SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1. TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER
Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
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(Exact name of Registrant as specified in its charter)
Florida 65-0805935
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
7563 Philips Highway, Suite 110
Jacksonville, FL 32256
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(Address of Principal Executive Officer) Zip Code
(904) 296-7500
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Registrant's Telephone Number and Area Code
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title Of Each Class Name Of Each Exchange on Which
To Be So Registered Each Class Is To Be Registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, .001 par value per share
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(Title of Class)
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TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF BUSINESS.................................... 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.......................................... 10
ITEM 3. DESCRIPTION OF PROPERTIES.................................. 18
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT...................................... 18
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS.............................. 19
ITEM 6. EXECUTIVE COMPENSATION..................................... 21
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS............................................... 23
ITEM 8. DESCRIPTION OF SECURITIES TO BE REGISTERED................. 24
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................ 29
ITEM 2. LEGAL PROCEEDINGS.......................................... 30
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS.................................................30
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.................... 30
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.................. 32
FINANCIAL STATEMENTS AND EXHIBITS.......................... 32
PART III
ITEM 1. INDEX TO EXHIBITS.......................................... 32
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ITEM 1. DESCRIPTION OF BUSINESS
Overview
Universal Beverages Holdings Corporation, a Florida corporation ("we,"
"us" or the "Company") is in the business of producing and selling bottled
water, and other beverages. We conduct business through our own wholly-owned
subsidiary, Universal Beverages, Inc. ("UBI"), which has had active operations
since March 1996. The principal source of revenues for our Company comes from
the production and distribution of the Syfo(R) brand of bottled waters. Bottled
water has been sold under the Syfo(R) brand since 1949 and is reputed to be one
of the original brands of bottled water in the chain store market place. We
acquired the exclusive distribution rights to the Syfo(R) brand in July 1998 and
acquired full trademark rights to Syfo(R) in February 1999.
We also manufacture beverages for other companies under contract at our
production plant located in Leesburg, Florida. We have manufactured Mistic(R)
and Snapple(R) products for Triarc Corporation, Bawls(R) Guarana for Hobarama
and will manufacture products for Publix Super Markets and other retailers
beginning this year.
We primarily distribute our products throughout the largest regional
grocery chain stores located in the Southeastern United States, such as Publix
Super Markets, Winn-Dixie Stores and Albertson's Food Stores. The principal area
of distribution of Syfo(R) bottled waters is Florida and Georgia.
The Bottled Water Market
The bottled water market nationally is estimated to be greater than $5.1
billion and is one of the fastest growing segments of the beverage market,
exceeding 8% annually. See "Bottled Water in the United States, May 1999, a
study published by the Beverage Marketing Corporation of New York. ("Beverage
Marketing Survey"). Unless otherwise noted, all statistics in this Registration
Statement on Form 10-SB have been obtained from the Beverage Marking Survey.
Florida is one of the largest bottled water markets, after California and Texas.
Our Company's immediate market area, including Florida, is considered the South,
which includes Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi,
North Carolina, South Carolina, Tennessee and Virginia. This area has
approximately 22% of the U.S. population. The wholesale dollar value of bottled
water in this area was approximately $637,800,000 during 1998, with the Florida
market area comprising the bulk of sales and population for this area.
The bottled water market is composed of two segments - carbonated and
non-carbonated. The carbonated segment of the market is composed of seltzers and
sparkling waters, both flavored and non-flavored. Statistically, this segment
also includes tonic waters and club sodas. The non-sparkling or non-carbonated
segment of the market refers to the market of commercial and home delivery
drinking water in bulk and in consumer size containers sold at retail chains,
convenience stores and in the mass market club stores and super centers. Except
for the year 1991, the rate of growth in the consumer size bottled water has
been double-digit since 1984 and in 1998, it approached 30%. It is this growth
in this market that has attracted Pepsi and Coke to introduce their
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own national brands of bottled water, Aqua Fina and Dasani. Coke and Pepsi have
recently entered the bottled water market on a national scale with "purified"
bottled waters. The Universal Beverages brand, Syfo(R), is a purified bottled
water.
The non-carbonated water has predominantly been "spring water", bottled
and sold as "pure" bottled water. The spring water moniker has prevented the
establishment of a national brand since most of these brands identify with the
source of the spring. The Perrier Group (Nestle S.A. Europe) has come the
closest with the purchase of a series of regional brands such as Arrowhead in
California, Poland Springs in New York, Zephyrhills and Deer Park in the South
and Callistoga in the Texas region. These brands, along with Great Brands of
Europe/Danone Group, a group that owns the Evian Brand, have achieved
consolidated sales exceeding $1.3 billion.
The expectation is that the overall category "Bottled Water" will continue
to grow at rates above the industry averages, and that the consumer size bottled
water market will continue to grow at a double-digit rate as bottled water is
recognized as a "mainstream" beverage and continues as a leading alternative to
tap water.
Key Driver: Non-Sparkling Segment
Throughout the 1990's, non-sparkling waters have been the key driver for
the industry. By the end of 1999 this segment was responsible for 90% of total
industry volume. By the end of the year, it should approach the 3.7 billion
gallon mark, advancing at an exceptional 11.8% growth rate for 1999.
Non-sparkling water is expected to grow at a rate of 10.1% per year through the
year 2003.
The non-sparkling water segment can be broken into three sub-segments: (1)
retail premium PET (polyethylene terephthalate plastic) waters, that is
1.5-liters and smaller sizes, (2) retail bulk waters, that is the 1 and 2.5
gallon jugs, and (3) direct-delivered waters. The single most important growth
driver for the entire bottled water category has been the retail premium PET
waters. No category or subcategory in any beverage segment has had the
consistent long-term growth of retail premium bottled waters. Over the last
seven years, retail premium PET waters have advanced at an exceptional 27%
compounded annual growth rate. In 1999, it is expected that this segment will
continue this high rate of growth, surging ahead nearly 30%. Retail bulk waters,
the 1 and 2.5 gallon jugs, are expected to end 1999 ahead about 3.9% and direct
delivered home and commercial waters are expected to increase by approximately
5.5%, reaching a new high of more than 1.4 billion gallons. We participate in
the retail PET and retail bulk segment of the industry.
Sparkling Waters and Imports
Sparkling waters have had a particularly difficult time in the 1990's and
1999 was no exception. Sparkling waters are expected to end the year at
approximately the 300 million gallon mark, down slightly more than 4% from 1998.
This category continues to be affected by the success of the non-carbonated New
Age beverages, including the non-sparkling PET segment of the industry. Imported
waters have doubled their volume in the 1990's. After a slow start at the
beginning of the
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decade, they have grown at a compounded annual rate of about 12% since 1994.
Despite this growth rate, imported waters are likely to decline by almost 7% in
1999. According to industry experts, almost all of this decline is attributable
to Canadian imports. We participate in this segment of the industry and most of
our current revenues are generated from our seltzers and sparkling waters.
History
We were originally incorporated in the State of Florida on July 18, 1989
under the name International Bon Voyage, Inc. On March 6, 1998, we acquired
through an exchange of shares 100% of the outstanding shares of Universal
Beverages, Inc. Our acquisition of UBI was accounted for as a pooling and a
reverse merger. The name of our Company was changed from International Bon
Voyage, Inc. to Universal Beverages Holdings Corporation. As a result of these
transactions, UBI is now a wholly owned subsidiary of our Company.
Syfo(R) Brand
The principal source of revenues for our Company comes from the production
and distribution of the Syfo(R) brand of bottled waters. Bottled water has been
sold under the Syfo(R) brand since 1949 and is reputed to be one of the original
brands of bottled water in the chain store market place. We acquired the rights
to the Syfo(R) brand in July 1998 and acquired full trademark rights to Syfo(R)
in February 1999. In fiscal 1999 and 1998, we spent approximately $738,000 for
the acquisition, rehabilitation, redesign and development of the Syfo(R) brand
mark. Much of these costs have been capitalized on our balance sheet reflecting
the inherent value of the brand mark. Our Company has also made significant
expenditures in expanding the product line. Initial marketing costs were
generally expensed. We believe we can effectively compete in the bottled water
market with this brand because:
1. The Syfo(R) brand has brand equity with a long-standing and loyal customer
base;
2. The Syfo(R) brand of seltzers and sparkling waters has premium shelf space
in the principal chain stores for this type of product;
3. The Syfo(R) brand mark and image was completely redesigned within the last
twenty-four months and has been positively received by its customers;
4. The Syfo(R) brand has never had the benefit of advertising and promotion,
these resources have not been expended on the Syfo(R) brand;
5. The sparkling water category exhibits a significant absence of innovative
promotion and advertising; and
6. The non-carbonated drinking water category shows no signs slowing growth
and will continue to be one of the fastest segments of the beverage
market.
Sparkling Waters
The Syfo(R) brand has principally been known for its sparkling waters,
which has generated most of the Company's current revenues. The Syfo(R) brand is
distributed throughout the major chain
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stores in the Florida and Georgia market area, Publix Super Markets, Albertson's
and Winn-Dixie Stores. We believe that we can double our current revenues in our
core business of seltzer and naturally-flavored sparkling waters within our
market area. The change in our brand presentation, improved shelf space as well
as aggressive pricing and marketing efforts have enabled us to regain some of
the market share lost prior to the acquisition of the Syfo(R) brand. By gaining
competitive shelf space and creating new customers, we expect to increase our
market share in the carbonated water market.
In 1998, the Southeastern bottled water market was estimated to be
approximately $637 million in wholesale dollar volume. This is for both
categories of bottled water - carbonated and non-carbonated. The sales of the
domestic sparkling water market are flat, with most companies demonstrating
declines. In a flat sparkling water market, the Syfo(R) brand continues to
thrive growing at an overall 13.7% rate in retail dollar sales for the current
52-week period ending June 20, 1999 exceeding the industry average for the
category. This percent growth is based on scan data for chain stores and does
not include convenience, club store/mass market or food service channels. Publix
Super Markets is our largest customer and Publix controls 58% of the bottled
water market in the Florida and Georgia market area.
Dollar Sales % Change - 52 Week Period ended
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June 20, 1999 Compared with Period ended June 20, 1998
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Publix Remaining Market
Syfo(R)Brand 11.7% 18.01%
The Overall Category .88% (1.75%)
Share of Market
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Publix Total Market
Syfo(R) Brand
Share of Market 7.19% 6.17%
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*Scan data for the 52-week period ending June 20, 1999.
The redesign of the Syfo(R) brand mark and revamping of the packaging,
including new graphics, has been positively received by the public. Little if
any marketing activity besides price pointing is occurring among the major
brands. The Company believes that it can continue to increase sales in the
sparkling water market as marketing efforts are increased. The Syfo(R) brand has
a loyal customer base and strong brand equity in the Florida market. Sales can
be generated from not only competitive shelf space but by creating new
customers.
Although the seltzer and sparkling water market is thought to have a
definite upper limit, it serves as a base from which to launch and promote other
product lines. Every dollar spent on advertising and promotion spills over to
other products of the Company.
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Non-Carbonated Waters
We developed and introduced a new non-carbonated version of our bottled
water in late 1997. By the end of 1998, the new product line could be found at
Publix Super Markets on a system-wide basis and Winn-Dixie Stores in the Miami
and Jacksonville areas. In early 1999, Albertson's introduced the Syfo(R) brand
of "Purified Water" products into its Southern Division. The South region market
area for non-carbonated drinking water products in which these products will
compete is over a half billion in wholesale dollars. We believe that we can
achieve a share of this market that will significantly increase our sales as a
consequence of our brand equity, recognition, placement and distribution in the
store, as well as advertising, sales and promotional efforts.
We intend to continue the development and introduction of our
non-carbonated line of purified waters. The non-carbonated spring water market
dominates the bottled water market in the southeastern United States. This
market is dominated by spring water sold through commercial and home delivery
and in small plastic recyclable PET (polyethylene terephthalate plastic)
containers. The total retail sales in this category of retail PET and bulk 1 and
2.5 gallons are estimated to be in excess of $600 million wholesale dollars in
our market area, with the majority of brands owned by large European companies,
such as The Perrier Group and Danone International that have wholesale dollar
sales of nearly $1.3 billion dollars. Zephyrhills and Deer Park are two such
brands in our market area that are owned by the Perrier Group; both brands are
produced at the same plant located in central Florida. Zephyrhills reported
wholesale dollar sales in 1997 of $90 million and Deer Park reported sales of
$70 million in 1997.
Most non-carbonated waters have been marketed from the spring water
perspective, promoting water from special pure locations. Recent studies
indicate that consumers are becoming better educated about the purity of water
and the amount of total dissolved solids that are found in spring waters.
Syfo(R) is a purified water and therein lies its point-of-differentiation among
a market filled with spring waters. Most spring and mineral waters have between
90 and 300 parts-per-million of total dissolved solids. Syfo's(R) purified water
is less than 10 parts-per-million of total dissolved solids. We have been able
to enter into the market niche for purified water with a non-carbonated version
of our well-known sparkling water. We were able to use our existing relationship
and the Syfo(R) brand-equity in the market with Publix Super Markets, Winn-Dixie
Stores and Albertson's to launch our non-carbonated line. We will need
additional capital to aggressively market these products and retain and secure
additional shelf space.
The potential for growth in this category is tremendous. We expect the
non-carbonated line to produce substantial growth as the distribution channels
are filled and the marketing and advertising begin to have an impact on revenue
growth. Scan data for the current 52-week period ending December 5, 1999 shows
our share of the Florida and Georgia market area at less than half of a percent.
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Since our initial introduction of our non-carbonated Syfo(R), we have lost
market share and shelf space as a direct consequence of our inability to commit
marketing resources and efforts into creating consumer pull. We have not been
able to make a significant impact in this segment of the bottled water market.
The negative percent reflects lost shelf space at Publix Super Markets and
Winn-Dixie Stores on two items. The positive percent in the remaining market
reflects the growth of our brand at Albertson's.
Dollar Sales % Change for 52 Week Period Ended
December 5, 1999 Compared with December 5, 1998
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Publix Remaining Market
Syfo(R)Brand -23.6% 159.8%
The Overall Category 14.0% 9.6%
Share of Market
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Publix Total Market
Syfo(R) Brand
Share of Market .318% .446%
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*Scan data for the current 52-week period ending December 5, 1999.
