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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
February 4, 2000
Date of Report
(Date of Earliest Event Reported)
FOODVISION.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
2152 NW Parkway, Suite K,
Marietta, Georgia 30067
(Address of principal executive offices)
770/937-0960
Registrant's telephone number
ECHELON ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
Delaware 0-28521 58-246-6626
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
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<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Agreement and Plan of Reorganization (the
"Acquisition Agreement") dated February 3, 2000 Foodvision.com, Inc.
("Foodvision" or the "Company"), a Delaware corporation, acquired all the
outstanding shares of common stock of Echelon Acquisition Corporation
("Echelon"), a Delaware corporation, from the shareholders thereof in an
exchange for an aggregate of 1,000,000 shares of common stock of Foodvision (the
"Acquisition"). As a result, Echelon became a wholly-owned subsidiary of
Foodvision.
The Acquisition was approved by the unanimous consent of the Board of
Directors of Foodvision on February 4, 2000. The Acquisition was effective
February 4, 2000. The Acquisition is intended to qualify as a reorganization
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended.
Foodvision had 13,109,984 shares of common stock issued and outstanding
prior to the Acquisition and 14,109,984 shares issued and outstanding following
the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission,
Foodvision elected to become the successor issuer to Echelon for reporting
purposes under the Securities Exchange Act of 1934 and elects to report under
the Act effective February 4, 2000.
A copy of the Acquisition Agreement is filed as an exhibit to this Form
8-K and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
<PAGE>
(b) The following table contains information regarding the
shareholdings of Foodvision's current directors and executive officers and those
persons or entities who beneficially own more than 5% of its common stock
(giving effect to the exercise of the warrants held by each such person or
entity):
<TABLE>
<CAPTION>
Number of shares of Percent of
Common Stock Beneficially Common Stock
Name Owned (1) Beneficially Owned (2)
<S> <C> <C>
Paul R. Smith 9,491,050 (3) 46.3%
Chairman, President and
Chief Executive Officer
2152 NW Parkway, Suite K
Marietta, Georgia 30067
Raj Kalra 9,491,050 (4) 46.3%
Director, Chief Operating Officer,
Chief Information Officer
2152 NW Parkway, Suite K
Marietta, GA 30067
Dr. Charles Sheehan 125,000 (5) *
Director
All executive officers and directors 19,107,100 (6) 71%
of the company as a group (3 persons)
* Less than 1%
</TABLE>
1. Includes options and warrants which are exercisable within 60 days of
the date hereof.
2. Based upon 14,109,984 shares outstanding following the Acquisition.
3. Mr. Smith's ownership includes 91,050 shares of common stock which he
acquired pursuant to the Company's acquisition of Investco on July 14,
1998, and 3,000,000 shares of common stock which were issued to him in
January 1999 pursuant to an agreement which provides that such shares
are forfeitable in the event Mr. Smith voluntarily terminates his
employment with the Company or is terminated for cause within two years
of the date of the agreement. In addition, Mr. Smith's beneficial
ownership includes 6,400,000 shares of common stock which Mr. Smith
presently has the right to acquire pursuant to incentive warrants
issued to him in fiscal 1999.
4. Mr. Kalra's ownership includes 91,050 shares of common stock which he
acquired pursuant to the Company's acquisition of Investco on July 14,
1998, and 3,000,000 shares of common stock which were issued to him in
January 1999 pursuant to an agreement which provides that such shares
are forfeitable in the event Mr. Kalra voluntarily terminates his
employment with the Company or is terminated for cause within two years
of the date of the agreement. In addition, Mr. Kalra's beneficial
ownership includes 6,400,000 shares of common stock which Mr. Kalra
presently has the right to acquire pursuant to incentive warrants
issued to him in fiscal 1999.
5. Dr. Sheehan's beneficial ownership includes 125,000 shares of common
stock which Mr. Sheehan presently has the right to acquire pursuant to
a warrant that has not been exercised.
6. Includes the 12,800,000 shares of common stock underlying warrants
currently exercisable owned by Messrs. Smith and Kalra discussed in
footnotes 3 and 4 above.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Acquisition Agreement
was negotiated between Echelon and Foodvision. In evaluating the Acquisition,
Echelon used criteria such as the value of assets of Foodvision, Foodvision's
ability to manage and expand its restaurant business, its arrangements and
agreements for interlinking of Internet information and Web sites, Foodvision's
ability to compete in the market place, Foodvision's current and anticipated
business operations, and Foodvision management's experience and business plan.
In evaluating Echelon, Foodvision placed a primary emphasis on Echelon's status
as a reporting company under the Section 12(g) of the Securities Exchange Act of
1934, as amended, and Echelon's facilitation of Foodvision's becoming a
reporting company under the Act.
(b) The Company intends to continue to operate its existing
restaurants, to sell its restaurant division, to concentrate on development of
its Internet division and to operate and further develop its e-commerce Web
site, www.foodvision.com.
BUSINESS
Company
The Company was formed on April 4, 1989 under the laws of the State of
Delaware as Heavenly Slender Sweets, Inc. for the primary purpose of
distributing a low calorie, low fat, salt free, soft ice cream substitute frozen
dessert product line in the United States and Canada. No revenues were earned
from the very limited operations and the Company accumulated a net loss of
$90,148 for fiscal year 1992. On March 2, 1994, the Company changed its name to
Heavenly Slender Foods, Inc. On June 14, 1994 the Company changed its name to
Pacific Pharmaceuticals, Inc. On June 23, 1994 the Company changed its name to
Sunmark Industries I, Inc. On May 12, 1998 the Company changed its name to Mark
I Industries, Inc.
On July 14, 1998, the Company acquired all of the issued and
outstanding common stock of Investco Corporation ("Investco"), a Georgia
corporation, in a reverse acquisition for 182,100 shares of Common Stock (all
share totals are after giving effect to a 1 for 100 reverse stock split in
January 1999). In June 1999, the Company changed its name to Foodvision.com,
Inc.
At the time the Company acquired Investco, Investco's operations
consisted of
(i) three Kenny Rogers Roasters ("Roasters") franchised restaurants in
the Atlanta metropolitan area which Investco had acquired on December 7, 1997 by
a foreclosure of security interests on the assets of the restaurants;
(ii) a restaurant in Renfrew, Ontario, Canada, known as the Hillbilly
Shack Saloon;
(iii) ownership of all of the issued and outstanding common stock of
Grandma Lee's USA Northpoint, Inc. ("GLUN") which operates a franchised Grandma
Lee's restaurant at the AT&T Headquarters Building in Alpharetta, Georgia and is
the franchisor of a Grandma Lee's restaurant near downtown Atlanta, Georgia; and
(iv) ownership of the exclusive franchise rights for Grandma Lee's
restaurants in the Atlanta metro area and Eastern Ontario and Quebec, Canada.
Subsequent to the acquisition of Investco, the Company began developing
a proprietary restaurant concept known as the Dirty Bird Cafe. The company
opened its first Dirty Bird Cafe in Powder Springs, Georgia in June 1999, and
its second Dirty Bird Cafe in Marietta, Georgia in September 1999. In addition,
the Company is planning to convert the three former Roasters restaurants to the
Dirty Bird Cafe format.
<PAGE>
The Company has three wholly-owned subsidiaries--Investco Corporation,
Foodvision, Inc. and Dirty Bird Cafe, Inc.-each of which subsidiaries, in turn,
has several wholly-owned subsidiaries.
