UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[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 pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____ to _____
Commission file number: 0-13118
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Florida 65-0805935
------------------------- -----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7563 Philips Highway, Suite 110
Jacksonville, FL 33256
(Address of principal executive offices, including zip code)
(904) 296-7500
(Registrant's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such requirements for the past
90 days.
YES [ ] NO [X]
The number of issued and outstanding shares of the Registrant's Common Stock,
$0.001 par value, as of September 30, 2000 was 7,813,204.
<PAGE>
<TABLE>
<CAPTION>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
PART I - FINANCIAL INFORMATION
PAGE
--------
<S> <C>
Item 1. Financial Statements:
Balance Sheets as of September 30, 2000 (Unaudited) and
December 31, 1999 (Audited)..............................................................................3-4
Statements of Operations for the Three Months and the Nine Months
Ended September 30, 2000 and 1999 (Unaudited)............................................................5-6
Statement of Changes in Stockholder's Equity for the Nine Months
Ended September 30, 2000 (Unaudited).....................................................................7-9
Statements of Cash Flows for the Nine Months Ended September 30,
2000 and 1999 (Unaudited) ...............................................................................10-11
Notes to Financial Statements............................................................................12-19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................................20-26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.........................................................................................27
Item 2. Changes in Securities.....................................................................................27
Item 3. Defaults Upon Senior Securities...........................................................................27
Item 4. Submission of Matters to a Vote of Security Holders.......................................................27
Item 5. Other Information.........................................................................................27
Item 6. Exhibits and Reports on Form 8-K..........................................................................27
Signatures........................................................................................................28
</TABLE>
2
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
September 30, December 31,
2000 1999
----------- -----------
Assets
Current Assets
Cash $ 104,352 $ (37,885)
Accounts receivable (net of allowance for
uncollectibles of $15,178 and $ 0) 657,526 169,097
Inventory 497,956 358,159
Advance receivable - McLean 50,000
Prepaid expenses 232,425 14,839
----------- -----------
Total Current Assets 1,542,259 504,210
Property and equipment 7,197,393 1,849,825
Less accumulated depreciation (383,032) (250,938)
----------- -----------
6,814,361 1,598,887
Intangible assets net of amortization of $ 157,456
and $ 61,502 671,619 765,119
Other assets
Deferred loan fees 49,469
Other assets 86,429
Deposits 82,721 6,000
----------- -----------
218,619 6,000
----------- -----------
$ 9,246,859 $ 2,874,216
=========== ===========
See notes to financial statements.
3
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 2,869,147 $ 988,094
Accrued expense 114,922 145,949
Accrued interest 11,478 436,964
Deferred compensation 30,500
Current portion of notes payable 965,918 2,276,500
----------- -----------
Total current liabilities 3,961,465 3,878,007
Long term note payable 27,874 1,306,000
Shareholders' equity
Preferred stock, $0.01 par value, 20 million shares
authorized, 687,100 and 8,500 shares issued and
outstanding respectively, redeemable at company's option
(liquidation preference $ 6,871,000 and $ 0) 6,871 85
Common stock, $0.001 par value 30 million shares
authorized, 7,813,204 and 4,363,454 shares issued and
outstanding respectively 7,813 4,363
Additional paid in capital 9,530,744 1,052,557
Retained deficit (4,287,909) (3,366,796)
----------- -----------
5,257,519 (2,309,791)
----------- -----------
$ 9,246,859 $ 2,874,216
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
For the period ended September 30,
Three months ended Nine months ended
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Sales, net of discounts and returns $ 1,795,885 $ 1,096,246 $ 2,972,946 $ 2,200,363
Cost of Goods Sold 1,477,060 735,763 2,447,130 1,705,604
----------- ----------- ----------- -----------
Gross Profit 318,825 360,483 525,816 494,759
Expenses
General and administrative 298,434 117,422 570,145 347,670
Sales expenses 290,730 90,816 473,823 231,147
Marketing expenses 118,206 20,173 229,244 54,109
Consulting and Professional fees 98,934 14,775 528,097 39,016
Rent 30,873 64,629 172,439 195,283
Bad debt -- 15,178
Depreciation and amortization 71,820 57,500 177,101 125,000
----------- ----------- ----------- -----------
908,997 365,315 2,166,027 992,225
Other income/(expenses)
Interest expense (26,304) (123,412) (186,732) (383,023)
Other income 8,271 451,473
Interest income 166 11,549
Litigation expenses -- (127,389) (10,680) (365,381)
----------- ----------- ----------- -----------
(17,867) (250,801) 265,610 (748,404)
----------- ----------- ----------- -----------
Loss from continuing operations $ (608,039) $ (255,633) $(1,374,601) $(1,245,870)
</TABLE>
See notes to financial statements.