We plan to obtain additional distribution of our Syfo(R) brand by
expanding the non-carbonated line into other chain stores in our market area and
the Southeast, such as Kroger's, Harris Teeter's, and Winn-Dixie Stores in
Orlando, Tampa, and Alabama. We also plan to re-present three items that have
been deleted from Publix Super Markets and Winn-Dixie Stores. We will also begin
to fill the single-serve distribution channel in convenience stores and other
outlets where the product will likely be sold by the bottle. These stores are
generally reached by intermediate distributors, delivering to individual stores
directly.
Private Label and other Contract Packing
The total market for private label contract manufacturing is estimated to
be in excess of $500,000,000 within the general geographic area in which our
Company will participate. Most of this is in the form of large contracts with
organizations such as Wal-Mart Stores, Publix Super Markets and others. Since
our manufacturing plant in Leesburg, Florida is fully operational, we expect to
increase our participation in the private label contracting business. We have
been approached by several large companies with proposals for private labeling
manufacturing and we anticipate entering into definitive agreements with some of
these companies.
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Manufacturing Facilities and Suppliers
We manufacture Syfo(R) brand products and other products are our
production plant in Leesburg Florida. The plant is an 89,900 square foot metal
building, located on 7.5 landscaped acres and contains production equipment used
to produce our products. The Leesburg operations center will provide the
warehouse space for both finished goods and raw materials for all products
manufactured by us.
We rely upon suppliers located in the general region in which our products
are produced and sold. Some of the materials used in the production of our
products are imported; however, suppliers do exist within the continental U.S.
for similar materials. None of the materials or suppliers is in short supply.
Environmental
We currently do not have any material capital expenditure commitments for
environmental remediation of any of our properties.
Sales and Marketing
We primarily sell our products to the largest regional grocery chain
stores located in the Southeastern United States, such as Publix Super Markets,
Winn-Dixie Food Stores and Albertson's. We also distribute products through
local distributors and some of our sales are exported to the Caribbean and
Central America.
We have done limited advertising and have relied mostly on the 50 years of
brand equity and recognition that the Syfo(R) trademark has in the Southern
market area. We plan to begin advertising our products through a media program
that will include local television and radio placement in targeted markets,
magazines and trade publications. In addition to our media program we have plans
for an aggressive public relations program that will include sponsorships of a
major NFL football team based in our market area, a national health organization
with chapters throughout the Southeast and various smaller regional
organizations where our visibility will directly impact the market area we
serve.
In March 2000, we were selected by the Jacksonville Jaguars National
Football League Franchise to retain the "pouring rights" to its stadium in
Jacksonville, Florida. These rights were held by Coca-Cola before the Jaguars
selected Syfo(R) brand bottled water. We expect to receive direct revenues from
this contract in the amount of approximately $150,000 to $250,000 annually. The
marketing exposure will result in substantial but not a predictable increase in
product demand at the local chain stores.
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Major Customers
We have three customers which represented a significant portion of our
sales in fiscal 1999 and 1998. In fiscal 1999 and 1998, Publix Super Markets
represented 48.1% and 61.7% of our total sales, Albertson's represented 10.1%
and 10.0% of our total sales and Winn-Dixie Food Stores represented 7.5% and
11.6% of our total sales. Loss of any of these customers will seriously affect
our business. We are constantly seeking new customers to lower the dependence of
our Company on these customers and are in discussions with several new
customers, which could dramatically reduce such dependence. We have been
appointed a vendor number and executed a vendor agreement with Wal-Mart Stores,
Inc. ("Wal-Mart") for our 1 liter seltzer and naturally-flavored sparkling
water. Supplying Wal-Mart may reduce our dependence on these customers, however
there can be no assurance any new customer or customers would reduce this
dominance or will continue ordering our products. Further, there are no
assurances that our contract with Wal-Mart will be profitable, or will be a
long-term contract.
Competition
We have significant competition for all of our products. Many of our
competitors are nationally recognized and possess substantially greater
marketing and financial resources than our Company. We compete with other brands
of similar products by price, shelf space and product positioning within the
designated shelf-space area of the chain store. Products with national brand
recognition generally have higher prices, while our Syfo(R) products are
generally priced lower than those of our national competitors. We market against
our competitors by aggressively managing our shelf space with our own
merchandising force, store level promotions (including some display activity)
consumer tasting programs and price specials.
Our principal competitors in the sparkling water segment are Canada Dry,
private label store brands, Ritz, Seagram's, Perrier, Clearly Canadian, Crystal
Bay, New York Seltzer, San Pelligrino, and LaCroix. Our principal competitors in
the non-carbonated bottle water market are Zephyrhills, Deer Park, Crystal
Springs and private label store brands. Our products, especially the Syfo(R)
products, are subject to intense competition from companies that have
significantly greater market share, shelf space, financial resources and
distribution. These companies have the resources to either lower the price of
their products in a predatory manner or secure the prime space in the outlets in
which these products are sold. These companies have relationships with stores
such as Publix Super Markets, which enable them to continuously promote their
products. Publix, on the other hand, enjoys significantly greater profits from
selling these brands as a consequence of the established consumer response.
We cannot be assured that the Syfo(R) brand will ultimately be successful,
or that outlets such as Publix Super Markets, Albertson's or Winn-Dixie Stores
will continue to carry our products. The shelf space is reviewed every six
months to a year. Slow selling products are eliminated and replaced with new
products or products that have a higher profit potential or greater sales. Last
year five new entrants entered the spring water market, each of which paid
substantial slotting fees. New
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entrants appear continuously and can be eliminated within six months if there is
no consumer response. Consumer response is created through marketing and sales
promotion.
Trademarks
The Company has registered its Syfo(R)trademark with the United States
Patent & Trademark Office. The Company also has registered trademarks for the
following products: Tropical Kraze(R), Rain Sweet(R)and Harvest(R).
Government Regulations
The Company employs a broad spectrum of treatment technologies for its
various bottled waters, ranging from minimum treatment of its natural spring
waters to extensive treatment of public water sources for its distilled and
drinking waters. Manufacturing practices, quality standards and labeling of the
Company's bottled water products are regulated by the Federal Food and Drug
Administration ("FDA") as well as the states and some localities in which the
water is distributed.
The FDA regulates our products as a "food." Accordingly, our products must
meet FDA requirements of safety for human consumption, of processing and
distribution under sanitary conditions and of production in accordance with the
FDA "good manufacturing practices." To assure the safety of our products, the
FDA has established quality standards that address the substances that may be
present in water which may be harmful to human health as well as substances that
affect the smell, color and taste of water. These quality standards also require
public notification whenever the microbiological, physical, chemical or
radiological quality of our products falls below standard. The labels affixed to
bottles and other packaging of our products are subject to FDA restrictions on
health and nutritional claims for foods under the Fair Packaging and Labeling
Act. In addition all drinking water must meet Environmental Protection Agency
standards established under the Safe Drinking Water Act for mineral and chemical
concentration and drinking water quality and treatment which are enforced by the
FDA.
Product Liability and Insurance
We are engaged in a business which could expose us to possible claims for
personal injury resulting from contamination of water produced by our
manufacturing plant or dispensing equipment. While the Company believes that
through regular testing it carefully monitors the quality of water produced by
its plants, it may be subject to exposure in the case of customer misuse of a
cooler or bottle storage. The Company maintains blanket "claims made" product
liability insurance against liability resulting from certain types of injuries
in amounts that it believes to be adequate. Additionally, the Company maintains
an umbrella policy that it believes to be adequate to cover claims above the
limits of the product liability insurance. Although no claims have been made
against the Company or any of its customers to date and the Company believes
that its current level of insurance is adequate for its present business
operations, there can be no assurance that such claims will not arise in the
future or that the proceeds of the Company's policy will be sufficient to
pay such claims.
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Employees
We have seventeen employees, none of whom are subject to a collective
bargaining agreement. Of this number, four are executive staff members, two are
clerical, one is quality control and nine constitute our production staff,
including two mechanics and two sales representatives.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following analysis of the Company's results of operation and financial
condition should be read in conjunction with the Company's financial statements
and notes thereto included elsewhere in this Form 10-SB. Because we had not
significant assets, liabilities or business activities prior to our purchase of
UBI in March 1996, the discussion below will be focused on the business and
operations of UBI, which continues to be in business and has been in business
since March 7, 1996.
Overview
We conduct business through our wholly owned subsidiary, UBI. We are in
the business of developing, manufacturing and marketing various beverage
products, particularly bottled water under our proprietary Syfo(R) brand. The
Company has significant sales to major chain stores located in the Southern U.S.
such as Publix Super Markets, Winn-Dixie Stores, Albertson's and minor sales to
local distributors and export customers.
Prior to July 1, 1998, we conducted business primarily as a manufacturer
of beverages for other beverage companies at our manufacturing plant in Orlando,
Florida. We acquired the exclusive distribution rights to the Syfo(R) brand in
July 1998 and acquired full trademark rights to Syfo(R) brand in February 1999.
After July 1998, our Company's recorded revenues are sales of Syfo(R) brand
products to customers such as grocery chain stores and others. Prior to July
1998, our Company's revenues were not sales of beverages but sales from the
contract manufacturing conducted by the Company up to that time. Accordingly,
the results between the periods are not directly comparable.
On June 11, 1998, the Company moved its manufacturing operations from
Orlando, Florida to its new facility located in Leesburg, Florida. The Leesburg
facility did not become operational until March 1999, over nine months after the
Company left its manufacturing plant in Orlando, Florida. During this time
period, the Company outsourced the manufacture of a substantial amount of its
Syfo(R) products, which increased the cost of these products from 45% to 80% of
total revenues. While the Leesburg plant was under construction, it was decided
that maintaining current customers was important and the cost of the outsourcing
was acceptable. Although these costs were to be short term in nature, the
negative impact on the Company's profitability and liquidity were
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severe. The extra costs due to outsourcing reduced the gross profit by $417,384
for the twelve months between June 30, 1998 and June 30, 1999.
The Company also experienced significant losses in fiscal 1998 and 1999 as
a result of protracted litigation with Triarc Company, the owners of the Snapple
and Mistic beverages, relating to Triarc's alleged breach of an agreement with
the Company. In August 1999, the Company entered into a settlement agreement
which resulted in total payments to Triarc of $102,500. The litigation was
finally resolved on November 15, 1999, when Triarc filed a satisfaction of
judgement. The costs associated with the Company performing under the agreement
and the Triarc litigation totaled $1,461,105, which caused a significant drain
on the Company's cash resources.
We reported net operating losses of $2,182,344 for December 31, 1999 and
$1,101,442 for fiscal 1998. The auditor's opinion issued in connection with our
financial statements for fiscal 1999 contained a qualification expressing
substantial doubt regarding the Company's ability to continue as a "going
concern."
We believe that the prospects for the future are significantly better than
the results of our last two fiscal years would demonstrate. We have taken
several steps to keep our Company viable and in existence as a going concern. As
of March 31, 2000, we completed a restructuring plan with six of our creditors
and converted $3,413,363.59 of outstanding debt and interest into equity. We
also raised $2,025,000 from private sources. As a result of the forgoing, our
net worth as of March 31, 2000 was $3,136,378 and we no longer have a "going
concern" qualification. We have also entered into agreements with several
retailers that will increase our revenues in fiscal 2000. See "Plan of
Operations."
Results of Operations
Three Months Ended March 31, 2000 Compared to Fiscal Year Ended March 31, 1999
We had total revenues of $513,759 in the three months ended March 31, 2000
compared with total revenues of $518,692 in the three months ended March 31,
1999.
Cost of goods was $375,257 in the first three months of fiscal 2000, or
73% of total revenues. This is a dramatic decline from the first three months of
fiscal 1999 in which the cost of goods was $518,925 or approximately 100% of
total revenues. The decrease in cost of goods is due to the Company's resumption
of producing its own products.
General and administrative expenses were $399,329 or 77.7% of total
revenues in the three months ended March 31, 2000 compared with $286,305 in the
three months ended March 31, 1999 or 55.2% of total revenues. These costs
include general and administrative expenses, sales expenses, consulting fees,
rent and depreciation and amortization expenses. Depreciation and amortization
expenses increased from $10,000 in the three months ended March 31, 1999 to
$45,094 in the three months ended March 31, 2000. Consulting fees increased from
$8,675 in the
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three months ended March 31, 1999 to $34,405 in the three months ended March 31,
2000.
Other expenses were $15,060 or 29% of total revenues in the three months
ended March 31, 2000 compared with expenses of $261,498 or 50.4% of total
revenue in the three months ended March 31, 1999. Other expenses consists of
interest expense, litigation expenses and additional income. Litigation
expenses, which were primarily related to the litigation with Triarc, decreased
from $129,263 in the three months ended March 31, 1999 to $10,680 in the three
months ended March 31, 2000. In the three months ended March 31, 2000, we had
other income of $135,152 which resulted from the forgiveness of interest.
As a result of the forgoing, our loss from continuing operations was
$257,887 in the three months ended March 31, 2000 compared with a loss of
$548,036 in the three months ended March 31, 1999.
We had extraordinary items equal to $237,819 in the three months ended
March 31, 2000. These extraordinary expenses include income in the amount of
$43,204 from the forgiveness of debt and a $194,615 gain on our debt
restructuring.
As a result of the forgoing, our net loss from operations was $38,068 in
the three months ended March 31, 2000 compared with $548,036 in the three months
ended March 31, 1999.
Fiscal Year ended December 31, 1999 ("fiscal 1999") Compared to Fiscal Year
Ended December 31, 1998("fiscal 1998")
We had total revenues of $2,774,153 in fiscal 1999 compared with
$2,082,923 in fiscal 1998, an increase of 33.2%. This increase in revenue is
attributable to our main production facility becoming operational in March 1999
and our Company being able to meet the demand. Almost all of these revenues
resulted from the sale of Syfo(R) products. During this period, we elected not
to aggressively market or promote our business until our financial base and
operations were secure. Since our Company did not own the Syfo(R) brand until
the third quarter of 1998, revenues from fiscal 1999 and fiscal 1998 are not
directly comparable. During the first two quarters of fiscal 1998, we
manufactured products for others.
