U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
Amendment No. 2
General form for registration of securities of
small business issuers Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
White Diamond Spirits, Inc.
---------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
88-0401630
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(I.R.S. Employer Identification No.)
701 North Green Valley Parkway, Suite 200, Henderson, Nevada 89014
------------------------------------------------------------------
Principal Executive Offices
702 990 3050
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(Issuer's Telephone No.)
Securities to be Registered under Section 12(b) of the Act: None
Securities to be Registered under Section 12(g) of the Act: Common Stock (Title
of Stock) ------------
Total number of pages: 68
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Index to Exhibits Appears on Page 44
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<PAGE>
Item 1
======
(a) Business Development
- ------------------------
White Diamond Spirits, Inc. (the Company) was incorporated in July 1998 under
the laws of the State of Nevada for the purpose of acquiring and carrying on the
business of White Diamond Importers, LLC, a Nevada Limited Liability Company. In
April 1999, the Company acquired 100% of the Member Interest of White Diamond
Importers, LLC, in exchange for 2,400,000 shares of the Company's common stock.
White Diamond Importers LLC was formed in 1997 to be the primary importer of the
"Brilliant" line of Ultra-Premium vodka into North America manufactured by
Brilliant Spirit Ltd. of Dublin , Ireland. The Company's Officers and Directors
are the founders of both the Company and White Diamond Importers, LLC.
On April 14, 1999, the Company entered into a Marketing Agreement with Brilliant
Spirit, Ltd. The agreement has a five year term with automatic renewal for
successive five year periods so long as the Company meets minimum purchase
requirements. Pursuant to the Marketing Agreement, the Company has a license to
import, promote and sell the Brilliant Spirit products in the United States and
Canada. On April 18, 2000 the Marketing Agreement was amended to waive the
minimum purchase requirements.
In August 1999, the Company received its basic Import Permit from the U.S.
Bureau of Alcohol, Tobacco and Firearms and as a result is able to import and
distribute its products in all fifty states. Typically, the Company will enter
into a Wholesale Distributor Agreement with a company already licensed to
distribute alcoholic products in a State and then the Company will file
applications to be registered as an importer to that State. As of April 2000,
the Company has entered into Wholesale Distributor Agreements which have
resulted in purchase orders and delivery of product to California, Illinois, and
Nevada. The Company is also approved for distribution in British Columbia,
Canada.
(b) Narrative Description of Business
- -------------------------------------
Principal Products: The Company imports and supplies wholesalers with the
following Brilliant Spirit Ltd. products:
Vodka Brilliant Clear 750ml
Vodka Brilliant Clear 100ml
Vodka Brilliant Clear 50ml
Vodka Brilliant Deluxe Black Onyx 750ml
Each product is contained in perfume quality hexagonal glass bottles complete
with "stopka" (attached shot glass). Packaging of the products includes a
fascinating and romantic product history based in Russian folklore, which
describes how the product derives from a Russian recipe which is associated with
quality vodka. The Brilliant Spirit products are protected under registered
trademarks and use proprietary product formulas.
-2-
<PAGE>
The first product developed by Brilliant Spirit was Brilliant clear vodka, and
was introduced in 1995 in order to establish an identity as a premier producer
of first quality vodka. The Company also intends to import and distribute
Brilliant Deluxe, a series of six flavored vodkas, special souvenir sets, the
Sabbath drink series, Russian Diplomat premium vodka and Millennium 2000 vodka.
Brilliant vodka has also been an award winner in both design and quality by Wine
and Spirit International, London, England and Interdrink, Moscow, Russia.
The Company has not engaged in research and development and does not anticipate
doing so.
Production and Delivery:
The Brilliant Product Line is distilled at Clyde Bonding, Scotland pursuant to a
manufacturing agreement with Brilliant Spirit, Ltd. The production line is able
to produce 150,000 bottles per 24 hour period. Raw materials are readily
available from a variety of sources. Delivery will be by ocean freight in twenty
foot containers (1100cs 12 x 750ml) directly into major U.S. ports. Customs
Brokers and warehousing have been arranged. arranged. The Company's products are
currently delivered to the Port of San Francisco/Oakland. McCaffrey
International is our customs broker there who clears the product through customs
and stores the same in bond warehousing until it is delivered to Western Wine
Services, which provides our bonded warehouse facility pending shipment to
distributors. Both McCaffrey International and Western Wine Services invoice the
Company for handling and storage fees at fixed rates which are then due upon
receipt. Purchase Orders received from distributors are paid within 30 days of
shipment.
The Company has distribution agreements with the following companies:
Frank-Lin Beverage Group, San Jose, California. Frank-Lin has exclusive
distribution rights in the State of California for two years beginning September
1, 1999 and automatically renewing thereafter. The Company has the right to
terminate the agreement on 60 days notice and the payment of a termination fee
equal to 100% of the gross profit on each case sold over the previous thirty-six
month period.
Majestic Distilling Co., Inc., Baltimore, Maryland. Majestic has agreed to
represent the Company's products in the states of:
Massachusetts Maryland North Carolina Georgia Nebraska
Florida Wash. D.C. South Carolina Tennessee Missouri
Pennsylvania Arkansas Kentucky Kansas Ohio
Delaware Michigan New York Virginia New Hampshire
West Virginia Vermont Rhode Island Colorado Maine
Texas Alabama
Majestic serves as a Master Agent and with the consent of the Company appoints
distributors in the various markets. Majestic is required to maintain an
inventory of the Company's products and maintain appropriate records for state
regulatory authority. Advertising and promotional material is provided by the
Company.
-3-
<PAGE>
Marketing:
The Company's marketing strategy is to initially focus on a select group of
cities such as Los Angeles, Las Vegas and Chicago in selected states including
California, Nevada and Illinois. The Company plans to promote brand recognition
and choice in individual state by state markets by agreements with wholesale
distributors. The Company will provide point of sale promotional material to its
wholesalers and use permissible media advertising such as print ads and
billboards in selected urban markets. As of April 2000 the Company's products
have been stocked in Las Vegas bars in prominent hotels and casinos such as
Mandalay Bay, Stratosphere, Rio and Mirage.
Competition:
Competition for sales of vodka is intense and the market is mature. The Company
also competes against discount and private label brands of vodka as well as
other spirits, beer and wine. The Company is aware of at least six other premium
vodka brands, which control approximately 90% of the current market for premium
vodka. These competitors are much larger and have much greater financial
resources than the Company. Competition among the premium brands is driven
largely by advertising with brand recognition being more important than pricing.
The Company believes that its product is competitive as a "premium vodka"
because of:
It's country of origin, Scotland is famous for its distilleries;
An expensive processing method of being five column distilled and three
times filtered;
Perfume quality hexagonal glass bottles and attached crystal shot glass;
Packaging Awards;
Tasting Awards; and
Premium Pricing of $22 t0 $24 per 750ml bottle.
Regulation:
The importation and distribution of alcoholic spirits is subject to extensive
regulation by the U.S. Bureau of Alcohol, Tobacco and Firearms (BATF) as well as
by State alcoholic beverage control agencies. In order to obtain its BATF Import
Permit, the Company and its officers and directors were subject to extensive
business and personal background checks for prior criminal activity or
associations which could have disqualified the Company or its officers and
directors from obtaining the import permit. The Company must report each import
shipment to the BATF and pay a Federal Duty Deposit once product is released by
U.S. Customs. In addition, the Company must report interstate shipments of
product to a Distributor. The Company must report changes in its officers and
directors to the BATF. Compliance with the BATF and state regulation requires
minor administrative cost. Failure to comply with the BATF and state regulations
could result in the revocation or suspension of the Company's Import Permit. Any
person who violates the conditions of the Permit can be subject to a civil
penalties of not more than $10,000 per violation.
-4-
<PAGE>
Typically, the Company will enter into a Wholesale Distributor Agreement with a
company already licensed to distribute alcoholic products in a State and then
the Company will file applications to be registered as an importer to that
State. The Company has received its B.A.T.F. Import Permit as well as licensing
permits from the States of California and Nevada. State and Federal regulation
on importers such as the Company focuses on product purity, consistence,
ownership of the regulated companies and advertising.
The Company has engaged the services of Compliance International of Sonoma,
California to make the necessary reports to state regulators of all shipments to
distributors. As and when a new distributor is engaged, Compliance International
prepares and submits the applications for the state where the new distributor is
located.
Employees:
The company employs five persons on a full time basis.
Item 2 - Management Discussion & Analysis or Plan of Operation
==============================================================
This section contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not guarantees of our future
performance. They are subject to risks and uncertainties related to business
operations, some of which are beyond our control. Our actual results may differ
materially from those anticipated in these forward-looking statements.
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<PAGE>
General Information
- -------------------
The Registrant was incorporated in July, 1998 for the purpose of a
reorganization with its subsidiary which was established in November, 1997.
Prior to April, 1999 reorganization with the subsidiary, the Registrant was
inactive. The discussion below relates to the results of operations on a
consolidated basis for the year ending October 31, 1999 and through the fiscal
quarter ended January 31, 2000.
In April 1999, the Company acquired 100% of the Member Interest of White Diamond
Importers, LLC, in exchange for 2,400,000 shares of the Company's common stock.
The cost of the acquisition of $109,378 was based on the value of the net assets
acquired of White Diamond Importers LLC. The net assets acquired consisted of
cash of $1,311 accounts receivable of $6,090, inventory of $75,000 prepaid
expenses of $380, due from related parties of $27,321, capital assets of $4,311
and accounts payable and accrued liabilities of $5,035.
On April 14, 1999, the Company entered into a Marketing Agreement with Brilliant
Spirit, Ltd. The agreement has a five year term with automatic renewal for
successive five year periods so long as the Company meets minimum purchase
requirements. On April 18, 2000 the Marketing Agreement was amended to waive the
minimum purchase requirements. The Company must also pay a royalty of $0.17 per
750ml bottle sold in the U.S., within 30 days of receipt of payment for the
sale.
In August 1999, the Company received its basic Import Permit from the U.S.
Bureau of Alcohol, Tobacco and Firearms and as a result is able to import and
distribute its products in all fifty states. As of April 2000, the Company has
entered into Wholesale Distributor Agreements which have resulted in purchase
orders and delivery of product to California, Illinois, and Nevada. The Company
is also approved for distribution in British Columbia, Canada. The Company has
never been denied a license or permit from any state to which it has applied.
The Company has engaged the services of Compliance International of Sonoma,
California to make the necessary reports to state regulators of all shipments to
distributors. As and when a new distributor is engaged, Compliance International
prepares and submits the applications for the state where the new distributor is
located.
-6-
<PAGE>
Operating Losses and Going Concern Qualification.
- ------------------------------------------------
We have incurred losses since inception of our operations in 1998, and may
continue to incur substantial losses in the future. In particular, the Company
incurred losses of $195,805 for fiscal 1999 and $90,000 for fiscal 1998 and have
incurred a loss of $ 155,409 for the three month period ended January 31, 2000.
The footnotes to our financial statements for the fiscal 1999 and fiscal 1998,
include an explanatory paragraph relating to the uncertainty of the Company's
ability to continue as a going concern. Our auditors report indicates that
certain factors raise substantial doubt about our ability to continue as a going
concern. Our auditors issued a going concern opinion because we :
- - have generated no significant revenue - have a severe working capital
deficiency - have a limited operating history
- - can provide no assurance that we will be able to generate sufficient funds for
our operations for the next twelve months.