5
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
For the period ended September 30,
Three months ended Nine months ended
2000 1999 2000 1999
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Loss from continuing operations $ (608,039) $ (255,633) $ (1,374,601) $(1,245,870)
Extraordinary items
Forgiveness of debt -- 43,204
Extraordinary litigation -- 215,669
Gain on Debt restructure -- 194,615
----------- ----------- ------------- -----------
Net Loss $ (608,039) $ (255,633) $ (921,113) $(1,245,870)
=========== =========== ============= ===========
Earnings (loss) per common share
Loss from continuing operations (0.12) (0.09) (0.25) $ (0.45)
Extraordinary items -- -- 0.07 --
----------- ----------- ------------- -----------
$ (0.12) $ (0.09) $ (0.18) $ (0.45)
----------- ----------- ------------- -----------
Earnings (loss) per common share assuming dilution
Loss from continuing operations (0.11) (0.23) (0.45)
Extraordinary items -- 0.06 --
----------- ----------- ------------- -----------
$ (0.11) $ -- $ (0.17) $ (0.45)
----------- ----------- ------------- -----------
</TABLE>
See notes to financial statements
6
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in Retained
Shares Amount Shares Amount Capital Deficit TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 2,608,454 $ 2,608 8,500 $ 85 $ 1,052,557 $ (1,184,452) $ (129,202)
Issuance of shares of common stock for consulting
services based on Board of Directors assessment
of value of services rendered during the year,
dated December 3, 1999 ($ 0.001 per share) 35,000 35 35
Issuance of shares of common stock to employees
based on Board of Directors assessments for
compensation, in lieu of cash payment dated
December 3, 1999 ($0.001 per share) 770,000 770 770
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment
as part of loan agreement with Mr. Dolan
December 3, 1999 ($ 0.001 per share) 200,000 200 200
Issuance of common stock to shareholders based on
Board of Directors dated December 3, 1999
(Adjustment merger agreement with Universal
Beverages, Inc. $ 0.001 per share) 750,000 750 750
Net loss December 31, 1999 (2,182,344) (2,182,344)
--------------------------------------------------------------------------------
Balance December 31, 1999 (Audited) 4,363,454 $ 4,363 8,500 $ 85 $ 1,052,557 $ (3,366,796) $(2,309,791)
</TABLE>
See notes to financial statements
7
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in Retained
Shares Amount Shares Amount Capital Deficit TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
sub-total 4,363,454 $ 4,363 8,500 $ 85 $ 1,052,557 $ (3,366,796) $(2,309,791)
Issuance of shares of common stock for consulting
services based on Board of Directors assessment
of value of services rendered during the year,
dated January 21, 2000 1,621,000 1,621 302,317 303,938
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment as
part of loan agreement with Mr. Dolan on
January 21, 2000 100,000 100 18,650 18,750
Conversion of Preferred stock to Common stock on
January 31, 2000 46,750 47 (8,500) (85) 38 --
Issuance of common stock in connection with warrants
exercised at $ 1.00 per share 970,000 970 969,030 970,000
Issuance of Preferred stock - Series B in connection
with private placement through September 30, 2000 432,500 4,325 4,075,175 4,079,500
Issuance of common stock in connection with the
Debt restructure, on March 31, 2000 712,000 712 254,600 2,546 3,112,977 3,116,235
--------------------------------------------------------------------------------
sub-total 7,813,204 $ 7,813 687,100 $ 6,871 $ 9,530,744 $ (3,366,796) $ 6,178,632
</TABLE>
See notes to financial statements
8
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in Retained
Shares Amount Shares Amount Capital Deficit TOTAL
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
sub-total 7,813,204 $ 7,813 687,100 $ 6,871 $ 9,530,744 $ (3,366,796) $ 6,178,632
Net Loss for the nine months ended September 30, 2000 (921,113) (921,113)
-------------------------------------------------------------------------------
Balance September 30, 2000 (Unaudited) 7,813,204 $ 7,813 687,100 $ 6,871 $ 9,530,744 $ (4,287,909) $ 5,257,519
===============================================================================