The Company has organized itself into two divisions -- an Internet
division and a food division. The Internet division operates an e-commerce Web
site known as www.foodvision.com through Foodvision, Inc. The restaurant/food
division operates through Dirty Bird Cafe, Inc. Dirty Bird Cafe, Inc. owns GLUN
and separate subsidiaries which own and operate the two existing Dirty Bird
Cafes, the Hillbilly Shack Saloon, and the three former Kenny Rogers Roasters
restaurants. The Company intends to devote its capital to the continued
development of the Dirty Bird Cafe format and the continued development of its
Internet division. Investco does not currently have any operations.
Current Operations
Restaurant Division
The Company currently operates two Dirty Bird Cafes, one Grandma Lee's
restaurant, one Hillbilly Shack Saloon, and two former Roasters. In addition,
the Company has terminated operations at one former Roasters while it is being
converted to the Dirty Bird Cafe concept. The Company is the franchisor of one
Grandma Lee's restaurant. All of the Company's restaurant operations are located
in the Atlanta metro area, except for the Hillbilly Shack Saloon, which is
located in Renfrew, Ontario, Canada.
Dirty Bird Cafe
In late 1998, the Company began developing a proprietary restaurant
concept to replace its existing Roasters restaurants and to use as a basis for
additional restaurants and ultimately for franchising to third parties. The
Company's efforts resulted in the development of the Dirty Bird Cafe, a casual
sit-down restaurant and bar. The phrase "Dirty Bird" is an unofficial name for
Atlanta's National Football League franchise, the Atlanta Falcons. The name was
selected because the phrase carries instant name recognition in the Atlanta
metropolitan area. In addition, a preliminary search of trademark registrations
indicated that no other person had obtained trademark protection for use of the
"Dirty Bird" name in an area which would conflict with the Company's use of the
name for a casual dining restaurant.
The Company opened its first Dirty Bird Cafe in the June 1999 at 1750
Powder Springs Rd., Powder Springs, Georgia, and its second location in
September 1999 at 736 Johnson Ferry Road, Marietta, Georgia. Dirty Bird Cafes
are designed to be installed in preexisting restaurant space so that the cost to
open a Dirty Bird Cafe is less than the cost to open other restaurant formats.
During 1999, the Company has opened two Dirty Bird Cafes, and is in the process
of converting one of its former Roasters restaurants into a Dirty Bird Cafe.
Based on the Company experience to date, the average cost of opening a Dirty
Bird Cafe is approximately $100,000 to $300,000 per location.
Grandma Lee's
The Company owns and operates one Grandma Lee's restaurant as a
franchisee in the AT&T Headquarters Building, 400 North Point Parkway, Building
300, Alpharetta, Georgia. In addition, the Company also is the franchisor of a
second Grandma Lee's Restaurant located at 1350 Peachtree Street, Midtown Plaza,
Atlanta, Georgia.
The Company owns the area franchise rights for the Grandma Lee's
concept in the areas of Metropolitan Atlanta, Eastern Ontario, Canada, and
Quebec, Canada. In the case of the franchise rights in Metropolitan Atlanta, the
Company owns such rights in perpetuity, and is not obligated to pay any
franchise fees for new locations, or any royalty or franchise fees from ongoing
operations. The Company is not obligated to open any new restaurants within the
designated territory in order to retain such rights.
As noted earlier, the Company is the subfranchisor of a Grandma Lee's
restaurant in Atlanta, Georgia. Under the franchise agreement, the subfranchisee
pays the Company a franchise fee of 4% of gross sales, none of which is shared
with the franchisor. The subfranchise agreement carries a term of 10 years,
which term expires December 31,
<PAGE>
2005. While the Grandma Lee's restaurant operated by the Company and the Grandma
Lee's restaurant operated by a franchisee of the Company are both profitable,
the Company has no current plans to open any additional Grandma Lee's
restaurants. In addition, because the Grandma Lee's restaurant operated by the
Company is currently profitable, the Company has no plans to convert the
existing Grandma Lee's locations to the Dirty Bird Cafe format.
Kenny Rogers Roasters
At the time Investco acquired the Roasters restaurants in 1997, the
restaurants were in financial distress, partly as a result of financial problems
of the Roasters franchisor and partly due to management neglect of the prior
owner of the restaurants. In 1998, the franchisor for the Roasters filed a
voluntary petition under Chapter 11 of the Bankruptcy Code, and in 1999 its
assets, including all rights to the Roasters name and concept, were sold to
another company. Because of the lack of support from the franchisor and costs
that would have been required to continue as a Roasters franchisor, the Company
elected not to continue as a Roasters franchisor with the new owner of the
franchise rights. Because the Company did not elect to remain a Roasters
franchisee, the Company has been required to remove any signage from the former
Roasters locations that identify the restaurants as a Kenny Rogers Roasters
restaurant.
The Company currently operates two former Roasters restaurants, one of
which is located at 1325 Powers Ferry Road, Marietta, Georgia, and the other of
which is located at 1100 Northpoint Circle, Alpharetta, Georgia. The Company has
closed its former Roasters location at 2916 N. Druid Hills Road, Atlanta,
Georgia, and is in the process of converting that location to the Dirty Bird
Cafe concept. The Company expects to convert the two remaining former Roasters
restaurants by September 2000, at a total cost of about $300,000.
Hillbilly Shack Saloon
The Hillbilly Shack was opened in Renfrew, Ontario, Canada in 1997. The
restaurant features traditional fare served in a distinctive, sports-oriented
atmosphere reminiscent of a sports arena/stadium. Full bar service is also
provided and alcoholic beverage sales accounted for approximately 50% of sales
in 1998. The restaurant has 20 television sets placed through out the restaurant
with a big screen TV in the common bar and restaurant area.
Governmental Regulation
Alcoholic Beverage Regulation. Each restaurant is subject to licensing
and regulation by a number of governmental authorities, which include alcoholic
beverage control and health, safety and fire agencies in the state, county and
municipality in which the restaurant is located. Difficulties or failures in
obtaining the required licenses or approvals could delay or prevent the opening
of a new restaurant in a particular area. Alcoholic beverage control regulations
require restaurants to apply to a state authority and, in certain locations,
county or municipal authorities for a license or permit to sell alcoholic
beverages on the premises and to provide service for extended hours and on
Sundays. Some counties prohibit the sale of alcoholic beverages on Sundays.
Typically, licenses or permits must be renewed annually and may be revoked or
suspended for cause at any time. Alcoholic beverage control regulations relate
to numerous aspects of a restaurant's operations, including minimum age of
patrons and employees, hours of operation, advertising, wholesale purchasing,
inventory control and handling, storage and dispensing of alcoholic beverages.
The Company may be subject to "dram-shop" statutes that generally
provide a person injured by an intoxicated patron the right to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance.
Internet Division
In April 1999, the Company entered the Internet business by initiating
the development of a dedicated vertical food portal devoted to the food and
beverage industry. The food portal became operational on November 1, 1999. The
Web site is divided into three sections: Business-to-Consumer, Business-to-
Business, and Agri-Business.
<PAGE>
Business Model
The Company aims to create a comprehensive "portal" for food-related
Internet information and commerce. The Company believes that it can economically
create a Web site containing current and relevant content on all food-related
issues through co-branding arrangements. The Web site will derive revenue from
advertisements, sponsorships, and e-commerce generated through the Web site.