Based upon our current business planning, we believe that we will need
approximately $1,000,000 of additional funding over the next twelve months. We
have developed a business strategy, which we hope will enable us to be
profitable. There can be no assurance, however, that such revenue will
materialize or to what extent, if any, our Company will generate profitable
operations. Our operating expenses will likely fluctuate substantially from
quarter to quarter. There can be no assurance that we can achieve profitable
operations on a consistent basis.
Results of Operations
- ---------------------
Results of Operations Fiscal Year ended October 31, 1999 ("fiscal 1999")
Compared to Fiscal Year Ended October 31, 1998("fiscal 1998")
We had total revenues of $51,600 in fiscal 1999 compared with $Nil in fiscal
1998. This increase in revenue is attributable to 1999 being our first year of
operations, with these sales taking place within the last quarter of the year.
The entire amount of these revenues resulted from the importation and sale of
vodka subsequent to receiving our basic Import Permit from the U.S. Bureau of
Alcohol. During this period, we were in the start up phase of our marketing and
advertising campaign. Since our Company did not have operations during fiscal
1998, revenues from fiscal 1999 and fiscal 1998 are not directly comparable.
Cost of sales was $25,993 in fiscal 1999 or approximately 50.3% of net revenues.
This cost of goods reflects the cost of importing our product under an agreement
we have with our sole supplier "Brilliant Spirit Ltd." General and
administrative expenses were $230,180 or 446% of total revenues in fiscal 1999
versus $90,000 during fiscal 1998. These costs reflect the administrative cost
of the Company, including legal and accounting fees of $24,477, consulting fees
of $61,758, promotion and shareholder information costs of $26,113 travel and
entertainment of $31,249 and executive, administrative and other costs
associated with managing and operating the Company. These costs were incurred as
part of establishing and developing the Company's business operations during
1999 and additional costs incurred in preparing its Form 10 S-B filing. As a
result of the forgoing, the Company's net loss was $195,805 in fiscal 1999
compared with $90,000 in fiscal 1998.
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<PAGE>
Results of Operations For The Three Month Period Ended January 31, 2000 Compared
to The Three Month Period Ended January 31, 1999
- --------------------------------------------------------------------------------
We had total revenues of $Nil for the three month period ended January 31, 2000
compared with $Nil for the three month period ended January 31, 1999. No
revenues were realized during the three month period ended January 31, 2000. By
definition, within the industry, sales of spirits are finalized during the three
quarters excluding January 31, 2000. General and administrative expenses were
$155,409. These costs reflect administrative costs, including legal and
accounting fees of $1,239, consulting fees of $3,658, marketing and development
costs of $6,664 travel and entertainment of $19,820, wages of $55,323 and
executive, administrative and other costs associated with managing and operating
the Company. These costs were incurred in establishing and developing the
Company's liquor importation business during the quarter. As a result of the
forgoing, the Company's net loss was $155,409 for the three month period ended
January 31, 2000 compared with $Nil for the three month period ended January 31,
1999.
Plan of Operations
- ------------------
During the current fiscal year the Company intends to continue its plans for
entering into contracts with wholesale distributors, filing its state compliance
documents and opening new markets. As of April 2000 the Company is selling and
shipping product in California, Illinois, and Nevada. The Company is also
approved for distribution in British Columbia, Canada. The Company is presently
negotiating wholesale distributor agreements which allow the products to be
distributed into all other U.S. States. In September 1999, the Company ordered
the production of 6,000 cases of product for its anticipated inventory needs.
needs. In December 1999 the Company returned 1,800 cases and retained the
balance of 4,200 cases. These cases represent the $232,727 of inventory as of
January 31, 2000. The Company owed Brilliant Spirits, Ltd. $90,300 for their
inventory as of January 31, 2000.
Liquidity and Capital Resources
- -------------------------------
On October 31, 1999 and October 31, 1998, we had negative working capital of
($90,497) and ($Nil) respectively. Our working capital deficit increased during
fiscal 1999 due to an increase in accounts payable and due to related parties.
During fiscal 1999 and 1998, the Company financed its working capital
requirements primarily with loans from directors of the Company. Net cash used
in operating activities was ($260,177) in fiscal 1999 compared with ($90,000) in
fiscal 1998. Net cash provided by investing activities was $1,311 in fiscal 1999
compared with ($Nil) in fiscal 1998. The net cash acquired through investing
activities in 1999 was obtained through the acquisition of White Diamond
Importers LLC. Net cash provided by financing activities was $278,444 in fiscal
1999 and $90,149 in fiscal 1998 both amounts derived through amounts advanced to
the Company by its directors.
On January 31, 2000, we had negative working capital of ($245,601). Our working
capital deficit increased during the three month period ended January 31, 2000
due to an increase in accounts payable and due to related parties. During the
three month period ended January 31, 2000 the Company financed its working
capital requirements primarily with loans from directors of the Company. Net
cash provided by operating activities was $14,152 for the three month period
ended January 31, 2000 compared with $8,561 for the three month period ended
January 31, 1999. Net cash provided by investing activities was $Nil for the
three month period ended January 31, 2000 compared with $Nil for the three month
period ended January 31, 1999. . Net cash provided by financing activities was
$Nil for the three month period ended January 31, 2000 and $Nil for the three
month period ended January 31, 1999.
-8-
<PAGE>
As of January 31, 2000, our cash balances were approximately $33,879 and we had
a working capital deficiency of ($245,601) which includes indebtedness to
related parties of $458,535 and accounts payable of $117,282. Based upon our
current budget and business planning, we believe that we will need approximately
$1,000,000 of additional funding to continue our operations over the next twelve
months. For the next twelve months, working capital requirements will be
provided by cash flows from the sale of existing inventory, continuing advances
from directors of the Company, as well as net income derived from the purchase
and sale of additional inventory. We cannot assure you that we will raise
sufficient funds to remedy the working capital deficit or fund the operations.
If we are unable to raise sufficient capital to remedy the working capital
deficit and fund our continuing operations, there will be a material adverse
effect on our business and our ability to continue as a going concern.
As of January 31, 2000 we expect to spend approximately $600,000 during the next
twelve months to acquire inventory and to generate gross revenue in the amount
of $1,200,000 from the sale of this and our existing inventory. We also expect
to spend approximately $70,000 in general and administrative expenses during the
next twelve months for the maintenance of our corporate offices, as well as
$170,000 for marketing and promotion for our products as well as travel in the
amount of $130,000. During the next twelve months we expect to incur
approximately $250,000 of salary, benefits and other personnel expenses.
We have no plans for any material capital expenditures over the next twelve
months.
Effect of Inflation:
- --------------------
The Company believes that inflation does not have a material affect on its
business.
Item 3. Description of Property
===============================
The Company leases it's 300 square foot office facility in Vancouver, British
Columbia from an unaffiliated third party at $350 USD per month pursuant to a
two year lease expiring in January 2002.
-9-
<PAGE>
The Company also leases approximately 200 square feet of office space in
Henderson, Nevada from an unaffiliated third party at $1,613 per month pursuant
to a twelve month lease expiring January 31, 2001. The Company pays a per case
inventory and re-distribution charge to bonded warehouse in Napa, California
from which the Company maintains and distributes its inventory.
Item 4. Security Ownership of Certain Beneficial Owners and Management
=======================================================================
(a) Security Ownership of Certain Beneficial Owners holding five percent or
greater of the 12,400,000 shares of common stock outstanding as of April 28,
2000.
Title Name and Address Amount and Nature % of
of Class of Beneficial Owner of Beneficial Owner Class
- ------------------------------------------------------------------------------
Common Gordon Witt 900,000 7.3%
121 Algoma Rd.
Wellington, New Zealand
Bruce Adams 800,000 6.5%
22 Dear Leap Rd.
Hamilton, New Zealand
Robert Shiviji 900,000 7.3%
81-4276 Hazelwood St.
Wellington, New Zealand
Victor Hicks 800,000 6.5%
13 Simpson Rd.
Sydney, Australia
(1) All Ownership is directly held by the named individual.
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<PAGE>
(b) Security Ownership of Management
Title Name and Address Amount and Nature % of
of Class of Beneficial Owner of Beneficial Owner Class
- ------------------------------------------------------------------------------
Common Michael Marleau 1,932,250 15.6%
1505-1383 Marinaside Crescent
Vancouver, B.C.
Canada V6V 2W9
Edwin E. Savage 690,250 5.6%
1324 Sunnyside Drive
North Vancouver, B.C.
Canada V7R 1B1
Igor Petrov 648,000 5.2%
1505-1383 Marinaside Crescent
Vancouver, B.C.
Canada V6V 2W9
Greg McCartney 486,000 3.9%
2089 - 134th Street
Surrey, B.C.
Canada V4A 9N8
Lawrence Pasemko 486,000 3.9%
14084 - 28th Avenue
Surrey, B.C.
Canada V4P 2C8
All officers and Directors
as a Group (5 persons) 4,242,500 34.2%
(1) All Ownership is directly held by the named individual.
Item 5. Directors, Executive Officers, Promoters and Control Persons
====================================================================
(a) Directors and Executive Officers
- -------------------------------------
MICHAEL MARLEAU - Age 42. President, CEO and Director, 1997 to present, founding
member of White Diamond Importers LLC. Mr. Marleau has extensive experience in
the public markets in the areas of securities brokerage, tax shelter and mutual
funds. From 1989 - 1995 he lived in Russia and established import-export trading
ventures in spirits, commodities and food products. 1990 - 1993 Commercial
Director of British / Russian joint venture of Intershelf. A solid network of
contacts in the distribution of vodka has been maintained and has assisted in
the creation of White Diamond Importers LLC. Education - 1985 Coast Guard
Navigation, Georgian College, Owen, Ontario. 1987 Investment Funds, Institute of
Canada.
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<PAGE>
EDWINE. SAVAGE - Age 45. Vice-President & Director. 1997 to present founding
member of White Diamond Importers LLC. 1976 - 1996, Managing Director of
Continental Importers located in Vancouver, B.C., Canada. The company is engaged
in the import-export business dealing primarily with specialty gourmet-foods,
wines and spirits to and from Europe and North America. Direct trade experience
includes management, sales, marketing, purchasing logistics and national
distribution. Education - Salesian College, London, England. University Prep.
Boston University, Massachusetts, U.S.A.
IGOR PETROV - Age 39. Secretary, Treasurer, C.F.O. & Director. From 1983 to
1990, Mr. Petrov served as Senior Sales Manager of the Russian Foreign Trade
Association, Moscow, Russia, an industry association promoting foreign trade
with Russia. From 1990 to 1994, he was the Commercial Director of Ost - West
Corporation, Moscow, Russia, a government approved corporation which coordinated
Russian based sales and marketing staff for foreign companies doing business in
Russia who were not allowed to directly employ Russian based staff. From 1994 to
1997, Mr. Petrov was the Director of Operations for Clorinda Trading Ltd.
Limassol, Cyprus, an exporter of Russian raw materials such as wool and animal
hides and importer of food products to Russia. From 1997 to the present, Mr.
Petrov has served as C.F.O. and founding member of White Diamond Importers LLC.
Mr. Petrov graduated from Moscow University, degree in Economics.