</TABLE>
See notes to financial statements
9
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (921,113) $(1,245,870)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 177,101 125,000
Bad Debt 15,178
Gain on debt restructure (194,615)
Gain on Litigation debts (215,669)
(Increase) decrease in prepaid expenses (217,586) (15,536)
(Increase) decrease in inventories (139,797) (154,793)
(Increase) decrease in receivables (503,607) (234,491)
(Increase) decrease in other assets (213,151) (16,873)
Increase (decrease) in accounts payable and accrued expenses 518,320 790,809
----------- -----------
Total adjustments (773,826) 494,116
----------- -----------
Net cash used by operating activities (1,694,939) (751,754)
----------- -----------
Cash flows from investing activities:
Cash payments for the purchase of property (3,612,912) (405,282)
----------- -----------
Net cash used by investing activities (3,612,912) (405,282)
----------- -----------
Cash flows from financing activities:
Proceeds from loan 700,000 1,204,784
Payments on notes payable (256,208)
Forgiveness of debt (43,204)
Proceeds from issuance of common and preferred stock 5,049,500 --
-----------
Net cash provided by financing activities 5,450,088 1,204,784
----------- -----------
Net increase in cash and cash equivalents 142,237 47,748
Cash and cash equivalents, beginning of period (37,885) 83,866
----------- -----------
Cash and cash equivalents, end of period $ 104,352 $ 131,614
=========== ===========
</TABLE>
See notes to financial statements
10
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
For the nine months ended September 30,
2000 1999
------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense 175,254 $ -
------- -------
Shareholders' equity note:
Approximately 1,721,000 shares of the Company's common stock were awarded to
various service providers in lieu of cash consideration of $ 322,688.
See notes to financial statements
11
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 1 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 310(b) of
Regulation SB. Accordingly, they do not include all of the
information and footnote disclosures normally included in
complete consolidated financial statements prepared in
accordance with generally accepted accounting principles. For
further information, such as significant accounting policies
followed by the Company, refer to the notes to the Company's
audited consolidated financial statements.
In the opinion of management, the unaudited consolidated
financial statements include all necessary adjustments
(consisting of normal, recurring accruals) for a fair
presentation of the financial position, results of operations
and cash flow for the interim periods presented. Preparing
consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses. Actual results may
differ from these estimates. Interim results are not
necessarily indicative of results for a full year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Universal Beverages Holdings Corporation and its wholly owned
subsidiary, Universal Beverages, Inc., are in the business of
manufacturing and distributing the SYFO(R) brand of bottled
water as well as other beverage products under contract. The
Company was incorporated in the State of Florida on July 18,
1989 under the name International Bon Voyage, Inc. On March 6,
1998 the Company acquired 100% of Universal Beverages, Inc., a
Florida corporation, and changed its name to Universal
Beverages Holdings Corporation.
Accounting Estimates
--------------------
The preparation of consolidated 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 consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
12
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation of
depreciable assets is computed using the Modified Accelerated
Recovery System (MACRS) for federal and state tax purposes.
Major expenditures for property acquisitions and those
expenditures, which substantially increase the estimated
useful lives of the property, are capitalized. Expenditures
for maintenance, repairs, and minor replacements are charged
to expense as incurred.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to
be cash equivalents.
