UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended December 31, 1996 Commission File Number 33-53748C
PERRY'S MAJESTIC BEER, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3769323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
134 Morgan Avenue
Brooklyn, New York 11237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (718) 894-4300
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 13, 1997 was 3,083,335.
<PAGE>
PERRY'S MAJESTIC BEER, INC.
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INDEX
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Page to Page
PART I
Item 1. Financial Statements
Balance Sheet as of December 31, 1996 [Unaudited]........... 1.....
Statements of Operations for the three and nine months ended
December 31, 1996 [Unaudited]............................... 2.....
Statement of Stockholders' Equity for the nine months ended
December 31, 1996 [Unaudited]............................... 3.....
Statements of Cash Flows for the nine months ended
December 31, 1996 [Unaudited]............................... 4.....
Notes to Financial Statements [Unaudited]................... 5.....7
Item 2. Managements' Discussion and Analysis of the Financial
Condition and Results of Operations................... 8......9
Signature......................................................10......
. . . . . . . . . . . . . . .
<PAGE>
Item 1: Financial Statements
PERRY'S MAJESTIC BEER, INC.
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BALANCE SHEET AS OF DECEMBER 31, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
Assets:
Current Assets:
Cash $ 1,889,418
Inventory 279,064
Accounts Receivable 19,538
-----------
Total Current Assets 2,188,020
Non-Current Assets:
Investment in Bev-Tyme, Inc. - Preferred Stock - Related Party [3] 800,000
----------
Property and Equipment - Net 14,170
----------
Other Assets:
Deposits 9,700
Other Assets 86,700
Goodwill - Net 251,767
-----------
Total Other Assets 348,167
Total Assets $ 3,350,357
===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable 41,536
Commitments and Contingencies [9] --
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, 3,083,335 Shares 308
Additional Paid-in Capital - Common Stock 2,524,778
Unrealized Loss on Available for Sale Investment [3] (1,200,000)
Retained Earnings [Deficit] (166,265)
Total Stockholders' Equity 3,308,821
Total Liabilities and Stockholders' Equity $ 3,350,357
===========
See Notes to Financial Statements.
1
<PAGE>
PERRY'S MAJESTIC BEER, INC.
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STATEMENT OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Three months Nine months
ended ended
December 31, December 31,
1 9 9 6 1 9 9 6
Sales - Net $ 155,172 $ 564,590
Cost of Goods Sold 123,443 450,581
---------- -----------
Gross Profit 31,729 114,009
Selling, General and Administrative Expenses 140,701 257,834
Amortization of Goodwill 13,683 21,883
---------- -----------
[Loss] from Operations (122,655) (165,708)
---------- -----------
Other [Income] Expense:
Interest Expense -- 6,998
Interest Income (4,103) (6,441)
---------- -----------
Other Expense - Net (4,103) 557
---------- -----------
[Loss] Before Income Taxes (118,552) (166,265)
Provision for Income Taxes -- --
---------- -----------
Net [Loss] $ (118,552) $ (166,265)
========== ===========
Net [Loss] Per Share (.03) (.05)
========== ===========
Number of Shares $3,583,335 $ 3,311,819
========== ===========
See Notes to Financial Statements.
2
<PAGE>
PERRY'S MAJESTIC BEER, INC.
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STATEMENT OF STOCKHOLDERS' EQUITY
[UNAUDITED]
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<TABLE>
Unrealized
Loss on
Additional Retained Available Total
Preferred Stock Common Stock Paid-in Earnings For Sale Stockholders'
Shares Amount Shares Amount Capital [Deficit] Investment Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Issued
for Cash - January 1996 -- $ -- 2,500,000 $ 250 $ 49,750 $ -- $ -- $ 50,000
500,000 Shares of Series
A and 7,000,000 Shares
of Ser 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
--------- -------- --------- ------- --------- -------- ---------- ---------
Balance - March 31, 1996 7,500,000 7,500 2,500,000 250 2,192,250 -- -- 2,200,000
Net Proceeds from Public
Offering of Common Stock -- -- 583,335 58 2,475,028 -- -- 2,475,086
Unrealized Loss on Avail
for Sale Investment [3] -- -- -- -- -- -- (1,200,000) (1,200,000)
Net[Loss]for the nine mo
ended December 31, 1996 -- -- -- -- -- (166,265) -- (166,265)
--------- --------- --------- ------- --------- -------- ----------- -----------
Balance-December 31, 1996
[Unaudited] 7,500,000 $ 7,500 3,083,335 $ 308 $4,667,278 $ (166,265) $(1,200,000) $3,308,821
========= ========= ========= ========== ========== =========== =========== ==========
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
PERRY'S MAJESTIC BEER, INC.
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STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 1996.
