UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
under Section 12(b) or (g) of
The Securities Exchange Act of 1934
Commission File No. 0-28447
VILLA PASTA, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Colorado 84-1313551
---------------------------- ---------------------------
(State of incorporation) (I.R.S. Identification No.)
581 County Line Road, Suite B, Palmer Lake, Colorado 80133
---------------------------------------------------- -----------
(Address of principle executive offices) (Zip Code)
(719) 481-6815
---------------------------
(Issuer's telephone number)
Securities to be registered under Section 12 (b) of the Exchange Act:
None
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, no par value
--------------------------
(Title of Class)
Copies of all communications, including all communications
sent to the agent for service, should be sent to:
David J. Babiarz, Esq.
Wendy H. Bird, Esq.
Overton, Babiarz & Associates, P.C.
7720 East Belleview Avenue, Suite 200
Englewood, Colorado 80111
(303) 779-5900
Page 1 of 36 Pages
Exhibit Page is Located at Page 19.
<PAGE>
TABLE OF CONTENTS
PART I........................................................................1
ITEM 1. DESCRIPTION OF BUSINESS............................................1
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........6
ITEM 3. DESCRIPTION OF PROPERTY............................................9
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....9
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS......10
ITEM 6. EXECUTIVE COMPENSATION............................................11
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................11
ITEM 8. DESCRIPTION OF SECURITIES.........................................11
PART II......................................................................14
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....14
ITEM 2. LEGAL PROCEEDINGS.................................................15
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.....................15
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...........................15
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................16
PART F/S.....................................................................18
FINANCIAL STATEMENTS......................................................18
PART III.....................................................................19
ITEM 1. EXHIBIT INDEX.....................................................19
SIGNATURES...................................................................20
i
<PAGE>
PART I
Item 1. Description of Business
===============================
History and Organization
- ------------------------
Villa Pasta, Inc. (the "Company") is a Colorado corporation organized on
April 6, 1999. The Company produces and distributes a line of gourmet dried
pasta and related food products through a variety of channels. The Company is a
successor to a Colorado limited liability company, Villa Pasta, Limited
Liability Company, which was originally organized in 1995. In 1999, the Company
was converted from a limited liability company to a corporation to facilitate
acquisition of additional working capital. The Company currently has
approximately 21 shareholders.
The Company operates from a single location in Palmer Lake, Colorado,
located approximately midway between Denver and Colorado Springs. This facility
serves as the Company's administrative headquarters, as well as its production
facility. Assets of the Company are currently limited, consisting primarily of
machinery and equipment utilized in connection with the production of its
products and various items of inventory. Distribution of the Company's products
is accomplished through third-party carriers. The Company's offices are located
at 581 County Line Road, Suite B, Palmer Lake, Colorado 80133, and its telephone
number is (719) 481-6815. The Company also maintains a toll-free number,
1-888-ME-PASTA.
Narrative Description of Business
- ---------------------------------
The Company manufactures and distributes a line of gourmet pasta and
related products. Its primary source of revenue is through the sale of these
products for distribution by grocery retailers and gourmet food shops and
through direct sales of gift baskets. The Company maintains a site on the
Worldwide Web ("Web") and utilizes direct mail marketing to allow customers to
order products directly from the Company. The Company also markets to various
non-profit organizations in an effort to incorporate its products into various
fund raisers held by these organizations. The Company operates exclusively in
one industry, the specialty food products industry.
The Company produces all of its pasta and related products from scratch.
Raw materials include semolina and, depending upon the type of pasta desired,
lemon-pepper, jalapeno powder, tomato powder, spinach powder, black pepper, beet
powder and garlic powder. Employees of the Company mix various ingredients
together under carefully controlled conditions to achieve the desired type of
pasta. At any given time, the Company offers approximately 15 to 20 different
types of pasta, varying in flavor, size and shape.
Management believes that the Company is a relatively small producer
compared to other manufacturers and distributors of comparable products. As a
result, a substantial portion of the Company's production process is manual.
After the raw materials are mixed in the required proportion to achieve the
desired product, Company employees place the mixture in a pasta machine owned
and operated by the Company. This machine serves to mold the pasta into the
desired shape and size. The desired length is obtained by manually cutting the
pasta as it exits the machine.
1
<PAGE>
Following mixture and molding of the raw material ingredients, the pasta
must be dried for preservation and shipping. This is accomplished by manually
placing the pasta on drying racks and placing the racks in a drying room under
carefully controlled conditions. The drying room, measuring approximately 220
square feet, is heat controlled by electric heaters and kept at a constant
humidity by controlled introduction of water by employees of the Company. After
the pasta is dried for the required length of time, it is sorted, packaged and
boxed according to delivery requirements. The packaging of the products is also
done on a manual basis. The entire production cycle takes approximately 24 hours
from start to finish.
The Company's pasta is individually packaged in 12 ounce portions for sale
to consumers. Each package is clearly and attractively wrapped in cellophane to
reveal the size, shape and content of the pasta inside. A total of twelve
packages per box of the same pasta is then packaged for shipment to retailers.
At any given time, the Company maintains an inventory of packaging material, in
addition to the raw materials utilized in making the pasta.
In addition to its line of dried pasta, the Company produces and
distributes a limited line of seasoning mixes for use in conjunction with its
pasta. These mixes include dried spices which, when added to additional
ingredients by the purchaser, produce sauces to compliment the pasta. Each of
the recipes contained in these seasoning mixes was conceived by the Company's
president based on his experience in the food service industry. Management
believes these mixes are unique and constantly strives to supplement its
offerings.
As of the date of this Registration Statement, the Company produces as much
as 430 pounds of pasta per day, averaging five production days per week. A
substantial portion of this production is sold to grocery retailers and
specialty food shops in the Denver metropolitan area. Customers of the Company
which account for ten percent (10%) or more of its sales on an annual basis
include Krogers, which operates the King Soopers and City Market retail grocery
chains, as well as Safeway and Alfalfa's. The Company's primary emphasis at
present is on expanding this distribution through additional and different
channels. The Company recently began distributing its products through Dean and
DeLuca, a well-known retailer located on the eastern seaboard of the United
States. (See "Marketing and Distribution" for additional information regarding
marketing efforts by the Company).
In addition to distribution of its product through retailers as discussed
above, the Company has placed substantial emphasis on the design and creation of
gift baskets and boxes for holiday occasions. These gift items include an
assortment of Company products, including pastas, sauce mixes, recipe book and
pasta spoon. Gift items are sold primarily to employers for distribution to
employees and service organizations for distributions to their clients.
Management views gift items as an important aspect of the Company's business,
accounting for approximately thirty (30%) percent of its revenues during the
year ended December 31, 1999.