Cost of goods was $1,514,101 in fiscal 1999 or approximately 54.6% of net
revenues. This is a dramatic decline from fiscal 1998, in which costs of goods
came to $1,310,033 or approximately 62.9% of net revenues. The lower cost of
goods reflects the positive results from the transition from outsourcing the
manufacturing of the Syfo(R) waters to our internal manufacturing of the Syfo(R)
products at our Leesburg plant. As of June 30, 1999, all of our products were
being manufactured in the Leesburg plant with the resultant decrease in the
manufacturing costs and increased utilization of the overhead associated with
the Leesburg plant. We believe that we will further reduce the cost of goods to
approximately 40% of net revenues if we internally manufacture our own PET
containers and we are in the process of developing this capacity.
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The Company experienced an operating margin of $1,260,052 or 45.4% of
total revenues for fiscal 1999 up from $772,890 or 34.7% of total revenues in
fiscal 1998. The higher operating profit reflects increased sales and a lower
cost of goods to manufacture the Company's Syfo(R) products as the Leesburg
plant came on line.
General and administrative expenses were $1,995,324 or 71.9% of total
revenues in fiscal 1999 compared with $929,711 in fiscal 1998 or 44.6 % of total
revenues. These costs reflect the administrative cost, including rents of the
Jacksonville office, executive, administrative and other costs associated with
managing and operating the Company.
Depreciation and amortization expenses increased to $272,875 in fiscal
1999 compared with $20,087 in fiscal 1998. Depreciation expenses increased in
fiscal 1999 because we acquired the Leesburg plant in March 1999 and began to
depreciate the assets acquired and placed into service on this plant in fiscal
1999.
Interest expenses were $460,999 in fiscal 1999 compared with $121,017 in
fiscal 1998. Interest expense increased because we borrowed additional high
interest rate debt in fiscal 1999. Most of this debt was acquired after an
offering of preferred stock in 1998 failed. We then turned to high interest rate
debt to complete the Leesburg operations. Litigation expenses were $713,198 in
fiscal 1999 compared with $803,532 in fiscal 1998.
As a result of the forgoing, the Company's net loss was $2,182,344 in
fiscal 1999 compared with a net loss of $1,101,457 in fiscal 1998. These losses
includes the write-down of the litigation receivable, interest costs and
extraordinary litigation costs.
Seasonal Aspects
Our business experiences some seasonality. The lowest season is during
January and February of each year. We experience substantial growth in revenues
in March and April of our sparkling bottled waters. The summer seasons have
shown an increase in non-carbonated bottled water for sales related to national
emergencies, such as floods and hurricanes.
Liquidity and Capital Resources
As of March 31, 2000, we had current assets of $2,529,201 compared to
($37,885) at December 31, 1999, total assets of $4,864,222 compared to $560,209
at December 31, 1999, current liabilities of $1,693,201 compared to $3,878,007
at December 31, 1999 and a current net worth of $3,136,378 compared to a
negative net worth of ($2,309,791) at December 31, 1999. This increase is
primary due to our restructuring of $2,859,513.59 of debt and accrued interest
with six of our creditors and $2,025,000 of capital that we raised in a private
offering.
Net cash used in operating activities was ($169,401) in the three months
ended March 31, 2000 compared with ($208,825) in the three months ended March
31, 1999. Net cash used in
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investing activities was ($11,109) in the three months ended March 31, 2000
compared with ($431,742) in the three months ended March 31, 1999. We decreased
our investing activities in the three months ended March 31, 2000 because we did
not purchase any equipment in the three months ended March 31, 2000.
Net cash provided by financing activities was $2,174,796 in the three
months ended March 31, 2000 compared with $565,000 in the three months ended
March 31, 1999. In the three months ended March 31, 2000, we raised $2,368,000
from the issuance of common and preferred stock in a private offerings.
Material Capital Commitments
On March 31, 2000, we entered into a contract to purchase the Leesburg
property for $1,400,000. We delivered a $100,000 escrow deposit to the seller
and intend to close on the contract by delivering $1,300,00 in cash on or before
July 1, 2000. We intend to expand the manufacturing capability of the Leesburg
plant to include PET manufacturing capability, including high-capacity injection
molding and blow molding equipment. The plant will also be expanded to include
an independent bottling line for large capacity containers such as gallon
containers and expansion of the existing bottling line to accommodate newer
packaging options. The total cost of these improvements is expected to exceed
$3,535,000. We expect to make these expenditures over the next year
Plan of Operations
During the next twelve months, we intend to increase our sales of our
Syfo(R) products. We will focus on sales and marketing efforts with a planned
expenditure for advertising that could reach $2 million. We intend to
reintroduce an updated version of Syfo(R) mixers (i.e. ginger ale, club sold,
and tonic waters) for the regional and international direct store delivery
markets. We will also introduce two PET versions of our sparking waters in 16
and 20 ounce containers for our local chain store sales and for more portable
versions of Syfo(R) when the glass version is not suitable. We will also
introduce a 12-ounce PET carbonated version of our sparking waters and an
8-ounce and 12-ounce version of our non-sparking waters for the school and
airline markets.
We have received a vendor agreement and have been assigned a vendor number
from Wal-Mart who has requested that our sparking water line be distributed in
all Wal-Mart or Super Centers along the entire east coast of the United States.
We are expecting the first of these shipments to occur during the first quarter
of 2000. We have no way of estimating the increase in revenues from the Wal-Mart
vendor agreements, however we believe that these revenues could easily fall
within a $1,000,000 to $4,000,000 annual increase. However, there can be no
assurances that these revenues will be achieved.
We also intend to further develop our private label contracting business.
We have been approached by several large companies with proposals for private
labeling manufacturing and we
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anticipate entering into definitive agreements with some of these companies
during the next year.
Factors That May Affect Our Future Results and Market Price of Stock
We operate in a rapidly changing environment that involves numerous risks,
some of which are beyond the Company's control. The following discussion
highlights some of these risks.
Limited Operating History. We have been in the beverage business since
March 7, 1996 and we have a limited operating history. Our operations consist of
manufacturing and distributing the Syfo(R) brand of bottled water as well as
other products. We have lost money in all periods since 1996. Although the
Syfo(R) brand has 50 years of history and is distributed throughout the South,
there is no assurance that we will be able to sell enough of the products to
ensure a profit. Our business is subject to all the risks inherent in any newly
formed business including the absence of a profitable operating history, lack of
market recognition and limited banking and financial relationships.
History of Operating Losses and Previous Going Concern Qualification. We
have incurred losses since inception of our operations in 1996, and may continue
to incur substantial losses in the future. In particular, the Company incurred
losses of $2,182,334 for fiscal 1999 and $1,101,442 for fiscal 1998. The
footnotes to our financial statements for fiscal 1999 and fiscal 1998, include
an explanatory paragraph relating to the uncertainty of the Company's ability to
continue as a going concern. However, we completed a restructuring plan with six
of our creditors in the first quarter of 2000 and converted approximately $3.38
million of debt and accrued interest into equity and our net worth is positive
as of March 31, 2000. We have developed a business strategy, which we hope will
enable us to be profitable. However, there can be no assurances that the Company
will ever have profitable operations Even if we do have profitable operations,
there can be no assurances that we can achieve profitable operations on a
consistent basis. It is possible that our Company may experience further net
losses.
Quarterly Dividend Payments. As of June 1, 2000, we have issued and
outstanding 202,500 shares of Series B Preferred Stock, 130,600 shares of Series
C Preferred Stock, 31,500 shares of Series D Preferred Stock, 57,500 shares of
Series E Preferred Stock and 35,000 shares of Series F Preferred Stock. We are
required to make quarterly dividend payments to these shareholders in the amount
of $92,990 and our annual dividend payments to these preferred shareholders
equals $371,960. If we issue more shares of preferred stock, our annual and
quarterly dividend payments will increase. Our obligation to make these dividend
payments will decrease our operating cash flow and our ability to make
expenditures to benefit our business. If we fail to make dividend payments for
three consecutive quarters, 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.
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Additional Financing Required; Lack of Traditional Financing Sources. We
are pursuing an aggressive growth strategy that will require substantially more
funding than we have on hand. We may seek additional financing through the sale
of additional debt or equity securities (or a combination thereof) in future
public or private offerings. However, there can be no assurance that any such
financing will in fact be available to us when needed or upon terms acceptable
to us. Consequently, should we be unable to secure needed additional financing
in the future on a reasonable basis, it is possible that our business plan won't
be executable and profitable operations will not be obtainable. There can be no
assurances that any such additional financing will be available on terms
satisfactory to us, if at all, since conventional financing may not be available
to us.
Dominant Customers. We have three customers which represented a
significant portion of our sales in fiscal 1999. Publix Super Markets
represented 48.1% of our sales, Albertson's represented 10.1% of our sales and
Winn-Dixie Food Stores represented 7.5% of our total sales. Loss of any of these
customers would seriously affect our business. We are constantly seeking new
customers to lower the dependence of our Company on Publix Super Markets,
Albertson's and Winn-Dixie Food Stores and are in discussions with several new
customers, which could dramatically reduce such dependence. We have been
appointed a vendor number and executed a vendor agreement with Wal-Mart Stores,
Inc. for our 1 liter seltzer and naturally-flavored sparkling water. Supplying
Wal-Mart may reduce our dependence on any our dominant customers, however there
can be no assurance any new customer or customers will reduce this dominance or
will continue ordering our products. Further, there are no assurances that our
contract with Wal-Mart will be profitable, or will be a long-term contract.
Uncertain Ability to Manage Growth. As part of our business strategy, we
intend to pursue rapid growth. Our ability to achieve our planned growth depends
upon a number of factors, including our ability to hire and train management and
other employees, the adequacy of our financial resources, our ability to
identify new markets in which we can successfully compete and our ability to
adapt our purchasing and other systems to accommodate our expanded operations.
In addition, there can be no assurance that we will be able to achieve our
planned expansion or that we will be able to manage successfully the expanded
operations. Failure to manage growth effectively could adversely affect our
financial condition, results of operations and prospects.
Competition. Our products, especially the Syfo(R) products, are subject to
intense competition from companies that have significantly greater market share,
shelf space, financial resources and distribution. Our principal competitors in
the sparkling water segment are Canada Dry, private label store brands, Ritz,
Seagram's, Perrier, Clearly Canadian, Crystal Bay, New York Seltzer, San
Pelligrino, and LaCroix. Our principal competitors in the non-carbonated bottle
water market are Zephyrhills, Deer Park, Crystal Springs and private label store
brands. These companies have the resources to either lower the price of their
products in a predatory manner or secure the prime space in the outlets in which
these products are sold. If these companies are successful in their efforts to
obtain greater market share, shelf space and/or distribution, this could affect
our Company's ability to sell its Syfo(R) products and could result in lower
total revenues.
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Dependence on Senior Management. Our future performance depends
substantially upon the continued services of our senior management, particularly
Mr. Moore and Ms. Mendius, and other key personnel. We have entered into
employment agreements with Mr. Moore and Ms. Mendius. See "Management -
Employment Agreements." The loss of services of Mr. Moore or Ms. Mendius could
have a material adverse effect on the Company's marketing strategy, business
operations, financial condition and results of operations. If our operations
expand, we will also be dependent upon our ability to attract and retain
additional qualified employees and consultants. There is significant competition
for qualified personnel, and there can be no assurance that the Company will be
successful in recruitng, retaining or training the management personnel it
requires.
Government Regulations. The Federal Food and Drug Administration ("FDA")
regulates our products as a "food." Accordingly, our products must meet FDA
requirements of safety for human consumption, of processing and distribution
under sanitary conditions and of production in accordance with the FDA "good
manufacturing practices." In the event that we do not continue to meet these
required standards, our manufacturing facilities may be shut down and our
business will be seriously affected.
Penny Stock Trading Rules. The Securities Exchange Act of 1934 as amended
and regulations promulgated thereunder place restrictions on trading activities
in "penny stocks." Penny stocks are defined as equity securities priced under
$5.00 which are not listed for trading on a national exchange or NASDAQ, subject
to certain exceptions. Under this definition, the Company's common stock is a
penny stock. Brokers dealing in penny stocks are subject to special disclosure
rules, are required to determine the suitability of penny stock transactions for
their clients, and are required to obtain and maintain written consents of their
clients to such transactions. These regulatory burdens discourage a number of
brokers from becoming involved in a security until it is no longer a penny
stock, which may adversely affect the depth and liquidity of any market in the
Company's common stock.
Lack of Liquidity for the Company's Common Stock. The Company's
common stock currently trades on the National Quotation Bureau Pink Sheets
("Pink Sheets") under the symbol, "UVBV." The Company is submitting a Form
15c2-11 application to NASDAQ to have its stock quoted on the OTC Bulletin
Board. Stocks trading on the Bulletin Board and Pink Sheets generally attract a
smaller number of market makers and a less active public market and may be
subject to significant volatility. Sales of substantial amounts of shares of the
Company's common stock in the public market (pursuant to exercise of warrants
and additional capital financing transactions which may be undertaken by the
Company in the future) could adversely affect the market price of the Company's
common stock and the Company's ability to raise equity capital in the future and
may make it more difficult for an investor to liquidate his investment in the
Company. The trading market for the Company's common stock is currently limited
to relatively low volume. There can be no assurance that a trading market will
be sustained in the future.
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Issuance of Additional Shares. Our Articles of Incorporation authorize the
issuance of 30 million shares of common stock and 20 million shares of preferred
stock. As of March 31, 2000, we had 6,028,704 shares of common stock issued and
outstanding and an aggregate of 454,600 shares of preferred stock of various
classes. Our Board of Directors has the power, without shareholder approval, to
issue up to 23,971,296 shares of common stock and 19,545,400 shares of preferred
stock, with preferences designated by the Board of Directors. Any such issuance
might result in a reduction of the book value or market price of the outstanding
common stock and preferred shares. Issuance of additional shares will reduce the
proportionate ownership and voting power of our then existing shareholders.
ITEM 3. DESCRIPTION OF PROPERTY
Our corporate offices are located in Jacksonville, Florida. We have a
one-year lease which expires on May 31, 2001. Our monthly rental payment is
approximately $2,573.75 per month.
We entered into a contract to purchase a production plant in Leesburg,
Florida and 7.5 acres of land underlying the production plant for $1,400,000 on
March 31, 2000. We delivered a $100,000 escrow deposit to the seller, BNS of
Central Florida, Ltd., and intend to close on the contract by delivering
$1,300,000 in cash on or before July 1, 2000.