Business to Consumers
For consumers, the Web site offers current news on food and beverage
issues, featured daily recipes that include important health and nutrition
information, wine recommendations, and a recipe calculator to adjust recipe
ingredients for fewer or more servings. Consumers are also able to conduct a
recipe search from thousands of recipes, specifying a specific ingredient, a
specific category (American, Chinese, Italian, etc.) or by health restriction
such as vegetarian or low cholesterol.
The Web site also features two online help sections. For questions
concerning food and cooking, the Web site offers "Ask the Chef". This service
allows consumers to submit a question and receive an e-mail response within 48
hours from Chef Mark Coulton Pierce. For a question concerning the proper wine
to serve with specific food, consumers can submit questions to Sommelier Phillip
Silverstone of Restaurant Report.com in the "Ask a Wine Expert" section and
receive an email response within 48 hours.
On August 25, 1999, the Company entered into a three-year non-exclusive
license agreement with Culinary Cafe, whereby the Company could display and use
Culinary Cafe's proprietary database of financial, pictorial, and textural
information pertinent to the food business. The Company will pay Culinary Cafe a
monthly fee of $2,000 during the term of the agreement. The Company and Culinary
Cafe will equally divide the net advertising revenue generated.
On September 1, 1999, the Company entered into a three-year license and
co-branding agreement with CNN to establish a co-branded Web site accessible via
hyperlinks from the Foodvision portal. The Company will be the exclusive recipe
and special events provider for CNN Food Central and in return CNN provides the
Foodvision portal with food related news. The contract requires the Company to
pay a total of $3,600,000 over three years.
As of November 1999, the Company has paid a total of $ 225,000, with
the next payment of $225,000 due February 2000. In addition, the Company
receives 500,000 banner impressions per month and rate discounts on CNN
interactive advertising.
On October 29, 1999 the Company entered into an agreement with
Dinecore, Inc. to develop and license an Affiliate Restaurant Guide. The Company
and Dinecore, Inc. will equally divide net advertising revenue generated by the
guide during the agreement's 12 month term.
Business to Business
For food industry professionals, the Web site currently offers several
services designed to keep the professional updated and current on food industry
trends and business opportunities. The Web site contains a "Chef's Corner" that
allows members to find out what other chefs are doing and to keep up with the
latest industry trends and information.
On October 5, 1999, the Company entered into a license and co-branding
agreement with The Restaurant Report, Inc., whereby the parties will establish a
co-branded Web site accessible via hyperlink from the Foodvision portal. The
Company agreed to pay The Restaurant Report $3,000 per month during the first
year, $4,000 per month during the second year, and $5,000 per month during the
third year. In addition The Restaurant Report is entitled to receive 30,000
shares of restricted common stock of the Company. The Company will retain 100%
of the advertising revenue generated by the co-branded Web site.
<PAGE>
The Company intends to develop a Design-A-Restaurant concept with
features that allow members to virtually "build" their own restaurant from the
ground up. The program allows members to choose from a variety of restaurant
furniture and fixtures to decorate their own virtual restaurant. When completed,
members will be able to click on a select item and purchase the exact item from
pre-selected vendors. The Company anticipates that it will receive a percentage
of the furniture and fixture sales generated from the Design-A-Restaurant
feature.
Agri-Business
A section of the Internet portal is dedicated to the agricultural side
of the food business. Producers will be able to use the Web site to access
important information for their business such as current news, important
innovations and upcoming events. They will also be able to purchase a wide range
of machinery, seed and products to fulfill their specific agri-business needs.
The Company entered into a non-exclusive license and co-branding
agreement with eHarvest.com, Inc. whereby the parties will establish a
co-branded Web site accessible via hyperlink from the Foodvision portal. The
contract calls for the Company to provide eHarvest.com, Inc. with 30,000 shares
of restricted common stock of the Company. The Company will retain 100% of the
advertising revenue generated by the co-branded Web site.
Business Plan
The Company's business strategy incorporates the following key
elements:
* Build Company brand awareness and network traffic by using cross-media
exposure--television, radio and print media--through relationships with
established food professionals, and through television, radio and
newspaper advertising;
* Cultivate multiple revenue streams of sponsorship and advertising fees
and e-commerce revenues from its Internet Web site;
* Attract a growing base of customers to its Internet Web site and
provide a superior shopping experience by offering quality lines of
grocery items and food industry products and useful links to
informative food-related content on affiliates' Web sites;
* Increase users' return visits to its network through interactive
features;
* Expand international presence in order to establish its Internet Web
site as a global brand;
* Provide quality customer service and rapid product delivery through
fulfillment facilities; and
* Pursue additional complementary relationships.
The Company plans to continue to employ a virtual warehouse model based
on strategic relationships with high quality product suppliers. Through these
relationships, the Company intends to obtain exclusive online access to high
quality products. In return, the Company intends to provide suppliers with a
branding opportunity and increased sales through an expanded customer base. The
Company believes that these relationships will help ensure product supply,
minimize out of stock issues, and reduce the likelihood that suppliers will
switch to other online providers.
No assurance can be given that the Company will be able to effect any
aspects of its business plan or to maintain the operations that it has currently
established. The Company is currently operating at a loss and will need
additional capital--either through raising capital or through operations--to
meet its business goals. There is no assurance that the Company can reverse its
operating losses or that it can raise additional capital that will allow it to
expand its planned Internet operations.
<PAGE>
Marketing and Distribution
The Company's partnership program with other Web sites plays a key role
in driving traffic to its Foodvision.com Web site. The Company has established
key partnerships that it divides into four categories as follows:
1. Large Content or Shopping Web Sites. The Company intends to create
partnerships with content and commerce companies.
2. Co-Branded, E-Commerce. The Company has four co-branded, e-commerce
agreements to date. The Company estimates that this number will grow in the year
2000 as a result of the Company's marketing programs on the Web and the
identification and attainment of new co-branded, e-commerce Web sites.
3. Miscellaneous Partners. The Company intends to establish other partnerships
that help drive traffic and sales with various on-line businesses..
4. Print Media Partnerships. The Company intends to establish co-promotional
relationships with off-line media partners. This will represent an immediate
marketing opportunity for Foodvision.com because these publications can provide
Foodvision.com with significant additional advertising exposure in exchange for
the Company listing them on the Foodvision.com Web site.
Employees
As of November 22, 1999, the Company employed four people full time in
the Internet division. As of December 6, 1999, the Company's food division
employed approximately 100 persons. Of those employees, approximately 15 held
managerial positions, and the remainder were engaged in the operation of the
restaurants.
Trademarks and Licenses
The Company has registered the name "Dirty Bird Cafe" with the United
States Patent and Trademark Office. The Company believes that its right to the
name "Dirty Bird Cafe" is an integral and important factor in establishing the
identity of the Dirty Bird concept. The Company applied for trademark protection
for "Foodvision.com" which registration is pending. In addition, the Company
intends to take steps to ensure that applicable copyright laws protect its Web
pages and software, but to date has not filed for copyright protection for any
of its Web pages or software.
Property
The Company owns one building located at 1100 NorthPoint Drive,
Alpharetta, Georgia. There is no mortgage on the building; however, the building
is subject to a long-term land lease which expires in the year 2008. This
building is the location of a former Roasters that the Company intends to
convert to a Dirty Bird Cafe by September 2000. In addition to the above, the
Company leases eight pieces of property for restaurant use.
Legal Proceedings
Royal Food Services, Inc., vs. Restaurant North Atlanta, Inc., Superior
Court of DeKalb County Georgia. The plaintiff sued the Restaurant North Atlanta,
Inc., a second tier subsidiary of the Company, to recover amounts due for
produce supplied on open account from June 10, 1998 to October 9, 1998. The
parties resolved this dispute by entering into a settlement agreement dated July
14, 1999.