Inventories
-----------
Inventories consisting of raw materials, work in process,
pallets and furnished goods are valued at the lower of cost or
market. Cost is determined by the first-in, first-out method
(FIFO).
Revenue Recognition
-------------------
Revenues are recognized when the products are shipped. Revenue
is reduced for estimated customer returns and allowances.
Accounts Receivable
-------------------
Accounts receivable are stated at the face amount net of
allowance for doubtful accounts. Generally accepted accounting
principles require that the allowance method be used to
reflect bad debts. A provision for doubtful accounts has been
established to reflect an allowance for uncollectible amounts.
Income Taxes
------------
The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, which requires companies to use
the asset and liability method of accounting for income taxes.
Concentration of Risk
---------------------
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of balances at
financial institutions.
13
<PAGE>
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Concentration of Risk
---------------------
The Company had deposits with four financial institutions
amounting to $104,352 and ($37,885) at September 30, 2000 and
December 31, 1999, respectively, which were insured for up to
$100,000 per financial institution by the U.S. Federal Deposit
Insurance Corporation. The Company believes that risks
relating to cash balances are minimized as a result of the
size and stature of the financial institutions in which the
Company maintains its account.
Advertising
-----------
Advertising costs are charged to operations when they first
take place. The Company had capitalized $188,573 on September
30, 2000, related to the final version of the infomercial that
has yet to be aired. Advertising expense totaled $138,230 for
the nine months ended September 30, 2000.
Amortization
------------
Amortization of trademarks, brand names, copyrights and
goodwill is determined utilizing the straight-line method
based generally on the estimated useful lives of the
intangibles as follows:
Organization expense 5 years
Trademark and brand name 15 years
Accounting Pronouncements
-------------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS No.
131), which established presentation of financial data based
on the "management approach". SFAS No. 131 is applicable for
years beginning after December 15, 1997. For the current
fiscal year we are not going to present segment reporting
because it is immaterial.
Basic Loss per Share and Diluted Loss per Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share (SFAS No. 128), which specifies the
computation, presentation and disclosure requirements for
earnings per share. SFAS No. 128 supercedes Accounting
Principle Board Opinion No. 15 entitled Earnings Per Share.
Basic earnings per share are computed by dividing income
available to common stockholders (the numerator) by the
weighted-average number of common shares (the denominator) for
the period. The computation of diluted earnings per share is
similar to basic earnings per share, except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if the
potentially dilutive common shares had been issued.
14
<PAGE>
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Basic Loss per Share and Diluted Loss per Share
-----------------------------------------------
The numerator in calculating basic earnings per share is
reported net loss. The denominator is based on the following
weighted-average number of common shares:
Basic 6,906,012
Dilutive 7,267.070
The 5,191,996 shares of common stock reserved for the exercise
of warrants are not included in the diluted earnings per share
because the exercise price is above the average market price
per share.
Principles of Consolidation
---------------------------
The consolidated financial statements of the Company include
those accounts of Universal Beverages, Inc. All significant
intercompany transactions and balances have been eliminated in
the consolidation.
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2000 and December 31,
1999 consisted of the following:
September 30, December 31,
2000 1999
----------- -----------
Land and building $ 2,476,867 $ 0
Plant equipment 4,448,243 1,233,003
Plant improvements 169,803 595,870
Office machines and equipment 102,480 20,952
----------- -----------
7,197,393 1,849,825
Less accumulated depreciation (383,032) (250,938)
----------- -----------
$ 6,814,361 $ 1,598,887
=========== ===========
Depreciation expense for the nine months ended September 30,
2000 and year ended December 31, 1999 was $57,000 and
$212,500, respectively.
NOTE 4 CAPITAL STOCK TRANSACTIONS
The Articles of Incorporation provide for the authorization of
30,000,000 shares of common stock at $0.001 par value; and
20,000,000 shares of preferred stock at $0.01.
15
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 4 CAPITAL STOCK TRANSACTIONS (continued)
Common Stock
------------
On January 21, 2000, the Company issued 1,621,000 shares of
common stock in lieu of cash consideration to various service
providers, at $0.1875 per share.
