U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q-SB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES ACT OF 1934
COMMISSION FILE NUMBER 000-28595
PEABODYS COFFEE, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 98-0209293
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
3845 ATHERTON ROAD, SUITE 9, ROCKLIN, CALIFORNIA, 95765
(Address of Principal Executive Office)
(916) 632-6090
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filings requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 10,678,384 shares of common stock.
Transitional Small Business Disclosure Format (Check One): Yes [X] No [ ]
-1-
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 13
Part II - Other Information
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 18
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 5 Other Information 18
Item 6 Exhibits and Reports on Form 8-K 18
Signatures 19
-2-
<PAGE>
PEABODYS COFFEE, INC.
BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
2000 1999
------------ ------------
ASSETS
Current Assets
Other receivables $ 16,192 $ 25,862
Inventories 45,763 52,610
Prepaid expenses 145,960 10,203
------------ ------------
Total Current Assets 207,915 88,675
Property and equipment (net) 473,853 506,767
Deposits and other assets 167,774 108,764
------------ ------------
Total Assets $ 849,542 $ 704,206
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Cash overdraft $ 20,075 $ 150,640
Accounts payable 486,783 806,940
Accrued expenses 226,251 437,920
Capital lease obligations 436 3,037
Short-term borrowings 33,420 171,630
Bridge note financing 40,000 367,500
------------ ------------
Total Current Liabilities 806,965 1,937,667
------------ ------------
Stockholders' Equity (Deficit)
Common stock authorized - 50,000,000 shares,
issued and outstanding, 10,678,384 and 6,565,477
$.001 par value 10,678 6,565
Paid-in capital 4,112,603 2,811,437
Accumulated deficit (4,080,704) (4,051,463)
------------ ------------
Total Stockholders' Equity (Deficit) 42,577 (1,233,461)
------------ ------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 849,542 $ 704,206
============ ============
See accompanying notes to financial statements
-3-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
UNAUDITED
2000 1999
------------ ------------
Sales $ 946,221 $ 1,054,785
Cost of Sales 371,634 429,601
------------ ------------
Gross Profit 574,587 625,184
Operating expenses
Employee compensation and benefits 476,175 576,420
General and administrative expenses 169,693 148,724
Occupancy 141,349 152,472
Director and professional fees 194,713 87,748
Depreciation and amortization 55,380 49,503
Settlement costs and other fees 6,082 --
------------ ------------
1,043,392 1,014,867
------------ ------------
Operating Loss (468,805) (389,683)
Interest expense (6,102) (41,279)
------------ ------------
Net loss before extraordinary item (474,907) (430,962)
Extraordinary item - forgiveness of debt 46,539 --
------------ ------------
Net Loss (428,368) (430,962)
Accumulated Deficit, beginning of period (3,652,336) (3,620,501)
------------ ------------
Accumulated Deficit, end of period $ (4,080,704) $ (4,051,463)
============ ============
Earnings per common share:
Net loss before extraordinary item $ (0.04) $ (0.07)
Extraordinary item .00 --
------------ ------------
Net loss $ (0.04) $ (0.07)
============ ============
See accompanying notes to financial statements
-4-
<PAGE>
PEABODYS COFFEE, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
UNAUDITED
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (428,368) $ (430,962)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 55,380 49,503
Gain on extraordinary item - forgiveness of debt (46,540) --
Loss on disposal of property and equipment 2,143 --
Changes in operating assets and liabilities:
Receivables 9,174 (7,664)
Inventories (5,315) (11,419)
Prepaid expenses 103,131 (1,162)
Accounts payable 58,487 81,996
Accrued expenses 3,708 97,990
------------ ------------
Net cash used by operating activities (248,200) (221,718)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (22,769) (132,895)
Changes to deposits and other assets (27,325) (50,788)
Acquisition of intangibles -- --
------------ ------------
Net cash used by investing activities (50,094) (183,683)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 95,000 128,377
Principal reductions of notes payable (50,500) --
Net proceeds from sale of stock 231,025 148,298
Payments on capital lease obligations (677) (2,450)
------------ ------------
Net cash provided by financing activities 274,848 274,225
NET DECREASE IN CASH AND
CASH EQUIVALENTS (23,446) (131,176)
CASH AND CASH EQUIVALENTS
Beginning of period 3,371 (19,464)
------------ ------------
End of period $ (20,075) $ (150,640)
============ ============
See accompanying notes to financial statements