In 1999, the Company ceased operations at its Memorial Drive location
due to continued operational losses at that location. The landlord for the
location holds a judgment against the subsidiary that occupied the premises, but
the subsidiary does not have any material assets. Investco is the original
lessee under the lease, and therefore is liable for any deficiency thereunder.
However, the landlord has not sued Investco. The Company is not able to estimate
the amount of any potential liability of Investco.
<PAGE>
The Company has operated certain restaurants using the "Kenny Rogers
Roasters" name and related trade dress. The Company did not have an agreement to
use the mark and did not pay royalties for its use. The Company may be liable
for using the mark. The Company received a final demand letter dated October 14,
1999, threatening legal action if the Company did not immediately de-identify
its restaurants and discontinue use of any marks, system or trade dress
belonging to NF Roasters Corporation.
Description of Securities
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, $0.001 par value, of which 14,109,984 shares are
currently issued and outstanding. In addition, the Company is authorized to
issue 1,000,000 shares of nonvoting Preferred Stock, par value $0.10 per share,
of which none are outstanding.
Market for the Company's Securities
The common stock of Foodvision is traded in the over-the-counter or OTC
market and quoted through the OTC Bulletin Board under the symbol "FVSN." The
market for the common stock is characterized generally by low volume and broad
price and volume volatility. Foodvision cannot give any assurance that a stable
trading market will develop for its stock or that an active trading market will
be sustained. Moreover, the trading price of Foodvision's common stock could be
subject to wide fluctuations due to such factors as quarterly variations in
operating results, competition, announcements of new products by Foodvision or
its competitors, product enhancements by Foodvision or its competitors,
regulatory changes, differences in actual results from those expected by
investors and analysts, changes in financial estimates by securities analysts,
and other events or factors.
The Company has been a non-reporting publicly traded company with
certain of its securities exempt from registration under the Securities Act of
1933 pursuant to Rule 504 of Regulation D of the General Rules and Regulations
of the Securities and Exchange Commission. The Company's common stock is traded
on the NASD OTC Bulletin Board under the symbol FVSN. The Nasdaq Stock Market
has implemented a change in its rules requiring all companies trading securities
on the NASD OTC Bulletin Board to become reporting companies under the
Securities Exchange Act of 1934.
Foodvision acquired all the outstanding shares of Echelon to become
successor issuer to it pursuant to Rule 12g-3 in order to comply with the
Eligibility Rule for the OTC Bulletin Board.
The following table represents the trading history of the Company
common stock:
High Low Volume
July 9, 1999 0.687 0.437 53,600
August 27, 1999 0.450 0.375 128,700
October 1, 1999 0.562 0.375 200,600
November 26, 1999 0.687 0.531 596,200
December 31, 1999 0.593 0.468 635,200
February 3, 2000 0.625 0.375 561,100
Management
Name Age Position
Paul R. Smith 52 Chairman, President, Chief Executive Officer
Raj Kalra 36 Director, Chief Operating Officer, Chief
Internet Officer
Dr. Charles Sheehan 50 Director
George J. Smith 52 Financial Controller, Secretary
<PAGE>
All directors hold office until the next annual meeting of shareholders
or until their successors are duly elected and qualified. Officers serve at the
pleasure of the board of directors. Set forth below is a summary description of
the business experience of each director and officer of the Company.
Paul R. Smith serves as a director of the Company and is its President
and Chief Executive Officer. Mr. Smith has a business degree from the Richard
Ivey School of Business Administration, a Harvard affiliate. Mr. Smith has
extensive corporate business experience in the hotel and resort industry. From
1988 to present, Mr. Smith has been the Owner/President PRS Hospitality, Inc., a
management firm which specializes in tourism and hospitality consulting. PRS
Hospitality provided the services of Mr. Smith to Grandma Lee's USA, Inc. from
November 1993 to September 1995. During this period, Mr. Smith developed and
implemented a strategic plan for Grandma Lee's International, a 100-unit
Bakery/Restaurant chain in Canada, to finance and franchise its 20-year-old
concept into the US market. PRS Hospitality, Inc., also provided development and
marketing services to international clients in Japan, Taiwan, South Korea,
Singapore, Thailand, Malaysia, Australia, New Zealand, Great Britain, Germany,
France, Canada and the United States. From 1980 to 1987, Mr. Smith served as
President and Chief Operating Officer of York Hannover Amusements, Ltd. Mr.
Smith also acted as Co-Chairman of York Hannover Hotels, Ltd., a chain of 12
hotel properties consisting of Skyline and Sheraton brands. Mr. Smith is not
related to George Smith, the Company's Financial Controller.
Raj Kalra, serves as a director of the Company and is its Chief
Operating Officer/Chief Internet Officer. Mr. Kalra has a degree in Hotel and
Restaurant Management from Hotel Consult, Switzerland. Mr. Kalra has also
received certificates in accounting and retail operations with post degree
courses in business management, finance and computer science. Mr. Kalra is the
company's expert in restaurant design and management. Mr. Kalra has designed,
built, and managed a virtual shopping mall Web site called ShoppersCity.com. As
President of Westcliff Corporation from 1990 to 1994, Mr. Kalra managed eleven
food service operations. From 1987 to 1990, Mr. Kalra was President of Eastern
Canada for Grandma Lee's International. During his service with Grandma Lee's
International, Mr. Kalra managed the company's corporate restaurants and
negotiated property leases. Mr. Kalra received his food and beverage training
with Intercontinental Hotels.
Dr. Charles H. Sheehan, III. serves as a director of the Company. Dr.
Sheehan attended Douwid University from 1964-1965 and 1971- 1972 and received
his Bachelor of Science degree in Biology. He went on to Douwid Medical School
to receive his medical degree in 1976. From 1996 to present, Dr. Sheehan was the
CEO of Clinical Healthcare, Inc., a medical management company. In that
position, Dr. Sheehan managed two clinics in the Atlanta area. Prior to that,
Dr. Sheehan was a partner at Capital Billing, a medical billing company, from
1995 to 1999. He consulted with physicians with management issues and solutions.
During 1994 to 1996, Dr. Sheehan was the Director of Development at American
Health Choice, a small medical company in Irving, Texas. As director, he
assisted with the acquisition of various medical clinics in the Atlanta area.
George J. Smith, serves as Controller and Secretary of the Company. Mr.
Smith is a graduate in Business Administration from Columbus College, Columbus,
Georgia. Mr. Smith was Controller for Medical Packaging Technologies located in
Georgia. From 1992 to 1995, Mr. Smith was the Controller for Earth Group, Inc. a
manufacturing company located in Marietta, Georgia. From 1980 to 1992, Mr. Smith
was the Branch Controller for Fruehauf Corporation. Mr. Smith is not related to
Paul R. Smith, the Company's Chairman and Chief Executive Officer.
The Company has no audit, compensation or executive committees. There
is no key man life insurance on any director, officer, or control person.
Related Transactions
On December 7, 1997, Investco foreclosed its liens on four restaurants
owned by Atlanta Foodquest, LLC. Investco had acquired the notes and liens in
two separate transactions on November 24, 1997 and December 5, 1997. At the time
of the foreclosure, Messrs. Smith and Kalra controlled both Investco and Atlanta
Foodquest, LLC, the later through their ownership of Atlanta Roasters, Inc.