If we do not close on the contract by the required date, we still have a
lease for the production plant and 7.5 acres of land. The lease expires on
August 31, 2004 and the monthly payments are approximately $18,758.96 per month.
The rent will be increased in 4% increments each year thereafter. Real estate
taxes are approximately $20,000 per annum.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, the beneficial
ownership of the Company's common stock (1) by each director of the Company (2)
by all directors and officers as a group and (3) by persons who are known by the
Company to own beneficially more than 5% of the Company's common stock. At March
31, 2000, we had 6,194,204 shares of our common stock issued and outstanding.
Unless otherwise indicate, the address for each person is c/o Universal
Beverages Holdings, Inc., 7563 Philips Highway, Suite 110, Jacksonville, Florida
32256.
Amount of Common
Name and Address Stock Owned Percent of Class
---------------- ----------- ----------------
Earl T. Smith(1) 559,000 9.0%
Cydelle Mendius 503,500 8.1%
Jonathon O. Moore 502,996 8.1%
Bridge Bank Ltd.(2) 741,000 12.0%
Jay D. Marsh 427,996 6.9%
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All Officers and Directors
as a Group (5 persons) 2,143,492 34.6%
-----------------------
(1) Includes 459,000 shares owned by ETS Enterprises, Inc., a company controlled
by Mr. Smith.
(2) The address for Bridge Bank LTD. is N-778 West Bay Street, Nassau, Bahamas
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The following table sets forth the names, ages and current positions with
our Company held by Directors, Executive Officers and Significant Employees.
Name Age Position
---- --- --------
Jonathon O. Moore 49 Chairman, CEO, Director
Cydelle Mendius 42 President: Director
Jay D. Marsh 57 Treasurer, Director
Earl T. Smith 79 Director
Marsha Flaige 49 Vice President - Finance and Secretary
Jerry Gaines 61 Vice President - Operations
Jose Matos PHD 37 Director of Quality Control
Jonathon O. Moore has served as the Chairman and CEO of the Company since
March 6, 1998. From April 1996 through May 1998, Mr. Moore was the sole
shareholder of Syfo Beverage Company of Florida. From January 1992 through April
1996, Mr. Moore was engaged as an independent consultant in several insurance
company ventures, including General Insurance Company and Peninsula Life. In the
1980's, he served as the Chairman of the Board and a major shareholder of Air
U.S. Mr. Moore has over 25 years of experience at all levels of management,
which includes a wide spectrum of challenges from new venture start-ups to
turning around entire organizations, including Air U.S., a Part 121- FAA
certified airline operation in the United States in the early 1980's. Mr. Moore
attended the University of Wyoming where he majored in Physics and Mathematics.
Cydelle Mendius has served as President and Director of the Company since
May 5, 1997. From April 1996 through May 1997, Ms. Mendius served as the
President of Syfo Beverage Company of Florida. From March 1993 through March
1996, Ms. Mendius worked as a business development specialist providing
consulting services in a variety of different industries, including the beverage
and agribusiness industries. Within the beverage industry she specialized in the
bottled water segment of the industry. In addition to her consulting experience,
Ms. Mendius has owned and operated two successful businesses, one of which was
sold and the other merged into a large entity. She has held the executive-level
positions of President, Vice President and General Manager during the past
sixteen years of her business career. She received her BA in Modern languages
and
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Latin American Studies, holds a Master's Degree in Business Administration and
has completed certificate programs in Small Company Management. She has been
named one of the Outstanding Young Women of America and is an alumna of the
University of Denver and Harvard University Graduate School of Business.
Earl T. Smith has served as a Director of the Company since March 6, 1998.
Mr. Smith served as a Lieutenant Colonel in the United States Air Force. After
retiring from the Air Force, he was General Manager of Two States Drilling
Company in Dallas, Texas after which he formed his own independent oil and gas
company, Earl T. Smith and Associates, Inc., Amarillo, Texas, which he has owned
and operated since 1955 through the present date.
Jay Marsh has served as a Director and Treasurer of the Company since
March 6, 1998. Since 1991 through the present date, Mr. Marsh has worked as a
consultant and been involved with the successful restructuring and refinancing
of several companies. From June 1970 through June 1973, Mr. Marsh served as a
consultant with Arthur Young and Company. Mr. Marsh has had significant
corporate finance experience as an investment banker in a wide variety of
mergers and acquisitions, restructuring, and lending transactions, as a
principal in leveraged buy-out transactions, and as a consultant to financially
troubled companies, specializing in the implementation of restructuring action
plans. His experience as chief executive of an investment banking firm includes:
completing 40 debt financing for clients totaling over $100 million and
arranging a $10 million equity investment in a home health care venture in 1988.
His experience as a principal includes chairman and CEO of a $20 million
leveraged buy-out of a seven jet commercial airline in 1984. Mr. Marsh has a
Bachelor of Science degree in Physics and a Masters of Business Administration
degree from Ohio State University. He is a Certified Public Accountant, member
of the AICPA and Illinois Society of CPA's.
Marsha Flaige has served as the Vice President-Finance and Secretary of
the Company since March 6, 1998. From October 1993 through the present date, Ms.
Flaige has served as the Vice President of Speciality Business Services, an
independent business consulting company. From September 1983 through April 1992,
she was an Assistant Vice President- Financial Analyst with Voyager Group (an
insurance subsidiary of Primerica), which required preparation of monthly,
quarterly, and year-end GAAP financial statement packages and line-of-business
reporting to the corporate parent. Upon the consolidation of Voyager with its
affiliated companies in April 1992, she opened a small business consulting firm
called Owner Executive Support Services. Ms. Flaige graduated from the
University of North Florida with a Bachelor of Business Administration with
emphasis in Finance and Corporate Planning and is currently a CPA candidate.
Jerry Gaines has served as the Vice President of Operations since August,
1999. During the five year period before he joined the Company, Mr. Gaines was
the Product Manager at American Can. Mr. Gaines has over thirty years of
experience in general manufacturing, production and quality programs. Mr. Gaines
is an active member of the International Beverage and Water Association and the
South East Water Association.
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Jose Matos, Ph.D. has served as Director of Quality Assurance since
August, 1999. From July 1998 to August 1999, Mr. Matos was the Laboratory
Manager at Lesco, Inc. From October 1997 to March 1998, he was the product
development management at SunPure, Ltd. From February 1990 to October 1997, he
was the Corporate Director of Research and Development and Quality Assurance at
Indian River Foods. Mr. Matos graduated from the University of Michigan with a
PhD in Chemistry. He has over seventeen years of experience at all levels of
quality control in the beverage industry, which includes flavors development,
citrus and other juices and water. He is an active member of the Institute of
Food and Technology (IFT), and American Chemical Society (ACS).
Designees
In connection with a capital investment, we gave an investor group the
right to appoint two persons to the Company's Board of Directors. Additionally,
in connection with our restructuring plan, we also gave one of our former
creditors the right to appoint one person to our Board of Directors. As of this
date, these groups have not named any nominees to our Board..
General Information about Directors
Each Director holds office until the next annual meeting of shareholders
of our Company and until his successor has been elected and qualified. Officers
of our Company are elected by the Board of Directors and serve at the discretion
of the Board. There is no immediate family relationship between or among any of
the directors, executive officers or significant employees. The Company is not
aware of any arrangement or understanding between any director or executive
officer and any other person pursuant to which he was elected to his current
position.
Directors who are full time employees of the Company receive no additional
compensation for services rendered as directors of the Company. Directors who
are not full time employees of the Company do not receive any compensation for
their services as directors.
NASDAQ Requirements and Committees
We intend to comply with the corporate governance standards established by
the NASDAQ Stock Market. In the near future, we intend to have two independent
directors on our Board of Directors and will establish an audit committee, with
a majority of independent directors.
ITEM 6. EXECUTIVE COMPENSATION
This Summary Compensation Table sets forth compensation earned by Jonathon
O. Moore, the Company's Chief Executive Officer and Chairman (the "Named
Executive Officer") for services rendered in all capacities to the Company
during its fiscal year ended December 31, 1999 and December 31, 1998. No other
principal executive officer received a total annual salary and bonus from the
Company which exceeded $100,000 during fiscal 1998 or 1999.
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Name and Position Year Salary Bonus Other Compensation
----------------- ---- ------ ----- ------------------
Jonathon O. Moore, 1999 $40,660 - $28,500
1998 $33,631 - -
(1) Includes stock awarded to Moore for his service as Chief Executive Officer
of the Company during fiscal 1999. Mr. Moore received 150,000 shares of the
Company's common stock on December 13, 1999 and the fair market value of the
Company's stock on such date was $.19 per share.
Option Grants in Fiscal 1999
We did not make any option grants to Mr. Moore during fiscal 1999.
Aggregate Option/SAR Exercises in Last Fiscal year and FY-End Option/SAR Values
Mr. Moore did not exercise any options during the last fiscal year.
Employment Agreements
We have entered into employment agreements with Jonathon Moore, Cydelle
Mendius and Marsha Flaige. Jonathon Moore is employed as the Company's Chief
Executive Officer and Chairman and his annual salary is $60,000, effective as of
March 6, 1998. Cydelle Mendius is employed as the Company's President and her
annual salary is $80,000 effective as of March 6, 1998. Marsha Flaige is
employed as the Company's Vice President and her annual salary is $60,000
effective as of March 6, 1998. Mr. Moore, Ms. Mendius and Ms. Flaige's
employment agreements are for three year terms from their effective dates and
all agreements expired on March 5, 2001.
The employment agreements provide that the executive's employment will be
terminated upon (1) the executive's death, (2) for cause and/or (3) if the
executive has a complete disability. For cause is defined as (1) the executive's
substance abuse, alcoholism, or conviction of a crime involving moral turpitude,
acts of fraud by the executive against the Company or its affiliates in
connection with their business or (3) if the executive resigns or abandons his
employment. Complete disability means the inability of the executive due to
illness, accident or any other physical or mental incapacity (other than
incapacity or illness resulting from the executive's performance of his duties
under the employment agreement) to perform the services provided for in his/her
employment agreement for a period of 120 consecutive days within any twelve (12)
consecutive month period.
If the executive's employment is terminated because of his death or
complete disability, the executive is entitled to receive his salary for a one
year period following the date of such termination, provided that any such
payments shall not extend beyond the term of the employment agreement, which
expires on March 5, 2001.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 15, 1997, Cydelle Mendius advanced $90,000 to UBI at an
interest rate of 15%, evidenced by a demand promissory note callable at any
time, and secured by the assets of our Company. Since that time, Ms. Mendius has
advanced additional funds to our Company bringing the total loan in excess of
$200,000 plus accrued interest.
Between June 6, 1997 and September 19, 1997, Bridge Bank, Ltd. advanced a
loan to UBI in the amount of $541,500 at an annual interest rate of 15% and the
loan was secured by common stock of Mr. Moore and Ms. Mendius. Bridge Bank also
received 350,0000 shares of the Company's common stock as consideration for
extending the loan at a price of $.001 per share. On February 1, 2000, Bridge
Bank entered into a debt forgiveness and exchange agreement in which it agreed
to forgive all of the Company's outstanding indebtedness and accrued interest
under the note in the amount of $720,500 in exchange for 700,000 shares of the
Company's common stock. On the date of the exchange, the fair market value of
our common stock was approximately $.78 per share.
In June 1996, the Company's subsidiary, Orlando Bottling & Production,
Inc. ("Orlando Bottling"), entered into a manufacturing agreement with Syfo
Beverage Company of Florida, Inc. ("Syfo Beverage"). At that time, Jonathon
Moore and Cydelle Mendius were both officers, directors and shareholders of the
Company and Syfo Beverage. Syfo Beverage had obtained an exclusive franchise
agreement to distribute and sell Syfo(R) products from the Best Day Company
f/k/a Syfo Water Co., Inc. (the "Best Day Company"), the previous owner of the
Syfo trademark and an unrelated party, and needed to retain a company to
manufacture, bottle and distribute the Syfo products.
Prior to entering into the manufacturing contract, the Company and
Orlando Bottling had obtained quotations on the cost of providing these services
to Syfo Beverage and priced the manufacturing contract on terms that were the
same as the outside quotations. Under the terms of the manufacturing agreement,
Orlando Bottling would manufacture the products, maintain adequate inventory and
distribute the products and Syfo Beverage would pay Orlando Bottling a set fee
for those services on a monthly basis.
In July 1998, the Company acquired rights to the Syfo(R) trademark by
purchasing a promissory note, secured by the Syfo trademark, from Union Planters
Bank and also succeeded to the bank's position in the lawsuit to foreclose on
the Syfo(R) trademark against the Best Day Company. In conjunction with this
transaction, the Company terminated its manufacturing contract with Syfo
Beverage Company in consideration for the net monies due the Company from Syfo
Beverage in the amount of $660,000.
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ITEM 8. DESCRIPTION OF SECURITIES
We are authorized to issue up to 30,000,000 shares of Common Stock and
20,000,000 shares of Preferred Stock. As of June 1, 2000, there were 6,194,204
shares of common stock outstanding and 453,100 shares of preferred stock of
various series.
Common Stock
The holders of our Common Stock are entitled to one vote per each share
held and have the sole right and power to vote on all matters on which a vote of
stockholders is taken. Voting rights are non-cumulative. The holders of shares
of Common Stock are entitled to receive dividends when, as and if declared by
the Board of Directors, out of funds legally available therefore and to share
pro-rata in any distribution to stockholders. Upon liquidation, dissolution, or
winding up of the Company, the holders of our common stock are entitled to
receive the net assets held by the Company after distributions to the creditors.
The holders of Common Stock do not have any preemptive right to subscribe for or
purchase any shares of any class of stock. The outstanding shares of Common
Stock and the shares offered hereby will not be subject to further call or
redemption and will be fully paid and non-assessable.
Preferred Stock
Within the limits and restrictions contained in our Articles of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issued up to 20,000,000 shares of preferred stock, $.01
par value per share (the "Preferred Stock"), in one or more series, and to fix,
as to any such series, the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, if any, conversion rights,
voting rights and any other preference or special rights and qualifications.
We have authorized the issuance of Series A, Series B, Series C, Series D,
Series E and Series F Preferred Stock. As of June 1, 2000, there were issued and
outstanding: 0 shares of Series A Preferred Stock, 202,500 shares of Series B
Preferred Stock, 130,600 shares of Series C Preferred Stock, 31,500 shares of
Series D Preferred Stock, 57,500 shares of Series E Preferred Stock, and 35,000
shares of Series F Preferred Stock.