-5-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
The notes to the financial statements include a summary of significant
accounting policies and other notes considered essential to fully disclose and
fairly present the transactions and financial position of the company as
follows:
Note 1 - Significant Accounting Policies
Note 2 - Related Party Transactions
Note 3 - Going Concern
Note 4 - Acquisitions
Note 5 - Recapitalization
Note 6 - Property and Equipment
Note 7 - Accounts Payable
Note 8 - Bridge Note Financing (Due and Payable on December 31, 1998)
Note 9 - Supplemental Disclosures Non Cash Transactions
Note 10 - Forgiveness of Debt
-6-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business
-----------------------
Peabodys Coffee (the "Company") owns and operates retail espresso coffee bar
kiosks in a variety of corporate and institutional locations throughout
California and Nevada. The Company has gained access to this segment of the
specialty coffee market by contracting with existing food service providers such
as Sodexho Marriott, Aramark, and The Compass Group. The Company's product
offerings include: high quality coffee and espresso beverages, fruit smoothies,
pastries, accompaniments, and coffee related accessories.
Estimates and Assumptions
-------------------------
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from these estimates.
Basis of Presentation
---------------------
In the opinion of management, all adjustments of a normal and recurring nature,
which were considered necessary for a fair presentation of these financial
statements, have been included. It is suggested that these statements are read
in conjunction with the financial statements and footnotes thereto included in
the annual report of the Company on Form 10-KSB for the year ended March 31,
2000. The results of operations for the period ended September 30, 2000 may not
necessarily be indicative of the operating results for the entire fiscal year.
Incorporation by Reference
--------------------------
The following notes from the Company's audited financial statements for the
years ended March 31, 2000 and 1999 included in the Annual Report of the Company
on Form 10-KSB, filed with the Commission on June 29, 2000, are hereby
incorporated by reference:
Note 10 - Capital Lease Obligations
Note 11 - Short-Term Borrowings
Note 12 - Lease Information
Note 13 - Income Taxes
Note 15 - Stockholders' Deficit
Note 16 - Stock Option Plans
Note 17 - Warrants
Note 21 - Risks and Uncertainties
Note 22 - Concentrations
Note 23 - Fair Value of Financial Instruments
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments with a maturity of three
months or less at the time of purchase to be cash equivalents.
-7-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation and amortization are
primarily accounted for on the straight-line method over the estimated useful
lives of the assets, generally ranging from five to seven years. The
amortization of site improvements is based on the shorter of the lease term or
the life of the improvement.
Intangible Assets
-----------------
Goodwill represents the excess of acquisition costs over the fair value of
assets acquired. Amortization is recorded on a straight-line basis over twenty
years.
It is the Company's policy to evaluate the ongoing profitability of the acquired
assets in order to determine if any impairment of the net goodwill value has
occurred.
Income Taxes
------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the use of the asset and liability method of computing deferred income
taxes.
Inventory
---------
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Compensated Absences
--------------------
Employees of the Company are entitled to paid vacation depending on job
classification, length of service and other factors. It is impracticable to
estimate the amount of compensation for future absences, and accordingly, no
liability has been recorded in the accompanying financial statements. The
Company's policy is to recognize the costs of compensated absences when actually
paid to employees.
Reclassifications
-----------------
Certain amounts from the September 30, 1999 financial statements have been
reclassified to conform with the current year presentation.
NOTE 2 - RELATED PARTY TRANSACTIONS
A member of the Company's Board of Directors provided management and other
services to the Company on various business issues. Fees accrued for such
services by the Company during the six months ended September 30, 2000 and 1999,
were $12,000 and $21,000, respectively. At September 30, 2000 and 1999, $0 and
$24,196, respectively, was accrued in accounts payable.
An officer of Mine-A-Max corporation was related to a board member of the
Company. Pursuant to the merger agreement, the Mine-A-Max corporate officer was
granted 35,000 stock options at an exercise price of $1.00 per share.