The Company acquires it raw materials from a variety of food brokers in the
Denver area. In the opinion of management, none of these raw materials are
subject to restrictions on supply and all are available from a variety of
sources. Most of the raw materials are derived from agricultural products and
have been available at constant prices for the past twelve months. While
management believes the Company will be afforded an adequate supply of these raw
2
<PAGE>
materials in the future, there is no assurance that the prices will remain
stable in the future. The supply and price of these raw materials are dependent
on such factors as worldwide supply and demand, weather conditions and
government subsidies.
Marketing and Distribution
- --------------------------
The Company's products are distributed through a variety of channels. Its
primary means of distribution, common in the retail food industry, is through
food brokers to retail outlets such as grocery chains and specialty food stores.
Additional channels of distribution include direct mail of holiday gift baskets.
Management continually strives to supplement and expand its distribution within
the financial and personnel resources of the Company.
The Company has relationships with three food brokers who distribute the
product through retail outlets. These brokers represent a number of different
food products throughout the Colorado front range, and are engaged by the
Company as independent contractors on a commission basis. It is the brokers'
objective to place the Company's product in as many outlets as possible
consistent with the Company's business plan of attracting customers with more
discriminating tastes. These brokers also seek to display the products in a
prominent manner to attract point of purchase sales.
The Company products are delivered through a combination of customer-owned
transportation and common carriers. Products sold to Kroger chains, including
King Soopers and City Market, are transported by carriers owned or operated by
that entity. Such transportation is done at the customers' expense. Shipments to
other retail outlets are done via common carrier, primarily UPS. The shipments
are done at the Company's expense and accordingly, the Company continually
monitors shipping costs to obtain the lowest prices possible.
The Company also maintains a Website and advertises its products on the
Internet. The Company's Website is located at http:\\www.villapasta.com.
Visitors to the Company's Website are afforded information about the Company's
products and details on ordering merchandise. During the fiscal year ended
December 31, 1998, direct sales resulted in approximately one (1%) percent of
the Company's revenue for the year.
The Company also utilizes direct mail as a means of marketing. Management
uses various customer lists for advertising its gift offerings at holidays, as
well as direct offering throughout the year. Management anticipates this means
of distribution will decrease as a percentage of Company revenue as efforts to
increase distribution through retail outlets are enhanced.
Gift baskets and boxes sold by the Company are attractively packaged and
contain an assortment of the Company's products. The Company markets these gift
packages primarily to employer groups for distribution to employees and
customers. Gift packages have been a substantial source of revenue for the
Company since its inception.
3
<PAGE>
The Company also markets its products to various non-profit groups for fund
raising efforts. In this context, the Company's products are sold at wholesale
prices for resale by the charitable organizations in fund-raising events. During
the year ended December 31, 1999, this segment of the Company's business
accounted for a minor portion of its revenues. However, management believes the
market to be an attractive source of revenue, and will continue to pursue it in
the future.
The Company's target market is middle to upper-income families with a love
of pasta and who demand the convenience of prepackaged food products. The
Company's pasta can be cooked in approximately five minutes and provides a
healthy and satisfying meal. Seasoning packages can be combined with readily
available products to create a nutritional sauce in a matter of minutes. The
Company's marketing plan is designed to appeal to these consumers.
Competition
- -----------
Competition in the specialty foods industry is intense. Many different
producers and distributors compete for the attention of consumers in this
industry. Success is often a function of the budget available for marketing and
advertising of a company's product. Due to the Company's limited capitalization
and personnel, management believes the company is at a competitive disadvantage
vis a` vis other participants in this industry. Nonetheless, management believes
the Company's product and service is superior and will make the Company a viable
competitor in this industry. However, the Company lacks the financial resources
at this time to employ marketing and advertising at a level consistent with
other industry competitors.
Competition in the specialty food products industry is intense. Competitors
of the Company include large, multi-national manufacturers and distributors, as
well as a myriad of local and regional producers and distributors. As a dietary
offering, the Company's products compete for consumer dollars with other forms
of pasta, along with a variety of other food products. Management believes the
Company is an insignificant participant in this industry.
Consumer choices among pasta products includes fresh, refrigerated pasta,
mass-produced dried pasta and specialty produced dried pasta such as that of the
Company. Distributors of fresh refrigerated pasta include Catalina, while
distributors of other specialty dried pastas include Al Dente, Pasta Mama and
Elenas. Distributors of mass-produced pasta are even more numerous. The Company
competes with a variety of distributors of dried pasta, both locally,
nationally, and internationally.
The Company's business plan contemplates that the Company will seek to
distinguish itself through the quality and taste of its products, as well as the
service provided to its customers. Management continually strives to upgrade and
diversify its product offerings while maintaining the quality of its products.
The Company also hopes to develop a loyal following in its retail customers
through direct sales and gift basket distributions.
Pricing
- -------
The Company's products are marketed as specialty, gourmet food items, on
the upper-end price scale for similar products. Management does not perceive the
price of the Company's
4
<PAGE>
products as a deterrent to consumers, and allows some latitude for the Company
to cover its costs and realize a reasonable profit. The Company currently
markets its pasta from $2.99 to $6.00 per package retail, $25.80 per carton for
wholesale distribution and $29.95 and $39.95 respectively, for direct sales of
gift boxes and gift baskets. Prices may change in the future depending upon the
price of raw materials, shipping and other factors affecting the Company's cost.
Government Regulation
- ---------------------
The Department of Agriculture regulates scale accuracies of the Company.
The Company is required to be accurate in its representations regarding weight
of the contents of its packages, that is, each package must actually contain
product which meets or exceeds the stated amount of product. The Company is also
required to accurately report the product ingredients and nutritional values on
its product labels. In addition to packaging regulations, the Company is
regulated by the Department of Health and environmental codes regarding
cleanliness standards in food preparation.
Employees and Consultants
- -------------------------
The Company currently employs nine individuals, including its president and
chief executive officer. Of those individuals, only the president is employed on
a full-time basis, and the remainder are part-time, depending on the needs of
the Company. The president is responsible for overseeing all of the Company's
operations as well as strategic planning, product development and marketing.
Other employees include a production manager, production assistant and shipping
and receiving personnel.
The Company employs additional part-time, seasonal help to assist in
packaging gift baskets during holiday time. Management does not perceive
retaining qualified help to be material to the Company's business. With the
exception of the Company's president, all of its employees are paid on an hourly
basis and none of the employees are subject to collective bargaining agreements
with the Company. The Company also retains independent consultants to assist
with administrative functions, such as bookkeeping, accounting and legal
services. Such individuals are retained at hourly rates customary in the
industry.
As of the date of this Registration Statement, the Company is totally
dependent on the efforts and expertise of Craig Van Scoten, its President and
Chief Executive Officer. In that capacity, he is responsible for overseeing all
of the Company's operations, including marketing, production and distribution.