Shares of Preferred Stock issued by the Company could be utilized, under
certain circumstances, to make an attempt to gain control of the Company more
difficult or time-consuming. For example, shares of Preferred Stock could be
issued with certain rights which might have the effect of diluting the
percentage of our common stock owned by a significant shareholder, or issued to
purchasers who might side with management in opposing a takeover bid. A takeover
transaction frequently affords shareholders the opportunity to sell their shares
at a premium over current market prices.
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Series A Preferred Stock
Our Articles of Incorporation authorize 600,000 shares of Series A
Preferred Stock. As of the date of this Memorandum, we do not have any shares of
our Series A Preferred Stock issued and outstanding. On January 31, 2000, we
issued a total of 42,500 shares of our common stock in exchange for all 8,500
shares of the Series A Preferred Stock which were issued and outstanding. We
also issued 1,700 shares of our common stock as a preferred stock dividend for
1999, which dividend was effective as of January 1, 2000.
Series B Preferred Stock
Our Board of Directors has authorized the issuance of up to 450,000 shares
of Series B Preferred Stock. Holders of Series B Preferred Stock are entitled to
cumulative dividends at a rate of $1 per share. Dividend payments will be made
on a quarterly basis. Each dividend is cumulative, in the event payments are not
made in any specific quarter, the dividend will cumulate and payments will first
be applied to those payments that are past due and then to dividends currently
due.
Dividends must be paid in cash if the Company's common stock is trading at
or below an average price of $4.50 per share during the thirty (30) calendar day
period prior to the record date for the dividend payment. The Board of Directors
may elect to pay the dividends in shares of our common stock if the common stock
is quoted at a price of above $4.50 per share during the thirty (30) calendar
day period before the record date for the dividend.
At any time after issuance, each shares of Series B Preferred Stock can be
converted into 2.5 shares of the Company's common stock. At any time, the
Company can redeem shares of Series B Preferred Stock by giving the preferred
shareholders 30 days written notice of such intention to redeem at the purchase
price of $12 per share. Series B Preferred Shareholders will have the right to
appoint two directors of the Board of Directors of the Company. The Series B
Directors can only serve while a majority of the originally issued Series B
Preferred Shares remain outstanding, unconverted and unredeemed.
The shares of Series B Preferred Stock do not have voting rights, unless
there is an Event of Default (as defined herein). If the Company fails to make
dividend payments for three quarters, the holders of 60% of the issued and
outstanding Series B Preferred Stock can declare an event of default by
providing the Company with 60 days notice of such event of default by certified
mail. If there is an Event of Default, each shares of Series B Preferred Stock
shall have 10 votes which may be counted toward the election of the Company's
Board of Directors. Except for the forgoing voting rights for directors in the
Event of Default, the Series B Preferred Stock will not have voting rights or
any other corporate matters.
In the event of the liquidation, dissolution or winding up of the Company,
holders of the Series B Preferred Stock will be entitled to receive a
liquidating distribution before any distribution or payment may be made to
holders of common stock or any other class of stock ranking junior to
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the shares of the Series B Stock. The liquidating distribution will be $12.00
per share. However, the holders of the shares of Series B Preferred Stock will
not be entitled to receive the liquidation price of such shares until the
liquidation price of any other series or class of the Company's stock hereafter
issued which ranks senior as to liquidation rights ("Senior Liquidation Stock")
of the Series B Preferred Stock has been paid in full. In the event the assets
of the Company available for distribution to the holders of the shares of all
Series of the Company's preferred stock, upon any such liquidation or winding up
of the Company, shall be insufficient to pay in full the preferential amounts to
which such holders are entitled, the holders of the Series B Stock shall share
ratably in any distribution of assets in proportion to the full amounts to which
such holder would otherwise be respectively entitled.
As long as shares of Series B Preferred Stock are outstanding, the Company
will not, without the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of the Series B Preferred Stock voting as a
class (1) create, authorize or issue any shares of any other class of Senior
Dividend Stock or Senior Liquidation Stock or (2) amend, alter or repeal,
whether by merger, consolidation or otherwise, the Company's Articles of
Incorporation, if such changes would materially and adversely affect the powers,
preference or special rights of the Series B Preferred Stock. The Company is
further prohibited from encumbering the underlying assets of the Company, other
than cash, accounts receivable, and inventories for the purposes of pledging,
securing or otherwise encumbering these assets for any reason, including further
borrowing or other purposes without the unanimous approval of the Board of
Directors of the Company, including the directors so appointed by the majority
of the Series B Preferred Shares.
Series C Preferred Stock
Our Board of Directors has authorized the issuance of up to 200,000 shares
of Series C Preferred Stock. Each share of Series C Preferred Stock is entitled
to cumulative dividends at a rate of $1 per share. Dividend payments will be
made on a quarterly basis. Each dividend is cumulative, in the event payments
are not made in any specific quarter, the dividend will cumulate and payments
will first be applied to those payments that are past due and then to dividends
currently due.
All dividend payments must be made in cash. At any time after issuance,
each shares of Series C Preferred Stock can be converted into 2.5 shares of the
Company's common stock. At any time, the Company can redeem shares of Series C
Preferred Stock by giving the preferred shareholders 30 days written notice of
such intention to redeem at the purchase price of $10 per share.
The shares of Series C Preferred Stock do not have voting rights, unless
there is an Event of Default (as defined herein). If the Company fails to make
dividend payments for three quarters, the holders of 60% of the issued and
outstanding Series B Preferred Stock can declare an event of default by
providing the Company with 60 days notice of such event of default by certified
mail. If there is an Event of Default, each shares of Series C Preferred Stock
shall have 10 votes which
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may be counted toward the election of the Company's Board of Directors. Except
for the forgoing voting rights for directors in the Event of Default, the Series
C Preferred Stock will not have voting rights or any other corporate matters.
In the event of the liquidation, dissolution or winding up of the Company,
holders of the Series C Preferred Stock will be entitled to receive a
liquidating distribution before any distribution or payment may be made to
holders of common stock or any other class of stock ranking junior to the shares
of the Series B Stock. The liquidating distribution will be $10.00 per share.
However, the holders of the shares of Series B Preferred Stock will not be
entitled to receive the liquidation price of such shares until the liquidation
price of any other series or class of the Company's stock hereafter issued which
ranks senior as to liquidation rights ("Senior Liquidation Stock") of the Series
C Preferred Stock has been paid in full (such as the Series B Preferred Stock.).
The Series C, Series D, Series E and Series F Preferred Shares are in pari passu
with respect to liquidation rights.
Series D, E and F Preferred Stock
Our Board of Directors has authorized the issuance of up to 200,000 shares
of Series C , Series D and Series Preferred Stock, respectively. Except for
dividend rights, the Series D, E and F Preferred Stock have the same terms and
preferences.
Holders of Series D Preferred Stock are entitled to cumulative dividends
at a rate of $1 per share. Dividend payments on the Series D Preferred Stock are
subordinate to the dividend payments on the Series B and Series C Preferred
Stock. Dividend payments will be made on a quarterly basis. Each dividend is
cumulative, in the event payments are not made in any specific quarter, the
dividend will cumulate and payments will first be applied to those payments that
are past due and then to dividends currently due.
Holders of Series E and F Preferred Stock are entitled to cumulative
dividends at a rate of $.80 per share. Dividend payments on the Series E
Preferred Stock are subordinate to the dividend payments on the Series B, C and
D Preferred Stock and dividend payments on the Series F Preferred Stock are
subordinate to the dividend payments on the Series B, C, D and E Preferred
Stock.
Dividend payments can be made in cash or common stock. At any time after
issuance, each share of Series D, E and F Preferred Stock can be converted into
shares of the Company's common stock at a price equal to 80% of the average of
the "bid" and "ask" price of the Company's common stock during the 30 day
trading period preceding the conversion date. At any time, the Company can
redeem shares of Series D, E or F Preferred Stock by giving the preferred
shareholders 30 days written notice of such intention to redeem at the purchase
price of $10 per share.
The shares of Series D, E and F Preferred Stock do not have voting rights,
unless there is an Event of Default (as defined herein). If the Company fails to
make dividend payments for three quarters, the holders of 60% of the issued and
outstanding Series D, E and F Preferred Stock, respectively, can declare an
event of default by providing the Company with 60 days notice of such
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event of default by certified mail. If there is an Event of Default, each share
of Series D, E and F Preferred Stock, respectively, shall have 10 votes which
may be counted toward the election of the Company's Board of Directors. Except
for the forgoing voting rights for directors in the Event of Default, the Series
D, E and F Preferred Stock will not have voting rights or any other corporate
matters.
In the event of the liquidation, dissolution or winding up of the Company,
holders of the Series D, E and F Preferred Stock will be entitled to receive a
liquidating distribution before any distribution or payment may be made to
holders of common stock or any other class of stock ranking junior to the shares
of the Series D Stock. The liquidating distribution will be $10.00 per share.
However, the holders of the shares of Series D, E and F Preferred Stock will not
be entitled to receive the liquidation price of such shares until the
liquidation price of any other series or class of the Company's stock hereafter
issued which ranks senior as to liquidation rights ("Senior Liquidation Stock")
of the Series D Preferred Stock has been paid in full (such as the Series B
Preferred Stock.) The Series C, Series D, Series E and Series F Preferred Shares
are in pari passu with respect to liquidation rights.
Stock Options
As of June 1, 2000, we do not have outstanding any options to purchase
shares of our common stock. However, we intend to adopt a stock option plan for
our officers, directors and employees.
Warrants
As of June 1, 2000, we have issued and outstanding 2,430,000 warrants to
certain investors, at exercise prices ranging from $1.00 per share to $10.00 per
share. The warrants expire at various dates through August 2003.
Certain Florida Legislation
Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The Florida Control Share Act generally provides that
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless such voting rights are approved by a majority or a
corporations disinterested shareholders. The Florida Affiliated Transactions Act
generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of outstanding voting shares of corporation (or their affiliates).
The Company's Articles of Incorporation do not provide for any additional
anti-takeover provisions other than those set forth in the Florida Business
Corporation Act and the ability of the Board of Directors of the Company to
issue, from time to time, one or more series of Preferred stock without
shareholder approval.
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Transfer Agent
The Transfer Agent is Interwest Transfer Co., Inc., 1981 East 4800 South,
Suite 100, Salt Lake City, Utah 84117. Its telephone number is (801) 272-9294.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRATION'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Our common stock is traded in the Pink Sheets under the symbol "UVBV." One
of our market makers is filing an application with the NASD to have our stock
quoted on the OTC Bulletin Board. The following table sets forth the high and
low bids, as reported by the National Quotation Bureau, Inc., for our common
stock for the calendar periods indicated. These quotations reflect intermediate
prices, without retail mark-ups, mark-downs or commissions, and may not
represent actual transactions.
High Low
Bid Bid
--- ---
Quarter Ended
-------------
June 30,1998 $6.12 $2.50
September 30, 1998 $8.50 $4.75
December 31, 1998 $8.50 $7.37
March 31, 1999 $8.62 $7.50
June 30, 1999 $7.50 $7.50
September 30, 1999 $6.50 $0.50
December 30, 1999 $0.93 $0.12
March 31, 2000 $5.00 $0.19
As of June 1, 2000, there were 75 holders of record of the Company's
common stock.
Dividend Policy
We have never paid cash dividends on our common stock. We will not be able
to make any dividend payments to our common shareholders unless we have made
dividend payments to our Series B, Series C, Series D, Series E and Series F
Preferred Shareholders. As of June 1, 2000, we are required to make quarterly
dividend payments to these preferred shareholders in the amount of $92,990 and
our annual dividend payments to these preferred shareholders will equal
$371,960. At the present time given our required dividend payments to our
preferred shareholders and our
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anticipated financial capital requirements for working capital, we do not
anticipate paying any dividends on our common stock.
ITEM 2. LEGAL PROCEEDINGS
We are involved from time to time in routine litigation arising out of the
ordinary course of its business, some of which is covered by insurance. In
management's opinion, none of the litigation in which the Company is currently
involved is material to its financial condition or results of operation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
During the last two fiscal years, we have not had any changes in or
disagreements with our accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth the Company's sale of securities during the last
three years, which securities were not registered under the Securities Act of
1933, as amended (the "Securities Act"). No underwriters were employed with
respect to the sale of any of the securities listed below. All shares were
issued in reliance on Section 4(2) and/or Section 3(b) of the Securities Act.
1. On March 6, 1998, the Company issued 1,724,999 shares of our common
stock in connection with its acquisition of Universal Beverages, Inc. The
Company issued the shares to eight former UBI shareholders in reliance upon
Section 4(2) of the Securities Act, because the shareholders were knowledgeable,
sophisticated and had access to comprehensive information about the Company. The
Company placed legends on the certificates stating that the securities were not
registered under the Securities Act and set forth the restrictions on their
transferability and sale.
2. On May 22, 1998, the Company completed the private placement of 490,000
shares of its common stock to five investors at an offering price of $2.00 per
share. The offering and sale of the shares was made in reliance upon Rule 504 of
Regulation D promulgated under the Securities Act of 1933, as amended. The
common stock was only offered and sold to accredited investors or persons who
represented that they had no need for liquidity in their investment and had
adequate financial resources to withstand a total loss of their investment.
3. On December 3, 1999, the Company issued 35,000 shares of its common
stock in exchange for consulting services at a price of $.001 per share. The
Company issued the shares to the consultant in reliance upon Section 4(2) of the
Securities Act, because the consultant was knowledgeable, sophisticated and had
access to comprehensive information about the Company. The Company placed
legends on the certificates stating that the securities were not registered
under the Securities Act and set forth the restrictions on their transferability
and sale.
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4. On December 3, 1999, the Company issued 770,000 shares of its common
stock to fifteen of its employees for compensation in lieu of cash payments. The
Company issued the shares to its employees in reliance upon Section 4(2) of the
Securities Act, because the employees were knowledgeable, sophisticated and had
access to comprehensive information about the Company. The Company placed
legends on the certificates stating that the securities were not registered
under the Securities Act and set forth the restrictions on their transferability
and sale.
5. On December 3, 1999, the Company issued 200,000 shares of its common
stock to Robert Dolan as part of a loan agreement at a price of $.001 per share.