-8-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 3 - GOING CONCERN
These statements are presented on the basis that the Company is a going concern.
Going concern contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The accompanying financial statements show an operating loss for the six months
ended September 30, 2000 of $468,805, and current liabilities exceed current
assets by $599,050. Without an infusion of additional capital, the Company's
ability to continue operations is doubtful. No adjustment has been made to the
financial statements relating to the uncertainty of continuing as a going
concern.
Management's Plan
-----------------
The Board and management acknowledge the issues raised as to the future of the
Company. As such, the Company has recently eliminated over $1 million of debt
through a combination of debt forgiveness and conversion of debt to equity, and
intends to further reduce debt via the same approach. The Company also
anticipates a reduction in cost of goods sold from a new supply agreement with a
national food and beverage distributor. In addition, the Company has engaged the
services of various consultants to enhance merger and acquisition activity and
capital raising efforts. The board and management believe that being a reporting
company under the Securities Exchange Act of 1934, along with improving
financial conditions, will help to attract investment and to create
opportunities for the Company.
NOTE 4 - ACQUISITIONS
In June 2000, the Company purchased certain assets of a coffee roasting company
in Van Nuys, California, an unrelated party. Terms of the agreement specify that
the ultimate consideration paid for the assets is contingent on the seller
meeting certain conditions. The seller has since been unable to meet the
required conditions of the agreement. The purchase price has been allocated to
the acquired assets on the basis of their estimated fair value on the date of
acquisition. The ultimate fair value of the assets acquired is summarized as
follows:
Inventory $ 11,662
Roasting equipment 52,338
----------
$ 64,000
==========
In April 1999, the Company purchased certain assets of a coffee company in San
Diego, California, an unrelated party, for $120,000 and 5,000 shares of common
stock of the Company. The purchase price has been allocated to the acquired
assets on the basis of their estimated fair value on the date of acquisition.
The fair value of the assets acquired is summarized as follows:
Inventory $ 5,125
Carts, kiosks and equipment 73,945
Intangibles 40,930
----------
$ 120,000
==========
-9-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 5 - RECAPITALIZATION
On June 30, 1999, Mine-A-Max Corporation, a public shell corporation, acquired
88% of the outstanding stock of Peabodys Coffee, Inc., a California corporation
("Peabodys California") at which time Peabodys was merged into Mine-A Max.
Twelve percent of Peabodys California shareholders have dissenter rights, which
could be exercised. For accounting purposes the acquisition will be treated as a
recapitalization of Peabodys, with Peabodys as the acquirer (reverse
acquisition). Pro-forma statements are not provided given the merger is to be
considered a reverse acquisition and not a business combination. Subsequent to
the merger, Peabodys stockholders own 95.82% of the recapitalized company. The
pre-merger balance sheet of Mine-A-Max at June 30, 1999 was as follows:
Cash $ 157
Accounts payable (4,041)
Due to officers (18,838)
Common Stock par
(authorized 50,000,000, issued 254,606 at $0.001) (128)
Paid in capital (319,502)
Accumulated Deficit 342,352
NOTE 6 - PROPERTY AND EQUIPMENT
At September 30, 2000, property and equipment were comprised of the following:
2000 1999
---------- ----------
Kiosk carts and equipment $ 500,449 $ 505,057
Equipment and furniture 282,092 207,342
Signage 44,356 41,095
Site improvements 77,395 67,433
---------- ----------
904,292 820,927
Less: accumulated depreciation (430,439) (314,160)
---------- ----------
$ 473,853 $ 506,767
========== ==========
NOTE 7 - ACCOUNTS PAYABLE
Of the $486,783 and $806,940 in accounts payable at September 30, 2000 and 1999,
approximately 71% and 77% have been outstanding for more than 90 days,
respectively.
-10-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 8 - BRIDGE NOTE FINANCING (DUE AND PAYABLE ON DECEMBER 31,1998)
In May 1996, the Company issued "units" consisting of secured convertible
promissory notes and warrants to purchase the Company's common stock. The
offering closed August 1996 with $760,000 of notes and warrants sold. Through
September 30, 2000 and 1999, $720,000 and $392,500 of principal notes had been
converted to common stock, respectively.