E. GREG McCARTNEY - Age 48. Chairman of the Board of Directors. Since 1995,
owner and Director of Aspenwood Holdings Corporation, a business consulting firm
specializing in financial and public relations and venture capital. The firm
specializes in developing companies in the technology and manufacturing
industries. Mr. McCartney has over 20 years experience serving as officer and
director of both private and public companies in various manufacturing and
technology industries. Education - University of Saskatchewan, Business
Administration.
LAWRENCE J. PASEMKO - Age 62. Director. Since 1989, owner and Director of
Tynehead Capital Corporation, a management and consulting firm specializing in
assisting start-up and development stage businesses, manage and achieve their
venture capital requirements. Mr. Pasemko has over 30 years experience in
business management, marketing and administration, including extensive knowledge
of financial analysis and inventory controls. Education - University of Alberta,
Industrial Registered Accounting.
(b) Significant Employees:
- --------------------------
ROGER BAER - 52- Vice President of Sales and Marketing. Mr. Baer joined White
Diamond Importers, LLC in May 1998. From June 1996 to May 1998, he was the
General Manager-Director of Sales and Marketing for California Beverage
Publications, Los Angeles, California, a state wide trade journal for the
alcoholic and non-alcoholic beverage industry. From August 1994 to June 1996 Mr.
Baer was the Western Regional Manager for Gaetano Specialties, Ltd., Beverly
Hills, California. Mr. Baer has over twenty years experience in the marketing
and distribution of alcoholic beverages.
-12-
<PAGE>
Item 6. Executive Compensation Table
====================================
The Summary Compensation Table has been omitted becuase Michael Marleau, the
President and Chief Executive Officer has not received nor accrued any cash or
non-cash compensation during the period of August 1, 1998 to October 31, 1999.
No other officer received a salary greater than $100,000 during the past fiscal
year.
(b) Option/SAR Grants in Last Fiscal Year (Individual Grants)
- --------------------------------------------------------------
No options have been granted to date.
The Company has a Stock Option Plan, entitled the "White Diamond Spirits, Inc.,
1998 Directors and Officers. Stock Option Plan" (the "Plan"). Its purpose is to
advance the business and development of the Company and its shareholders by
affording to the employees, directors and officers of the Company the
opportunity to acquire a proprietary interest in the Company by the grant of
Options to such persons under the Plan's terms. By doing so the Company seeks to
motivate, retain and attract highly competent, motivated employees, executive
Officers and Directors to lead the Company. The effective date of the Plan is
July 22, 1998. Article 4 of the Plan provides that the Board shall exercise its
discretion in awarding Options under the Plan, not to exceed a total of
1,000,000 shares. The per share Option price for the stock subject to each
Option shall be as the Board may determine. All Options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the Options, although the Board may vote to terminate the Plan. Under
the Plan, there have been no Options granted.
(c) Aggregated Option/SAR Exercises and Option/SAR Values for last fiscal year:
None
- --------------------------------------------------------------------------------
(d) Long-term Incentive Plans -- Awards in last fiscal year: None
- ------------------------------------------------------------------
The Company has not otherwise awarded any stock options, stock appreciation
rights or other form of derivative security or common stock or cash bonuses to
its executive officers and directors.
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<PAGE>
(e) Compensation of Directors
- -------------------------------
1. Standard Arrangements: The members of the Company's Board of Directors
are reimbursed for actual expenses incurred in attending Board meetings.
2. Other Arrangements: There are no other arrangements.
(f) Employment Contracts, Termination of Employment, and Change-in-control
Arrangements
- --------------------------------------------------------------------------------
The Company's executive officers do not work pursuant to written employment
agreements and draw salaries which were determined by the Board of Directors and
are reviewed annually. Edwin Savage, Vice President is paid $3,795 per month.
Michael Marleau, the President and CEO has accrued a salary of $4,222 per month
beginning November 1999. Roger Baer, Vice President of Sales and Marketing is
paid $7,500 per month.
Item 7. Certain Relationships and Related Transactions
======================================================
The Company's Directors are the Company's Founders and Promoters. The Company's
By-Laws include a provision regarding Related Party transactions which requires
that each participant to such transaction identify all direct and indirect
interests to be derived as a result of the Company's entering into the related
transaction. A majority of the disinterested members of the board of directors
must approve any Related Party Transaction. However at the present time, the
sole director is only accountable to the shareholders for any related party
transaction he may enter into.
In April 1999, the Company acquired 100% of the Member Interest of White Diamond
Importers, LLC, in exchange for 2,400,000 shares of the Company's common stock.
White Diamond Importers LLC was formed in 1997 to be the primary importer of the
"Brilliant" line of Ultra-Premium vodka into North America manufactured by
Brilliant Spirit Ltd. of Dublin , Ireland. The Company's Officers and Directors
are the founders of both the Company and White Diamond Importers, LLC.
In March and April, 1999, the Company's directors purchased 1,842,500 at $0.05
per share for a total of $92,125 from several unaffiliated shareholders. Mr.
Marleau acquired 1,092,250 shares, Mr. Savage acquired 402,250 shares, Mr.
Petrov acquired 360,000, Mr. McCartney acquired 270,000 shares and Mr. Pasemko
acquired 270,000 shares.
-14-
<PAGE>
Item 8. Description of Securities
=================================
The authorized capital stock of Company consists of 200,000,000 shares of common
stock. No warrants to acquire common stock have been authorized. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of the Company's common stock.
The common stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The common stock
affords the holders no cumulative voting rights, and the holders of a majority
of the shares voting for the election of the directors can elect all of the
directors if they should choose to do so.
PART II
=======
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters
================================================================================
(a) Market Information
- -----------------------
The Company's stock is not listed for sale on any exchange or trading medium.
The Company intends to seek the listing of its Common Stock on the OTC
Electronic Bulletin Board upon the effectiveness of this Form 10-SB. Until such
time, there is no public market for the Company's Common Stock. In July 1998,
the Company sold 10,000,000 shares for $100,000 to twenty investors in a private
placement of securities exempt from registration pursuant to Rule 504 of
Regulation D. The Company then sold 2,400,000 shares in exchange for the shares
of White Diamond Importers, LLC. There are ten holders of restricted securities
as defined by Rule 144, which have not been held in excess of one year. The
8,157,500 shares held by non-affiliates may be traded in market transactions
without restriction. The shares held by the affiliates may only be sold pursuant
to Rule 144. The Company has not agreed to file any registration statements for
its existing shareholders.
The Company believes that its common stock will be characterized as "penny
stock" under Securities and Exchange Commission. As such, broker-dealers dealing
in the common stock will be subject to disclosure rules for transactions
involving penny stocks which require the broker-dealer among other things to (i)
determine the suitability of purchasers of the securities, and obtain the
written consent of purchasers to purchase such securities and (ii) disclose the
best (inside) bid and offer prices for such securities and the price at which
the broker-dealer last purchased or sold the securities. The additional burdens
imposed upon broker-dealers may discourage them from effecting transactions in
penny stocks, which could reduce the trading activity in any market which may
develop and reduce the liquidity of the Company's common stock.
-15-
<PAGE>
(b) Holders
- ------------
There are 140 holders of the Company's Common Stock as of April 28, 2000.
(c) Dividends
- -------------
The Company has paid no dividends to date on its Common Stock. The Company
reserves the right to declare a dividend when operations merit.
Item 2. Legal Proceedings
=========================
The Company is the Defendant is an action filed in August, 1999 by Dr. Werner F.
Greider in the Supreme Court of British Columbia in Vancouver. The action
alleges commissions and expenses due to Dr. Greider in the amount of
approximately $25,000 arising from a verbal agreement to assist the Company in
obtaining financing. The Company has denied the allegations and intends to
vigorously defend the action. The Company does not believe there would be a
materially adverse effect upon the Company even in the unlikely event of
judgment in favor of Dr. Greider.
Item 3. Changes in and Disagreements with Accountants: None
===========================================================
Item 4. Recent Sales of Unregistered Securities
==============================================
During the past three years, the Company sold securities which were not
registered under the Securities Act of 1933, as amended, as set forth below.
Date Name # of shares Consideration
issued (U.S. $)
- --------------------------------------------------------------------------------
072198 Eric Harris 350,000 3,500
072198 Krystyna Kieeberger 250,000 2,500
072198 John Hou 100,000 1,000
072198 Warren Ennis 600,000 6,000
072198 Les Ennis 300,000 3,000
072198 Barry Dunn 50,000 500
072198 Steven Hill 175,000 1,750
072198 Norman Ickert 300,000 3,000
072198 Allen Hackstep 700,000 7,000
072198 Linda Taylor 500,000 5,000
072198 Sharon Wainwright 500,000 5,000
-16-
<PAGE>
072198 Michael Paul 900,000 9,000
072198 Helen Scott 225,000 2,250
072198 Gorden Witt 900,000 9,000
072198 Bruce Adams 800,000 8,000
072198 Robert Shivji 900,000 9,000
0721/98 James Connelly 900,000 9,000
072198 Victor Hicks 800,000 8,000
072198 Gary Stewart 450,000 4,500
0721/98 Bud Losing 300,000 3,000
-------- ---------
Total 10,000,000 $100,000
041999 Michael Marleau 840,000 exchange
041999 Edwin Savage 288,000 exchange
041999 Igor Petrov 288,000 exchange
041999 Greg McCartney 216,000 exchange
041999 Larry Pasemko 216,000 exchange
041999 Ruth Marleau 216,000 exchange
041999 Victoria Creighton 96,000 exchange
041999 Alex de Haydu 96,000 exchange
041999 Ken Shaw 24,000 exchange
041999 Roger Baer 120,000 exchange
-------
Total 2,400,000
The Company was not a reporting company pursuant to the Securities Exchange Act
of 1934 nor was it a development stage company with no business plan. Thus it
was eligible to rely upon Rule 504 as a safe harbor exemption from the
registration requirements of the Securities Act of 1933. Moreover, Rule 504 was
available in that the Company sold less than$1,000,000.00 worth of securities in
the previous 12 month period and except for the Company's officers and
directors, the purchasers were unaffiliated investors. The Company relied upon
the Rule 504 safe harbor exemption for the sales of securities for cash. These
sales were entirely private transactions pursuant to which all material
information as specified in Rule 502(b)(2) was made available to the purchasers.
On all transactions depicted, no sales commission was paid by the Company to
Pacific Rim Investment Inc. pursuant to the July 21, 1998, Offering Sales Agency
Agreement. (See Exhibit 10(ii)). Pacific Rim Investment Inc. is a corporation
organized under the law of the Pacific island nation of Vanuatu. Pacific Rim has
two principals. They are Geoffrey Robert Gee and John Caldwell Malcolm.
The Company relied upon the exemption from registration set forth in section
4(2) of the Securities Act of 1933 for its sale of shares pursuant to the
exchange of shares for White Diamond Importers, LLC. The purchasers in this sale
are sophisticated investors who were provided all material information regarding
the Company. In addition, the Company placed a restrictive legend upon the
certificates issued to the purchasers denoting the securities are "restricted
securities" or held by a control person of the Company and may only be sold in
compliance with Rule 144. Thus the exemptions from registration afforded by Rule
4(2) and Rule 3(b) were available to the issuer.