The Company issued the shares to Mr. Dolan in reliance upon Section 4(2) of the
Securities Act, because Mr. Dolan was knowledgeable, sophisticated and had
access to comprehensive information about the Company. The Company placed
legends on the certificates stating that the securities were not registered
under the Securities Act and set forth the restrictions on their transferability
and sale.
6. On December 3, 1999, the Company issued 750,000 shares of its common
stock as an adjustment to the Stock Purchase Agreement with UBI. The Stock
Purchase Agreement provided that the Company issue options to five shareholders
of UBI. The options were never issued or exercised. To comply with the original
Stock Purchase Agreement these shares have been subsequently issued and the
parties have agreed that the Company is no longer in breach of the original
Stock Purchase Agreement. The Company issued the shares to these persons in
reliance upon Section 4(2) of the Securities Act, because the five shareholders
were knowledgeable, sophisticated and had access to comprehensive information
about the Company. The Company placed legends on the certificates stating that
the securities were not registered under the Securities Act and set forth the
restrictions on their transferability and sale.
7. On February 1, 2000, the Company entered into a debt restructuring
agreement with Bridge Bank, Ltd. The Company issued 700,000 shares of its common
stock to Bridge Bank, Ltd. in exchange for the forgiveness of debt and accrued
interest in the amount of $720,500. On the date of the exchange, the fair market
value of our common stock was approximately $.78 per share. The Company issued
the shares to Bridge Bank, Ltd. in reliance upon Section 4(2) of the Securities
Act, because Bridge Bank was knowledgeable, sophisticated and had access to
comprehensive information about the Company. The Company placed legends on the
certificates stating that the securities were not registered under the
Securities Act and set forth the restrictions on their transferability and sale.
8. On March 31, 2000, the Company issued 202,500 shares of its Series B
Convertible Preferred Stock to thirty accredited investors in a private
offering. The offering price was $10.00 per share. Each investor was also given
the opportunity to purchase a warrant package equal to 1/5 of his/her investment
in the private offering. Each warrant package consisted of Class A Warrants,
Class B Warrants and Class C Warrants. Each warrant gave each investor the right
to purchase one share of the Company's common stock at various exercise prices.
The exercise price for the Class A, Class B and Class C Warrants is $1.00 per
share, $3.00 per share and $5.00 per share, respectively. One condition to
purchase the warrant package was that the investor must exercise all
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of the Class A Warrants at the time of purchase. The investors purchased 343,000
Warrant Packages. The offering and sale of the Series B Preferred Shares and the
warrant package was made in reliance upon the exemption from registration
contained in Rule 506 of Regulation D, as promulgated under the Securities Act
of 1933, as amended. The Series B Preferred Shares and warrant package were only
offered and sold to accredited investors who had access to comprehensive
information about the Company. The Company placed legends on the stock
certificates and the warrant certificates stating that the securities were not
registered under the Securities Act and set forth the restrictions on their
transferability and sale..
9. On March 31, 2000, the Company entered into debt restructuring
agreements with five of its creditors. The Company issued 12,000 shares of its
common stock to Mr. Moore in exchange for the forgiveness of debt and accrued
interest in the amount of $29,475. The Company issued 130,6000 shares of its
Series C Preferred Stock to Capital International, SBIC in exchange for
forgiveness of debt and accrued interest in the amount of $1,358,514.23. The
Company issued 31,500 shares of its Series D Preferred Stock to Eva and Lasse
Moe and Roberto and Barbara Rial in exchange for forgiveness of debt and accrued
interest in the amount of $372,859.27. The Company issued 57,500 shares of its
Series E Preferred Stock to McClean Ventures, Inc. in exchange for the
forgiveness of debt and accrued interest in the amount of $593,750. The Company
issued 35,000 shares of its Series F Preferred Stock to Altamonte Capital, Inc.
in exchange for forgiveness of debt and accrued interest in the amount of
$338,265.09.
The Company issued the shares to these five creditors in reliance upon
Section 4(2) of the Securities Act, because these creditors were knowledgeable,
sophisticated and had access to comprehensive information about the Company. The
Company placed legends on the certificates stating that the securities were not
registered under the Securities Act and set forth the restrictions on their
transferability and sale.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation limit, to the maximum extent permitted by
the Florida Business Corporation Act, the personal liability of directors and
officers for monetary damages for breach of their fiduciary duties as directors
and officers (other than liabilities arising from acts or omissions that involve
intentional misconduct, fraud or knowing violations of law or the payment of
distributions in violation of the Florida Business Corporation Act). Our
Articles of Incorporation provide further that our Company shall indemnify, to
the fullest extent permitted by the Florida Business Corporation Act, any person
made a party to an action or proceeding by reason of the fact that such person
was a director, officer, employee or agent of our Company. Subject to our
Articles of Incorporation, the By-laws provide that our Company shall indemnify
directors and officers for all costs reasonably incurred in connection with any
action, suit or proceeding in which such director or officer is finally adjudged
to have been derelict in the performance of his duties as such director or
officer.
Our Company intends to enter into separate indemnification agreements with
its directors
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and officers containing provisions that provide for the maximum indemnity
allowed to directors and officers under the Florida Business Corporation Act and
our Company, among other obligations, to indemnify such directors and officers
against certain liabilities that may arise by reason of their status as
directors and officers, other than liabilities arising from willful misconduct
of a culpable nature, provided that such person acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interest of our Company and, in the case of a criminal proceeding, had no
reasonable cause to believe that his or her conduct was unlawful. In addition,
the indemnification agreements provide generally that our Company will, subject
to certain exceptions, advance the expenses incurred by directors and officers
as result of any proceeding against them as to which they may be entitled to
indemnification. We believe these arrangements are necessary to attract and
retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of our
Company pursuant to the foregoing provisions or otherwise, our Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
FINANCIAL STATEMENTS AND EXHIBITS
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
MARCH 31, 1999
Page No.
Balance Sheets - March 31, 2000 (Unaudited) and
December 31, 1999 (Audited) F-1
Statements of Operations - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited) F-3
Statement of Changes in Stockholders' Equity -
For the Three Months Ended March 31, 2000
(Unaudited) F-4
Statement of Cash Flows - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited) F-6
Notes to Financial Statements F-7
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998
Page No.
Independent Auditors' Report F-16
Balance Sheets F-18
Statements of Income F-20
Statements of Changes in Stockholders' Deficit F-21
Statements of Cash Flows F-24
Notes to Financial Statements F-26
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PART III
ITEM 1. INDEX TO EXHIBITS
2.1 Stock Purchase Agreement between the Company and Universal
Beverages, Inc. dated March 6, 1999 (incorporated by reference from
Exhibit 2.1 in the Company's Registration Statement on Form 10-SB
filed with the SEC on April 14, 2000).
3.1 Articles of Incorporation of the Company filed with the Florida
Secretary of State on July 18, 1989 (incorporated by reference from
Exhibit 3.1 in the Company's Registration Statement on Form 10-SB
filed with the SEC on April 14, 2000).
3.2 Amendment to Articles of Incorporation of the Company filed with the
Florida Secretary of State on January 22, 1998 (incorporated by
reference from Exhibit 3.2 in the Company's Registration Statement
on Form 10-SB filed with the SEC on April 14, 2000).
3.3 Amendment to Articles of Incorporation of the Company filed with the
Florida Secretary of State on February 24, 1998 (incorporated by
reference from Exhibit 3.3 in the Company's Registration Statement
on Form 10-SB filed with the SEC on April 14, 2000).
3.4 Amended and Restated Articles of Incorporation of the Company filed
with the Florida Secretary of State on March 12, 1998 (incorporated
by reference from Exhibit 3.4 in the Company's Registration
Statement on Form 10-SB filed with the SEC on April 14, 2000).
3.5 Certificate of Designation, Articles of Amendment of the Company
filed with the Florida Secretary of State on January 6, 1999
(incorporated by reference from Exhibit 3.5 in the Company's
Registration Statement on Form 10-SB filed with the SEC on April 14,
2000).
3.6 Articles of Amendment of the Company filed with the Florida
Secretary of State on March 31, 2000 (incorporated by reference from
Exhibit 3.6 in the Company's Registration Statement on Form 10-SB
filed with the SEC on April 14, 2000).
3.7 Bylaws, as amended (incorporated by reference from Exhibit 3.7 in
the Company's Registration Statement on Form 10-SB filed with the
SEC on April 14, 2000).
10.1 Employment Agreement dated March 6, 1998 between the Company and
Jonathon Moore (incorporated by reference from Exhibit 10.1 in the
Company's Registration Statement on Form 10-SB filed with the SEC on
April 14, 2000).
10.2 Employment Agreement dated March 6, 1998 between the Company and
Cydelle Mendius (incorporated by reference from Exhibit 10.2 in the
Company's Registration Statement on Form 10-SB filed with the SEC on
April 14, 2000).
10.3 Employment Agreement dated March 6, 1998 between the Company and
Marsha Flaige (incorporated by reference from Exhibit 10.3 in the
Company's Registration Statement on Form 10-SB filed with the SEC on
April 14, 2000).
10.4 Lease for the office space in Jacksonville, Florida (incorporated by
reference from Exhibit 10.4 in the Company's Registration Statement
on Form 10-SB filed with the SEC on April 14, 2000).
10.5 Deposit Receipt & Purchase and Sale Agreement dated March 30, 2000,
by and between BNS of Central Florida, Ltd. and the Company
(incorporated by reference from Exhibit 10.5 in the Company's
Registration Statement on Form 10-SB filed with the SEC on April 14,
2000).
34
<PAGE>
10.6 Addendum to Agreement dated as of March 30, 2000 by and between BNS
of Central, Florida, Ltd. and the Company (incorporated by reference
from Exhibit 10.6 in the Company's Registration Statement on Form
10-SB filed with the SEC on April 14, 2000).
10.7 Lease Agreement dated as of May 1, 1998 between BNS of Central
Florida, Ltd. and the Company relating to the lease of the
production plant in Leesburg, Florida (incorporated by reference
from Exhibit 10.7 in the Company's Registration Statement on Form
10-SB filed with the SEC on April 14, 2000).
10.8 Lease Extension Agreement dated as of October 8, 2000 between BNS of
Central Florida, Ltd. and the Company (incorporated by reference
from Exhibit 10.8 in the Company's Registration Statement on Form
10-SB filed with the SEC on April 14, 2000).
27.1 Financial Data Schedule for the fiscal year ended December 31, 1999
(incorporated by reference from Exhibit 27.1 in the Company's
Registration Statement on Form 10-SB filed with the SEC on April 14,
2000).
27.2 Financial Data Schedule for the three months ended March 31, 2000.
35
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this Amendment No. 1 to its Registration Statement on Form 10-SB
to be signed on its behalf by the undersigned thereunto duly authorized on this
9th day of June, 2000.
UNIVERSAL BEVERAGES HOLDINGS
CORPORATION.
/s/ Jonathon Moore
------------------
Jonathon Moore, Chief Executive Officer
36
<PAGE>
INDEX TO FINANCIAL STATEMENTS
UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
MARCH 31, 1999
Page No.
Balance Sheets - March 31, 2000 (Unaudited) and
December 31, 1999 (Audited) F-1
Statements of Operations - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited) F-3
Statement of Changes in Stockholders' Equity -
For the Three Months Ended March 31, 2000
(Unaudited) F-4
Statement of Cash Flows - For the Three Months
Ended March 31, 2000 and 1999 (Unaudited) F-5
Notes to Financial Statements F-7
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998
Independent Auditors' Report F-16
Balance Sheets F-18
Statements of Income F-20
Statements of Changes in Stockholders' Deficit F-21
Statements of Cash Flows F-24
Notes to Financial Statements F-26
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
BALANCE SHEETS
MARCH 31, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
March 31, December 31,
2000 1999
--------------- ---------------
Assets
Current Assets
Cash $ 1,956,401 $ (37,885)
Accounts recievable 150,957 169,097
Inventory 420,409 358,159
Prepaid Expenses 1,434 14,839
--------------- ---------------
Total Current Assets 2,529,201 504,210
Property and equipment 1,860,934 1,849,825
Less accumulated depreciation (280,938) (250,938)
--------------- ---------------
1,579,996 1,598,887
Intangible assets net of amortization
of $76,596 and $61,502 750,025 765,119
Other assets
Deposits 5,000 6,000
--------------- ---------------
$ 4,864,222 $ 2,874,216
=============== ===============
See notes to financial statements.
F-1
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
BALANCE SHEETS
MARCH 31, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
March 31, December 31,
2000 1999
--------------- ---------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 994,458 $ 988,094
Accrued expense 108,500 145,949
Accrued interest 99,886 436,964
Deferred compansation 30,500
Current portion of notes payable 490,357 2,276,500
--------------- ---------------
Total current liabilities 1,693,201 3,878,007
Long Term Note payable 34,643 1,306,000
Shareholders' equity
Preferred stock, $0.01 par value,
20 million shares authorized,
457,100 and 8,500 shares issued
and outstanding respectively,
redeemable at company's option
(liquidation preference
$4,976,000 and $0) 4,571 85
Common stock, $0.0001 par value
30 million shares authorized,
5,462,654 and 4,363,454 shares
issued and outstanding
respectively 5,463 4,363
Additional paid in capital 6,531,208 1,052,557
Retained deficit (3,404,864) (3,366,796)
--------------- ---------------
3,136,378 (2,309,791)
--------------- ---------------
$ 4,864,222 $ 2,874,216
=============== ===============
See notes to financial statements.
F-2
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (Unaudited)
For the three months ended March 31,
2000 1999
--------------- ---------------
Revenue
Sales, net of discounts and returns $ 513,759 $ 518,692
Cost of Goods Sold (375,257) (518,925)
--------------- ---------------
Gross Profit 138,502 (233)
Expenses
General and administrative 171,691 137,369
Sales expenses 72,070 68,180
Consulting 34,405 8,675
Rent 76,069 62,081
Depreciation and amortization 45,094 10,000
--------------- ---------------
399,329 286,305
Other income/expenses
Interest expense (139,532) (132,235)
Other income 135,152
Litigation expenses (10,680) (129,263)
--------------- ---------------
(15,060) (261,498)
--------------- ---------------
Loss from continuing operations (275,887) (548,036)
Extraordinary items
Forgivness of Debt 43,204
Gain on Debt restructure 194,615 -
--------------- ---------------
Net Loss $ (38,068) $ (548,036)
=============== ===============
Earnings per share
Loss from continuing operations $ (0.06) $ (0.20)
Extraordinary items 0.05 -
--------------- ---------------
Net Loss $ (0.01) $ (0.20)
=============== ===============
See notes to financial statements.