Loss of his service would adversely affect the Company. In addition, the Company
does not maintain any key-man insurance on his life. The ability of the Company
to retain any additional employees is dependent on the results of its future
marketing and the availability of additional working capital.
Facilities
- ----------
The Company leases its administrative and production facilities from an
unrelated third party. This space, consisting of approximately 1600 square feet,
is characterized as warehouse and is located in a rural community south of
Denver. The space is divided between production,
5
<PAGE>
packaging, shipping and receiving and administrative areas. Management deems
these facilities to be adequate for the Company's needs for the foreseeable
future.
The space is rented on an annual basis at the rate of $550 per month, which
lease currently expires February 1, 2001. Management believes the lease can be
renewed on acceptable terms for the foreseeable future.
Item 2. Managements' Discussion and Analysis or Plan of Operation
==================================================================
Introduction
- ------------
Villa Pasta, Inc. operates in the specialty food industry as a maker of
fine pasta and related products which are sold in supermarkets and specialty
stores in Colorado and other locations in the United States. The Company was
originally organized as a limited liability company under the laws of the State
of Colorado in July, 1995. In April, 1999, the Company was converted to a
corporation under the laws of the State of Colorado. This transaction was
treated as a reorganization for financial statement purposes, with the
then-existing members exchanging 100% of their membership interest for 900,000
shares of Common Stock. The financial statements included in this Registration
Statement for the years ended December 31, 1999 and 1998 include its operations
as a limited liability company through March 31, 1999.
Certain statements contained in this Registration Statement may be "forward
looking" in nature. Such statements are identified by words such as
"anticipates," "expects," "believes" and "hopes." Investors are cautioned not to
put undue reliance on these forward looking statements, as they do not represent
statements of fact. These forward looking statements are subject to future
events affecting the Company and its operations, including the availability of
working capital, competition, consumer eating habits and the overall state of
the domestic and worldwide economy. Many of these factors are beyond the control
of the Company. Except as otherwise required by applicable securities laws, the
Company disclaims any obligation or intent to update these forward looking
statements.
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to statements made in the Registration Statement.
Liquidity and Capital Resources
- -------------------------------
December 31, 1999.
- ------------------
At December 31, 1999, management believed the Company had sufficient
liquidity and capital to meet its needs for the next twelve months. This assumes
limited funds are spent on marketing and promotion. In order for the Company to
become profitable, managements believes marketing must be increased. At December
31, 1999, the Company had working capital of $49,256, consisting of current
assets of $60,038 and current liabilities of $10,782. Working capital at
December 31, 1999 represented an increase of $26,012 from fiscal year end
December 31, 1998. That increase resulted from a private placement conducted by
the Company during the second quarter of the current fiscal year, discussed
below.
6
<PAGE>
The Company has extremely limited capitalization and working capital. Since
inception, the Company has received approximately $48,750 in funding from
contributions from its original founders and the sale of securities to investors
in a private placement. A portion of the working capital will be spent on
professional fees and expenses, including legal and accounting fees to be
incurred in connection with this Registration Statement. Remaining funds must be
used by the Company to pay operating expenses. As a result, very limited funds
remain for additional marketing, promotion and additional operating expenses.
There is no assurance that existing capital will be sufficient to achieve the
Company's objectives.
Capital requirements for the next twelve months include cash to pay
vendors, employees and other general and administrative expenses pending
collection of accounts receivable. Management believes the Company has
sufficient assets for that purpose for the foreseeable future. Most of the
Company's customers are large supermarket chains or established specialty food
stores, so collection of accounts receivable has not been an issue for the
Company to date. The Company's production operations are not highly automated,
so acquisition of additional property and equipment is not expected to represent
a material expenditure in the foreseeable future. Finally, the Company leases
its administrative and production facilities, so substantial additional capital
is not required for that purpose.
Liabilities of the Company at December 31, 1999 consisted of trade accounts
payable and other expenses accrued in the ordinary course of business. The
Company has no long-term debt, and it is not expected that borrowing will be
necessary in the foreseeable future. Historically, the Company has relied on
periodic advancements from the owner to finance short-term capital requirements.
However, with the private placement discussed below, such borrowing should not
be necessary for the foreseeable future.
In the second quarter of 1999, the Company conducted a private placement of
its Common Stock pursuant to exemptions from the registration requirements of
Federal and state law. The Company sold an aggregate of 155,000 shares of Common
Stock at a price of $.25 per share for aggregate proceeds of $38,750. Sales were
made by an officer and director of the Company and accordingly, no commissions
were paid in connection with that offering. A portion of those proceeds were
used to repay outstanding indebtedness to a related party and the balance was
available for operations.
For the year ended December 31, 1999, and after taking into account its net
loss for the period, the Company's operations provided approximately $2,954 in
cash. Cash provided by operations was supplemented by cash produced from
financing activities, specifically the private placement. As a result, the
Company's cash increased $32,074 during the year ended December 31, 1999. This
compares to the year ended December 31, 1998, when the Company's cash decreased
an aggregate of $16,838.
December 31, 1998.
- ------------------
At December 31, 1998, the Company had working capital of $23,244,
consisting of current assets of $36,516 and current liabilities of $13,272. The
Company also had additional liabilities of $11,452, representing indebtedness to
a related party. In the opinion of management, the Company's financial condition
at December 31, 1998 warranted
7
<PAGE>
additional efforts to increase liquidity and available capital. As a result, the
private placement discussed above was conducted.
Operation of the Company for the year ended December 31, 1998 used $13,241
of cash. The Company also spent $2,180 on capital expenditures and approximately
$5,000 on distributions to its owners. Partially offsetting this adverse effect
on cash flow was advances from members in the amount of $3,576. However, the
Company's cash decreased an aggregate of $16,838, leaving the Company
approximately $4,000 entering fiscal 1999. Proceeds from the private placement
were used to remedy this situation.
Results of Operations
- ---------------------
Year Ended December 31, 1999.
- -----------------------------
During the year ended December 31, 1999, the Company realized a net loss of
$28,588 on revenues of $123,192. That represents an increase in the net loss for
the year ended December 31, 1998, when the Company realized a net loss of $4,356
on total revenues of $115,559. Sales increased very slightly from 1998 to 1999,
up approximately 6.5%. Management believes substantial additional marketing is
necessary to raise sales significantly. However, with the Company's current
financial condition, little capital is available for that purpose. Accordingly,
it is anticipated that sales will continue at its present level for the
foreseeable future. Management may explore an acquisition as a means of
expanding sales. However, none is planned at this time.
The Company's gross margin remained constant at 55% for each year. The
single greatest factor contributing to the increased loss for the 1999 period
was the compensation expense related to issuance of stock to an officer of the
Company for services rendered in connection with the reorganization to a
corporation and consulting in connection with the Company's business. The amount
of the expense was based on a value of $.25 per share, the price at which the
Company was offering stock to investors beginning in March, 1999.