In addition, the Company is obligated to make quarterly interest payments on the
principal balance outstanding, at nine percent (9%) per annum and to repay such
principal balance in full on December 31, 1998. Certain note holders have
elected to forgive all accrued interest in exchange for warrants to purchase
common stock. This transaction is discussed in detail in Note 10. As of
September 30, 2000, the Company is approximately $24,860 in arrears on interest
payments relating to the remaining Secured Notes. Under the terms of the
Security Agreement relating to the Secured Notes, a note holder has the right
to: (a) declare all principal and interest immediately due and owing, (b)
exercise its rights and remedies under the California Commercial Code as a
secured creditor having a security interest in the collateral, which includes,
but is not limited to equipment, inventory, accounts, trademarks, and trade
names and other intellectual property rights (the "Collateral"), and, in
particular, sell, any part of the Collateral, and (c) exercise any other rights
or remedies of a secured party under California Law. As of September 30, 2000,
the Company has not received any notice of default relating to the Secured
Notes.
NOTE 9 - SUPPLEMENTAL DISCLOSURES NON CASH TRANSACTIONS
Non-cash transactions for the six months months ended September 30, 2000 are as
follows:
Accrued interest on bridge note obligations
forgiven in exchange for warrants to
purchase common stock $ 9,266
Conversion of obligations on bridge financing
notes into shares of common stock 20,000
Issuance of common stock in exchange for
services provided 310,000
Additional Paid in Capital in exchange for
equipment and inventory 64,000
Conversion of obligations on trade payables
and other accrued expenses into shares
of common stock 245,255
-11-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
NOTE 10 - FORGIVENESS OF DEBT
This income represents the forgiveness of accrued expenses, recorded as expenses
in prior years and in the six months ended September 30, 2000.
In 1995 and 1996 the Company issued interest bearing convertible secured
promissory notes ("Bridge Notes"). During the six months ended September 30,
2000, a Bridge Note holder elected to convert its outstanding principal balance
into common stock at a conversion price of $1.00 per share. In addition, the
Bridge Note holder who elected to convert its outstanding principal agreed to
forgive the Company of its debt obligations related to accrued interest
associated with their Bridge Note. In exchange for the debt forgiveness of
$9,266, the Company issued this note holder warrants to purchase 9,266 shares of
the Company's common stock at a price per share of $1.00.
On September 30, 2000, the Company's legal counsel agreed to accept a
nonstatutory option for the purchase of 150,000 shares of common stock, with an
exercise price of $0.20 per share as full and final settlement for accrued legal
fees totaling $19,370.
A tax effect was not attributed to the gain as the gain will reduce the
Company's prior net operating loss.
-12-
<PAGE>
PEABODYS COFFEE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
UNAUDITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The preparation of this section requires management to make estimates and
assumptions about the past, current and future activities, business practices,
and financial records of the Company. Actual results may differ from these
estimates and assumptions.
The Statements of Loss and Accumulated Deficit show a decrease in Sales and
Gross Profit for the six months ended September 30, 2000 over the same period in
fiscal 1999. The Company also shows a significant ongoing increase in the
Accumulated Deficit for the six months ended September 30, 2000, indicating a
poor overall operating performance.
REVENUES
Net revenues for the six months ended September 30, 2000 decreased 10.3% to
$946,221 from $1,054,785 for the same period in fiscal 1999. This was due
primarily to a decrease in the number of operating kiosks from 28 to 21. Retail
kiosk and cart sales accounted for 100% of revenues for both periods.
COSTS AND EXPENSES
Cost of sales for the six months ended September 30, 2000 decreased 11.8%
to $371,634 from $429,601 for the same period in fiscal 1999. As a percentage of
net revenues, cost of sales was 39.3% for the six months ended September 30,
2000 and 40.7% for the comparable period in fiscal 1999.
Employee compensation and benefits for the six months ended September 30,
2000 decreased to $476,175 from $576,420 for the same period in fiscal 1999. As
a percentage of net revenues, employee compensation and benefits decreased to
50.3% for the six months ended September 30, 2000 from 54.7% for the comparable
period in fiscal 1999. The decrease as a percent of net revenues is due to the
restructuring of supervision at the Company's operating sites.