On January 21, 2000, the Company issued 100,000 shares of
common stock as part of a loan agreement with Mr. Dolan, at
$0.1875 per share.
On January 31, 2000, the Company converted the 8,500 shares of
Preferred Stock - Series A to 46,750 shares of common stock.
On March 31, 2000, in a Debt Restructure agreement (see Note
7), the Company issued 712,000 shares of common stock in
exchange for $749,975 notes payable as follows:
With Bridge Bank, 700,000 shares of common stock in
exchange for $720,500 notes payable.
With Alan Moore, 12,000 shares of common stock in
exchange for $29,475 notes payable.
During the period between January 1 and September 30, 2000,
970,000 warrants were exercised at $1.00 per share for 970,000
shares of common stock.
Preferred Stock
---------------
On March 31, 2000, in a Debt Restructure agreement (see Note
7), the Company issued 254,600 shares of Preferred Stock
(Series C, D, E and F) in exchange for $2,610,875 notes
payable.
At September 30, 2000, a total of 432,500 shares of Preferred
Stock were issued in exchange for $4,079,500 in cash, net of
$270,500 offering expense.
Warrants
--------
At September 30, 2000, warrants were as follows:
Warrants - 12/31/99 1,250,000
Warrants issued 01/01/00 - 09/30/00 5,593,994
Exercised - 09/30/00 (970,000)
---------
Total Warrants 5,873,994
=========
The remaining warrants will expire on various dates through
August 2003.
16
<PAGE>
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 5 INCOME TAXES
The Company has a federal net operating loss carryforward for
the year ended December 31, 1999 of $3,366,796 through various
years to 2019.
NOTE 6 NOTES PAYABLE
The Company has outstanding notes payable at September 30,
2000 and December 31, 1999 as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------------
<S> <C> <C> <C>
Note payable to Bridge Bank with an interest
rate of 15% per year, unsecured, due on demand. $ 0 $ 541,500
Note payable to American Access with an
interest rate of 15% per year; unsecured, due
on demand. 0 500,000
Note payable to FNB Bank with an interest rate
of 10.5% per year; secured, due 01/02/01. $ 600,000 $ 0
Note payable to Rial/Moe with an interest rate
of 8% per annum payable in 36 monthly payments;
secured by production equipment; due 3/31/00. 43,792 500,000
Note payable to various shareholders at a 15%
interest rate per year; due on demand; secured
by all assets of Company. 0 185,000
Note payable to Altamonte Capital with a 15%
interest rate; due on demand; secured. 0 300,000
Note payable to Telcoa with a 15% interest rate
per year; due on 8/31/00. 250,000 250,000
</TABLE>
17
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 6 NOTES PAYABLE - continued
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- ----------
<S> <C> <C>
Note payable to Telcoa with a 10% interest rate
per year; due on 7/11/00, renewable up to two
more times. 100,000 0
14% note payable to an investment company; secured
by a blanket lien on assets; payable interest only
through 11/4/03, and 36 equal payments of principal
plus interest beginning 11/5/03. The note also
includes a prepayment penalty clause. 0 1,306,000
----------- ----------
993,792 3,582,500
Less current portion (965,918 (2,276,500)
----------- ----------
$ 27,874 $1,306,000
=========== ==========
</TABLE>
The amount of interest accrued but unpaid as of September 30,
2000 was $11,478. The total interest expense related to this
loan was $176,166 at September 30, 2000.
NOTE 7 DEBT RESTRUCTURE
On March 31, 2000, the Company renegotiated a total of
$3,610,850 in notes payable from various creditors in a Debt
Restructure agreement as follows:
Note payable of $720,500 to Bridge Bank in exchange for
700,000 shares of common stock. On the date of the exchange,
the fair market value of the common stock was approximately
$0.78 per share. The Company recognizes an extraordinary gain
of $174,500 on the restructuring.
Note payable of $29,475 to Alan Moore in exchange for 12,000
shares of common stock. On the date of the exchange, the fair
market value of the common stock was approximately $0.78 per
share. The Company recognizes an extraordinary gain of $20,115
on the restructuring.
