, on the earlier of (i) March ,1997 or (ii) the closing date of
the first underwritten public offering of Maker's securities, at which time all
principal and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Fifty Thousand Dollars ($50,000) to Perry's
Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive One Million (1,000,000 ) Class A Redeemable Purchase Warrants (the
"Bridgeholder's Warrants") of the Company. The terms and conditions of the Class
A Warrants will be identical to the terms and conditions of the shares of the
Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
/s/ John Pasquale
------------------------------
John Pasquale
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$50,000.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to John Pasquale ("Holder") at such place as Holder
may designate in writing, the entire principal sum of Fifty Thousand Dollars
($50,000), together with interest at the rate of eight percent (8%) per annum,
on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Twenty Five Hundred Dollars ($2,500) to
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to
the terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive Fifty Thousand (50,000 ) Class A Redeemable Purchase Warrants (the
"Bridgeholder's Warrants") of the Company. The terms and conditions of the Class
A Warrants will be identical to the terms and conditions of the shares of the
Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
/s/ Harold Yordy
-----------------------------
Harold Yordy
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
-------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$2,500.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to Harold Yordy ("Holder") at such place as Holder
may designate in writing, the entire principal sum of Twenty Five Hundred
Dollars ($2,500), together with interest at the rate of eight percent (8%) per
annum, on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
March , 1996
Mr. Robert Sipper
Chief Executive Officer
Perry's Majestic Beer, Inc.
Brooklyn, New York
Re: Bridge Loan
Dear Mr. Sipper:
This letter summarizes our agreement as follows:
1. Bridge Loan. Upon the execution of this letter, the undersigned
("Lender") shall loan (the "Loan") Twenty Five Hundred Dollars ($2,500) to
Perry's Majestic Beer, Inc., a Delaware corporation (the "Company"), pursuant to
the terms of a certain promissory note, the form of which is attached hereto as
Exhibit "A" (the "Note"). Concurrently, with the execution of this letter, the
Company shall execute and deliver the Note to Lender.
2. Issuance of Bridgeholder's Warrants. As additional consideration,
solely for making the Loan, the Company hereby grants to Lender the right to
receive Fifty Thousand (50,000 ) Class A Redeemable Purchase Warrants (the
"Bridgeholder's Warrants") of the Company. The terms and conditions of the Class
A Warrants will be identical to the terms and conditions of the shares of the
Class A Warrants to be offered to the public in the Company's initial public
offering ( "Initial Public Offering").
3. Registration Rights. The Company agrees to include the Bridgeholder's
Class A Warrants as well as the shares of Common Stock of the Company issuable
upon the exercise of the Class A Warrants (the "Registrable Securities"), in the
registration statement filed in connection with the Initial Public Offering,
during the five (5) year period after the date hereof, at no cost or expense to
Lender.
Anything in this Section 3 to the contrary notwithstanding, in the event
that the managing underwriter of the Initial Public Offering informs the Company
in writing that the inclusion of the Registrable Securities in the Initial
Public Offering will result in the inability to effect the Initial Public
Offering or qualify the Initial Public Offering in one or more states which such
managing underwriter, in its sole discretion, deems necessary for the Initial
Public Offering to proceed, Lender shall agree to withhold some or all of the
Registrable Securities
<PAGE>
from registration in accordance with the instructions of such managing
underwriter. In such event, upon Lender's request, the Company shall file a
registration statement with the Commission for the purpose of registering the
Registrable Securities as soon as practicable after the closing date of such
Initial Public Offering at no cost or expense to Lender.
Lender agrees not to sell, pledge, hypothecate, encumber or otherwise
dispose of any of the Registrable Securities for a period of thirteen (13)
months following the effective date of the Initial Public Offering, subject to
earlier release at the discretion of the underwriter of the Initial Public
Offering.
4. Representations of Lender. Lender represents that he is acquiring the
Bridgeholder's Units and the Underlying Bridge Securities for investment
purposes only and not with a view to any resale or public distribution thereof.