A substantial portion of the Company's sales are recorded in the fourth
fiscal quarter, commensurate with the holiday season. During 1999, almost 50% of
sales were made in the fourth quarter. At that time of the year, sales of the
Company's gift baskets increase substantially with sales to corporate and other
special purchasers.
General and administrative expenses remained constant from the year ended
December 31, 1998 to the year ended December 31, 1999. A portion of those
expenses are attributable to legal and accounting fees incurred by the Company
during 1999 in connection with the private placement and preparation and filing
of this Registration Statement. Other general and administrative expenses
remained generally constant.
Year Ended December 31, 1998 Compared to December 31, 1997
- --------------------------------------------------------------
For the year ended December 31, 1998, the Company reported a net loss of
$4,356 on sales of $115,559. This compares to a profit of $2,671 on sales of
$103,899 for the year ended December 31, 1997. The Company's gross margin
remained generally constant from 54% for 1997 to 55% for 1998. The difference in
results of operations for 1998 compared to 1997 is therefore attributable to the
increase in sales, and the increase in general and administrative expenses from
$53,295 for the year ended
8
<PAGE>
December 31, 1997 to $67,750 for the year ended December 31, 1998. This increase
is primarily attributable to higher overhead due to location change of the
facility and increased payroll expenses.
Item 3. Description of Property
===============================
The Company owns no real property as of the date of this Registration
Statement. The Company leases its production facility and administrative offices
pursuant to an annual lease with the landlord. Management deems such arrangement
to be adequate for the Company's needs for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners and Management
======================================================================
As of the date of this Registration Statement, there were a total of
1,155,000 shares of Common Stock of the Company outstanding, the only class of
voting securities of the Company currently outstanding.
The following tabulates holdings of Common Stock of the Company by each
person who holds of record, or is known by management of the Company to own
beneficially, more than 5% of the voting securities outstanding and, in
addition, by all directors and officers of the Company individually and as a
group. The shareholders listed below have sole voting and investment power. All
ownership of securities is direct ownership unless otherwise indicated.
Name and Address Number of Shares Percent of Voting Securities
- ---------------- ---------------- ----------------------------
Craig Van Scoten 900,000 77.92%
581 County Line Road, Suite B
Palmer Lake, CO 80133
Michael Wolf 100,000 8.66%
3430 East Geddes Drive
Littleton, CO 80122
All Officers and Directors
as a Group (2 persons) 1,000,000 86.58%
Each of the individuals listed in the foregoing table are officers and directors
of the Company.
Changes In Control
- ------------------
Officers and directors of the Company presently own an aggregate of
1,000,000 shares of Common Stock, representing 86.58% of all voting securities
outstanding. Due to the absence of cumulative voting by shareholders, such
individuals can elect the entire board of directors for the foreseeable future.
Shareholders will be unable to influence the management or policies of the
Company pending issuance of additional stock. The Company knows of no
arrangements, including the pledge by any person of securities of the Company,
which may result in a change of control of the Company in the future.
9
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons
====================================================================
The following individuals presently serve as officers and directors of the
Company:
Name Age Position
- ---------------- --- --------------------------------------
Craig Van Scoten 46 President, Treasurer and Director
Michael Wolf 46 Vice President, Secretary and Director
Mr. Van Scoten should be considered a "founder" and "parent" of the Company
(as such terms are defined by rule under the Securities Exchange Act of 1934, as
amended), inasmuch as he has taken initiative in founding and organizing the
business of the Company. Mr. Van Scoten served as the Manager of the predecessor
limited liability company since its inception in July of 1995.
Messrs. Van Scoten and Wolf serve as directors of the Company until the
next annual meeting of shareholders and until their successors are elected and
qualify. Each individual serves as an officer at the will of the Board of
Directors. Each individual has served in his current capacity since the
Company's conversion from a limited liability company in April of 1999.
The following represents a summary of the business history of each of the
foregoing individuals for the last five years:
Craig Van Scoten:
- -----------------
Since 1995, Mr. Van Scoten has acted as President, owner and operator of
Villa Pasta, Inc. and its predecessor Villa Pasta, Limited Liability Company.
From 1992 to 1994, Mr. Van Scoten served as a securities salesman with Tamaron
Securities, a retail securities broker-dealer located in Englewood, Colorado.
Mr. Van Scoten earned a Bachelor of Science in business administration from
Plymouth State College in Plymouth, New Hampshire in 1976 and attended the
Restaurant School of Philadelphia in Philadelphia, Pennsylvania from 1976 to
1977.
Michael Wolf:
- ------------
In April of 1999, Mr. Wolf joined Villa Pasta, Inc. as the Vice President
and Secretary of the corporation. He devotes only a minor portion of his time to
the affairs of the Company. In 1976, Mr. Wolf acted as a founder and one of the
original partners of Epicurean Catering, a private Colorado corporation
currently having revenues of approximately $10,000,000. Mr. Wolf sold his share
of the business to his partner in 1991, and since that time has served as vice
president of finance and administration for Epicurean Catering. In that capacity
Mr. Wolf oversees approximately 125 employees and the financial affairs of that
entity in conjunction with the president. Epicurean Catering's market is
primarily large-scale commercial special events. Mr. Wolf earned a Bachelor of
Science in business administration with a major in hotel/restaurant management
from the University of Denver in 1974.
No family relationships exist between either of the officers and directors
of the Company.
10
<PAGE>
Item 6. Executive Compensation
==============================
Mr. Van Scoten currently receives an annual salary of $26,000 to act as
President of the Company. Mr. Van Scoten does not currently have an employment
contract and receives no benefits or bonuses from the Company. In 1999, Mr. Wolf
received 100,000 shares of stock in exchange for consulting and marketing
services rendered to the Company valued in the amount of $25,000. Specifically,
Mr. Wolf has made introductions within the food services industry and provided
sales leads, offered advice and counsel on web site design and other marketing
concepts, and provided general business consulting. The Company does not
currently have a stock option plan.
The Company's directors presently serve without compensation, but are
entitled to reimbursement for reasonable and necessary expenses incurred on
behalf of the Company.
Item 7. Certain Relationships and Related Transactions
======================================================
Initial Capitalization
- ----------------------
On April 6, 1999, the Company issued 900,000 shares of Common Stock to Mr.
Van Scoten and 100,000 shares of Common Stock to Mr. Wolf in completion of its
initial capitalization. The shares issued to Mr. Van Scoten were issued in
exchange for his membership interest in the predecessor limited liability
company and were valued at $21,025. The shares issued to Mr. Wolf for services
rendered in connection with the organization of the Company and valued at
$25,000 for purposes of that transaction. Messrs. Van Scoten and Wolf were the
only members of the Board of Directors approving those transactions.