-17-
<PAGE>
Item 5. Indemnification of Directors and Officers
=================================================
Article 11 of the Company's By-laws provides that every person who was or is a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or a person for whom he is the legal representative
is or was a director or officer of the corporation or is or was serving at the
request of the corporation or for its benefit as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the General Corporation Law of the State of
Nevada against all expenses, liability and loss (including attorney's fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Such right of indemnification
shall be a contract right which may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other right
which such directors, officers or representatives may have or hereafter acquire
and, without limiting the generality of such statement, they shall be entitled
to their respective rights of indemnification under any bylaw, agreement, vote
of stockholders, provision of law or otherwise, as well as their rights under
Article 11.
Nevada Revised Statutes Section 78.7502 provides for discretionary and mandatory
indemnification of officers, directors, employees and agents as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed legal
proceeding, except by or in the right of the corporation, by reason of the
fact that the person is or was a director, officer, employee or agent of
the corporation, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
the person in connection with the action, suit or proceeding if the person
acted in good faith and in a manner which was reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, against expenses, including
amounts paid in settlement and attorneys' fees actually and reasonably
incurred by the person in connection with the defense or settlement of the
action or suit if the person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the
extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines
-18-
<PAGE>
upon application that in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 1 and 2, or in defense of any
claim, issue or matter therein, the corporation shall indemnify the person
against expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense.
Nevada Revised Statutes Section 78.751 requires authorization for discretionary
indemnification; advancement of expenses and limitation on indemnification and
advancement of expenses as follows:
1. Any discretionary indemnification under NRS 78.7502 unless ordered by a
court or advanced pursuant to subsection 2, may be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
PART F/S
========
The following financial statements are filed as part of this registration
statement:
Consolidated Financial Statements of White Diamond Spirits, Inc.
Independent Auditors Report
Consolidated Balance Sheets
Consolidated Statements Of Operations
Consolidated Statements Of Changes In Stockholders' Equity
Consolidated Statements Of Cash Flows
Notes To The Consolidated Financial Statements
Financial Statements of White Diamond Importers, LLC.
Independent Auditors Report
Balance Sheets
Statements Of Operations and Deficit
Statements Of Cash Flows
Notes To The Consolidated Financial Statements
Pro-Forma Unaudited Consolidated Financial Statements
White Diamond Spirits Inc. And White Diamond Importers, LLC.
Pro-Forma Consolidated Statement Of Operations
Notes To The Pro-Forma Consolidated Financial Statements
-19-
<PAGE>
((Letterhead))
DAVIDSON & COMPANY-Chartered Accountants---A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
White Diamond Spirits Inc.
We have audited the accompanying consolidated balance sheets of White Diamond
Spirits Inc. as at October 31, 1999 and 1998 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year ended October 31, 1999 and the period from incorporation on July 20, 1998
to October 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as at
October 31, 1999 and 1998 and the results of its operations, changes in its
stockholders' equity and its cash flows for the year ended October 31, 1999 and
the period from incorporation on July 20, 1998 to October 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ "DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
December 2, 1999
((Letterhead))
A Member of Accounting Group International
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Center, Vancouver, B.C., Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
-20-
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS AT OCTOBER 31
1999 1998
- --------------------------------------------------------------------------------
ASSETS
Current
Cash $ 19,727 $ 149
Accounts receivable 69,667 -
Inventory 127,427 -
Prepaid expenses 368 -
-------------- ------------
Total current assets 217,189 149
Capital assets (Note 4) 4,070 -
-------------- ------------
Total assets $ 221,259 $ 149
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable $ 29,093 $ -
Due to related parties (Note 5) 278,593 149
-------------- ------------
Total current liabilities 307,686 149
-------------- ------------
Stockholders' equity (Note 6)
Capital stock
Authorized
200,000,000
common shares
with a par
value of $0.001
Issued and outstanding
October 31, 1999 - 12,400,000
common shares with a par
value of $0.001
October 31, 1998 - 10,000,000
common shares with a par
value of $0.001 12,400 10,000
Additional paid-in capital 186,978 80,000
Deficit (285,805) (90,000)
-------------- ------------
Total stockholders' equity (86,427) -
-------------- ------------
Total liabilities and stockholders' equity $ 221,259 $ 149
============== ============
Contingency (Note 11)
Commitments (Note 12)
The accompanying notes are an integral part of these
consolidated financial statements.
-21-
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
Period From
Incorporation
on July 20,
Year Ended 1998 to
October 31, October 31,
1999 1998
- --------------------------------------------------------------------------------
SALES $ 51,600 $ -
COST OF SALES (25,993) -
-------------- -----------
25,607 -
-------------- -----------
EXPENSES
Accounting 20,502 -
Amortization 241 -
Bank charges and interest 2,685 -
Consulting 61,758 90,000
Duties and taxes 18,977 -
Filing fees 16,713 -
Freight 8,005 -
Legal 3,975 -
Office 23,582 -
Promotion and shareholder
information 26,113 -
Samples 9,244 -
Telephone and utilities 6,161 -
Transfer agent 975 -
Travel and entertainment 31,249 -
-------------- -----------
230,180 90,000
-------------- -----------
Loss before other item (204,573) (90,000)
OTHER ITEM
Foreign exchange gain 8,768 -
-------------- -----------
Net loss for the period $ (195,805) $ (90,000)
============== ===========
Basic and diluted loss
per share $ (0.02) $ (0.01)
============== ===========
Weighted average number
of common shares
outstanding 11,308,493 10,000,000
============== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
-22-
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Common Stock
-------------------------------- Additional
Number of Paid-in
Shares Amount Capital Deficit Total
--------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, July 20, 1998 - $ - $ - $ - $ -
Issued for cash (net of share
issuance costs) 10,000,000 10,000 80,000 - 90,000
Net loss for the period - - - (90,000) (90,000)
--------------- -------------- -------------- --------------- ---------------
Balance, October 31, 1998 10,000,000 10,000 80,000 (90,000) -
Shares issued for acquisition of subsidiary 2,400,000 2,400 106,978 - 109,378
Net loss for the year - - - (195,805) (195,805)
--------------- -------------- -------------- --------------- ---------------
Balance, October 31, 1999 12,400,000 $ 12,400 $ 186,978 $ (285,805) $ (86,427)
=============== ============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-23-
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period From
Incorporation
on July 20,
Year Ended 1998 to
October 31, October 31,
1999 1998
--------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss for the period $ (195,805) $ (90,000)
Item not involving an outlay of cash:
Amortization 241 -
Net changes in non-cash working capital items
Increase in accounts receivable (63,577) -
Increase in inventory (52,427) -
Decrease in prepaid expenses 12 -
Increase in accounts payable 24,058 -
Decrease in due from related parties 27,321 -
--------------- -----------------
Net cash used in operating activities (260,177) (90,000)
--------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in due to related parties 278,444 149
Share issuance costs - (10,000)
Issuance of capital stock - 100,000
--------------- -----------------
Net cash provided by financing activities 278,444 90,149
--------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash from acquisition of subsidiary 1,311 -
--------------- -----------------
Net cash provided by investing activities 1,311 -
--------------- -----------------
Change in cash position for the period 19,578 149
Cash, beginning of period 149 -
--------------- -----------------
Cash, end of period $ 19,727 $ 149
=============== =================
Supplemental disclosure with respect to cash flows
Cash paid during the period for interest $ - $ -
Cash paid during the period for income taxes - -
Non-cash investing activities
Issuance of common stock to acquire subsidiary 109,378 -
=============== =================
</TABLE>
There were no non-cash transactions for the period ended October 31, 1998.
The accompanying notes are an integral part of these
consolidated financial statements.
-24-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated on July 20, 1998 under the laws of the
State of Nevada and is in the business of importing spirits and alcohol
for sale and distribution in North America. The Company is the primary
importer of alcohol for a company called Brilliant Spirits Ltd.,
located in Dublin, Ireland. The Company has offices located in
Henderson, Nevada and Vancouver, Canada, and stores its inventory in a
warehouse located in California.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. It is management's plan to seek additional capital through
short-term loans from directors and future equity financings.
1999 1998
-------------- ------------
Deficit $ (285,805) $ (90,000)
Working capital deficiency (90,497) -
============== ============
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Principles of consolidation
---------------------------
These financial statements have been prepared on a consolidated basis and
include the operations of the Company and its wholly-owned subsidiary,
White Diamond Importers, LLC ("Importers") (Note 3). All inter-company
transactions have been eliminated upon consolidation.
Cash and cash equivalents
-------------------------
Cash and cash equivalents include highly liquid investments with a maturity
of three months or less.
Inventory
---------
Inventory is valued at the lower of cost (using the first-in, first-out
method of accounting) and net realizable value.
Capital assets
--------------
Capital assets are recorded at cost and amortization is provided for on the
following basis:
Computers 30% declining balance
-25-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Foreign currency translation
----------------------------
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non-monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Revenues
and expenses are translated at the rates of exchange prevailing on the
dates such items are recognized in earnings. Gains and losses from
restatement of foreign currency monetary and non-monetary assets and
liabilities are included in income. The Company's functional currency is
the United States dollar.
Accounting for derivative instruments and hedging activities
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, FASB issued SFAS 137 to
defer the effective date of SFAS No. 133 to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company does not anticipate
that the adoption of the statement will have a significant impact on its
financial statements.
Disclosure about segments of an enterprise and related information
------------------------------------------------------------------
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," ("SFAS 131") requires
the use of the "management approach" model for segment reporting. The
management approach model is based on the way a company's management
organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company. Currently, SFAS 131 has
no effect on the Company's financial statements, as substantially all of
the Company's operations are conducted in the United States.
Reporting on costs of start-up activities
-----------------------------------------
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company has adopted the requirements of SOP 98-5 during the
current period.
Stock-based compensation
------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock. Because the Company does not have any outstanding stock
options issued, there is no impact on its financial statements.
-26-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Comprehensive income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total stockholders' equity as at
October 31, 1999.
Earnings (loss) per share
-------------------------
Earnings (loss) per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Under SFAS 128, basic and diluted earnings (loss) per share are to be
presented. Basic earnings (loss) per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares.
Revenue recognition
-------------------
Revenue from operations is recognized when the product is shipped, which is
when the title transfers to the buyer, and collection of revenue is
reasonably assured.
Income taxes
------------
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) result from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
3. BUSINESS COMBINATION
Pursuant to an acquisition agreement, effective April 15, 1999, the Company
acquired a 100% ownership interest in White Diamond Importers, LLC
("Importers") with the issuance of 2,400,000 common shares with a par value
of $0.001 per share.
The cost of an acquisition should be based on the fair value of the
consideration given, except where the fair value of the consideration given
is not clearly evident. In such a case, the fair value of the net assets
acquired is used.
The acquisition of Importers has been accounted for using the purchase
method and accordingly, these financial statements include the results of
operations of Importers from the date of acquisition.
On April 15, 1999, the company's shares were not listed on any market
making it impossible to estimate the actual market value of the 2,400,000
common shares. Therefore, the cost of the acquisition, $109,378 has been
determined by the fair value of Importer's net assets.