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UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2000
NOTE 7 DEBT RESTRUCTURE (continued)
Note payable of $1,306,000 to Capital International SBIC, LP
in exchange for 130,600 shares of preferred stock, series C.
There was no market price available for the preferred stock on
the date of the exchange.
Note payable of $622,860 to Eva and Lasse Moe, and Roberto and
Barbara Rial. The term of restructure included a new note
payable in the amount of $50,000, payable over a three-year
period, a $250,000 payment in cash, and a transfer of an
equity interest consisting of 31,500 shares of preferred stock
- series D. There was no market price available for the
preferred stock on the date of the exchange.
Note payable of $593,750 to McLean Ventures in exchange for
57,500 shares of preferred stock, series E. There was no
market price available for the preferred stock on the date of
the exchange.
Note payable of $338,265 to Altamonte Capital in exchange for
35,000 shares of preferred stock, series F. There was no
market price available for the preferred stock on the date of
the exchange.
NOTE 8 CONTINGENCIES
During the third quarter, a contractor, who installed the
plant's production line and performed preliminary work for the
second line, filed a lien against the Leesburg real property
for $ 394,000. They are also threatening a lawsuit. However,
the ultimate outcome is unknown at this time. In the opinion
of management, the outcome will have no adverse effect on the
financial statements.
NOTE 9 SUBSEQUENT EVENTS
During October and November 2000, the company offered to the
series B preferred stockholders, stock dividends in lieu of
dividends in arrears. The total amount of dividends in arrears
on the series B preferred stock at September 30, 2000 was
$158,750.
On October 4, 2000 the company obtained a loan in the amount
of $ 150,000 from Alan Moore to be used in the purchase of a
multipacker machine. The total expenses in connection with the
loan were $ 35,000 to be paid in four equal installments
beginning October 2000. The loan is guaranteed by a junior
security interest in cash, accounts receivables and equipment.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion of our financial condition and results of operations is
based upon the financial statements contained in this Form 10Q-SB. This
discussion contains forward-looking statements that involve risks and
uncertainties. At the end of the section there is a description of those
forward-looking statements and the risks and uncertainties.
Results of Operations
Revenue for the three months ended September 30, 2000 substantially
increased to a record of $1,795,885 in contrast to $1,096,246 for the same
period of 1999. This revenue includes approximately $1,097,000 from the sale of
spring water to Sam's Club, for which shipments began in September 2000. Our net
sales of Syfo(R) increased during the third quarter by approximately $150,000 as
a result of our increased marketing. However, our results for the third quarter
of 2000 do not include any revenue from the sale of water to the United States
to meet hurricane emergencies. We generated approximately $550,000 from this
source in the third quarter of 1999.
Our cost of goods sold did not increase proportionately resulting in an
increase in our cost of goods sold to approximately 82% for the three months
ended September 30, 2000 in contrast to approximately 67% for the same period in
1999. Management does not believe that this increase in costs of goods sold
actually reflects what is occurring and attributes this number to the fact that
for the month of September it installed a new
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computer system while the first two months of the quarter were recorded on the
old computer system. Management believes that the variance that occurred may
very well be cancelled during the year end at the annual audit. However, there
can be no assurances that management's belief is correct. In any event, as a
result of the low gross profit margin, our gross profit for the quarter ended
September 30, 2000 was $ 318,533 in contrast to $360,483 for the same quarter in
1999.
Our general and administrative expenses substantially increased for the
three months ended September 30, 2000 resulting in an increase of approximately
154%. This substantial increase is primarily attributable to our write-off of
costs incurred in an acquisition we did not complete, increased public company
costs and our increase in staff to support our increase in business. Our sales
expense increase of approximately $130,000 is primarily due to freight costs
incurred in shipments to Sam's Club. Marketing expenses increased by
approximately $80,000. About one-half of this increase is attributable to our
exclusive agreement to distribute water in AllTel Stadium in Jacksonville,
Florida and our marketing of the Jacksonville Jaguars NFL team. The other
marketing increase is from our increase in marketing our Syfo(R) brand. The
increase in consulting and professional fees is from an increase in routine
litigation as the result of our tight cash flow, and increased accounting costs
resulting from our new Securities and Exchange Commission reporting obligations
and an increase in investor relations expenses.