During the two years ended December 31, 1999, Mr. Van Scoten advanced funds
to the Company for working capital purposes. At December 31, 1999 and 1998, the
amount outstanding from Mr. Van Scoten was $1,822 and $11,452, respectively. All
of these amounts accrued interest and were payable on demand. The amount of
$9,630 was repaid by the Company during the year ended December 31, 1999, and
$1,822 remained outstanding. The Company is of the opinion that the foregoing
transactions were no less favorable than could have been obtained from an
unaffiliated third party.
Item 8. Description of Securities
==================================
The Company's authorized capital consists of 50,000,000 shares of Common
Stock, no par value and 5,000,000 shares of Preferred Stock, no par value. The
following description of the Company's securities is qualified in its entirety
by reference to the Company's Articles of Incorporation ("Articles of
Incorporation"), a copy of which is filed as an Exhibit to this Registration
Statement.
Common Stock
- ------------
Each share of Common Stock is entitled to one vote at all meetings of
shareholders. All shares of Common Stock are equal to each other with respect to
liquidation rights and dividend
11
<PAGE>
rights. There are no preemptive rights to purchase any additional shares of
Common Stock. The Articles of Incorporation of the Company prohibit cumulative
voting in the election of directors. In the event of liquidation, dissolution or
winding up of the Company, holders of shares of Common Stock will be entitled to
receive on a pro rata basis all assets of the Company remaining after
satisfaction of all liabilities and all liquidation preferences, if any, granted
to holders of the Company's preferred stock..
All of the Company's issued and outstanding Common Stock is fully paid and
non-assessable and is not subject to any future call.
Preferred Stock
- ---------------
The Articles of Incorporation vest the Board of Directors of the Company
with authority to divide the preferred stock into series and to fix and
determine the relative rights and preferences of the shares of any such series
so established to the full extent permitted by the laws of the State of Colorado
and the Articles of Incorporation in respect to, among other things, (i) the
number of shares to constitute such series and the distinctive designations
thereof; (ii) the rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from which any
dividend shall accrue; (iii) whether preferred stock may be redeemed and, if so,
the redemption price and the terms and conditions of redemption; (iv) the
liquidation preferences payable on preferred stock in the event of involuntary
or voluntary liquidation; (v) sinking fund or other provisions, if any, for
redemption or purchase of preferred stock; (vi) the terms and conditions by
which preferred stock may be converted, if the preferred stock of any series are
issued with the privilege of conversion; and (vii) voting rights, if any.
The Articles of Incorporation of the Company authorize the issuance of up
to 5,000,000 shares of preferred stock. While no shares of preferred stock are
currently outstanding, and the Company has no plans to issue any in the
foreseeable future, issuance of preferred stock could act to the detriment of
holders of Common Stock. Under the Company's Articles, preferred stock can be
issued with preferences on liquidation and dividends or to prevent a takeover of
the Company. The terms and conditions of any preferred stock issued in the
future could operate to the disadvantage of holders of the Common Stock.
Transfer Agent
- --------------
The Company currently acts as its own transfer agent and registrar for the
Common Stock. However, management anticipates the Company may retain the
services of a third-party transfer agent if the Company is successful in
obtaining quotation of its Common Stock on the Bulletin Board.
Dividends
- ----------
No dividend has been declared or paid by the Company on its shares of
Common Stock since inception, and no dividends on shares of Common Stock are
contemplated in the foreseeable future. Any earnings of the Company will be
reinvested in the Company's business
12
<PAGE>
to obtain additional personnel and increase marketing. Investors should not
expect dividends in the immediate future.
13
<PAGE>
PART II
Item 1. Market Price for Common Equity and Related Stockholder Matters.
=======================================================================
Potentially Limited Trading Market
- ----------------------------------
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities, but the Company may initiate such discussions in the
future following receipt of an effective date for this Registration Statement.
In addition to rules regulating sales of penny stocks, discussed below,
trading in the Company's Common Stock may be limited by the "Blue Sky" statutes
enacted by individual states. Initial sale and distribution of the Company's
Common Stock was extremely limited, primarily restricted to residents of the
State of Colorado. Since the sale of the Common Stock was not qualified in any
additional states, trading in any after-market may be limited. While the Company
will seek to overcome this obstacle by obtaining listing in Standard and Poors
Corporation Records or another recognized securities manual, there is no
assurance that such efforts will be successful or that a market will develop.
Purchasers of the Common Stock may therefore have difficulty selling their
shares, should they desire to do so.
Market Price
- ------------
The Company's Common Stock is not quoted at the present time.
Shares Available for Future Sale
- --------------------------------
An aggregate of 1,000,000 shares of the Common Stock presently outstanding
are "restricted securities" within the meaning of the 1933 Act and may hereafter
be sold in compliance with Rule 144 promulgated thereunder. Rule 144 provides,
among other things, and subject to certain limitations, that a person holding
restricted securities for a period of one year may sell, every three months,
those securities in brokerage transactions equal to 1% of the Company's
outstanding Common Stock or the average weekly trading volume during the four
weeks preceding the sale, whichever amount is greater. After two years, holders
of restricted stock who are not affiliates of the Company may apply to sell all
restricted stock free of restrictions. Possible sales of the Company's Common
Stock pursuant to Rule 144 may have a depressive effect on the price of the
Company's Common Stock. All of the restricted shares of Common Stock presently
outstanding were issued in April of 1999, and will be available for sale free of
restrictions by mid-2001.
Holders
- -------
There are 21 holders of the Company's Common Stock as of the date of this
Registration Statement.
14
<PAGE>
Penny Stock Regulation
- ----------------------
In the event the Company is successful in obtaining listing of its Common
Stock on the OTC Bulletin Board, investors should be aware of limitations on
marketing securities characterized as "penny stocks" under existing securities
statutes and regulations. Broker-dealer practices in connection with
transactions in "Penny Stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risk associated with the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.
If the Company is successful in obtaining listing of its Common Stock, the
stock will likely have a trading price of less than $5.00 per share and will not
be traded on any exchanges. Therefore, the Company's stock will become subject
to the penny stock rules and investors may find it more difficult to sell their
securities, should they desire to do so.
Item 2. Legal Proceedings.
==========================
The Company knows of no legal proceeding to which it is a party or to which
any of its property is subject which are either pending, threatened or
contemplated, nor are there any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements With Accountants.
======================================================
The Company has retained its accountants, Cordovano and Harvey, P.C., 201
Steele Street, Suite 300, Denver, Colorado 80206 since its conversion to a
corporation and there are no disagreements with the findings of said
accountants.
Item 4. Recent Sales of Unregistered Securities.
================================================
On April 6, 1999, the Company completed its initial capitalization by
selling an aggregate of 1,000,000 shares to its directors, 900,000 shares to Mr.