<PAGE>
On April 16, 1998, Investco International Management, Inc ("IMM")
purchased from Mr. Kalra the area franchise rights for Grandma Lee's for the
Quebec and Ottawa areas by assuming notes of $34,100 and $22,700, respectively.
On June 1, 1998, IMM purchased from Mr. Kalra all the outstanding stock of
Hillbilly Shack, Inc. by issuing a note for $22,114 and by assuming $9,032 in
liabilities. The note carries an interest rate of 8% per annum and monthly
payments of $2,000 began on November 15, 1999 and continue through April 15,
2001. As of December 31, 1998, the Company was indebted to Mr. Kalra for
$42,566.
On April 24, 1998, Messrs. Smith and Kalra, two directors of the
Company, personally guaranteed a real estate lease for a restaurant location in
Powder Springs, Georgia. The personal guarantee was limited to a term of 12
months and a maximum liability of $15,000.
On July 14, 1998, the Company acquired all of the common stock of
Investco in consideration for the issuance of 182,100 shares of common stock.
Messrs. Smith and Kalra each owned 50% of the outstanding common stock of
Investco prior to its acquisition by the Company, and therefore each acquired
91,050 shares of Common Stock of the Company in connection with the transaction.
At the time the Company acquired Investco, Messrs. Smith and Kalra did not have
any affiliation with the Company, and therefore the Company's purchase of
Investco was an arms-length transaction. In connection with the acquisition of
Investco, the Company's board of directors and all but one director resigned and
Messrs. Smith and Kalra were appointed to fill the vacant positions.
On July 15, 1998, the Company agreed to pay a note owed by Mr. Kalra by
issuance of 30,400 shares of common stock valued at $15,200.
On July 28, 1998, Messrs. Smith and Kalra personally guaranteed a
promissory note to Charter Bank & Trust Co. in the original amount of $12,500.
This note has since been paid in full.
On August 31, 1999, the Company granted stock warrants to a managerial
employee of the Company to purchase 200,000 shares of common stock of the
Company with an exercise price of $0.375 per share, which is equal to the
closing bid price for the Company's common stock on that date. The employee is
the son of Paul R. Smith, the Company's chairman and chief executive officer.
Executive Compensation
No officers of the Company earned more than $100,000 a year during any
of the last three fiscal years.
RISK FACTORS
Foodvision is currently operating at a loss. Foodvision incurred net
losses for the years ended December 31, 1998 and 1997 of ($645,424) and
($114,526) respectively and during the nine months ended September 30, 1999,
the Company reported a net loss of ($918,971). The Company's increased net loss
was the result the continued deterioration of operations at its former Roasters
restaurants, startup costs associated with two new Dirty Bird Cafe restaurants
which the Company opened in July 1999 and October 1999, and costs associated
with the formation of the Company's Internet division. If losses continue, the
Company may need to raise additional capital through the placement of its
securities or from debt or equity financing. If the Company is not able to raise
such financing or obtain alternative sources of funding, management will be
required to curtail operations.
Limited History of Operations. Foodvision has only a limited history of
operations in its Internet operations. Its Internet operations are subject to
the risks and competition inherent in the establishment of a relatively new
business enterprise in a highly competitive field. There can be no assurance
that future operations will be profitable. Revenues and profits, if any, will
depend upon various factors. There is no assurance that the Company will achieve
its expansion goals and the failure to achieve such goals would have an adverse
impact on it.
<PAGE>
Foodvision May Need Additional Financing. Future events, including the
problems, delays, expenses and difficulties frequently encountered by companies
may lead to cost increases that could make the Company's source of funds
insufficient to fund the Company's proposed operations. The Company may seek
additional sources of capital, including an additional offering of its equity
securities, an offering of debt securities or obtaining financing through a bank
or other entity. The Company has not established a limit as to the amount of
debt it may incur nor has it adopted a ratio of its equity to a debt allowance.
If the Company needs to obtain additional financing, there is no assurance that
financing will be available, from any source, or that it will be available on
terms acceptable to the Company, or that any future offering of securities will
be successful. The Company could suffer adverse consequences if it is unable to
obtain additional capital when needed.
The Company has entered into certain agreement which Have Payment
obligation. Foodvision has entered into an agreement with CNN to establish a
co-branded Web site. Pursuant to this agreement, Foodvision is required to pay a
total of $3,600,000 over the next three years with $225,000 due in February,
2000. If Foodvision is not able to make this payment or to negotiate an
extension thereof, then its anticipated Internet development will be delayed.
The Company has entered into other agreements which also require payments in the
near future. Any failure of the Company to make such payments or to obtain
extensions thereof, could severally impede the Company's development of its
Internet activities.
Foodvision is subject to Risks in Operation of its Restaurants. Each
restaurant is subject to licensing and regulation by a number of governmental
authorities, which include alcoholic beverage control and health, safety and
fire agencies in the state, county and municipality in which the restaurant is
located. Difficulties or failures in obtaining the required licenses or
approvals could delay or prevent the opening of a new restaurant in a particular
area. The Company may be subject to "dram-shop" statutes that generally provide
a person injured by an intoxicated patron the right to recover damages from an
establishment that wrongfully served alcoholic beverages to the intoxicated
person. The Company carries liquor liability coverage as part of its existing
comprehensive general liability insurance. In addition, the Company would be
subject to liability for any unforeseen consequences involved in selling food to
the public, including possible claims of spoiled or bad food, unsafe or sanitary
food preparation or service or other possible claims. The Company does not have
any such claims pending and takes all reasonable steps to ensure no such actions
will occur but there can be no guarantee that such an event may occur.
Lack of Continued Development of E-commerce Market. The use of the
Internet and the World Wide Web for commercial purposes is expanding
dramatically. There is no assurance, however, that as increased commerce takes
place on the Internet that unforeseen overloads, lack of sufficient hardware,
telephone availability or other problems may develop. In addition, consumer use
of the Internet for purchases, banking, and other commercial uses may decline
for any number of reasons such as security problems, overload difficulties,
shopping trends, or slow Internet access. These difficulties may undermine
Company's expansion and promotional efforts. There is no assurance that the
Company will be able to successfully overcome these difficulties and maintain
its competitive pricing and services.
Failure to Attract Qualified Personnel. A change in labor market
conditions that either further reduces the availability of employees or
increases significantly the cost of labor could have a material adverse effect
on the Company's business, financial condition and results of operations.
Foodvision's business is dependent upon its ability to attract and retain highly
sophisticated research and development personnel, business administrators and
corporate management. There is no assurance that it will be able to employ a
sufficient number of such personnel in order to accomplish its growth
objectives.
Issuance of Future Shares May Dilute Investors Share Value. The
Certificate of Incorporation of the Company authorizes the issuance of
50,000,000 shares of common stock and 1,000,000 shares of preferred stock. The
future issuance of all or part of the remaining authorized common or preferred
stock may result in substantial dilution in the percentage of the Company's
common stock held by the its then existing shareholders. Moreover, any common
stock issued in the future may be valued on an arbitrary basis by the Company.
The issuance of the Company's shares for future services or acquisitions or
other corporate actions may have the effect of diluting the value of the shares
held by investors, and might have an adverse effect on any trading market,
should a trading market for the Company's common stock develop.
<PAGE>
Shares Available For Future Sale. The market price of Foodvision common
stock could drop if substantial amounts of shares are sold in the public market
or if the market perceives that such sales could occur. A drop in the market
price could adversely affect holders of the stock and could also harm
Foodvision's ability to raise additional capital by selling equity securities.