F-3
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1998 2,608,454 $ 2,608 8,500 $ 85
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
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
($0.001 per share) 770,000 770
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment
as part of loan agreement with Mr. Dolan.
December 3, 1999 ($ 0.001 per share) 200,000 200
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
Net loss December 31, 1999
------------------------------------------------------------------------
Balance December 31, 1999 (Audited) 4,363,454 $ 4,363 8,500 $ 85
<CAPTION>
Paid in Retained
Capital Deficit TOTAL
-----------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 1998 $ 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
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
($0.001 per share) 770
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment
as part of loan agreement with Mr. Dolan.
December 3, 1999 ($ 0.001 per share) 200
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
Net loss December 31, 1999 (2,182,344) (2,182,344)
----------------------------------------------------------
Balance December 31, 1999 (Audited) $ 1,052,557 $ (3,366,796) $ (2,309,791)
</TABLE>
See notes to financial statements.
F-4
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
sub-total 4,363,454 $ 4,363 8,500 $ 85
Conversion of Preferred stock to Common stock on
January 31, 2000 42,500 43 (8,500) (85)
Dividend on Preferred stock declared 1999 1,700 2
Issuance of common stock in connection with warrants
exercised at $ 1.00 per share 343,000 343
Issuance of Preferred stock - Series B in connection
with private placement 202,500 2,025
Issuance of common stock in connection with the
Debt restructure. 712,000 712 254,600 2,546
Net Loss March 31, 2000
------------------------------------------------------------------------
Balance March 31, 2000 (Unaudited) 5,462,654 $ 5,463 457,100 $ 4,571
========================================================================
<CAPTION>
Paid in Retained
Capital Deficit TOTAL
---------------------------------------------------------
<S> <C> <C> <C>
sub-total $ 1,052,557 $ (3,366,796) $ (2,309,791)
Conversion of Preferred stock to Common stock on
January 31, 2000 42 -
Dividend on Preferred stock declared 1999 2
Issuance of common stock in connection with warrants
exercised at $ 1.00 per share 342,657 343,000
Issuance of Preferred stock - Series B in connection
with private offering 2,022,975 2,025,000
Issuance of common stock in connection with the
Debt restructure. 3,112,977 3,116,235
Net Loss March 31, 2000 (38,068) (38,068)
---------------------------------------------------------
Balance March 31, 2000 (Unaudited) $ 6,531,208 $ (3,404,864) $ 3,136,378
=========================================================
</TABLE>
See notes to financial statements.
F-5
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
2000 1999
----------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (38,068) $ (548,036)
------------------ ------------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 45,094 10,000
Gain on Debt restructure (194,615)
(Increase) decrease in prepaid expenses 13,404 (6,168)
(Increase) decrease in inventories (62,250) (22,733)
(Increase) decrease in receivables 18,140 (20,997)
(Increase) decrease in other assets 1,000 50,000
Increase (decrease) in accounts payable and accrued
expenses 47,894 329,109
------------------ ------------------
Total adjustments (131,333) 339,211
------------------ ------------------
Net cash used by operating activities (169,401) (208,825)
------------------ ------------------
Cash flows from investing activities:
Cash payments for the purchase of property (11,109) (431,742)
------------------ ------------------
Net cash provided by investing activities (11,109) (431,742)
------------------ ------------------
Cash flows from financing activities:
Proceeds from loan 100,000 565,000
Payments on Notes payable (250,000)
Forgivness of Debt (43,204)
Proceeds from issuance of common and preferred stock 2,368,000 -
------------------ ------------------
Net cash provided by financing activities 2,174,796 565,000
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 1,994,286 (75,567)
Cash and cash equivalents, beginning of period (37,885) 83,866
------------------ ------------------
Cash and cash equivalents, end of period $ 1,956,401 $ 8,299
================== ==================
</TABLE>
See notes to financial statements.
F-6
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 1 UNAUDITED FINANCIAL STATEMENTS
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-Q
and Rule 310(b) of Regulation SB. Accordingly, they do not include
all of the information and footnote disclosures normally included in
complete 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 financial statements.
In the opinion of management, the unaudited 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. The
results of operations for the three-month periods ended March 31,
2000 and 1999 are not necessarily indicative of operating results to
be expected 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 financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-7
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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. Significant
expenditures were made for improvements to the leased building.
These amounts are being amortized over the life of the lease
agreement that expires in August 2004.
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 with no allowance
for doubtful accounts. Generally accepted accounting principles
require that the allowance method be used to reflect bad debts. No
provision for doubtful accounts has been made since all receivables
were considered collectible.
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.
F-8
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Concentration of Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of balances at
financial institutions.
The Company had deposits with three financial institutions amounting
to $1,956,401 and ($37,885) at March 31, 2000 and December 31, 1999,
respectively, which was insured for up to $300,000 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 incurred.
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.
F-9
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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.
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 4,393,487
The 2,430,000 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 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.
F-10
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 3 CAPITAL STOCK TRANSACTIONS - continued
Common Stock
On January 31, 2000, the Company converted the 8,500 shares of
Preferred Stock - Series A to 42,500 shares of common stock.
On March 31, 2000, the Company in a Debt Restructure agreements (see
Note 9), 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
On March 31, 2000, 343,000 warrants were exercised at $1.00 per
share for 343,000 shares of common stock.
Preferred Stock
On March 31, 2000, the Company in a Debt Restructure agreements (see
Note 9), issued 254,600 shares of Preferred Stock (Series C, D, E
and F) in exchange for $2,610,875 notes payable.
At March 31, 2000, a total of 202,500 shares of Preferred Stock were
issued in exchange for $2,025,000 in cash.
Warrants
At March 31, 2000, warrants were as follows:
Warrants - 12/31/99 1,250,000
Warrants issued 01/01/00 - 03/31/00 1,523,000
Exercised - 3/31/00 (343,000)
---------
Total Warrants 2,430,000
=========
The remaining warrants will expire on various dates through August
2003.
F-11
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 4 INVENTORY
At March 31, 2000 and December 31, 1999, inventory consisted of the
following:
March 31, December 31,
2000 1999
---------- ----------
Finished goods $ 80,467 $ 104,969
Raw materials 270,006 167,624
Pallets 20,961 19,409
Work in Process 48,975 66,157
---------- ----------
$420,409 $ 358,159
========== ==========
NOTE 5 PROPERTY AND EQUIPMENT DEPRECIATION
Property and equipment at March 31, 2000 and December 31, 1999
consisted of the following:
March 31, December 31,
2000 1999
---------- ----------
Production equipment $1,238,773 $1,233,003
Plant improvements 595,870 595,870
Office equipment 26,291 20,952
---------- ----------
1,860,934 1,849,825
Less accumulated depreciation (280,938) (250,938)
---------- ----------
$1,579,996 $1,598,887
========== ==========
Depreciation expense for the three months ended March 31, 2000 was
$30,000.
F-12
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 6 INTANGIBLE ASSETS
At March 31, 2000 and December 31, 1999, intangible assets were:
March 31, December 31,
2000 1999
---------- ----------
Brand name and trademark $758,804 $758,804
Organization cost 2,817 2,817
Deferred loan cost 65,000 65,000
---------- ----------
826,621 826,621
Less accumulated amortization (76,596) (61,502)
---------- ----------
$750,025 $765,119
========== ==========
Amortization expense for the three months ended March 31, 2000 was
$15,094.
NOTE 7 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 8 NOTES PAYABLE
The Company has outstanding notes payable at March 31, 2000 and
December 31, 1999 as follows:
March 31, December 31,
2000 1999
---------- ----------
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
F-13
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 8 NOTES PAYABLE - continued
March 31, December 31,
2000 1999
----------- ----------
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. 50,000 500,000
Note payable to various
shareholders at a 15% interest
rate per year; due on demand;
secured by all assets of Company. 125,000 185,000
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
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
----------- ----------
525,000 3,582,500
Less current portion (490,357) (2,276,500)
----------- ----------
$ 34,643 $1,306,000
=========== ==========
F-14
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 8 NOTES PAYABLE - continued
The amount of interest accrued but unpaid as of March 31, 2000 was
$99,886. The total interest expense related to this loan was
$139,532 at March 31, 2000.
NOTE 9 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.
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 Ventura 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.
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders
Universal Beverages Holdings Corporation
and Subsidiary
Jacksonville, Florida
We have audited the accompanying balance sheets of Universal Beverages Holdings
Corporation and subsidiary, formerly known as International Bon Voyage, Inc. (a
Florida corporation) as of December 31, 1999 and December 31, 1998 and the
related statements of income, changes in stockholders' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Universal
Beverages Holdings Corporation and subsidiary as of December 31, 1999 and
December 31, 1998, and the consolidated results of its operations and its cash
flows for the years then ended in conformity in accordance with generally
accepted accounting principles.
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 15 to the financial
statements, the Company's recurring losses from operations, negative working
capital, stockholders' capital deficiency, and defaults under the Company's debt
agreement raise substantial doubt about its ability to continue as a going
concern. Management's plan concerning these matters is also discussed in Note
15.
F-16
<PAGE>
The financial statements do not include adjustments that might result from the
outcome of this uncertainty; however, if losses from operations continue without
an additional infusion of capital, it would raise substantial doubt about the
Company's ability to continue as a going concern.
SEWELL AND COMPANY, PA
/s/SEWELL AND COMPANY, PA
------------------------------
Hollywood, Florida
January 21, 2000
F-17
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
------------ ------------
Current Assets:
Cash $ (37,885) $ 83,866
Accounts receivable 169,097 95,673
Inventories 358,159 201,948
Prepaid expenses 70,838 73,827
------------ ------------
Total Current Assets 560,209 455,314
------------ ------------
Property and Equipment 1,849,825 1,394,549
Less Accumulated Depreciation (250,938) (38,438)
----------- ------------
1,598,887 1,356,111
----------- ------------
Other Assets:
Brand name and trademark 708,274 756,196
Deposits 6,000 319,601
Prepaid marketing 0 70,992
Other 846 1,691
------------ ------------
715,120 1,148,480
------------ ------------
$ 2,874,216 $ 2,959,905
============ ============
See auditors' report and notes to financial statements.
F-18
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' DEFICIT
1999 1998
------------ ------------
Current Liabilities:
Notes payable $2,276,500 $1,312,000
Accounts payable 988,094 387,218
Accrued expenses 145,949 175,722
Accrued interest 436,964 139,167
Deferred compensation 30,500 10,000
------------ ------------
Total Current Liabilities 3,878,007 2,024,107
------------ ------------
Long Term Liabilities:
Notes payable 1,306,000 1,065,000
------------ ------------
Stockholders' Deficit:
Common stock, par value $.001
30,000,000 common shares authorized
4,363,454 and 2,608,454 shares issued
and outstanding 4,363 2,608
Preferred stock, par value $.01;
20,000,000 preferred shares authorized;
85,000 shares issued and outstanding 85 85
Additional paid-in capital 1,052,557 1,052,557
Retained Deficit (3,366,796) (1,184,452)
------------ ------------
(2,309,791) (129,202)
------------ ------------
$2,874,216 $2,959,905
============ ============
See auditors' report and notes to financial statements.
F-19
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
Sales - Net of Returns $ 2,774,153 $ 2,082,923
Cost of Sales 1,514,101 1,310,033
------------ ------------
Gross Profit 1,260,052 772,890
------------ ------------
Expenses:
General and administrative expenses 1,995,324 929,711
Depreciation and amortization 272,875 20,087
Interest 460,999 121,017
Litigation expenses 713,198 803,532
------------ ------------
3,442,396 1,874,347
------------ ------------
Net Loss $ (2,182,344) $ (1,101,457)
============ ============
Earnings Per Share
Net Loss $ (0.792) $ (0.522)
============ ============
See auditors' report and notes to financial statements.
F-20
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1997 1,000,000 $ 10,000 - $ -
Ten for one reverse stock split (900,000) (9,000)
Issuance of new shares 296,939 2,969
-----------------------------------------------------------------------
396,939 $ 3,969 - $ -
Issuance of common stock in connection with the
acquisition of Universal Beverages Inc., on
March 6, 1998. 1,724,999 17,250
Adjustment in connection with the acquisition
Private issuance of shares for cash, net of
expenses, during the period ended May 11, 1998
($ 2. per share) 485,000 4,850
Effects of common stock changes in par value from
$ 0.01 to $ 0.001 (23,462)
Private issuance of shares 10% preferred stock,
convertible, net of expenses, during the period
ended October 31, 1998 ($ 10. per share) 8,500 85
Dividend preferred stock declared 1998 1,516 1
-----------------------------------------------------------------------
sub-total 2,608,454 $ 2,608 8,500 $ 85
<CAPTION>
Paid in Accumulated
Capital Deficit TOTAL
-------------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 1997 $ - $ (1,000) $ 9,000
Ten for one reverse stock split - - (9,000)
Issuance of new shares 2,969
-------------------------------------------------------------
$ - $ (1,000) $ 2,969
Issuance of common stock in connection with the
acquisition of Universal Beverages Inc., on
March 6, 1998. 174,190 (81,980) 109,460
Adjustment in connection with the acquisition (49,036) (49,036)
Private issuance of shares for cash, net of
expenses, during the period ended May 11, 1998
($ 2. per share) 819,650 824,500
Effects of common stock changes in par value from
$ 0.01 to $ 0.001 23,462 -
Private issuance of shares 10% preferred stock,
convertible, net of expenses, during the period
ended October 31, 1998 ($ 10. per share) 72,165 72,250
Dividend preferred stock declared 1998 12,126 (15) 12,112
-------------------------------------------------------------
sub-total $ 1,052,557 $ (82,995) $ 972,255
</TABLE>
See auditors' report and notes to financial statements.
F-21
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
sub-total 2,608,454 $ 2,608 8,500 $ 85
Net loss December 31, 1998
-----------------------------------------------------------------------
Balance December 31, 1998 2,608,454 $ 2,608 8,500 $ 85
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
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 ($0.001 per share) 770,000 770
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment
as part of loan agreement with Mr. Dolan.