-27-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
3. BUSINESS COMBINATION (cont'd.....)
The total purchase price of $109,378 was allocated as follows:
Cash $ 1,311
Accounts receivable 6,090
Inventory 75,000
Prepaid expenses 380
Due from related parties 27,321
Capital assets 4,311
Accounts payable and accrued liabilities (5,035)
-------------
$ 109,378
4. CAPITAL ASSETS
Net Book Value
---------------------------
Accumulated
Cost Amortization 1999 1998
---------- ------------- ---------- ------------
Computers $ 4,311 $ 241 $ 4,070 $ -
========= =========== ========== ============
5. DUE TO RELATED PARTIES
Amounts due to related parties are non-interest bearing with no stated
terms of repayment.
6. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company consists of 200,000,000 shares
of common stock. No warrants to acquire common stock have been authorized.
There are no outstanding obligations of the Company to repurchase, redeem
or otherwise acquire any shares of the Company's common stock.
The common stock carry no pre-emptive rights, are not convertible,
redeemable, assessable or entitled to the benefits of any sinking fund. The
common stock affords the holders no cumulative voting rights and the
holders of a majority of the shares voting for election of the directors
can elect all of the directors if they should choose to do so.
On July 21, 1998, the Company issued 10,000,000 shares of common stock
pursuant to a private placement at a price of $0.01 per share, for total
proceeds of $100,000. These shares were sold pursuant to Rule 504 of
Regulation D. In connection with the above private placement, the Company
paid a $10,000 commission fee to Pacific Rim Investment, Inc., pursuant to
an Offering Sales Agency Agreement and has no further obligations to
Pacific Rim Investment, Inc.
On April 15, 1999, the Company issued 2,400,000 shares of common stock at a
deemed value of $109,378 for the acquisition of its subsidiary.
The Company's Board of Directors approved the reservation of 1,000,000
shares for issuance pursuant to the Company's Stock Option Plan, effective
July 22, 1998. The option price will be $1.00 per share or such other price
as the Board may determine. All options must be granted within 10 years
from the effective date of the plan. At October 31, 1999, no stock options
have been granted under the plan.
-28-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
7. UNCERTAINTY DUE TO THE 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 incorrectly
recognize the year 2000 as some other date, resulting in errors. 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 to 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 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
8. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, and due to related parties. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted.
9. RELATED PARTY TRANSACTIONS
The following transactions were entered into with related parties:
a) The Company acquired a wholly-owned subsidiary, White Diamond
Importers, LLC of which certain members of this company are also
directors of the Company (Note 3).
10. DEFERRED INCOME TAXES
The Company's total deferred tax asset is as follows:
1999 1998
---------------- ----------------
Net operating loss carryforward $ 91,458 $ 28,800
Valuation allowance (91,458) (28,800)
---------------- ----------------
$ - $ -
================ ================
The Company has a net operating loss carryforward of approximately $324,509
which expires between the years 2018 and 2019. The Company provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding realizability.
11. CONTINGENCY
A lawsuit has been commenced against the Company in which the plaintiff is
seeking commissions and expense reimbursements allegedly owing. Management
has denied the allegations and has commenced a counter claim against the
plaintiff. The outcome of these claims cannot be determined at this time,
therefore any amounts relating to the claims will be reflected in the year
of settlement.
-29-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
12. COMMITMENTS
a) The Company entered into a marketing agreement with Brilliant Spirits
Ltd. ("Brilliant"), whereby the Company was granted the right to sell
and promote the sale of some of Brilliant's products in the United
States and Canada (except in the State of New Jersey). The Company has
full authority to act on Brilliant's behalf, in appointing
distributors and brokers, registering products and posting prices as
may be required by law. The agreement has a five-year term with
automatic renewal for successive five-year periods, as long as the
Company meets its minimum purchase requirements. The minimum purchase
requirements are as follows:
i) 60,000 cases of Brilliant's products, including mixed sizes, in
the first 18 months;
ii) 90,000 cases of Brilliant's products, including mixed sizes, for
the next 12 months thereafter; and
iii) 300,000 cases of Brilliant's products, including mixed sizes, for
the next 30 months thereafter.
In addition, the Company is obligated to pay a royalty fee of US$0.17
for each unit of 750 ml "Brilliant" vodka sold in the United States
only, which is payable within 30 days of receiving payment.
b) The Company leases an office in Vancouver, British Columbia for $350
per month pursuant to a two-year lease, expiring on January 31, 2002.
c) The Company leases an office in Henderson, Nevada for $1,613 per
month pursuant to a twelve-month lease, expiring on January 31, 2001.
-30-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1998
-31-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of
White Diamond Importers, LLC
We have audited the accompanying balance sheet of White Diamond Importers, LLC
as at October 31, 1998 and the related statements of operations and deficit and
cash flows for the period from date of organization on November 11, 1997 to
October 31, 1998. 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 an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as at October 31,
1998 and the results of its operations and its cash flows for the period from
date of organization on November 11, 1997 to October 31, 1998, in accordance
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, unless the Company attains future profitable operations and/or
obtains additional funding, there is substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada /s/ Chartered Accountants
-------------------------
December 2, 1999
-32-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
BALANCE SHEET
(Expressed in U.S. Dollars)
AS AT OCTOBER 31, 1998
ASSETS
Current
Cash $ 992
Accounts receivable 4,350
---------------
5,342
Due from related party 149
Capital assets (Note 3) 2,088
---------------
$ 7,579
===============
LIABILITIES AND MEMBERS' EQUITY
Current
Accounts payable $ 2,000
Members' equity
Members' capital (Note 4) 310,570
Deficit (304,991)
---------------
5,579
$ 7,579
===============
The accompanying notes are an integral part of these financial statements.
-33-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
STATEMENT OF OPERATIONS AND DEFICIT
(Expressed in U.S. Dollars)
PERIOD FROM DATE OF ORGANIZATION ON NOVEMBER 11, 1997 TO OCTOBER 31, 1998
EXPENSES
Accounting and legal 10,791
Amortization 369
Bank charges 529
Consulting 75,000
Office 10,130
Promotion 37,278
Rent 26,730
Telephone 21,416
Travel 128,929
--------------
(311,172)
OTHER ITEM
Foreign exchange gain 6,181
--------------
Loss for the period (304,991)
Deficit, beginning of period -
--------------
Deficit, end of period $ (304,991)
==============
The accompanying notes are an integral part of these financial statements.
-34-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
STATEMENT OF CASH FLOWS
(Expressed in U.S. Dollars)
PERIOD FROM DATE OF ORGANIZATION ON NOVEMBER 11, 1997 TO OCTOBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (304,991)
Item not affecting cash
Amortization 369
Changes in non-cash working capital items:
Increase in accounts receivable (4,350)
Increase in accounts payable 2,000
------------
Net cash used in operating activities (306,972)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Due from related party (149)
Purchase of capital assets (2,457)
------------
Net cash used in investing activities (2,606)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions from members 514,126
Drawings by members (203,556)
------------
Net cash provided by financing activities 310,570
------------
Change in cash position for the period 992
Cash, beginning of period -
------------
Cash, end of period $ 992
============
Supplemental disclosure with respect to cash flows
Cash paid during the period for interest $ -
Cash paid during the period for income taxes -
============
There were no non-cash transactions for the periods ended October 31, 1999 and
1998.
The accompanying notes are an integral part of these financial statements.
-35-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1998
1. ORGANIZATION OF THE COMPANY
The Company was organized on November 11, 1997 under the Laws of the
State of Nevada and is in the business of importing spirits and alcohol
for sale and distribution in North America. The Company has offices
located in Henderson, Nevada and Vancouver, Canada.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. It is management's plan to seek additional capital through
short-term loans from directors and equity financings.
1998
----------------------------------------
Deficit $ (304,991)
Working capital 3,342
========================================
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Foreign currency translation
----------------------------
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non-monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Revenues
and expenses are translated at the rates of exchange prevailing on the
dates such items are recognized in earnings. Gains and losses from
restatement of foreign currency monetary and non-monetary assets and
liabilities are included in income. The Company's functional currency is
the United States dollar.
Cash and equivalents
--------------------
Cash and equivalents include highly liquid investments with a maturity of
three months or less.
Capital assets and amortization
-------------------------------
Capital assets, being computer equipment, are recorded at cost less
accumulated amortization. The Company provides for amortization using the
declining balance method at a rate of 30% per annum.
Comprehensive income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total members' equity as of October
31, 1998.
-36-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1998
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Disclosure about segments of an enterprise and related information
-------------------------------------------------------------------
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," ("SFAS 131") requires
the use of the "management approach" model for segment reporting. The
management approach model is based on the way a company's management
organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company. Currently, SFAS 131 has
no effect on the Company's financial statements, as substantially all of
the Company's operations are located in the United States.
Accounting for derivative instruments and hedging activities
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Reporting on costs of start-up activities
-----------------------------------------
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company has adopted the requirements of SOP 98-5 during the
current period.
3. CAPITAL ASSETS
====================== =============== ==============================
Accumulated Net
Cost Amortization Book Value
------------ -------------- ----------------
Computer equipment $ 2,457 $ 369 $ 2,088
============ ============== ==============
4. MEMBERS' CAPITAL
Members' capital, opening balance $ -
Contributions 514,126
Drawings (203,556)
-----------------
Members' capital, closing balance $ 310,570
=================
-37-
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1998
5. RELATED PARTY TRANSACTIONS
The Company paid consulting fees in the amount of $30,000 to a member of
the Company.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
due to related party and accounts payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted.
7. UNCERTAINTY DUE TO THE 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 incorrectly
recognize the year 2000 as some other date, resulting in errors. 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 to 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 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
-38-
<PAGE>
((Letterhead))
DAVIDSON & COMPANY-Chartered Accountants---A Partnership of Incorporated
Professionals
WHITE DIAMOND SPIRITS INC.
AND
WHITE DIAMOND IMPORTERS, LLC
PRO-FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro-forma consolidated statements of operations for the
year ended October 31, 1999 and the period from incorporation on July 20, 1998
to October 31, 1998 (the "pro-forma financial statements") of White Diamond
Spirits Inc. (the "Company") give effect to the following transaction as of the
beginning of the periods indicated for purposes of the statement of operations:
i) The acquisition by the Company of 100% ownership of White Diamond
Importers, LLC on April 15, 1999.
Pro-forma adjustments to the statements of operations reflect adjustments only
for dates prior to the date the transaction was consummated.
The pro-forma financial statements have been prepared by the Company based upon
the financial statements of the Company and White Diamond Importers, LLC. The
pro-forma financial statements give effect to the acquisition under the purchase
method of accounting and to certain assumptions and adjustments described more
fully in the accompanying notes. These pro-forma financial statements may not be
indicative of the results that actually would have occurred if the transactions
had been completed on the dates indicated or of the results which may be
obtained in the future. The pro-forma financial statements should be read in
conjunction with the financial statements and notes thereto of the Company and
White Diamond Importers, LLC included elsewhere in this Form 10-SB.