As the result of our March 31, 2000 debt restructuring, our interest
expense for the three months ended September 30, 2000 was $29,698 in contrast to
$123,412 for the same quarter in 1999. The other significant item for the
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quarter was that we had no extraordinary litigation expenses which accrued for
the last quarter in contrast to $127,389 for the quarter ended September 30,
1999. These factors resulted in our sustaining a loss of $608,039 for the
quarter ended September 30, 2000 in contrast to $255,633 for the same quarter in
1999.
For the nine months ended September 30, 2000 our revenue was a record
of $2,972,946 in contrast to $2,200,363 for the nine months ended September 30,
1999. The reasons for the increase are the same as the reasons for the increase
of the third quarter of 2000. Because of the substantial increase in cost of
goods sold, and for the same reasons expressed above, our gross profit margins
for the nine months ended September 30, 2000 were approximately 18% in contrast
to approximately 22% for the same period in 1999. Our general administrative
expense for the nine months ended September 30, 2000 were $2,116,235 in contrast
to $992,225 for the same period of 1999. This increase and increases in sales,
marketing and consulting and professional expenses were for the same reasons as
expressed above although consulting and professional fees totaled $548,597 for
the nine months ended September 30, 2000 in contrast only $39,016 for the same
period of 1999. Additionally, we incurred significant non-cash charges during
the first six months of this year as the result of stock issuances recorded as a
consulting expense.
Our interest expense for the nine months ended September 30, 2000 was
$190,126 in contrast to $383,023 for the same period 1999. Much of the interest
occurred in the first quarter prior to the March 31, 2000 restructuring. We also
incurred other income of $451,473 for the nine months ended September 30, 2000
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primarily resulting from gains recognized in connection with the restructuring.
The other significant item during the nine months ended September 30, 2000 was
that extraordinary litigation expenses were only $10,680 in contrast to $365,381
for the nine months ended September 30, 1999. Most of these litigation expenses
are attributable to significant litigation, which we settled in 1999.
Our loss from continuing operations from the nine months ended
September 30, 2000 was $1,398,495 in contrast to $1,245,870 for the same period
in 1999.
Liquidity and Capital Resources
As of September 30, 2000, our current liabilities, including the
current portion of long-term debt, exceeded our current assets by $2,436,675. We
have a substantial amount of debt due in the next several months. Because we do
not anticipate receiving proceeds from the exercise of warrants by that date, we
are currently seeking alternate sources of financing and to restructure or
extend our indebtedness. Between our indebtedness, which is coming due in the
next several months, and dividends owed to preferred to shareholders due in
January 2001, we estimate that we need over $1,500,000 including interest by
early January 2001. This includes $600,000 owed to First National Bank of Blue
Island which holds a first lien on all of our assets including our manufacturing
facility and equipment as well as our accounts receivable and cash. This amount
also includes $350,000 plus interest owed to Telcoa International Corporation,
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and $150,000 owed to Clifford Alan Moore, who holds a junior security interest
in our cash, accounts receivable and equipment. We also owe Mr. Moore a $35,000
transaction fee which is to be paid in four equal monthly installments beginning
October 4, 2000. Further, we have recently learned that one of our creditors,
Eva and Lasse Moe and Roberto and Barbara Rial, has elected to accelerate the
repayment on its $50,000 note, with an unpaid balance of $43,792 at September
30, 2000, due to our alleged failure to make monthly payments as agreed. We are
currently endeavoring to find short-term financing or reach accommodations with
creditors in order to extend our indebtedness.
Our short-term liquidity needs include approximately $165,000 owed in
dividends to our preferred shareholders. Under the terms of all of our
outstanding classes of preferred stock, if we fail to make three consecutive
dividend payments, holders of each outstanding series may declare a dividend
default in which event each share of the series of preferred stock shall have 10
votes per share in connection with the election of directors. We have failed to
make the initial two dividend payments and the third payments are due January
10, 2001. We recently offered our Series B holders the opportunity to receive
shares of our common stock at $1.00 per share in lieu of past-due dividends for
two quarters. This offer has been well received.