Lender has had full access to the books and records of the Company and has had
the opportunity to question the officers, counsel and independent accountants of
the Company. Lender is an "accredited investor" as defined in section 2(15) of
the Securities Act of 1933, as amended, and Regulation D promulgated by the
Commission. Additionally, Lender represents that he is neither a member of,
affiliated with or employed by a member of the National Association of
Securities Dealers, nor is he employed by or affiliated with a broker-dealer
registered with the Securities and Exchange Commission or with any state
regulatory authority.
5. Governing Law; Jurisdiction and Venue. Regardless of the place of
execution or performance, this letter and the Note shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to such State's conflicts of laws provisions. Each of the parties hereto
irrevocably consents to the jurisdiction and venue of the federal and state
courts located in the State of New York, County of New York.
<PAGE>
Please acknowledge your consent to the foregoing terms by countersigning
the enclosed duplicate copy of this letter and returning it to us together with
the Note.
Very truly yours,
/s/ Michael Yordy
----------------------------
Michael Yordy
AGREED TO AND ACKNOWLEDGED:
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
-------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$2,500.00 March , 1996
New York, New York
FOR VALUE RECEIVED, PERRY'S MAJESTIC BEER, INC., a Delaware corporation
("Maker"), promises to pay to Michael Yordy ("Holder") at such place as Holder
may designate in writing, the entire principal sum of Twenty Five Hundred
Dollars ($2,500), together with interest at the rate of eight percent (8%) per
annum, on the earlier of (i) March ,1997 or (ii) the closing date of the first
underwritten public offering of Maker's securities, at which time all principal
and interest shall be due and owing.
All payments of principal and interest hereunder shall be payable in
lawful money of the United States.
Maker shall be in default hereunder, at the option of Holder, upon the
occurrence of any of the following events: (i) the failure by Maker to make any
payment of principal or interest when due hereunder, and such failure shall have
continued for a period of more than ten (10) days; (ii) the entering into of a
decree or order by a court of competent jurisdiction adjudicating Maker a
bankrupt or the appointing of a receiver or trustee of Maker upon the
application of any creditor in an insolvency or bankruptcy proceeding or other
creditor's suit; (iii) a court of competent jurisdiction approving as properly
filed, a petition for reorganization or arrangement filed against Maker under
the Federal bankruptcy laws and such decree or order not being vacated within
thirty (30) days; (iv) the pendency of any bankruptcy proceeding or other
creditors' suit against Maker; (v) a petition or answer seeking reorganization
or arrangement under the Federal bankruptcy laws with respect to Maker; (vi) an
assignment for the benefit of creditors by Maker; (vii) Maker consents to the
appointment of a receiver or trustee in an insolvency or bankruptcy proceeding
or other creditors' suit; (viii) the existence of any uncured event of default
under the terms of any instrument in writing evidencing a debt to someone other
than Holder, provided, that Maker is not contesting in good faith by appropriate
proceedings such uncured event of default; (ix) the existence of any judgment
against, or any attachment of property of Maker; or (x) any other condition
which, in the good faith determination of Holder, would materially impair the
timely repayment of this Note.
Upon the occurrence of any event or condition of default hereunder, or at
any time thereafter, Holder at his option may accelerate the maturity of this
Note and declare all of the indebtedness or any portions thereof to be
immediately due and payable, together with accrued interest thereon, and payment
thereof may be enforced by suit or other process of law.
<PAGE>
If this Note is not paid when due, whether at maturity or by acceleration,
Maker agrees to pay all reasonable costs of collection and such costs shall
include without limitation all costs, attorneys' fees and expenses incurred by
Holder hereof in connection with any insolvency, bankruptcy, reorganization,
arrangement or similar proceedings involving Holder, or involving any endorser
or guarantor hereof, which in any way affects the exercise by Holder hereof of
its rights and remedies under this Note.
Presentment, demand, protest, notices of protest, dishonor and non-payment
of this Note and all notices of every kind are hereby waived.
The terms "Maker" and "Holder" shall be construed to include their
respective heirs, personal representatives, successors, subsequent holders and
assigns.