((Letterhead))
A Member of Accounting Group International
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Center, Vancouver, B.C., Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
-39-
<PAGE>
WHITE DIAMOND SPIRITS INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
White
White Diamond
Diamond Importers,
Spirits Inc. LLC
Year Ended Year Ended Pro-forma
October 31, October 31, Adjustments Pro-forma
1999 1999 (Note 2) Consolidated
-------------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
SALES $ 51,600 $ 38,904 $ - $ 90,504
COST OF GOODS SOLD (25,993) (21,238) - (47,231)
-------------- -------------- ---------- --------------
25,607 17,666 - 43,273
-------------- -------------- ---------- --------------
OPERATING EXPENSES
Accounting 20,000 2,012 - 22,012
Amortization - 1,107 - 1,107
Bank charges and interest 1,929 2,176 - 4,105
Commissions - 1,174 - 1,174
Consulting fees 3,000 143,625 - 146,625
Duties 18,977 - - 18,977
Filing and printing 16,713 3,776 - 20,489
Freight 115 15,869 - 15,984
Legal 2,754 1,221 - 3,975
Office 590 45,088 - 45,678
Promotion and shareholder information 19,705 6,223 - 25,928
Rent - 4,412 - 4,412
Samples 9,244 - - 9,244
Telephone and utilities - 16,217 - 16,217
Transfer agent 975 - - 975
Travel and entertainment 7,673 60,127 - 67,800
-------------- -------------- ---------- --------------
101,675 303,027 - 404,702
-------------- -------------- ---------- --------------
OTHER ITEM
Foreign exchange gain - 8,467 - 8,467
-------------- -------------- ---------- --------------
- 8,467 - 8,467
-------------- -------------- ---------- --------------
Loss for the period $ (76,068) $ (276,894) $ - $ (352,962)
============== ============== ========== ==============
Basic and diluted loss per share $ (0.01) $ n/a $ n/a $ (0.03)
============== ============== ========== ==============
Weighted average number of shares outstanding 11,308,493 n/a 1,091,507 12,400,000
============== ============== ========== ==============
</TABLE>
See notes to the pro-forma consolidated financial statements.
-40-
<PAGE>
WHITE DIAMOND SPIRITS INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
White White
Diamond Diamond
Spirits Inc. Importers,
Period From LLC
Incorporation Period From
on July 20, July 20,
1998 to 1998 to Pro-forma
October 31, October 31, Adjustments Pro-forma
1998 1998 (Note 2) Consolidated
-------------- -------------- ---------- --------------
OPERATING EXPENSES
<S> <C> <C> <C> <C>
Accounting $ - $ 1,420 $ - $ 1,420
Amortization - 369 - 369
Bank charges - 291 - 291
Consulting fees 90,000 75,000 - 165,000
Legal - 9,371 - 9,371
Office - 10,130 - 10,130
Promotion and shareholder information - 37,278 - 37,278
Rent - 26,730 - 26,730
Telephone and utilities - 21,416 - 21,416
Travel and entertainment - 128,929 - 128,929
-------------- -------------- ------- --------------
90,000 310,934 - 400,934
OTHER ITEM
Foreign exchange loss - 9,201 - 9,201
-------------- -------------- ------- --------------
Loss for the period $ (90,000) $ (320,135) $ - $ (410,135)
============== ============== ========== ==============
Basic and diluted loss per share $ (0.01) $ n/a $ n/a $ (0.03)
============== ============== ========== ==============
Weighted average number of shares outstanding 10,000,000 n/a 2,400,000 12,400,000
============== ============== ========== ==============
</TABLE>
See notes to the pro-forma consolidated financial statements.
-41-
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 1999
1. BASIS OF PRESENTATION
Business combination of White Diamond Spirits Inc. ("Spirits") and White
Diamond Importers, LLC ("Importers")
Effective April 15, 1999, a business combination occurred between Spirits
and Importers, whereby Spirits legally acquired Importers as a wholly-owned
subsidiary. The terms of the combination provided that the Company acquired
all of the assets and liabilities of Importers by the issuance of 2,400,000
common shares at a deemed value of $109,378.
2. PRO-FORMA FINANCIAL INFORMATION
Management has prepared and provided certain pro-forma interim consolidated
financial information to assist readers to understand the nature and effect
of the combination on the audited financial statements of Spirits and
Importers.
The pro-forma financial information is unaudited and has been prepared from
the audited financial statements of Spirits for the year ended October 31,
1999 and the audited financial statements of unaudited financial statements
of Importers for the year ended October 31, 1999 and the audited financial
statements of Spirits for the period from incorporation on July 20, 1998 to
October 31, 1998 and Importers for the period from July 20, 1998 to October
31, 1998.
Pro-forma statements of operations and loss per share:
------------------------------------------------------
The pro-forma statements of operations reflect a simple combination of the
results of operations of Spirits and Importers for the year ended October
31, 1999 and the period from July 20, 1998 to October 31, 1998.
a) The impact of the calculation on pro-forma basic loss per share is
based on the number of shares that would have been outstanding for the
period had the business combination taken place at the beginning of
the fiscal period.
The calculation of pro-forma weighted average shares outstanding at
October 31, 1999 and October 31, 1998 are as follows:
Weighted average shares outstanding
as at October 31, 1998 10,000,000
Shares issued for acquisition of Importers 2,400,000
----------
12,400,000
==========
Weighted average shares outstanding
as at October 31, 1999 11,308,493
Shares issued for acquisition of Importers 1,091,507
----------
12,400,000
==========
-42-
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHITE DIAMOND SPIRITS, INC.
(Company)
By: /s/MICHAEL MARLEAU
------------------
Michael Marleau, President, Chief Executive Officer, Director
April 28, 2000
/s/ EDWIN SAVAGE
----------------
Edwin Savage, Director
April 28, 2000
/s/ IGOR PETROV
---------------
Igor Petrov, Secretary, Treasurer (Chief Financial Officer), Director
April 28, 2000
/s/ GREG McCARTNEY
------------------
Greg McCartney, Director
April 28, 2000
/s/ LARRY PASEMKO
------------------
Larry Pasemko, Director
April 28, 2000
-43-
<PAGE>
PART III
========
Item 1. Index to Exhibits
- -------------------------
3. (i) Articles of Incorporation (Previously Filed)
(ii) By-laws (Previously Filed)
10.1 Share Purchase Agreement dated April 19, 1999 (Previously Filed)
10.2 Marketing Agreement (Previously Filed)
10.3 Amendment to Marketing Agreement dated April 18, 2000
10.4 Agreement with Frank-Lin Beverage Group
10.5 Memorandum Agreement with Majestic Distilling Co., Inc.
27 Financial Data Schedule
99.1 Importer's Basic Permit #NV-I-874
99.2 California Certificate of Qualification to transact intrastate business
99.3 California State Board of Equalization Seller's permit
-44-
Exhibit 10.3
((Letterhead))
BRILLIANT
SPIRIT ((LOGO))
LTD
56 St. Margarets Ave.
Dublin 5, Ireland Internet: www.brilliant-spirit.com
Registered Number 235507 E mail: [email protected]
With reference to the "Marketing Agreement" executed and signed between
BRILLIANT SPIRIT LTD., and WHITE DIAMOND SPIRITS, INC. the following Amendments
are hereby made effective.
Given the complexity of entering the U.S.A. spirits importing market we are
aware of, and understand, the additional time factors involved in the completion
of Federal and State by State compliance. Therefore Brilliant Spirit Ltd. remain
totally supportive of the efforts of White Diamond Spirits, Inc. to establish a
gradual entry into the market marketplace in accordance with regulatory
guidelines.
Brilliant Spirit Ltd. will not consider any "Default" to the said Agreement
based on the aforementioned Amendments. All other Terms and Conditions remain in
good standing.
BRILLIANT SPIRIT LTD.
((Company Stamp))
/s/ Igor Trakhtenberg
Igor Trakhtenberg
Managing Director
-45-
Exhibit 10.4
Letter of Understanding
Distribution Agreement
This letter of understanding is between White Diamond Importers, with principal
executive offices located at 19360 Rinaldi Street, Northridge, California 91326
and Frank-Lin Beverage Group, a California Corporation with principal executive
offices located at 675 North King Road, San Jose, California.
It is agreed that Frank-Lin will distribute Brilliant Vodka (Exhibit A)
exclusively in the entire state of California, as agreed to in Exhibit B of the
attached agreement.
It is agreed that this understanding shall remain in full force for two years,
beginning September 1, 1999 and ending August 31, 2001, and thereafter shall
automatically renew for successive one year terms in accordance with either of
the following provisions:
A. After this initial two-year period, sales objectives will be mutually set
by both partners in order to set goals for the extension and renewal of
this understanding.
B. Should no new goals be set, this agreement will renew and remain evergreen,
using the previous year's sales as a benchmark for the next year's goals,
barring any special sale or close out of vintages which would significantly
impact sales numbers.
It is agreed that should White Diamond Importers want to terminate its
understanding with Frank-Lin, they may do so with a 60-day notice. If so, White
Diamond Importers must pay Frank-Lin 100% of the gross profit for each case of
product sold for the previous thirty-six (36) months. The thirty-six (36) month
termination agreement is in effect immediately. 100% gross profit defined as
follows: Product cost to San Jose, minus average sell price $46.00 - $12.00
gross profit per case support.
Supplier shall provide 100% sampling on a limited basis as needed for the first
90 days, followed by a 50/50 share between supplier and distributor for the
remainder of this agreement.
It is agreed that if White Diamond Importers should terminate this
understanding, they will pickup all merchandise in the Frank-Lin Warehouse, and
pay an additional $1.00 handling charge per case.
In the event that there is a dispute regarding our business relationship
and understanding, it is agreed that the dispute shall be resolved by binding
arbitration in San Jose, California. It is further agreed that the arbitrator
shall not be a lawyer, and that the disputants shall not be represented by
lawyers, but by themselves.
-46-
<PAGE>
Letter of Understanding Page 2
We are fully aware of the provision of section 1282.4 of the California
Code of Civil Procedures as shown below.
1282.4 (Right in counsel)
A party to the arbitration has the right to be represented by an attorney
at any proceeding or hearing in arbitration under this title. A waiver of this
right may be revoked; but if a jury revokes such waiver, the other party is
entitled to a reasonable continuance for the purpose of procuring an attorney.
Added Stats 1961 ch 451 2.
We hereby, with full comprehension of our rights, agree to waive our rights
to be represented by an attorney at any binding arbitration and shall not revoke
such waiver.
IN WITNESS WHEREOF, the parties to this agreement have executed it as of
the date first above written.
FOR SUPPLIER: White Diamond Importers
By /s/ Roger Baer Date 9/9/99
-------------- ------
Vice President Sales and Marketing
FOR DISTRIBUTOR: Frank-Lin Beverage Group
By _____________ Date _______
-47-
<PAGE>
Exhibit A: Items To Be Carried
White Diamond Importers Products
Brilliant Vodka 12/750ml
Brilliant Vodka 48/100ml
Brilliant Vodka 120/50ml
Exhibit B: Location To Be Sold Exclusively
The Entire State of California
-48-
Exhibit 10.5
(LOGO)
WHITE DIAMOND
SPIRITS, INC.
MEMORANDUM
DATE: January 4, 2000
TO: Majestic Distilling Co., Inc.
Mr. Lee Schuman, President
Mr. Harold "Corky" Graff, Vice President
Sales & Marketing
FROM: Roger Baer, C.O.O. Vice President Sales & Marketing
RE: Formal Letter of Agreement for the Appointment of Majestic Distilling Co.,
Inc. as Master Sales Agent/Broker To Represent White Diamond Spirits, Inc.
in Specific Designated USA States
This agreement shall be in effect beginning January 1, 2000 through December 31,
2003. There will be as mutually agreed to a 4th and 5th year option.
The following markets which Majestic Distilling Company has agreed to represent
White Diamond Spirits in, are as follows:
Massachusetts Maryland North Caroline Georgia
Nebraska Florida D.C. South Carolina
Tennessee Missouri Pennsylvania Arkansas
Kentucky Kansas Ohio Delaware
Michigan New York Virginia New Hampshire
W. Virginia Vermont Rhode Island Colorado
Maine Texas Alabama
Additional US markets may be considered in the future. Any and all international
markets will be discussed and handled accordingly.