We are currently seeking to borrow $157,000, which we intend to use to
complete the installation of our own bottling facility. If we are able to make
arrangements for this loan, we will likely issue warrants or other equity
securities in connection with the financing, as well as execute a promissory
note.
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In connection with our arrangements for this loan, one of our preferred
shareholders affiliated with the potential lender agreed to convert its
preferred stock into 383,333 shares of our common stock at an effective price of
$1.40 per share including other consideration. This conversion price was above
fair market value; the preferred shareholder actually could have converted at
20% discount to market. We believe this favorable transaction coupled with the
related loan negotiation reflects the confidence in our business plan.
Additionally, we need approximately $600,000 to purchase additional
laboratory equipment for our quality control efforts. Our future results of
operations will be directly affected by our ability to acquire this additional
equipment, particularly the completion of our bottle making facility. We
estimate, that based upon our existing business, operating our own bottle making
facility will save us approximately $2,100,000 in 2001.
Forward-Looking Statements
The above management's discussion and analysis contains forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995
relating to adjustments in costs of goods sold expected to occur in or following
the fourth quarters, our ability to solve our working capital needs and
liquidity, results of the offer to our Series B preferred shareholders and
estimated savings from operating our own bottling facility. In addition to these
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statements, trend analyses and other information including words such as "seek,"
"anticipate," "believe," "plan," "estimate," "expect," "intend" and other
similar expressions are forward looking statements. Some or all of these
forward-looking statements may not occur. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially from the forward-looking statements. These risks and uncertainties
include the following: our ability to harmonize our old accounting system with
our new accounting system, our ability to reach an accommodation with our
creditors and preferred shareholders and ability to efficiently install and
operate our bottle making facility.
These statements are based on our beliefs as well as assumptions we made using
information currently available to us. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to a number of lawsuits arising out of commercial
transactions. Although none of the suits would normally involve a material
amount of potential liability, our current liquidity needs result in a different
conclusion. Any adverse determination would have a material adverse effect on
our financial condition. Additionally, a contractor which installed our plant's
production line and performed preliminary work for our proposed second line,
recently filed a lien against our Leesburg real property for $394,000. It also
is threatening suit.
Further, we recently were given notice of default by the holders of a
note for which we currently owe approximately $44,000. The default arose because
we inadvertently failed to pay the November 1st installment of $1,389 plus
interest. We are attempting to persuade the note holders to withdraw their
notice of default. If they fail to do so and initiate litigation, we will defend
the suit since we believe the holders have acted in a commercially unreasonable
manner.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are required to make quarterly dividend payments to our Series B,
Series C, Series D, Series E and Series F preferred shareholders in the amount
of $167,500 and our annual dividend payments to these preferred shareholders
equals $668,600. The scheduled dividend payment dates are January 10, April 10,
July 10 and October 10. We failed to make our first and second scheduled
dividend payment on July 10 and October 10, 2000. If we fail to make three
dividend payments, the preferred shareholders can send us a notice stating that
we are in default under the terms of the preferred stock. If we are in default,
each share of preferred stock will have 10 votes per share toward the election
of directors of the Company. Accordingly, if we are in default under the terms
of the preferred stock, the preferred shareholders will probably be in a
position to control our board of directors. In October and November of 2000, we
offered shares of our common stock, as provided in our articles of
incorporation, in lieu of past due dividends. To date, more than half of the
Series B preferred shareholders have accepted this offer.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits
27.1 Financial Data Schedule
B. Reports on Form 8-K
On October 24, 2000, we filed a form 8-K to comply with
Regulation FD.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: November 22, 2000 UNIVERSAL BEVERAGES HOLDINGS
CORPORATION
By /s/ Jonathon Moore
---------------------------
Jonathon Moore
Chief Executive Officer and Chairman
By /s/ Jay D. Marsh
---------------------------
Jay D. Marsh
Treasurer
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