[UNAUDITED]
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Net Cash - Operating Activities $ (363,455)
-----------
Investing Activities:
Acquisition of Old Marlborough Brewery (172,213)
Riverosa Acquisition (100,000)
Loan to Bev-Tyme (75,000)
Repayment of Loan from Bev-Tyme 75,000
-----------
Net Cash - Investing Activities (272,213)
-----------
Financing Activities:
Proceeds from Bridge Loan 60,000
Proceeds from Sale of Preferred Stock to Bev-Tyme 75,000
Payment of Bridge Loan Obligation (150,000)
Final Payment on Stock Subscription for Common Stock 4,800
Proceeds of Public Offering - Net of Offering Costs 2,475,086
-----------
Net Cash - Financing Activities 2,464,886
-----------
Net Increase in Cash 1,829,218
Cash - Beginning of Period 60,200
-----------
Cash - End of Period $ 1,889,418
===========
Supplemental Disclosures of Cash Flow Information:
Cash paid for the period for:
Interest $ 6,998
Income Taxes $ --
See Notes to Financial Statements.
4
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS
[UNAUDITED]
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[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 were 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] Earnings Per Share - The number of shares to be used for earnings per share
calculation purposes is based on the number of shares issued and outstanding for
the period presented. Convertible Preferred Stock shares are included if
dilutive.
[C] 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.
[D] 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.
[E] Goodwill - Amounts paid in excess of the estimated value of net assets
acquired of Riverosa and Old Marlborough are charged to goodwill. Goodwill
relates 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 will also evaluate
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.
[F] Stock Options and Similar Equity Instruments Issued to Employees - The
Company uses the intrinsic value method to recognize cost for stock issued to
employees.
[G] Basis of Reporting - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b)of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such statements include all
adjustments which are considered necessary in order to make the interim
financial statements not misleading.
[2] Business Combination
[A] 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 was payable with interest of 8% and was paid in August of 1996 with
proceeds from the Company's initial public offering. The combination is
accounted for by the purchase method.
Goodwill of approximately $246,000 will be amortized over five years under the
straight-line method.
Amortization of goodwill of $20,500 was recorded for the nine months ended
December 31, 1996.
Interest expense for the nine months ended December 31, 1996 was $2,790.
5
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
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[2] Business Combination [Continued]
[B] In August of 1996, the Company entered into a letter of intent to acquire a
brewery for $50,000. In September 1996, the Company finalized its acquisition of
the Old Marlborough Brewery. The total purchase price was $160,513 of which
$35,513 was for inventory and equipment and $75,000 was for distribution rights.
Goodwill of $27,650 was recorded and will be amortized over five years under the
straight-line method. For the nine months ended December 31, 1996, amortization
of goodwill was $1,383. This acquisition was deemed insignificant.
During the third quarter, the Company paid an additional $11,700 for
distribution rights.
[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 at March 31, 1996] and $150,000.
As of March 31, 1996, $75,000 of cash was collected and the balance of $75,000
was received on April 4, 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.
On April 19, 1996, the Company lent $75,000 to Bev-Tyme, Inc., which was repaid
September 9, 1996.
Interest income for this loan for the nine months ended December 31, 1996 was
$2,338.
The investment in Bev-Tyme, Inc. is classified as "available for sale" and is
presented at estimated fair value. As of December 31, 1996, the Company recorded
an unrealized loss of $1,200,000 to reflect the change in the market value of
Bev-Tyme, Inc.'s Series C Preferred Stock.
[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] Common Stock
[A] 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 was received April 4, 1996.
[B] The Company's registration statement for 583,335 shares of common stock at
$6.00 per share was declared effective in July of 1996 and net proceeds of
approximately $2,475,000 were received in August of 1996.
[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 were paid at the closing of the initial public offering of the
Company's securities in August of 1996. As of March 31, 1996, $90,000 was
received in cash from the bridge loan and $60,000 was received April 4, 1996.
The principal balance of $150,000 and interest for $4,208 was paid August 5,
1996.
6
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
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[7] New Authoritative Pronouncements
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair value, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
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 establishes 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. The Company adopted SFAS No. 121 on April 1,
1996. Adoption of SFAS No. 121 did not have a material impact on the Company's
financial statements. In the future, if the sum of the expected undiscounted
cash flows is less than the carrying amount of the asset, an impairment loss
would be recognized.
The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995. SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity instruments issued to employees 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 recognition requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company adopted the disclosure requirements on April 1, 1996. SFAS 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. Those transactions must be
accounting for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
This requirement is effective for transactions entered into after December 15,
1995. The adoption of SFAS No. 123 could have a material impact on the Company's
financial statements.
[8] Financial Instruments
The carrying amount of cash, accounts receivable and payable approximates fair
value because of their short maturities.
[9] Commitments and Contingencies
In April of 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 $75,000 per
annum. In addition, on each of March 31, 1997, March 31, 1988, 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.
Also in April of 1996, the Company entered into a three [3] 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 $52,000 per annum.
In October of 1996, Mr. Sipper exercised his option to transfer his Bev-Tyme
salary of $106,650 to the Company.
. . . . . . . . . . . . . . . . . . .