General and administrative expenses for the six months ended September 30,
2000 increased to $169,693 from $148,724 for the same period in fiscal 1999. As
a percentage of net revenues, general and administrative expenses increased to
17.9% for the six months ended September 30, 2000 from 14.1% for the comparable
period in fiscal 1999. The increase as a percent of net revenues is primarily
due to an increase in training costs associated with new unit level employees
and increased repairs and maintenance expenditures for improving operational
efficiencies.
Occupancy costs for the six months ended September 30, 2000 decreased to
$141,349 from $152,472 for the same period in fiscal 1999. As a percentage of
net revenues, occupancy costs increased to 14.9% for the six months ended
September 30, 2000 from 14.5% for the comparable period in fiscal 1999.
Director and professional fees for the six months ended September 30, 2000
increased to $194,713 from $87,748 for the same period in fiscal 1999. As a
percentage of net revenues, director and professional fees increased to 20.6%
for the six months ended September 30, 2000 from 8.3% for the comparable period
in fiscal 1999. The increase as a percentage of net revenues was primarily due
to the engagement of various consultants to assist the Company in obtaining
growth financing and in the penetration of new markets. The increase is further
due to the accounting fees incurred directly related to the completion of the
audit for the year ended March 31, 2000. These audit fees were incurred in the
three months ended December 31, 1999 for the fiscal year ended March 31, 1999.
-13-
<PAGE>
Depreciation and amortization expense for the six months ended September
30, 2000 increased to $55,380 from $49,503 for the same period in fiscal 1999.
The increase was primarily due to increased depreciation related to the
acquisition of property and equipment associated with the Northern Lights Coffee
purchase in April 1999, the South Lake Tahoe operating site in May 1999, and
site improvements at three locations in March 2000.
Interest expense for the six months ended September 30, 2000 decreased to
$6,102 from $41,279 for the same period in fiscal 1999. As a percentage of net
revenues, interest expense decreased to 0.6% for the six months ended September
30, 2000 from 3.9% for the comparable period in fiscal 1999. The decrease was
primarily due to savings from the conversion of interest bearing debt into
shares of common stock. $20,000 of debt was converted to common stock in April
2000, $307,500 in December 1999, and $4,500 in April 1999.
Operating losses for the six months ended September 30, 2000 increased to
$468,805 from $389,683 the same period in fiscal 1999. As a percentage of net
revenues, operating losses increased to 49.5% for the six months ended September
30, 2000 from 36.9% for the comparable period in fiscal 1999. The increase as a
percentage of net revenues was primarily due to the increases in professional
fees associated with the engagement of various consultants to assist the Company
in obtaining growth financing and in the penetration of new markets. The
increase is further due to accounting fees incurred directly related to the
completion of the audit for the year ended March 31, 2000. These audit fees were
incurred in the three months ended December 31, 1999 for the fiscal year ended
March 31, 1999.
Net loss for the six months ended September 30, 2000 decreased to $428,368
from $430,962 for the same period in fiscal 1999. As a percentage of net
revenues, net losses increased to 45.3% for the six months ended September 30,
2000 from 40.9% for the comparable period in fiscal 1999. The increase was
primarily due to the increase in consulting and professional fees, offset by
extraordinary income resulting from debt forgiveness of $9,266 of accrued
interest payable on notes.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company ended the period with a working capital
deficit of $599,050. Cash and cash equivalents decreased $23,446 during the six
months ended September 30, 2000. Cash utilized by operating activities totaled
$248,200 during the six months ended September 30, 2000, primarily due to an
operating loss of $428,368 offset by a decrease in prepaid expenses of $103,131,
an increase in accounts payable of $58,487 and depreciation expense incurred of
$55,380.
Cash utilized for investing activities for the six months ended September
30, 2000 included capital additions to property and equipment of $22,769
primarily related to the refurbishment of existing operating units, and
increases in deposits to suppliers of $10,000.
The Company had net cash provided from financing activities for the six
months ended September 30, 2000 totaling $274,848. Cash from financing
activities primarily consists of $231,025 from net proceeds from the sale of
Company stock. These amounts were utilized in the day-to-day operations of the
Company.
Management is currently attempting to secure sufficient equity investment
capital to allow the Company to open or acquire 5 additional operating units.