Regardless of the place of execution or performance, this letter and the
Note shall be governed by, and construed in accordance with, the laws of the
State of New York without giving effect to such state's conflicts of laws
provisions. Each of the parties hereto irrevocably consents to the jurisdiction
and venue of the federal and state courts located in the State of New York,
County of New York.
PERRY'S MAJESTIC BEER, INC.
By: /s/ Robert Sipper
--------------------------------------
Robert Sipper, Chief Executive Officer
<PAGE>
AGREEMENT
AGREEMENT made this 13th day of November, 1992 by and between Mark Butler
and Ron Zagha, jointly and severally, ("Customer"), with principal offices at
101 West 75th Street, New York, New York, 10023, and Frankenmuth Brewery, Inc.
("Brewer"), a Michigan corporation with principal offices at 426 South Main
Street, Frankenmuth, Michigan 48734.
WHEREAS, Brewer is a brewer licensed under the laws of the State of
Michigan; and
WHEREAS, Customer desires to have Brewer brew and bottle its beer under a
private label of "Perry's Majestic"; and
WHEREAS, Brewer desires to brew and bottle, "Perry's Majestic" for
Customer;
THEREFORE, IT IS AGREED AS FOLLOWS:
1. Customer agrees to provide at its own expense, all malted barley hops,
bottles, crowns, labels, six-pack carriers and cases for packaging "Perry's
Majestic". All packaging materials will be designed and manufactured in
accordance with Brewer's production requirements. All labels will be designed in
accordance with the Bureau of Alcohol, Tobacco and Firearms regulations and in
compliance with all other applicable Federal and state laws and regulations.
2. Brewer agrees to provide brewing, filling and packaging services; and
the yeast, water and carbon dioxide necessary therefor. Brewer and Customer will
agree upon formulas and recipes to brew "Perry's Majestic", which shall be
specifically determined in writing and signed by the parties. Brewer agrees to
follow such formulas and recipes in brewing "Perry's Majestic" unless otherwise
instructed in writing by Customer. To the extent consistent with the foregoing,
Brewer agrees to use the same production standards in brewing "Perry's Majestic"
as it uses in brewing beers sold under its own labels.
<PAGE>
3. Customer will pay Brewer a per case (24/12 oz. bottles packed in 4/6
packs) brewing and packing fee at the rate of:
A. $1.90 per case for ninety (90) days following the date of the first
bottling of "Perry's Majestic" or June 30, 1993, whichever comes first;
B. Brewer may adjust the fee up to $0.35 per case effective not before
the 91st day and thereafter;
C. Brewer may adjust the fee up to an additional $0.20 per case
effective not before the 181st day and thereafter; and
D. Brewer may adjust the fee up to 7.5% per six month period effective
not before one year after the date of first bottling or June 30, 1993,
whichever comes first, and each six-month date thereafter.
No price change will take effect, however, before ninety (90) days after Brewer
gives notice of the change to Customer. Nothing in this Paragraph limits
Brewer's or Customer's right to terminate set forth in Paragraphs 8 and 10
below.
Payment must be made to Brewer on the earlier of delivery and two (2) weeks
after bottling.
4. All rights, title and interests in the name, logo and trademark of
"Perry's Majestic" shall be the sole property of Customer. Customer represents
and warrants that it is the lawful owner of all rights, title and interest to
the name, logo and trademark. Customer shall indemnify and hold harmless the
Brewer, its officers, directors, employees, agents and affiliates from any
claims made for patent, copyright or trademark infringement arising out of the
use of the private label brand(s) being produced hereunder.
5. Brewer agrees that all information, materials, documentation and data
provided by Customer, or acquired from Customer (hereinafter collectively called
the "Confidential Information") is Customer's confidential and proprietary
property and shall be held in strictest confidence by Brewer. Customer's
Confidential Information shall not be disclosed to others or used without the
prior written permission of Customer. It is further agreed that Confidential
Information shall not include any information, material, documentation or data
which:
<PAGE>
(a) is already known to Brewer;
(b) is or becomes publicly known through no wrongful act of Brewer;
(c) is independently developed by Brewer for a party other than
Customer without use of any Confidential Information; or
(d) is approved for release by Customer.