Van Scoten and 100,000 shares to Mr. Wolf. This offering was conducted under
Section 4(2) of the Securities Act, as each individual was afforded access to
information typically contained in a registration statement under such Act, and
each was able to fend for himself in the transaction. Securities were sold for
15
<PAGE>
an aggregate consideration of $46,025, consisting of $25,000 in services
provided by Mr. Wolf in connection with the Company's organization and $21,025
in membership interests owned by Mr. Van Scoten and converted to shares of
common stock upon the conversion from the predecessor limited liability company.
Also in April, 1999, the Company completed a private offering pursuant to
the provisions of Regulation D, Rule 504 of the Securities Act. The Company sold
an aggregate of 155,000 shares of Common Stock at an offering price of $.25 per
share for aggregate proceeds of $38,750. Those securities were sold to a group
of accredited investors consisting of friends, relatives and business associates
of the founders of the Company. The Company obtained agreements from the
subscribers in the offering confirming their status as accredited investors and
all sales were made by the Company through its officers and directors.
Item 5. Indemnification of Directors and Officers.
==================================================
Article IX of the Company's Articles of Incorporation contain provisions
providing for the Indemnification if directors and officers of the Company as
follows:
The Board of Directors of the Corporation shall have the power to:
Section 1. Indemnify any director, officer, employee or agent of the
Corporation to the fullest extent permitted by the Colorado Business Corporation
Act as presently existing or as hereafter amended.
Section 2. Authorize payment of expenses (including attorney's fees)
incurred in defending a civil or criminal action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it is ultimately determined that he is entitled to be
indemnified by the Corporation as authorized in this Article X [sic].
Section 3. Purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation or who is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article X [sic].
The indemnification provided by this Article X [sic] shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these Articles of Incorporation, and Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his official capacity and as to action in
another capacity while holding such office, shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
16
<PAGE>
Section 7-109-103 of the Colorado Business Corporation Act (the "Act")
provides that a corporation organized under Colorado law shall be required to
indemnify a person who is or was a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or fiduciary or agent of another corporation or other entity or of any
employee benefit plant (a "Director") or officer of the corporation and who was
wholly successful, on the merits or otherwise, in defense of any threatened,
pending or complete action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (a
"Proceeding"), in which he was a party, against reasonable expenses incurred by
him in connection with the Proceeding, unless such indemnity is limited by the
corporation's articles of incorporation.
Section 7-109-102 of the Act provides, generally, that a corporation may
indemnify a person made a party to a proceeding because the person is or was a
Director against any obligation incurred with respect to a Proceeding to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or reasonable expenses incurred in the
Proceeding if the person conducted himself or herself in good faith and the
person reasonably believed, in the case of conduct in an official capacity with
the Corporation, the person's conduct was in the corporation's best interests
and, in all other cases, his or her conduct was at least not opposed to the
corporation's best interests and, with respect to any criminal proceedings, the
person had no reasonable cause to believe that his or her conduct was unlawful.
A corporation may not indemnify a Director in connection with any Proceeding by
or in the right of the corporation in which the Director was adjudged liable to
the corporation or, in connection with any other Proceeding charging the
Director derived an improper personal benefit, whether or not involving actions
in an official capacity, in which Proceeding the Director was judged liable on
the basis that he or she derived an improper personal benefit. Any
indemnification permitted in connection with a Proceeding by or in the right of
the corporation is limited to reasonable expenses incurred in connection with
such Proceeding. Under Section 7-109-107 of the Act, unless otherwise provided
in the articles of incorporation, a corporation may indemnify an officer,
employee, fiduciary, or agent of the corporation to the same extent as a
Director and may indemnify an officer, employee, fiduciary, or agent who is not
a director to a greater extent, if not inconsistent with public policy and if
provided for by its bylaws, general or specific action of its board of directors
or shareholders, or contract.
Section 7-108-402 of the Act provides, generally, that the articles of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director; except that any such
provision may not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) acts specified in ss. 7-108-403, or (iv)
any transaction from which a director directly or indirectly derived an improper
personal benefit. Such provision may not eliminate or limit the liability of a
director for any act or omission occurring prior to the date on which such
provision becomes effective.
The Company's Articles of Incorporation limit director's liability to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by Colorado law.
17
<PAGE>
PART F/S
Financial Statements
- ---------------------
The financial statements of the Company are attached to this Registration
Statement and filed as a part thereof.
18
<PAGE>
PART III
Item 1. Exhibit Index Sequential
page
number
No. Description
- --- -----------
(1) Not applicable
(2) Not applicable
(3) Charters and by-laws
(i) Articles of Incorporation, as filed with the Colorado Secretary of
State on April 6, 1999.
(ii) Bylaws
(4) Not applicable
(5) Not applicable
(6) Not applicable
(7) Not applicable
(8) Not applicable
(9) Not applicable
(10) Not applicable
*(27) Financial Data Schedule
*filed herewith
19
<PAGE>
Item 7: Financial Statements
============================
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
Index to Financial Statements
Page
Independent auditors' report................................................F-2
Balance sheet, December 31, 1999............................................F-3
Statements of operations, for the years ended
December 31, 1999 and 1998............................................F-4
Statement of shareholders' equity, from January 1, 1998 through
December 31, 1999......................................................F-5
Statements of cash flows, for the years ended December 31, 1999 and 1998....F-6
Notes to financial statements...............................................F-8
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders of
Villa Pasta, Inc. (formerly Villa Pasta, LLC)
We have audited the accompanying balance sheet of Villa Pasta, Inc. (formerly
Villa Pasta, LLC), a Colorado corporation, as of December 31, 1999 and the
related statements of operations, shareholders' equity/members' capital and cash
flows for each of the years in the two-year period ended December 31, 1999.
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Villa Pasta, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for each
of the years in the two year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
Cordovano and Harvey, P.C.