Management anticipates that the addition of these 5 Company operated units will
have a significant positive impact on the Company's overall operating losses.
However, management estimates that the number of Company operated units will
-14-
<PAGE>
need to grow to at least 40 with comparable or slightly improved performance to
the existing units in order to reach break even with operational costs. The
Company estimates that this growth to 40 units will require approximately
$500,000 of additional investment capital (in addition to the investment capital
required to address the current working capital deficit) and approximately six
months to achieve. In anticipation of this growth, and the need for additional
capital, the Company has engaged the services of various consultants and is
currently negotiating with several alternative sources of capital. Management
believes that one or more of these sources may be in place by the end of the
current fiscal year. However, there can be no assurances that such capital will
be in place.
-15-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
(c) The following equity securities were sold by the Company in
unregistered transactions during the period covered by this report:
On July 1, 2000, the Company issued 12,275 shares of its common stock, at a
price of $0.50 per share, upon the exercise of non-statutory stock options by a
single entity. The optionee used debt forgiveness as consideration for the
exercise price. The issuance was exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended. The entity to whom the shares were
issued had a longstanding relationship with the Company, was composed of
sophisticated investors, and had access to the same information as would be
included in a registration statement prepared by the Company.
On July 19, 2000, the Company issued, to an individual consultant of the
Company as consideration for consulting services: (i) 150,000 shares of its
common stock valued at $0.50 per share; and (ii) a warrant for the purchase of
an additional 100,000 shares of its common stock. The warrant has a term of 3
years, and exercise prices of: (a) $2.00 per share for 50,000 of the shares, and
(b) $2.50 for 50,000 of the shares. The shares and warrant were issued in a
transaction exempt under Rule 506 of Regulation D promulgated under Section 4(2)
of the Securities Act, as amended.
From August 11, 2000, continuing through the end of the period covered by
this report, the Company has sold 575,000 shares of its common stock in a
private offering exempt under Rule 506 of Regulation D promulgated under Section
4(2), as amended. The sales were to individuals and entities, each of whom was a
sophisticated investor and an existing shareholder of the Company.
On August 15, 2000 the Company issued 25,000 shares of its common stock, at
a price of $0.20 per share, upon the exercise of stock options. The Optionee
used debt forgiveness as consideration for the exercise price. The issuance was
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended. The individual to whom the shares were issued had a longstanding
relationship with the Company as its former controller, and had access to the
same information as would be included in a registration statement prepared by
the Company.
On August 23, 2000 the Company issued a non-statutory stock option to an
individual, for the purchase of 20,000 shares of its common stock, at an
exercise price of $0.35 per share, as consideration for consulting services. The
option has a term of 2 years and is fully vested. The option was issued under
the exemption provided by Section 4(2) of the Securities Act of 1933, as
amended. The optionee is a sophisticated investor with a preexisting
relationship with the Company, and had access to the same information as would
be included in a registration statement prepared by the Company.
On September 1, 2000, the Company issued 230,000 shares of its common stock
to three purchasers pursuant to a restructuring and repricing of an earlier
purchase of stock by the three purchasers. The shares were issued in a
transaction exempt under Rule 506 of Regulation D promulgated under Section 4(2)
of the Securities Act, as amended.
-16-
<PAGE>
On September 7, 2000, the Company issued 7,500 shares of its common stock
upon the exercise of a warrant at an exercise price of $0.10 per share. The
holder of the warrant used cash as consideration for the exercise price. The
issuance was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended. The individual to whom the shares were issued had a
pre-existing relationship with the Company, was a sophisticated investor, and
had access to the same information as would be included in a registration
statement prepared by the Company.
On September 19, 2000, the Company issued, to a consultant of the Company,
50,000 shares of its common stock as consideration for consulting services. The
shares were issued in a transaction exempt under Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act, as amended.
On September 28, 2000, the Company issued 2,750 shares of its common stock,
at a price of $0.10 per share, upon the exercise of a warrant. The individual
exercising the warrant used cash as consideration for the exercise price. The
issuance was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended. The individual to whom the shares were issued had a
pre-existing relationship with the Company, was a sophisticated investor, and
had access to the same information as would be included in a registration
statement prepared by the Company.