Foodvision has outstanding options and warrants, including convertible
redeemable debentures exercisable at a price below that of the market price. The
exercise of these warrants and options or conversion of such debentures at a
price less than the market price would dilute the value of outstanding shares
and depressive the market price. In addition, the perception that these
instruments may be exercised for or converted into common stock that could be
sold into the public market could adversely affect the market price of
Foodvision's common stock. In addition, shares issued by Foodvision in private
transactions over the past two years will become eligible for sale into the
public market under SEC Rule 144.
Penny Stock Regulation. The Company's common stock may be deemed to be
a penny stock. Penny stocks generally are equity securities with a price of less
than $5.00 per share other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system. The Company's securities may be subject to
"penny stock rules" that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the transaction,
of a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. Consequently, the
"penny stock rules" may restrict the ability of broker-dealers to sell the
Company's securities. The foregoing required penny stock restrictions will not
apply to the Company's securities if such securities maintain a market price of
$5.00 or greater. There can be no assurance that the price of the Company's
securities will reach or maintain such a level.
Foodvision may not be able to protect its trade or service marks.
Management cannot be certain that it will be able to prevent the
misappropriation of Foodvision's trade or service marks.
Computer Systems Redesigned for Year 2000. Many existing computer
programs use only two digits to identify a year in such program's date field.
These programs were designed and developed without consideration of the impact
of the change in the century for which four digits will be required to
accurately report the date. If not corrected, many computer applications could
fail or create erroneous results in or following the year 2000 (the "Year 2000
problem"). Many of the computer programs containing such date language problems
have been corrected by the companies or governments operating such programs. The
Company's operations are dependent upon the properly functioning computer
equipment which may fail because of such Year 2000 problems. The Company does
not know what steps, if any, have been taken by any of its business partners in
regard to the Year 2000 problems. The Company's operations will be severally
curtailed if one or more of its business partners were to suffer Year 2000
problems. Furthermore, it is impossible to predict if the basic utilities
serving the Company will continue uninterrupted.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
<PAGE>
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, the Company elected to become the successor
issuer to Echelon for reporting purposes under the Securities Exchange Act of
1934 and elects to report under the Act effective February 4, 2000.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The sole officer and director of Echelon resigned effective upon
completion of the Acquisition.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements for Foodvision.com, are included
herewith:
Audited Balance Sheet, Income Statement, Statement of Cash Flows and
Statement of Changes in Stockholder's Equity for the Company for the
fiscal year ended December 31, 1998, and the fiscal years ended
December 31, 1997 and 1998.
Unaudited Balance Sheet, Consolidated Statement of Operations, and
Consolidated Statement of Cash Flows for the period ended September 30,
1999.
On December 7, 1999, Investco acquired four restaurants by foreclosure.
Prior to the acquisition of the restaurants, Investco had not conducted active
operations, and had minimal assets. Therefore, Investco's acquisition of the
restaurants was a significant acquisition for Investco. Investco has accounted
for the acquisition of the restaurants under the purchase method of accounting,
and therefore has only included the accounts of the restaurants in its financial
statements from the date of their acquisition, or December 7, 1997.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
EXHIBITS
*2.1. Agreement and Plan of Reorganization between Foodvision.com, Inc. and
Echelon Acquisition Corporation, dated February 4, 2000.
**27.1. Financial Data schedule.
- -------
* Previously filed
**To be filed by amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
FOODVISION.COM, INC.
By
-------------------------
Paul R. Smith
President
<PAGE>
Audited Balance Sheet, Income Statement, Statement of Cash Flows and Statement
of Changes in Stockholder's Equity for the Company for the fiscal year ended
December 31, 1998, and the fiscal years ended December 31, 1997 and 1998.
FOODVISION.COM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
FOODVISION.COM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
Independent Auditors' Report 1
Consolidated Financial Statements
Consolidated Balance Sheet 2-3
Consolidated Statement of Operations 4
Consolidated Statements of Changes in Stockholders' Equity 5-6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Foodvision.com, Inc.
We have audited the accompanying consolidated balance sheet of Foodvision.com,
Inc. as of December 31, 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the two years
then ended. 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 the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 Foodvision.com, inc.
as of December 31, 1998, and the results of its operations and its cash flows
for the two years then ended, in conformity with generally accepted accounting
principles.
/s/ HLB Gross Collins, P.C.
Atlanta, Georgia
November 23, 1999
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 44,208
Accounts receivable 2,790
Inventories 34,978
Prepaid expenses and other current assets 9,825
--------
TOTAL CURRENT ASSETS
91,801
--------
PROPERTY AND EQUIPMENT, at cost
Equipment under capital leases 213,455
Furniture, fixtures, and equipment 92,962
Vehicle 29,388
Leasehold improvements 31,867
--------
367,672
Less accumulated depreciation (88,946)
--------
PROPERTY AND EQUIPMENT, net 278,726
--------
OTHER ASSETS
Loan receivable, officer 42,566
Franchise agreement and other intangibles, net of accumulated
amortization of $24,165 416,251
Deposits 11,382
--------
TOTAL OTHER ASSETS 470,199
TOTAL ASSETS $840,726
--------
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $168,390
Accrued expenses 31,854
Notes payable, short-term 87,500
Other current liabilities 34,116
Notes payable, related parties 9,584
Current portion of note payable 3,223
Current portion of notes payable, related parties 42,602
Current portion of capital lease obligations 23,888
--------
TOTAL CURRENT LIABILITIES 401,157
--------
LONG-TERM DEBT
Note payable, less current portion 18,165
Notes payable, related parties, less current portion 19,512
Capital lease obligations, less current portion 170,442
Deferred lease obligations 14,595
--------
TOTAL LONG-TERM DEBT 222,714
--------
TOTAL LIABILITIES 623,871
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 50,000,000 shares authorized,
30,056,469 shares issued and outstanding 30,056
Additional paid-in capital 944,964
Accumulated deficit (759,950)
Accumulated other comprehensive income 1,785
--------
TOTAL STOCKHOLDERS' EQUITY 216,855
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $840,726
--------
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1998 and 1997
Years Ended December 31,
------------------------
1998 1997
---- ----
REVENUES
Beverage and food sales $2,004,856 $ 142,084
Other revenues 8,088 -
---------- ---------
TOTAL REVENUES 2,012,944 142,084
---------- ---------
COSTS AND EXPENSES
Cost of goods sold 758,910 65,566
General and administrative expense 1,720,392 181,577
Depreciation 81,376 7,725
Amortization 72,815 -
Interest 24,875 1,742
---------- ---------
TOTAL COSTS AND EXPENSES 2,658,368 256,610
---------- ---------
NET LOSS $ (645,424) $(114,526)
---------- ---------
NET LOSS PER COMMON SHARE $ (0.05) $ (0.57)
---------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,394,056 200,000
---------- ---------
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Subscription Accumulated Comprehensive Stockholders'
Stock Capital Receivable Deficit Income Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ -- $ -- $ -- $ -- $ -- $ --
Common stock issued 20 -- -- -- -- 20
Net loss for 1997 -- -- -- (114,526) -- (114,526)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1997 20 -- -- (114,526) -- (114,506)
Exchange of shares of common
stock to effect reverse
acquisition and recapitalization 24,273 (5,324) (100,000) -- -- (81,051)