6. Brewer agrees not to brew any "organic" beer products for resale by
themselves or by third parties other than Customer during the term of this
Agreement and for six (6) months after termination as set forth in Paragraphs 8
and 10 hereof.
7. Orders for production must be placed by Customer not less than 60 days
prior to the requested pick up date. The "Perry's Majestic" to be produced under
this Agreement shall be produced and purchased in minimum lots of 1,200 cases,
or the equivalent of one brew.
8. This Agreement shall not terminate before six (6) months following the
date of first bottling of "Perry's Majestic" or June 30, 1993, whichever comes
first, and shall automatically renew on a year-to-year basis thereafter,
provided the parties have then agreed in writing upon the fees payable during
the renewal period. Notwithstanding the foregoing, a party may terminate this
Agreement at any time after six (6) months following the date of first bottling
of "Perry's Majestic" and June 30, 1993, whichever comes first, by giving four
(4) months prior written notice to the other party.
9. Customer will, in its own name, arrange and pay for all transportation
of ingredients and packaging materials to the Brewer's facility in Frankenmuth,
Michigan, and for all transportation of the beer produced under this Agreement.
Customer will pay a storage fee for any beer that is stored by the Brewer longer
than two (2) weeks after bottling. This fee will be $0.20 per case per month or
any portion thereof, payable on the first day of each month.
<PAGE>
10. This Agreement shall terminate upon the following events:
(a) This Agreement is deemed by the Michigan Liquor Control Commission
or any other Federal or state authority to be in violation of its rules or
regulations and such violation cannot be corrected without substantial
alteration of this Agreement;
(b) After the period specified in Paragraph 8 hereof, either party
notifies the other of termination to be effective not earlier than sixty (60)
days after notice; or
(c) The bankruptcy, receivership or dissolution of either party.
At termination of this Agreement, for whatever cause: (i) Customer
agrees to purchase all "Perry's Majestic" on hand in accordance with this
Agreement; and (ii) Brewer agrees to purchase from Customer, at Customer's or
Brewer's cost, whichever is less, such quantity of unused bottles as Brewer
reasonably believes it can use in its own production. All representations and
warranties under this Agreement shall survive its termination with respect to
transactions and events originating prior to termination.
11. (a) Customer will hold Brewer harmless for any liability incurred
relative to advertising or other acts undertaken by Customer for its benefit or
in carrying out this Agreement.
(b) Brewer will indemnify and hold Customer, its officers and
directors harmless from and against liability to third parties resulting from
defective product. Brewer will name Customer as an "additional insured" on its
liability insurance police.
(c) It is mutually agreed that this Agreement will not constitute or
create a partnership, joint venture association or agency between the parties.
12. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors, heirs and assigns.
13. This Agreement may not be assigned by either party without the written
consent of the other party, which consent shall not be unreasonably withheld.
<PAGE>
14. This Agreement embodies and constitutes the entire understanding
between the parties and all prior contemporaneous oral or written agreements are
void; it shall not be modified save by an agreement in writing signed by both
parties.
15. The parties warrant and confirm that they have the capacity to enter
into this Agreement and, if applicable, that they have been duly authorized to
execute this Agreement on behalf of their respective companies.
16. Any notices required to be given under this Agreement shall be given by
United States Mail, certified or registered, return receipt requested, and
addressed to the parties as follows:
If to the Brewer:
Frankenmuth Brewery, Inc.
425 South Main Street
Frankenmuth, Michigan 48734
If to the Customer:
Mark Butler & Ron Zagha
101 West 75th Street
Suite 58
New York, New York 10023
17. This Agreement is entered into the date and year first above written at
Frankenmuth, Saginaw County, Michigan and shall be subject to the laws of the
State of Michigan.
CUSTOMER FRANKENMUTH BREWERY, INC.
/s/ Mark Butler By: [ILLEGIBLE]
- ------------------------- ------------------------
Mark Butler