Denver, Colorado
March 24, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
BALANCE SHEET
December 31, 1999
ASSETS
<S> <C>
Current assets:
Cash...........................................................................$ 36,084
Receivables
Trade, net of allowance of $1,000........................................... 7,790
Inventories, at lower of cost or market (Note C)............................... 16,164
---------------
Total current assets 60,038
Property and equipment, less accumulated
depreciation of $15,876....................................................... 5,485
Other assets........................................................................ 1,482
---------------
$ 67,005
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade....................................................... $ 3,401
Other current liabilities:
Due to officer (Note B)..................................................... 1,822
Accrued salaries and payroll taxes.......................................... 534
Other accrued expenses...................................................... 5,025
---------------
Total current liabilities 10,782
---------------
Shareholders' equity (Note F):
Preferred stock, no par value; 5,000,000 shares authorized;
-0- shares issued and outstanding........................................... -
Common stock, no par value; 50,000,000 shares authorized;
1,155,000 shares issued and outstanding..................................... 84,775
Retained deficit............................................................... (28,552)
---------------
Total shareholders' equity/members' capital 56,223
---------------
$ 67,005
===============
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
----------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Net sales...........................................................................$ 123,192 $ 115,559
Cost of sales....................................................................... 54,796 51,619
--------------- ---------------
Gross profit 68,396 63,940
Other costs and expenses:
Selling, general and administrative expenses................................... 70,903 67,750
Stock based compensation consulting (Note B)................................... 25,000 -
Provision for doubtful accounts................................................ 1,081 546
--------------- ---------------
(96,984) (68,296)
--------------- ---------------
Loss before income taxes (28,588) (4,356)
Provision for income taxes (Note E):
Current........................................................................ 5,442 -
Deferred....................................................................... (5,442) -
Net loss $ (28,588) $ (4,356)
=============== ===============
Pro forma information (Note A):
Pro forma loss before income taxes.............................................$ (28,588) $ (4,356)
Pro forma provision for income taxes:
Current..................................................................... 6,852 839
Deferred.................................................................... (6,852) (839)
--------------- ---------------
Pro forma net loss $ (25,288) $ (4,356)
=============== ===============
Basic loss per common share.........................................................$ (0.03) $ *
=============== ===============
Weighted average common shares outstanding.......................................... 1,091,250 900,000
=============== ===============
Basic pro forma loss per share on common stock......................................$ (0.03) $ *
=============== ===============
Pro forma weighted average number of shares outstanding............................. 1,091,250 900,000
=============== ===============
</TABLE>
* Less than $.01 per share
See accompanying notes to the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
(Formerly Villa Pasta, LLC)
STATEMENT OF SHAREHOLDERS' EQUITY/MEMBERS' CAPITAL
January 1, 1998 through December 31, 1999
Preferred Stock Common Stock
Members' ----------------- --------------------- Retained
Capital Shares Amount Shares Amount Earnings Total
--------- ------- ------- ----------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998...........................$ 30,338 $ - $ - $ - $ - $ - $ 30,338
Distributions.................................. (4,993) - - - - - (4,993)
Net loss....................................... (4,356) - - - - - (4,356)
--------- ------- ------- ----------- ------- ---------- ----------
Balance, December 31, 1998 20,989 - - - - - 20,989
Net income prior to reorganization............. 36 - - - - - 36
--------- ------- ------- ----------- ------- ---------- ----------
21,025 - - - - - 21,025
Reorganization from a limited liability
company to a corporation (Note A)........... (21,025) - - 900,000 21,025 - -
Deferred taxes relating to the reorganization
(Note E)..................................... - - - - - (1,179) (1,179)
Issuance of common stock in exchange for
services, valued at $.25 per share (Note B).. - - - 100,000 25,000 - 25,000
Sale of common stock at $.25 per share
(Note F)..................................... - - - 155,000 38,750 - 38,750
Net loss after reorganization.................. - - - (27,373) (27,373)
--------- ------- ------- ----------- ------- ---------- ----------
Balance, December 31, 1999 $ - - $ - $1,155,000 $84,775 $ (28,552) $ 56,223
========= ======= ======= =========== ======= ========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
----------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................................................$ (28,588) $ (4,356)
Transactions not requiring cash:
Depreciation................................................................ 3,712 3,593
Common stock exchanged for services (Note B)................................ 25,000 -
Changes in current assets and current liabilities:
(Increase) decrease in accounts receivable, inventories
and other current assets................................................. 7,070 (12,359)
Increase (decrease) in accounts payable and accrued expenses................ (4,240) (119)
--------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 2,954 (13,241)
--------------- ---------------
INVESTING ACTIVITIES
Capital expenditures........................................................... - (2,180)
NET CASH (USED IN) --------------- ---------------
INVESTING ACTIVITIES - (2,180)
--------------- ---------------
FINANCING ACTIVITIES
Sale of common stock........................................................... 38,750 -
Borrowings from members/officers (Note B)...................................... - 3,576
Repayments to members/officers (Note B)........................................ (9,630) -
Members' distributions......................................................... - (4,993)
NET CASH PROVIDED BY (USED IN) --------------- ---------------
FINANCING ACTIVITIES 29,120 (1,417)
--------------- ---------------
NET CHANGE IN CASH 32,074 (16,838)
Cash, beginning of year............................................................. 4,010 20,848
--------------- ---------------
CASH, END OF YEAR $ 36,084 $ 4,010
=============== ===============
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
----------------------------------------
1999 1998
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S> <C> <C>
Cash paid during the period for:
Interest.......................................................................$ - $ -
=============== ===============
Income taxes...................................................................$ - $ -
=============== ===============
NON-CASH FINANCING TRANSACTIONS
Common stock issued for members' capital (Note A)..............................$ 21,025 $ -
=============== ===============
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
NOTES TO THE FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
===================================================================
Description of operations and recent reorganization
- ---------------------------------------------------
Villa Pasta, Inc. (the "Company") was incorporated in Colorado on April 6, 1999
to act as the successor to Villa Pasta, LLC (the "LLC"). Effective April 1,
1999, the LLC reorganized (the "Reorganization") and the existing members
exchanged 100 percent of their membership interests for 900,000 common shares of
the Company. This transaction was a reorganization of entities under common
control, and accordingly, it was accounted for at historical cost.
The Company is a maker of fine pastas that are sold in supermarkets and
specialty stores across the United States.
Use of estimates
- ----------------
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Pro forma financial information.
- --------------------------------
Pro forma provision for income taxes and pro forma net income.
Prior to the reorganization, Villa Pasta was organized as a limited liability
company and consequently, was not subject to income tax. A pro forma provision
for income taxes for the years ended December 31, 1999 and 1998 has been
presented for purposes of comparability as if the Company had been a taxable
entity for all periods presented.
Pro forma loss per share.
- -------------------------
The Company reports pro forma loss per share using a dual presentation of basic
and diluted pro forma loss per share. Basic pro forma loss per share excludes
the impact of common stock equivalents and preferred stock dividends. Diluted
pro forma loss per share uses the average market price per share when applying
the treasury stock method in determining common stock equivalents. The Company
has a simple capital structure for the years presented, therefore, there is no
variance between the basic and diluted loss per share.
Pro forma weighted average shares outstanding at December 31, 1999 and
1998.
- --------------------------------------------------------------------------------
Pro forma weighted average common shares outstanding for December 31, 1998
represents the weighted average number of common shares issued in the
Reorganization. Pro forma weighted average shares outstanding for December 31,
1999 represents the weighted average of, for the period prior to the Offering
(see Note F), common shares issued in the Reorganization and, for the period
subsequent to the Offering, the total number of common shares outstanding.