Collection of subscription
receivable -- -- 100,000 -- -- 100,000
Issuance of common stock
Common stock issued in settlement 100 80,951 -- -- -- 81,051
of stockholder loan
Common stock issued to purchase 870 433,930 -- -- -- 434,800
franchise agreements
Common stock issued to pay note 30 15,170 -- -- -- 15,200
in behalf of officer
Common stock issued for legal 50 24,950 -- -- -- 25,000
services
Other common stock issued 250 24,750 -- -- -- 25,000
Common stock issued in conversion 4,463 370,537 -- -- -- 375,000
of debentures
</TABLE>
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Subscription Accumulated Comprehensive Stockholders'
Stock Capital Receivable Deficit Income Equity
<S> <C> <C> <C> <C> <C> <C>
Net loss for 1998 -- -- -- (645,424) -- (645,424)
Foreign currency translation -- -- -- -- 1,785 1,785
adjustments ------- -------- ------ --------- ------ --------
Balance at December 31, 1998 $30,056 $944,964 $ -- $(759,950) $1,785 $216,855
------- -------- ------ --------- ------ --------
</TABLE>
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(645,424) $(114,526)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation and amortization 154,191 7,725
Common stock issued for services 25,000 -
Revenues applied to acquisition (14,553) -
Loss on disposal of assets - 3,000
Changes in assets
(Increase) in accounts receivable (744) (2,046)
Decrease in inventories 4,499 664
(Increase) decrease in prepaid expenses 21,685 (22,935)
(Increase) in deposits and other assets (11,382) -
Changes in liabilities
Increase in accounts payable 64,293 98,967
Increase in accrued expenses 13,638 18,216
Increase in other current payables 21,689 8,525
Increase in deferred lease obligations 14,595 -
--------- --------
NET CASH (USED) BY OPERATING ACTIVITIES (352,513) (2,410)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (83,387) -
Loans to stockholder (27,366) -
-------- --------
NET CASH (USED) BY INVESTING ACTIVITIES (110,753) -
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances from related parties 8,121 1,463
Collection of subscription receivable 100,000 20
Proceeds from sale of common stock 25,000 -
Proceeds from notes payable 392,775 -
Repayments of capital lease obligations (14,661) (4,464)
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 511,235 (2,981)
-------- --------
EFFECT OF EXCHANGE RATES ON CASH 1,630 -
-------- --------
NET INCREASE (DECREASE) IN CASH 49,599 (5,391)
CASH, BEGINNING OF YEAR (5,391) -
-------- --------
CASH, END OF YEAR $ 44,208 $ (5,391)
-------- --------
</TABLE>
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 14,084 $ 1,531
-------- -------
Schedule of noncash investing and financing transactions
transactions:
Acquisition of Atlanta Roasters, Inc.'s security interest in the
personal property of Atlanta Foodquest, LLC by issuance of
promissory note $40,000
Capital lease obligations assumed for use of equipment 213,455
Acquisition of vehicle
Cost of vehicle $ 29,388
Vehicle note payable (21,388)
Cash down payment for vehicle $ 8,000
Acquisition of all the common stock of 1067063 Ontario, Inc.
Fair value of assets acquired $ 31,146
Liabilities assumed 9,032
Promissory note issued 22,114
Reverse acquisition recorded at historical cost
Net book value of assets acquired (81,051)
Common stock issued in settlement of stockholder loan 81,051
Common stock issued for legal services 25,000
Acquisition of franchise agreements and other intangibles and all
the common stock of Grandma Lee's USA Northpoint, Inc. by
issuance of common stock 434,800
Common stock issued to pay note in behalf of officer 15,200
Acquisition of equipment financed with an equipment note 12,500
Conversion of debentures to common stock 375,000
</TABLE>
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(1) Nature of business and organization
Foodvision.com, Inc. (the "Company") (formerly known as Mark I Industries, Inc.,
Sunmark Industries I, Inc., Pacific Pharmaceuticals, Inc., Heavenly Slender
Foods, Inc., and Heavenly Slender Sweets, Inc.) is a Delaware corporation whose
operations consist primarily of operating fast food and full service restaurants
in the metropolitan Atlanta, Georgia, area through its wholly owned subsidiaries
Investco Corporation ("IC") (formerly known as Anne Ryan, Inc.), Restaurant
North Atlanta, Inc. ("RNA"), Sports Cantina One, Inc. ("SCO"), Sports Cantina
Two, Inc. ("SCT"), and Grandma Lee's USA Northpoint, Inc. ("GLUN") and in
Ontario, Canada, through its wholly-owned subsidiaries Investco International
Management, Inc. ("IIM") (formerly known as 1230471 Ontario, Inc.) and 1067063
Ontario, Inc., d/b/a Hillbilly Shack ("HS").
On July 14, 1998, Mark I Industries, Inc. ("MII") (now known as Foodvision.com,
Inc.) entered into an Agreement and Plan of Share Exchange (the "Agreement")
with IC. Pursuant to terms of the Agreement, MII effected a reverse acquisition
by acquiring all of the issued and outstanding stock of IC which became a wholly
owned subsidiary of MII. For accounting purposes, IC is deemed to be the
acquiring corporation and, therefore, the transaction is being accounted for as
a reverse acquisition of the Company by IC at historical cost. IC was
incorporated on May 9, 1996, but had no significant operations until December 7,
1997, when it acquired four restaurants. The accompanying financial statements
reflect the financial position and results of operations of IC.
(2) Summary of significant accounting policies
The following is a summary of significant accounting policies followed by the
Company.
Cash and cash equivalents - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.
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 amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of consolidation - The consolidated financial statements include the
accounts of the Company and five wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(2) Summary of significant accounting policies (continued)
Inventories - Inventories consist of liquor, wine, beer, and food items.
Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method.
Depreciation and amortization - Property and equipment are stated at cost.
Depreciation is provided using an accelerated method for equipment, furniture
and fixtures, and vehicles over the assets' estimated useful lives as follows:
equipment, furniture and fixtures, seven years; vehicles, five years. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful lives of the improvements. Equipment under capital lease obligations is
being depreciated over the seven-year lease terms.
Intangibles - Franchise agreements and the AT&T service agreement are amortized
over the terms of the agreements from 65 months to 120 months. Purchase goodwill
is amortized over 65 months. Costs related to the issuance of subordinated
debentures are amortized over the one-year life of the debentures.
Measurement of impairment - At each balance sheet date, the Company reviews the
amount of recorded goodwill and franchise agreements (separately by location)
for impairment. Whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable out of undiscounted future
operating cash flows and the sum of the expected cash flows from these assets is
less than the carrying amount of these assets, the Company will recognize an
impairment loss in such period in the amount by which the carrying amount of the
assets exceeds the fair value of the assets.
Repairs and maintenance - Normal costs incurred to repair and maintain fixed
assets are charged to operations as incurred. Repairs and betterments which
extend the life of an asset are capitalized and subsequently depreciated on a
straight-line basis over the remaining useful life of the asset. When assets are
sold or retired, the cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in operations.
Income taxes - Income taxes are provided based on earnings reported in the
financial statements. The Company follows Statement of Financial Accounting
Standards No. 109 whereby deferred income taxes are provided on temporary
differences between reported earnings and taxable income. Deferred tax
liabilities and assets are recognized for the tax effects of differences between
the financial statement and tax bases of assets and liabilities. A valuation
allowance is established to reduce deferred tax assets if it is more likely than
not that a deferred tax asset will not be realized.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(2) Summary of significant accounting policies (continued)
Basic and diluted loss per common share - In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128 ("SFAS 128"), "Earnings Per Share" ("EPS"), which the Company has
adopted. Basic EPS is calculated by dividing the income (loss) available to
common stockholders by the weighted average number of common shares outstanding
for the period without consideration for potentially dilutive securities.