December 3, 1999 ($ 0.001 per share) 200,000 200
-----------------------------------------------------------------------
sub-total 3,613,454 $ 3,613 8,500 $ 85
<CAPTION>
Paid in Accumulated
Capital Deficit TOTAL
-------------------------------------------------------------
<S> <C> <C> <C>
sub-total $ 1,052,557 $ (82,995) $ 972,255
Net loss December 31, 1998 (1,101,457) $ (1,101,457)
-------------------------------------------------------------
Balance December 31, 1998 $ 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
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 ($0.001 per share) 770
Issuance of shares of common stock to Robert
Dolan, based on Board of Directors assessment
as part of loan agreement with Mr. Dolan.
December 3, 1999 ($ 0.001 per share) 200
-------------------------------------------------------------
sub-total $ 1,052,557 $ (1,184,452) $ (128,197)
</TABLE>
See auditors' report and notes to financial statements.
F-22
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Amount Shares Amount
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
sub-total 3,613,454 $ 3,613 8,500 $ 85
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
Net loss December 31, 1999
-----------------------------------------------------------------------
4,363,454 $ 4,363 8,500 $ 85
=======================================================================
<CAPTION>
Paid in Accumulated
Capital Deficit TOTAL
-------------------------------------------------------------
<S> <C> <C> <C>
sub-total $ 1,052,557 $ (1,184,452) $ (128,197)
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
Net loss December 31, 1999 (2,182,344) (2,182,344)
-------------------------------------------------------------
$ 1,052,557 $ (3,366,796) $ (2,309,791)
=============================================================
</TABLE>
See auditors' report and notes to financial statements.
F-23
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Cash flow from operating activities: 1999 1998
---------- ----------
<S> <C> <C>
Net Loss ($2,182,344) ($1,101,457)
---------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 272,875 20,087
(Increase) decrease in accounts receivable (73,424) (95,673)
(Increase) decrease in inventory (156,211) (10,277)
(Increase) decrease in receivable in litigation 358,104
(Increase) decrease in prepaid expenses 2,989 (16,714)
(Increase) decrease in other assets 845 10,406
Increase (decrease) in accounts payable 600,877 122,627
Increase (decrease) in accrued liabilities (9,258) 116,018
Increase (decrease) in accrued interest 297,797 95,777
(Increase) decrease in deposits 313,601 (319,601)
(Increase) decrease in prepaid marketing 70,992 (70,992)
---------- ----------
Total adjustments 1,321,083 209,762
---------- ----------
Net cash used for operating activities (861,261) (891,695)
---------- ----------
Cash flows from investing activities:
Purchase of plant and equipment (455,276) (1,273,360)
Investment in brand and trademark (12,469) (395,489)
---------- ----------
Net cash used for investing activities (467,745) (1,668,849)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,755 800,783
Proceeds from issuance of preferred stock 0 72,250
Proceeds from notes payable 1,205,500 1,767,500
---------- ----------
Net cash provided by financing activities 1,207,255 2,640,533
---------- ----------
Net increase (decrease) in cash and cash equivalents (121,751) 79,989
Cash and cash equivalents - Beginning of year 83,866 3,877
---------- ----------
Cash and cash equivalents - End of year $ (37,885) $ 83,866
========== ==========
</TABLE>
See auditors' report and notes to financial statements.
F-24
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Supplemental Disclosures of Cash Flow Information
Shareholders' Equity Note
On March 6, 1998, the Company issued 1,724,999 share of its common stock in
connection with the acquisition of all the shares of common stock of Universal
Beverages, Inc. for $109,460. The Company acquired assets with a fair market
value of $1,093,642 and assumed liabilities of $984,182.
See auditors' report and notes to financial statements.
F-25
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Universal Beverages Holdings Corporation and subsidiary, (the Company)
formerly known as International Bon Voyage, Inc. is 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 (see Note 12),
and changed its name to Universal Beverages Holdings Corporation and
subsidiary.
Accounting 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.
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. During 1999 and 1998 significant
expenditures were made for improvements to the leased building. These
amounts are being amortized over the life of the lease agreement that
expires in August 2004.
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).
F-26
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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 with no allowance for
doubtful accounts. Generally accepted accounting principles require
that the allowance method be used to reflect bad debts. No provision
for doubtful accounts has been made since all receivables were
considered collectible.
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.
The Company had deposits with one financial institution amounting to
$(37,885) and $83,866 at December 31, 1999 and 1998, respectively,
which was insured for up to $100,000 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 incurred. Advertising
costs during 1999 and 1998 amounted to $32,319 and $1,169,
respectively.
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
F-27
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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.
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:
1999 1998
--------- ---------
Basic 2,754,704 2,088,073
The 1,250,000 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.
F-28
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 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.
Common Stock
On March 6, 1998 the Company issued 1,724,999 shares with the
acquisition of Universal Beverages, Inc.
On May 11, 1998, the Company, according to a private placement
offering, completed a sale of 485,000 shares of common stock at a price
of $2.00 per share.
Dividends for preferred stock were declared for the year ended December
31, 1998 in the amount of 1,516 shares of common stock, and $15 cash
payments. No dividends were declared in 1999.
On December 3, 1999 the Company issued 35,000 shares of common stock in
exchange for consulting services at a price of $.001 per share.
On December 3, 1999 the Company issued 770,000 shares of common stock
to employees for compensation in lieu of cash payments.
On December 3, 1999 the Company issued 200,000 shares of common stock
to Robert Dolan as part of the loan agreement at a price of $.001 per
share.
On December 3, 1999 the Company issued 750,000 shares of common stock
as an adjustment to the acquisition agreement with Universal Beverages,
Inc. at a price of $.001 per share.
Preferred Stock
On October 31, 1998 the Company, according to a private placement
offering, completed a sale of 8,500 shares of preferred stock at a
price of $10 per share. The shares of preferred stock offered were of
Series A Convertible 10% Preferred Stock.
F-29
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 CAPITAL STOCK TRANSACTIONS - continued
The total shares at December 31, 1999 and 1998 were as follows:
1999 1998
---------- ----------
Common stock - issued &
outstanding ($.001 par value) 4,363,454 2,608,454
Preferred stock - issued &
outstanding ($.01 par value) 8,500 8,500
NOTE 3 INVENTORY
At December 31, 1999 and 1998, inventory consisted of the following:
1999 1998
---------- ----------
Finished goods $ 104,969 $ 55,619
Raw materials 167,624 116,463
Pallets 19,409 12,866
Work in Process 66,157 17,000
---------- ----------
$ 358,159 $ 201,948
========== ==========
NOTE 4 PROPERTY AND EQUIPMENT DEPRECIATION
Property and equipment at December 31, 1999 and 1998 consisted of the
following:
1999 1998
---------- ----------
Production equipment $1,233,003 $ 964,881
Plant improvements 595,870 415,021
Office equipment 20,952 14,647
---------- ----------
1,849,825 1,394,549
Less accumulated depreciation (250,938) (38,438)
---------- ----------
$1,598,887 $1,356,111
========== ==========
F-30
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 4 PROPERTY AND EQUIPMENT DEPRECIATION - continued
Depreciation expense for the years ended December 31, 1999 and 1998 was
$212,500 and $19,524, respectively.
NOTE 5 INTANGIBLE ASSETS
At December 31, 1999 and 1998, intangible assets were:
1999 1998
---------- ----------
Brand name and trademark $ 758,804 $ 756,196
Organization cost 2,817 2,817
Deferred loan cost 65,000 65,000
---------- ----------
826,621 824,013
Less accumulated amortization (61,502) (1,127)
---------- ----------
$ 765,119 $ 822,886
========== ==========
Amortization expenses for the years ended December 31, 1999 and 1998
was $60,375 and $563, respectively.
NOTE 6 INCOME TAXES
The Company has a federal net operating loss carryforward for the years
ended December 31, 1999 and 1998 of $2,182,344 and $1,101,457,
respectively, of which $2,182,344 expires in 2019, and $1,101,457
expires in 2018. .
F-31
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 7 LEASES
The Company rents office space in Jacksonville, Florida for $2,417 plus
tax per month, which expires on May 31, 2000. The Company also leases
the manufacturing plant in Leesburg, Florida for $16,133 per month plus
tax. The revised lease agreement expires on August 31, 2004, and
reflects a new monthly payment amount of $18,758.96 for the year 2000
and increases in 4% increments each year thereafter. Real estate taxes
are approximately $20,000 per annum.
Rental expense for the years ended December 31, 1999 and 1998 was
$238,204 and $136,252, respectively. Future anticipated minimum annual
rental expenses for subsequent years are as follows:
Years Ended Amount
----------- ----------
2000 $ 252,610
2001 249,329
2002 259,302
2003 269,674
2004 186,974
----------
$1,217,889
----------
NOTE 8 EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with its top three
officers, commencing on May 6, 1998 and expiring on May 5, 2001.
Chairman, Chief Executive Officer $ 60,000 per annum
President, Chief Operating Officer $ 80,000 per annum
Vice President Finance $ 60,000 per annum
F-32
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 NOTES PAYABLE
The Company has outstanding notes payable at December 31, 1999 and
1998 as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note payable to Bridge Bank with an
interest rate of 15% per year; unsecured,
due on demand. $ 541,500 $ 134,000
Note payable to American Access with
an interest rate of 15% per year; unsecured,
due on demand 500,000 500,000
Note payable to Rial/Moe with an interest
rate of 15% per annum; secured by
production equipment; due on demand 500,000 500,000
Note payable to various shareholders at a
15% interest rate per year; due on demand;
secured by all assets of Company. 185,000 140,000
Note payable to Altamonte Capital with a
15% interest rate; due on demand; secured 300,000 0
Note payable to Telcoa with a 15% interest
rate per year; due on August 31, 2000 250,000 0
Note payable to American Container; due on
demand; unsecured; no interest 0 38,000
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. 1,306,000 1,065,000
----------- ----------
3,582,500 2,377,000
Less current portion (2,276,500) (1,312,000)
----------- ----------
$1,306,000 $1,065,000
----------- ----------
</TABLE>
F-33
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 9 NOTES PAYABLE - continued
The amount of interest accrued but unpaid as of December 31, 1999 and
1998 was $436,964 and $139,167, respectively.
NOTE 10 RELATED PARTY TRANSACTIONS
On July 2, 1998, the Company purchased a Promissory note dated
January 15, 1996 in the original amount of $112,086 made by Best Day
Company, fka Syfo Water Company, Inc., an unrelated third party. As
part of that transaction, Union Planters Bank assigned all of its
rights under a security agreement and guarantee securing the
indebtedness. Pursuant to the agreement Best Day Co. granted a
security interest in its inventory, accounts receivable, contract
rights, general intangibles, furniture, fixtures, and equipment. The
purchase price was $90,000. Syfo Beverage Company of Florida, Inc.
had an exclusive franchise and bottling contract for the Syfo brand
of products with Best Day Company.
The officers and directors of Syfo Beverage Company of Florida, Inc.
own 14.6% of the outstanding common stock of the Company at December
31, 1998. In conjunction with the above transaction the Company
exchanged the $660,000 unsecured debt owed by Syfo Beverage Company
of Florida, Inc. in consideration of the termination of its exclusive
franchise and bottling contract for the Syfo brand of products.
An independent appraiser has valued the Brand Name and Trademark at a
minimum of $540,000.
Sales of Syfo products amounted to approximately $2,204,514 during
1998. Note the first six months the Company was contract packing for
Syfo Beverage Company of Florida.
NOTE 11 UNCERTAINTY DUE TO YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 and 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in some systems, which use
certain dates in 1999 to represent something other than a date.
F-34
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 11 UNCERTAINTY DUE TO YEAR 2000 ISSUE - continued
The effects of the Year 2000 issue may be experienced before, on, or
after January 1, 2000, and if not addressed, the impact on operations
and financial reporting may range from minor errors in significant
systems failure, which could affect an entity's ability to conduct
normal business operations. It is not possible to be certain that all
aspects of the Year 2000 issues affecting the entity, including those
related to the efforts of customers, suppliers, or third parties will
be fully resolved.
NOTE 12 MERGER
On March 6, 1998, Universal Beverage Holdings Corporation merged with
Universal Beverage, Inc., a Florida corporation. The combination was
accounted for as a pooling of interest under which net assets of both
foundations were combined at book value and neither recognized a gain
or loss. The merger shall qualify as a tax-free reorganization under
Section 386(a)(1)(B) of the Internal Revenue Code of 1986, as amended
("The Code").
NOTE 13 LITIGATION
The Company was involved in several lawsuits at December 31, 1999.
The ultimate outcome of this litigation is unknown at this time and
attorneys for the Company could not determine liability. However,
$107,375 has been accrued by the Company for litigation and
contingencies.
NOTE 14 SUBSEQUENT EVENTS
On January 11, 2000 the Company obtained a loan for working capital
from Telcoa International, Corp. for $100,000 with an interest rate
of 10% for 90 days, renewable up to 3 times.
F-35
<PAGE>
UNIVERSAL BEVERAGES HOLDINGS CORPORATION
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 15 GOING CONCERN
These financial statements are presented on the basis that the
Company is a going concern. For the years ended December 31, 1999 and
1998, the Company showed operating losses of $2,182,344 and
$1,101,457, respectively. The accompanying financial statements
indicate that current liabilities exceed current assets by $3,317,798
and $1,568,792 for the years ended December 31, 1999 and 1998.
The Company is in default for payments on short-term loans in the
amount of $2,026,500 and $1,185,000, respectively. The accrued
interest on these loans amounted to $436,964 for 1999 and $139,167
for 1998. Currently, the Company is involved in a lawsuit relating to
this matter which includes two loans of $250,000 each. The outcome is
still pending.
Management's plan concerning this matter includes debt conversion to
common stock and/or preferred stock in the amounts of $2,847,500 at
December 31, 1999. At the date of this report, the conversion is
still in the negotiation stage. The Company also entered into a
distribution agreement with Wal-Mart. At the date of this report, a
vendor number has been assigned. Management also plans a private
offering to raise working capital (See Note 15). In addition,
Management has secured a long-term contract to provide bottled water
for FEMA (Federal Emergency Management Association) to be distributed
for any and all disasters, in which this agency is involved. The
Company has also been selected by the National Football League
Franchise, Jacksonville Jaguars, to retain the "pouring rights" to
their stadium in Jacksonville, Florida.
F-36