On September 29, 2000, the Company issued 277,888 shares of its common
stock to three trade creditors in exchange for debt forgiveness in three
separate transactions: (i) 204,378 shares were issued with a valuation of $0.50
per share; (ii) 33,510 shares were issued with a valuation of $0.30 per share;
and (iii) 40,000 shares were issued with a valuation of $0.20 per share. Each of
the three issuances was exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended. Each of the three trade creditors to whom
the shares were issued had a longstanding, pre-existing relationship with the
Company, was a sophisticated investor, and had access to the same information as
would be included in a registration statement prepared by the Company.
On September 29, 2000, the Company issued 17,000 shares of its common
stock, at a price of $0.10 per share, upon the exercise of a warrant. The
individual exercising the warrant used debt forgiveness as consideration for the
exercise price. The debt was in the form of a promissory not. The issuance was
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended. The individual to whom the shares were issued had a pre-existing
relationship with the Company, was a sophisticated investor, and had access to
the same information as would be included in a registration statement prepared
by the Company.
On September 30, 2000, the Company issued 6,667 shares of its common stock,
at a price of $3.33 per share, in exchange for debt forgiveness. The debt was in
the form of a promissory note. The issuance was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended. The individual to whom
the shares were issued had a pre-existing relationship with the Company, was a
sophisticated investor, and had access to the same information as would be
included in a registration statement prepared by the Company.
On September 30, 2000 the Company issued 175,000 shares of its common stock
to two optionees, at a price of $0.04 per share, upon the exercise of stock
options in two separate transactions, one for the issuance of 112,500 shares,
and one for the issuance of 62,500 shares. The optionees each used debt
forgiveness as consideration for the exercise price. The issuances were exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended.
The individuals to whom the shares were issued each had a longstanding
relationship with the Company, were officers of the Company, and had access to
the same information as would be included in a registration statement prepared
by the Company.
-17-
<PAGE>
On September 30, 2000, the Company issued a non-statutory stock option to a
law firm, for the purchase of 150,000 shares of its common stock, at an exercise
price of $0.20 per share, as consideration for forgiveness of debt for past
services rendered. The option has a term of 4 years and is fully vested. The
option was issued under the exemption provided by Section 4(2) of the Securities
Act of 1933, as amended. The optionee is a sophisticated investor with a
preexisting relationship with the Company, and had access to the same
information as would be included in a registration statement prepared by the
Company.
On September 30, 2000, an individual purchased 200,000 shares for
$58,175.00 in a transaction exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended. The individual to whom the shares were
issued had a longstanding relationship with the Company, was a director of the
Company, and had access to the same information as would be included in a
registration statement prepared by the Company.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Exhibit No. Description
----------- -----------
2.1* Articles of Incorporation of Kimberley Mines, Inc.
2.2* Certificate of Amendment of Articles of Incorporation
(Mine-A-Max Corp.)
2.3* Certificate of Amendment of Articles of Incorporation
(Peabodys Coffee, Inc.)
2.4* Amended and Restated Bylaws of Peabodys Coffee, Inc.
3.1* Peabodys Coffee, Inc. 1995 Stock Option Plan
3.2* Peabodys Coffee, Inc. 1999 Stock Option Plan
6.1* Executive Services Agreement with Barry J. Gibbons
6.2** Arrosto Asset Purchase Agreement
6.3** Consulting Agreement--Ward
6.4** Consulting Agreement--Lyman
6.5*** Asset Purchase Agreement with Arrosto Coffee Company, LLC
*Incorporated by reference to the Company's Registration Statement on Form
10-SB, as amended, originally filed with the Commission under the Exchange Act
on December 21, 1999.
**Incorporated by reference to the Company's Annual Report on Form 10-KSB, filed
with the Commission on June 29, 2000.
***Incorporated by reference to the Company's Current Report on Form 8-K, dated
June 19, 2000.
-18-
<PAGE>
(b) Reports on Form 8-K.
-------------------
The Company filed no reports on Form 8-K during the reporting period.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PEABODYS COFFEE, INC.,
A Nevada Corporation
By:_____________/S/___________________
Todd Tkachuk, President
Date: November 14, 2000
-19-