At this point in time, an inventory of Brilliant Vodka 750 ML, 100 ML and
50 ML's will be maintained at
19360 Rinaldi Street
PMB #348
Northridge, CA 91326
TEL:(800)971-8003
FAX:(818)368-1956
-49-
<PAGE>
January 4, 2000
Page 2
Majestic Distilling Co. no storage fee to WDS.
This inventory will be tax and duty paid and solely owned by WDS. This inventory
will be used to sell and service specific designated markets by WDS and
Majestic. Majestic will be responsbile for the safekeeping of WDS inventory on
their premises.
Certain designated markets by WDS and Majestic will be shipped and billed by
Majestic, counter billed by WDS for payment. Billing and payment details to be
worked out under separate cover.
At a mutually agreed to time, Majestic may want to purchase product from WDS
under certain conditions, terms and price - details under separate agreement.
WDS has assumed product liability of Brilliant Vodka (copy of policy
forthcoming), WDS assumed all risk of loss.
Regarding Brilliant Vodka as a line extension on certain designated states, any
costs born by Majestic regading state licensing fees both for open and control
states will be reimbursed by WDS. This to be discussed prior to state
appointments.
All distributor appointments as it relates to the agreement bewteen Majestic and
WDS must be approved prior to any appointment, in writing.
Any trade, newspaper, magazine, P.R. releases by Majestic, must be approved in
advance in writing to WDS prior to release.
Promotional and advertising funding will be handled by WDS unless otherwise
agreed to by Majestic and WDS.
All P.O.S. will be furnished by WDS unless otherwise agreed to with Majestic.
Sample product will be provided by WDS. Discussion of usuage of product by
Majestic with WDS prior to withdrawl. A Record of all samples will be kept
-50-
<PAGE>
January 4, 2000
Page 3
on file and reviewed on a monthly basis.
Specifics of responsibility/performance by Majestic.
- - Distribution of product (Brilliant Vodka) in assigned state.
- - Maintain reasonable product size and quantity inventory in designated states.
- - Oversee-mutually agreed to distributor programs.
- - Copies of all distributor/retailer programs or agreements where legal and
applicable.
- - Written recaps of all state programs instituted.
- - Copies of all inventory and depletion reports by states where applicable.
- - Where billing in either control or open states is done by Majestic (as agreed
to) reimbursement of those funds to WDS will be in a timely manner upon said
payment by distributor or state board made to Majestic.
- - Any additional promotional funds that we deem necessary in the various
designated markets will be on a need-to-do basis.
As I stated earlier, we are excited and enthusiactic about this new venture and
look forward to many successful and prosperous years.
Sincerely,
/s/ Signature
- -------------
Roger Baer, COO
Vice President Sales & Marketing
CC: Mike Marleau, President/CEO (WDS)
-51-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 19,727
<SECURITIES> 0
<RECEIVABLES> 69,667
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 217,189
<PP&E> 4,070
<DEPRECIATION> 0
<TOTAL-ASSETS> 221,259
<CURRENT-LIABILITIES> 29,093
<BONDS> 0
0
0
<COMMON> 12,400
<OTHER-SE> 186,978
<TOTAL-LIABILITY-AND-EQUITY> 221,259
<SALES> 51,600
<TOTAL-REVENUES> 51,600
<CGS> 25,993
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 230,180
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,685
<INCOME-PRETAX> (195,805)
<INCOME-TAX> 0
<INCOME-CONTINUING> (195,805)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195,805)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
Exhibit 99.1
DEPARTMENT OF THE TREASURY
BUREAU OF ALCOHOL, TOBACCO AND FIREARMS
8002 Federal Office Building 550 Main Street
Cincinnati, Ohio 45202-3263
February 14, 2000
802023:SLC
5100
NV-I-874
White Diamond Spirits, Inc.
701 No. Green Valley Parkway, Suite 200
Henderson, Nevada 89104
Gentlemen:
Enclosed for proper filing at the permit premises is your Importer's Basic
Permit No. NV-I-874, which has been amended this date to reflect the change in
location from 3525 East Harmon Avenue, Las Vegas, Nevada 89121 to 701 No. Green
Valley Parkway, Suite 200, Henderson, Nevada 89104. A copy of your application
on ATF F 1643 us attached to the permit.
Receipt is acknowledged of your Importer's Basic Permit No. NV-I-874, which has
been appropriately marked and filed.
Please tell us promptly if you have any further changes of name, location,
ownership or type of business.
If you have any questions, please contact Sandy Clark, ATF Specialist at
1-800-398-2282 or 513-684-7274. You may also write to the letterhead address.
Sincerely yours,
/s/ Barb Jeffries for
Roger L. Bowling
Chief , National Revenue Center
-53-
<PAGE>
DEPARTMENT OF THE TREASURY 1. PERMIT NO.
BUREAU OF ALCOHOL, TOBACCO AND FIREARMS NV-I-874
BASIC PERMIT 2. DATE OF PERMIT
AUGUST 18, 1999
(Under Federal Alcohol Administration Act)
- --------------------------------------------------------------------------------
5. NAME AND ADDRESS OF PERMITTEE 3. REGISTRY NO. (if applicable)
(Number and street, city or town,
State and zip code)
4. DATE OF AMENDED APPLICATION
JANUARY 27, 2000
WHITE DIAMOND SPIRITS, INC.
701 No. Green Valley Parkway, Suite 200
Henderson, Nevada 89104 ((BUREAU OF ALCOHOL, TOBACCO AND
FIREARMS STAMP))
- --------------------------------------------------------------------------------
6. TRADE NAMES AUTHORIZED BY THIS PERMIT
(Trade name approval does not constitute approval as a brand name for labeling
purposes. If needed, list on reverse or use continuation sheet)
WHITE DIAMOND SPIRITS; WHITE DIAMOND IMPORTERS; WDS
- --------------------------------------------------------------------------------
7. PERMIT GRANTED FOR (ONE TYPE OF OPERATION ONLY)
Pursuant to the application of the date indicated in item 4, you are
authorized and permitted to engage at the above address, in the business of:
a. __ Distilled Spirits __ distiller __ rectifier (processor)
__ warehouseman and/or __ warehouseman and bottler
and while so engaged to sell, offer or deliver for sale, contract to sell
or ship, in interstate or foreign commerce, the distilled spirits so
distilled or rectified, or warehoused and bottled, or the wines so
rectified.
b. __ Wine __ producer and blender __blender
and while so engaged, to sell, offer or deliver for sale, contract to
sell or ship, in interstate or foreign commerce, the wine so produced
or blended.
c. X Importer - Importing into the United States the following alcoholic
beverages: DISTILLED SPIRITS
and while so engaged to sell, offer to deliver for sale, contract to
sell or ship, in interstate or foreign commerce, the alcoholic
beverages so imported.
d. __ Wholesaler - Purchasing for resale at wholesale the following
alcoholic beverages:
and while so engaged to receive or to sell, offer to deliver for sale,
contract to sell or ship, in interstate or foreign commerce, the
alcoholic beverages so purchased.
- --------------------------------------------------------------------------------
This permit is conditioned upon your compliance with the Federal Alcohol
Administration Act; the Twenty-first Amendment and laws relating to its
enforcement; all other Federal laws relating to distilled spirits, wine and malt
beverages, including taxes with respect to them; the Federal Water Pollution
Control Act; and all applicable regulations made pursuant to law which are now,
or may hereafter be, in force.
The basic permit is effective from the date shown above and will remain
in force until suspended, revoked, annulled, voluntarily surrendered or
automatically terminated.
THIS PERMIT WILL AUTOMATICALLY TERMINATE THIRTY DAYS AFTER ANY CHANGE IN
PROPRIETORSHIP OR CONTROL OF THE BUSINESS, unless an application for a new basic
permit is made by the transferee or permittee within the thirty day period. If
an application for a new basic permit is timely filed, the outstanding basic
permit will continue in effect until the application is acted on by the District
Director, Bureau of Alcohol, Tobacco and Firearms.
-54-
<PAGE>
THIS PERMIT IS NOT TRANSFERABLE, ANY CHANGE IN THE TRADE NAME, CORPORATE
NAME, MANAGEMENT OR ADDRESS OF THE BUSINESS COVERED BY THIS PERMIT, OR ANY
CHANGE IN STOCK OWNERSHIP (MORE THAN 10%) MUST BE REPORTED TO THE DISTRICT
DIRECTOR WITHOUT DELAY.
- --------------------------------------------------------------------------------
THIS IS AN ORIGINAL PERMIT X AMENDED PERMIT
- --------------------------------------------------------------------------------
REASON FOR AMENDMENT DATE OF AMENDMENT
CHANGE IN LOCATION FEBRUARY 14, 2000
- --------------------------------------------------------------------------------
SIGNATURE OF DISTRICT DIRECTOR, BUREAU OF ALCOHOL, TOBACCO AND FIREARMS
BY AUTHORITY OF DD /s/ Barb Jeffries
- --------------------------------------------------------------------------------
ATF FORM 1631 (5170.2x11-87) Replaces ATF Forms 5110.10, 5120.18 and 5170.3
which are obsolete.
-55-
Exhibit 99.2
((State of California Stamp))
SECRETARY OF STATE
CERTIFICATE OF QUALIFICATION
I, Bill Jones, Secretary of State of the State of California, hereby certify:
That on the 13th day of May 1999, WHITE DIAMOND SPIRITS INC., a corporation
organized and existing under the laws of Nevada, complied with the requirements
of California law in effect on that date for the purpose of qualifying to
transact intrastate business in the State of California, and that as of said
date said corporation became and now is qualified and authorized to transact
intrastate business in the State of California, subject however, to any
licensing requirements otherwise imposed by the laws of this State.
IN WITNESS WEHREOF, I execute this
certificate and affix the Great
Seal of the State of California
this day of May 14, 1999.
((California State Seal))
/s/ Bill Jones
--------------
Bill Jones
Secretary of State
-56-
<PAGE>
((State of California Stamp))
SECRETARY OF STATE
CERTIFICATE OF QUALIFICATION
I, Bill Jones, Secretary of State of the State of California, hereby certify:
That the attached transcript of 2 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it is
full, true and correct.
IN WITNESS WEHREOF, I execute this
certificate and affix the Great
Seal of the State of California
this day of
------------------------------------
((California State Seal))
/s/ Bill Jones
--------------
Secretary of State
-57-
Exhibit 99.3
STATE OF CALIFORNIA ((California State Seal))
STATE BOARD OF EQUALIZATION JONAN KLEHR
50 D Street, Suite 215, Santa Rosa, California First District, Hayward
(P.O. Box 730, Santa Rosa, CA 75402-0730)
TELEPHONE (707) 576-2101 DEAN F. ANDAL
FAX (707) 576-2113 Second District, ????
ERNEST J DRONENGURG, JR.