F-8
<PAGE>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
NOTES TO THE FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
==============================================================================
Year end
- --------
The Company operates on a year ending on December 31.
Financial instruments and cash equivalents
- ------------------------------------------
The Company's financial instruments consist of cash, receivables, accounts
payable, indebtedness to related parties, and accrued expenses. The carrying
value of these financial instruments approximates fair value because of their
short-term nature. For financial accounting purposes and the statement of cash
flows, cash equivalents include all highly liquid debt instruments purchased
with an original maturity of three months or less.
Inventories
- -----------
Inventories are valued at the lower of cost or market as determined by the
average cost method.
Property, equipment and depreciation
- ------------------------------------
Property and equipment are recorded at cost. Depreciation is calculated under
the straight-line method over the estimated useful life of the respective
capital assets. Expenditures for additions and improvements are capitalized,
while repairs and maintenance costs are expensed as incurred.
Revenue recognition
- -------------------
Revenue from sales is recognized at the time the product is delivered.
Stock-based compensation
- ------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to follow the provisions of APB 25 for employees and SFAS
No. 123 for non-employees during the year ended December 31, 1999.
Reclassifications
- -----------------
Certain reclassifications have been made to the 1998 financial statements in
order to conform to the 1999 presentation.
F-9
<PAGE>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
NOTES TO THE FINANCIAL STATEMENTS
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recently issued accounting pronouncements
The Company has adopted the following new accounting pronouncements for the year
ended December 31, 1999. SFAS No. 133, "Accounting for Derivative Instruments
and Hedging activities," requires an entity to recognize all derivatives on a
balance sheet, measured at fair value. Statement of Positions ("SOP") 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal use." This SOP requires that entities capitalize certain internal-use
software costs once certain criteria are met. SOP 98-5, "Reporting on the Costs
of Start-Up Activities." SOP 98-5 provides, among other things, guidance on the
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
company will continue to review these new accounting pronouncements over time to
determine if any additional disclosures are necessary based on evolving
circumstances. SFAS No. 137, issued in June 1999, amended the implementation
date for SFAS No. 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000.
NOTE B: RELATED PARTY TRANSACTIONS
- ----------------------------------
Certain officers have provided non-interest bearing cash advances to the Company
for working capital purposes. During the years ended December 31, 1999 and 1998
working capital transactions were as follows:
December 31,
------------------------
1999 1998
--------- --------
Cash advances $ - $3,576
Repayment of advances $ 9,630 $ -
At December 31, 1998 $11,452 was owed to an officer of the Company. During the
year ended December 31, 1999, the Company repaid the officer $9,630, which
reduced the obligation to $1,822 at December 31, 1999.
On April 6, 1999, the Company issued 100,000 shares of its no par value common
stock to a director in exchange for consulting services relating to the
Company's incorporation and operations. The Board of Directors valued the
transaction at the fair value of the common stock, $.25 per share. The Board of
Directors considered contemporaneous equity transactions and other analysis to
determine the fair value of the common stock. The accompanying financial
statements present stock-based compensation expense of $25,000.
F-10
<PAGE>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
NOTES TO THE FINANCIAL STATEMENTS
NOTE C: INVENTORIES
===================
Inventories consisted of the following as of December 31, 1999:
Ingredients $ 1,122
Packaging 7,753
Finished product 7,289
------------------
$16,164
==================
NOTE D: PROPERTY AND EQUIPMENT
==============================
Listed below are the major classes of property and equipment as of December 31,
1999:
Office equipment $ 3,191
Furniture and fixtures 612
Pasta-making equipment 17,558
-----------------
21,361
Accumulated depreciation (15,876)
-----------------
$ 5,485
=================
Depreciation expense was $3,712, and $3,593 for the years ended December 31,
1999 and 1998.
NOTE E: INCOME TAXES
====================
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
In connection with the reorganization from a limited liability company to a
corporation, the Company recorded deferred income taxes as of April 1, 1999 and
a one-time charge to earnings of $1,179.
The total income tax provision for the nine months ended December 31, 1999 has
been allocated as follows:
Arising from reorganization $ 1,179
Subsequent to reorganization (6,621)
Valuation allowance 5,442
----------
----------
$ -
==========
F-11
<PAGE>
VILLA PASTA, INC.
(Formerly Villa Pasta, LLC)
NOTES TO THE FINANCIAL STATEMENTS
NOTE E: INCOME TAXES, CONTINUED
===============================
A reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the nine months subsequent to reorganization.
U.S. federal statutory graduated rate 15.00%
State income tax rate, net of federal benefit 4.04%
Net operating loss for which no tax
benefit is currently available- -19.04%
--------------
--------------
0.00%
===============
The above net deferred tax asset is due to a net operating loss of $27,373,
which is offset by a valuation allowance of $5,442.
The change in the valuation allowance for the nine months ended December 31,
1999 was $5,442. Net operating loss carryforwards at December 31, 1999 will
begin expire in 2019. The valuation allowance will be evaluated at the end of
each year, considering positive and negative evidence about whether the asset
will be realized. At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
NOTE F: SHAREHOLDERS' EQUITY
============================
Preferred stock
- ---------------
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of shares
in the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the shares, (5) terms of conversion and (6) voting rights.
Confidential private offering of common stock
- ---------------------------------------------
In April of 1999 the Company offered for sale 4,000,000 shares of its no par
value common stock for $.25 per share pursuant to the provisions of Regulation
D, Rule 504 of the Securities Act of 1933, as amended (the "Act"). The Company
sold 155,000 shares for proceeds of $38,750. The shares were offered through
officers of the Company and there were no offering costs incurred.
NOTE G: OPERATING LEASE
=======================
The Company entered into an operating lease on February 1, 1999 for space to
conduct its operations. The lease commenced February 1, 1999 and expires
February 1, 2000. Monthly payments under the lease total $525. Rent expense on
the space totaled $6,250 and $5,400 for the years ended December 31, 1999 and
1998, respectively.
F-12
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Villa Pasta, Inc.
By: /s/ Craig Van Scoten Date: April 14, 2000
----------------------------------- --------------
Craig Van Scoten, President
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 36,084
<SECURITIES> 0
<RECEIVABLES> 8,790
<ALLOWANCES> (1,000)
<INVENTORY> 16,164
<CURRENT-ASSETS> 60,038
<PP&E> 21,361
<DEPRECIATION> (15,876)
<TOTAL-ASSETS> 67,005
<CURRENT-LIABILITIES> 10,782
<BONDS> 0
0
0
<COMMON> 84,775
<OTHER-SE> (28,552)
<TOTAL-LIABILITY-AND-EQUITY> 67,005
<SALES> 123,192
<TOTAL-REVENUES> 123,192
<CGS> 54,796
<TOTAL-COSTS> 54,796
<OTHER-EXPENSES> 96,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (28,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,588)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