7
<PAGE>
Item 2:
PERRY'S MAJESTIC BEER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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OVERVIEW
Perry's Majestic Beer, Inc. [the "Company" or "Perry's"] was formed in December
of 1995. There were 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
proposed acquisition of Riverosa Company, Inc. ["Riverosa"] were investing and
financing activities through March 31, 1996 [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. Management of
Riverosa consisted of Mark Butler and Ron Zagha. Mark Butler is the Vice
President of the Company and Robert J. Sipper is the President of the Company
and will be responsible for the management functions of the Company.
Bev-Tyme, Inc. ["Bev-Tyme"], the Company's controlling shareholder and parent,
through its wholly owned subsidiary, shall be the distributor for Perry's in New
York City. Besides Robert J. Sipper, who is the President and Chief Executive
Officer of Bev-Tyme, Inc. and the Company and Robert Forst, the Chief Financial
Officer of Bev-Tyme, it is not anticipated that any other employees of Bev-Tyme
or its subsidiaries will be involved with the Company's operations. It is
anticipated that the two companies will be run independently of each other.
The Board of Directors of Perry's consist of three people, two of whom have no
interest [not an employee, officer or director] in Bev-Tyme. Accordingly, all
potential conflicts of interest shall be decided by an impartial Board.
Results of Operations
The Company had a loss from operations of $165,708 and net loss of $166,265 for
the nine months ended December 31, 1996.
The sales for the Company for the nine months ended December 31, 1996 were
$564,590. The Company believes its customers base will increase in 1997. 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 designing incentive and price promotion programs.
The Company's selling, general and administrative expenses for the nine months
ended December 31, 1996 were $257,834. The Company's selling, general and
administrative expenses increased for the December 31, 1996 quarter as a result
of two additional sales personnel.
The Company's interest expense for the nine months ended December 31, 1996 was
$6,998. The interest expense was attributable to the $150,000 bridge loans and
the $100,000 acquisition note for Riverosa, both repaid in August of 1996.
8
<PAGE>
PERRY'S MAJESTIC BEER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Liquidity and Capital Resources
Perry's had excess working capital at December 31, 1996 of $2,146,484. For the
nine months ended December 31, 1996, the Company utilized $363,455 in cash for
operations. The Company utilized $272,213 in investing activities for the
acquisition of Riverosa and the Old Marlborough brewery as of December 31, 1996
and expended another $75,000 as a loan to Bev-Tyme, Inc. which was repaid in
September of 1996. The Company generated $2,464,886 in cash from financing
activities for the nine months ended December 31, 1996 resulting from the sale
of preferred stock to Bev-Tyme, Inc. with additional cash proceeds of $75,000
being received in April of 1996, the sale of common stock with additional cash
proceeds of $4,800 being received in April of 1996, the additional proceeds from
bridge loans of $60,000 being received in April of 1996 and the net proceeds
from the initial public offering of $2,475,086. The $150,000 bridge loans from
the seven unaffiliated lenders had an interest rate of 8% per annum. These loans
were repaid at the close of the initial public offering on August 4, 1996. The
cash balance at December 31, 1996 was $1,889,418.
In April of 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 $75,000 per
annum. In addition, on each of March 31, 1997, March 31, 1988, 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.
Also in April of 1996, the Company entered into a three [3] 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 $52,000 per annum. In October of 1996, Mr. Sipper exercised his option to
transfer his Bev-Tyme salary of $106,650 to Perry's.
In August of 1996, the Company entered into a letter of intent to acquire a
brewery for $50,000. In September 1996, the Company finalized its acquisition of
the Old Marlborough Brewery. The total purchase price was $160,513 of which
$35,513 was for inventory and equipment and $75,000 was for distribution rights.
During the third quarter, the Company paid an additional $11,700 for
distribution rights.
The Company anticipates that the net proceeds of $2,475,086 from the initial
public offering in August of 1996 along with anticipated cash to be generated
from operating activities will be sufficient to satisfy its cash requirements
for at least 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.
9
<PAGE>
SIGNATURE
- ------------------------------------------------------------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB to be signed on its behalf
by the undersigned thereon duly authorized.
PERRY'S MAJESTIC BEER, INC.
By:/s/ Robert J. Forst
Robert J. Forst
Chief Financial Officer
February 13, 1997
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,889,418
<SECURITIES> 0
<RECEIVABLES> 19,538
<ALLOWANCES> 0
<INVENTORY> 279,064
<CURRENT-ASSETS> 2,188,020
<PP&E> 14,170
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,350,357
<CURRENT-LIABILITIES> 41,536
<BONDS> 0
0
7,500
<COMMON> 308
<OTHER-SE> 1,158,153
<TOTAL-LIABILITY-AND-EQUITY> 3,350,357
<SALES> 155,172
<TOTAL-REVENUES> 155,172
<CGS> 123,443
<TOTAL-COSTS> 140,171
<OTHER-EXPENSES> (4,103)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (118,552)
<INCOME-TAX> 0
<INCOME-CONTINUING> (118,552)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (118,552)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