Third District, San Diego
KATHLEEN CONNELL
Controller, Sacramento
JUNE 18, 1999
WHITE DIAMOND SPIRITS JOHN CHANG
3525 EAST HARMON AVE Acting Member
LAS VEGAS, NV 891219 Fourth District, Los Angeles
E.L. SORENSON, JR
Executive Director
In Reply Refer To:
SR JHF 97-558388
DEAR TAXPAYERS:
Recently you applied to the Board of Equalization for a seller's permit. In
response to your request, you have been issued account number SR JHF 97-558388.
As a holder of a seller's permit, you are required to file tax returns on a
YEARLY reporting basis. A return will be due on or before the last day of the
month following the end of the reporting period. Your first return will cover
the period from 06/18/99 to 12/31/99 and will be due on 01/31/2000. The due
dates of subsequent returns will be indicated on the returns when they are sent
to you from Sacramento. If you do not receive a return within 15 days prior to
the due date, please contact any Board office for a form. A return is due even
if you did not receive a form.
To avoid penalty and interest charges, be sure your returns are postmarked on or
before the date they are due. However, if your return is past due, please
calculate the appropriate penalty and interest and include those accounts with
your return. You must file a return even if no activity or sales occurred during
the period.
We have also included information to help you understand your rights and
responsibilities as a seller and to determine the taxability of your products or
services.
If you would like additional information, please contact this office at the
number listed above.
Sincerely,
((Stamp /s/ C. Silva))
CAROL SILVA
Authorized Representative
707-576-2134
Enclosure
-58-
<PAGE>
CALIFORNIA STATE BOARD OF EQUALIZATION
((CALIFORNIA STATE BOARD OF EQUALIZATION STAMP))
SELLER'S PERMIT
ACCOUNT NUMBER
6/18/1999 SR JHF 97558388
THIS PERMIT DOES NOT
AUTHORIZE THE HOLDER
WHITE DIAMOND SPIRITS TO ENGAGE IN ANY
875 HANNA DRIVE BUSINESS CONTRARY TO
AMERICAN CANYON, CA 94589 LAWS REGULATING THAT
BUSINESS OR TO
POSSESS OR OPERATE
ANY ILLEGAL DEVICE.
IS HEREBY AUTHORIZED PURSUANT TO SALES AND USE TAX LAW
TO ENGAGE IN THE BUSINESS OF SELLING TANGIBLE PERSONAL
PROPERTY AT THE ABOVE LOCATION
Not valid at any other address
THIS PERMIT IS VALID UNTIL REVOKED OR CANCELED BUT IS NOT TRANSFERABLE. IF YOU
SELL YOUR BUSINESS, OR DROP OUT OF A PARTNERSHIP, NOTIFY US OR YOU COULD BE
RESPONSIBLE FOR SALES AND USE TAXES OWED BY THE NEW OPERATOR OF THE BUSINESS.
BOE-442-R-LZ REV. 12 (6-95)
NOTICE TO INDIVIDUALS REGARDING
INFORMATION FURNISHED TO THE BOARD OF EQUALIZATION
The Information Practices Act of 1977 and the Federal Privacy Act requires this
agency to provide the following notice to individuals who are asked by the State
Board of Equalization (Board) to supply information, including the disclosure of
the individual's social security account number.
Individuals applying for permits, certificates, or licenses, or filing tax
returns, statement, or other forms prescribed by this agency, are required to
include their social security numbers for proper identification. (See Title 42
United States Code Section 405(c)(2)(C )(i). It is mandatory to furnish all the
appropriate information requested by applications for permits or licenses, tax
returns and other related data. Failure to provide all of the required
information requested by an application for permit or license could result in
your not being issued a permit or license. In addition, the law provides
penalties for failure to file a return, failure to furnish specific information
required, failure to supply information required by law or regulations, or for
furnishing fraudulent information.
Provisions contained in the following laws require persons meeting certain
requirements to file applications for registration, applications for permits or
licenses, and tax returns or reports in such form as prescribed by the State
Board of Equalization: Alcoholic Beverage Tax, Sections* 32001-32556; Childhood
Lead Poisoning Prevention Fee, Sections 43001-43651, Health & Safety Code,
Sections 105275 -105310; Cigarette and Tobacco Products Tax, Sections
30001-30481; Diesel Fuel Tax, Sections 60001-60709; Emergency Telephone Users
Surcharge, Sections 41001-41176; Energy Resources Surcharge, Sections
40001-40216, Hazardous Substances Tax, Sections 43001-43651; Integrated Waste
Management Fee, Sections 45001-45984; International Fuel Tax Agreement, Sections
9401-9433; Motor Vehicle Fuel License Tax, Sections 7301-8405; Occupational Lead
Poisoning Prevention Fee, Section 43001-43651; Heath & Safety Code, Sections
105175-105197; Oil Spill Response, Prevention, and Administration Fees, Sections
46001-46751, Government Code, Sections 8670.1-8670.53; Publicly Owned Property,
Sections 1840-1841; Sales and Use Tax, Sections 6001-7279.6; State Assessed
Property, Section 721-868, 4876-4880, 5011-5014; Tax on Insurers, Sections
12001-13170; Timber Yield tax, Sections 38101-38908; Tire Recycling Fee,
Sections 55001-55381; Public Resources Code, Sections 42860-42895; Underground
Storage Tank Maintenance Fee, Sections 50101-50161; Health & Safety Code,
Sections 25280-25299.96; Use Fuel Tax, Sections 8601-9355.
The principle purpose for which the requested information will be used is to
administer the laws identified in the preceding paragraph. This includes the
determination and collection of the correct amount of tax. Information you
furnish to the Board may be used for the purpose of collecting any outstanding
tax liability.
As authorized by law, information requested by an application for a permit or
license could be disclosed to other agencies, including, but not limited to, the
proper officials of the following: 1) United States governmental agencies: U.S.
Attorney's Office; Bureau of Alcohol, Tobacco and Firearms; Depts. Of
Agriculture, Defense, Justice; Federal Bureau of Investigation; General
Accounting Office; Internal Revenue Service; the Interstate Commerce Commission;
2) State of California governmental agencies and officials: air Resources Board;
Dept. of Alcoholic Beverage Control; auctioneer Commission; Employment
Development department; Energy Commission; Exposition and Fairs; Food &
Agriculture; Board of Forestry; Forest products Commission; Franchise Tax Board;
Dept. of Health Services; Highway Patrol; Dept. of Housing & Community
Development; California Parent Locator Service; 3) State agencies outside the
California for tax enforcement purposes; and 4) city attorneys and city
prosecutors; county district attorneys, sheriff departments.
As an individual, you have the right to access personal information about you in
records maintained by the State Board of Equalization. Please contact you local
Board office listed in the white pages of your telephone directory for
assistance. If the local Board office is unable to provide the information
sought, you may also contact the Disclosure Office in Sacramento by telephone at
(916) 445-2918. The Board officials responsible for maintaining this
information, who can be contacted by telephone at (916) 445-6484, are: Sales and
Use Tax, Deputy director, Sales and Use Tax Department, 450 N Street, MIC:43,
Sacramento, CA 95814; Excise Taxes, Fuel Taxes and Environmental Fees, Deputy
Director, Special Taxes Department, 450 N Street, MIC:31, Sacramento, CA 95814;
Property Taxes, Deputy Director, Property Tax Department, 450 N Street, MIC:63,
Sacramento, CA 95814
- -----------------
* All references are to the California Revenue and Taxation Code unless
otherwise indicated.
-59-
<PAGE>
ALCOHOL BEVERAGE TAX BOND
EXECUTED PURSUANT TO DEMAND FOR SECURITY
UNDER THE CALIFORNIA ALCOHOLIC BEVERAGE TAX LAW
BOND NO. 9945279
Know all persons by these presents:
That we, White Diamond Spirits, Inc.
---------------------------
(PRINCIPAL - Enter owner name only - do not enter dba)
whose address for service is 4455 S. Pecos Road Suite B Las Vegas, CA 89121
-------------------------------------------------
(street address, city, state, and zip code)
as PRINCIPAL, and Great American Insurance Company
--------------------------------
a corporation organized under the laws of Ohio and an admitted surety insurer
authorized to transact a general surety business in the State of California, as
SURETY, and whose address for service is
750 The City Drive 3rd Floor Orange CA 92668
---------------------------------------------
(street address, city, state, and zip code)
are held and firmly bound to the People of the State of California, as OBLIGEE,
in the penal sum of One Thousand and no/100---- Dollars ($ 1,000 ) to be paid to
the OBLIGEE, for which payment we bind ourselves, our heirs, executors,
administrators, successors and assigns, jointly and severally, firmly by these
presents.
WHEREAS, the above-bounder Principal has been issued, or has applied for
the issuance of, one or more licenses, making the Principal liable for the
payment of excise taxes, under the provisions of the Alcoholic Beverage Tax Law;
and
WHEREAS, a demand has been made upon the Principal by the State Board of
Equalization for security, as authorized by Revenue and Taxation Code Sections
32102 and 32123, to insure compliance with said law; and this bone is executed
and tendered in accordance therewith.
NOW, THEREFORE, if the above-bounder Principal shall pay all amounts due
under the Alcoholic Beverage Tax Law, then this obligation is to be void,
otherwise it is to remain in full force and effect.
PROVIDED, HOWEVER, this bond is issued subject to the following express
conditions:
1. This bond is executed by the Surety to comply with the provisions of
Part 14 (commencing with Section 32001) of Division 2 of the Revenue and
Taxation Code and of Chapter 2 (commencing with Section 995.010) of Title 14 of
Part 2 of the Code of Civil Procedure, and said bond shall be subject to all of
the terms and provisions thereof, including, without limitation, the payment of
all taxes, penalties and other obligations of the Principal arising out of Part
14 of Division 2 of the Revenue and Taxation Code.
2. This bond shall be deemed continuous in form and shall remain in full
force and effect and shall run concurrently with the license period for which
the license is granted, and each and every succeeding renewal period or periods,
after which liability hereunder shall cease except as to any liability or
indebtedness therefore incurred or accrued hereunder
3. The aggregate liability of the Surety hereunder on all claims whatsoever
shall not exceed the penal sum of this bond in any event.
4. This bond may be withdrawn by the Surety in accordance with the
provision of Section 32104 of the Revenue and Taxation Code if written notice of
the withdrawal is given to the State Board of Equalization. The withdrawal shall
be effective on the first day of the calendar month after receipt of notice by
the Board if the notice is received on or before the 15th day of the month;
otherwise the withdrawal shall be effective on the first day of the second
calendar month after receipt of the notice by the Board.
5. This bond to become effective May 12, 1999 The premium on this-bond is $
90.00 for the term 5/12/99 to 5/12/2000
Great American Insurance Company 580 Walnut Street Cincinnati OH 45202
- ----------------------------------- -------------------------------------
Name of Surety Address
I certify (or declare) under penalty of perjury that I have executed the
foregoing bond under an unrevoked power of Attorney.
Executed in Atlanta, GA on 5/12/99
----------- -------
(city and state) (date)
under the laws of the State of California.
/s/ Michael Marleau, President /s/ Sam H. Newberry
- ------------------------------ -------------------
(Signature of Principal) (Signature of Attorney-in-fact for Surety)
Las Vegas, NV Sam H. Newberry Attorney-in-Fact
- ------------- --------------------------------
Executed at (city and state) (Printed or typed name of Attorney-in-fact
for Surety)
-60-