"Diluted" EPS is determined similarly to fully diluted EPS under the provisions
of APB Opinion No. 15.
For all periods presented in the Consolidated Statements of Operations, the
effect of including convertible debentures would have been antidilutive.
Accordingly, basic and diluted EPS for all periods presented are equivalent.
Advertising costs - Advertising costs are expensed as incurred. Total
advertising costs were $83,520 and $15,748 in 1998 and 1997, respectively.
Foreign currency translation - The financial statements of a foreign subsidiary
have been translated into U.S. dollars in accordance with Financial Accounting
Standards Board Statement No. 52, "Foreign Currency Translation." All balance
sheet accounts have been translated using the exchange rate in effect at the
balance sheet date. Income statement amounts have been translated using an
average exchange rate for the period. The gains and losses resulting from the
changes in exchange rates from year to year are reported separately as a
component of stockholders' equity.
Recent accounting pronouncements - In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income." The new
standard discusses how to report and display comprehensive income and its
components. This standard is effective for years beginning after December 15,
1997. The adoption of this statement did not have a material impact on the
presentation of the Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." This
standard requires enterprises to report information about operating segments,
their products and services, geographic areas, and major customers. This
standard is effective for years beginning after December 15, 1997.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(2) Summary of significant accounting policies (continued)
Financial instruments - Financial instruments which potentially subject the
Company to concentrations of risk consist principally of temporary cash
investments and accounts receivable. The Company invests its temporary cash
balances in financial instruments of highly rated financial institutions with
maturities of less than three months. The carrying values reflected in the
balance sheet reasonably approximate the fair values for cash, accounts
receivable, payables, accruals and debt.
(3) Business combinations, acquisitions, and dispositions
On July 14, 1998, the Company effected a reverse acquisition by acquiring all of
the issued and outstanding stock of IC from the stockholders of IC in exchange
for 18,210,000 restricted shares of its $0.001 par value common stock. As a
result of the Agreement, IC became a wholly owned subsidiary of the Company. For
accounting purposes, IC is deemed to be the acquiring corporation and,
therefore, the transaction is being accounted for as a reverse acquisition of
the Company by IC at historical cost. Prior to July 14, 1998, MII had
insignificant operations in 1997 and 1998.
On August 27, 1997, the stockholders' of IC purchased 100% of the stock of
Atlanta Roasters, Inc. ("AR"), which owned a 50.1% equity interest in Atlanta
Foodquest, LLC ("AF"), the Operating Agreement between AR and Foodquest, Inc.
appointing AR manager of AF, and a note in the original principal amount of
$1,100,000 secured by the furniture, equipment, personal property, and inventory
of two of the Kenny Rogers Roasters Restaurants owned by AF. On August 29, 1997,
AR assigned the portions of the Operating Agreement appointing AR manager of AF
to IC. On November 24, 1997, IC purchased a 49.9% equity interest in AF and a
note in the original principal amount of $1,300,000 secured by the furniture,
equipment, personal property, and inventory of two of the Kenny Rogers Roasters
Restaurants owned by AF for $40,000. On December 5, 1997, IC purchased AR's
security interest in the personal property of AF for $40,000. On December 7,
1997, IC enforced its secured claims and took possession of the assets of AF and
transferred them to its wholly owned subsidiaries, Restaurant North Atlanta,
Inc. and Restaurant Stockbridge, Inc. On December 7, 1997, IC sold its 49.9%
equity interest in Atlanta Foodquest, LLC to 1278129 Ontario, Inc., a Canadian
corporation, for $10 and other good and valuable consideration. On December 31,
1997, IC sold its 100% equity interest in Restaurant Stockbridge, Inc. to the
same Canadian corporation for $10 and other good and valuable consideration. IC
continued to operate Restaurant Stockbridge, Inc. during the first quarter of
1998 until it could be closed.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(3) Business combinations, acquisitions, and dispositions (continued)
On April 16, 1998, IIM purchased from an officer and major stockholder of the
Company the area franchise rights for Grandma Lee's for the Quebec and Ottawa
areas by assuming notes of $34,100 and $22,700, respectively. On July 15, 1998,
the Company purchased the Grandma Lee's metropolitan Atlanta franchise rights,
Midtown Atlanta franchise agreement, AT&T service agreement, and all the
outstanding stock of GLUN for 756,000 shares of the Company's common stock
valued at $0.50 per share. GLUN operates a cafeteria at the AT&T office center
in Alpharetta, Georgia.
On June 1, 1998, IIM purchased from an officer and major stockholder of the
Company all the outstanding stock of HS by issuing a note of $22,114 and by
assuming $9,032 in liabilities. HS operates a restaurant in Renfrew, Ontario.
Financial statements for the businesses acquired are not available for periods
prior to acquisition and, therefore, pro forma financial information is not
presented.
(4) Franchise agreements and other intangibles
Franchise agreements and other intangibles consist of the following:
<TABLE>
<CAPTION>
Amortizable
Life
<S> <C> <C>
Grandma Lee's Quebec Area Franchise Agreement 111 months $ 34,100
Grandma Lee's Ottawa Area Franchise Agreement 111 months 22,700
Grandma Lee's Metropolitan Atlanta Area Franchise Agmt. 120 months 278,000
AAAAgreement
Grandma Lee's Midtown Atlanta Franchise Agreement 92 months 75,000
Grandma Lee's AT&T Service Agreement 65 months 25,000
Goodwill - Grandma Lee's USA Northpoint, Inc. 65 months 5,616
--------
Total 440,416
Accumulated amortization (24,165)
--------
Net intangibles $416,251
--------
</TABLE>
The Company measures the potential impairment of recorded goodwill and franchise
agreements by the undiscounted value of expected future operating cash flows in
relation to its net capital investment.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(4) Franchise agreements and other intangibles (continued)
The aggregate amortization of goodwill and franchise agreements charged to
operations was $24,165 for the year ended December 31, 1998.
(5) Notes payable
Short-term notes payable consist of the following:
1998
3% Series B Senior Subordinated Convertible Redeemable
Debentures - due in monthly installments of interest only
through November 18, 1999, at which time a final
payment of unpaid principal is due. Interest is computed at
3% per annum. The debenture is convertible into shares of $ 75,000
the Company's common stock at a conversion price of
75% of the average closing bid price of the common stock
for either five trading days before or five trading days after
the conversion date.
Note payable to Charter Bank & Trust Co. - due on
October 1, 1998, bearing interest at prime plus 1%.
Secured by equipment. The note was in default at 12,500
December 31, 1998. --------
Total short-term notes $ 87,500
--------
Costs related to the placement of the subordinated debentures totaling $48,650
were charged to expense in 1998 and $8,575 of such costs is included in other
current assets at December 31, 1998, and is being amortized over the life of the
remaining debenture.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(5) Notes payable (continued)
Note payable, long-term consisted of the following at December 31, 1998:
1998
Note due in monthly installments of $547, including
interest at 18% per annum through November 15, 2003. $ 21,388
Secured by automobile.
Less current portion (3,223)
--------
Noncurrent portion $ 18,165
--------
Maturities of the note payable are as follows:
Years ending
December 31, Amount
1999 $3,223
2000 3,583
2001 4,283
2002 5,121
2003 5,178
------
Total 21,388
------
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(5) Notes payable (continued)
Notes payable, related parties consisted of the following at December 31, 1998:
1998
Promissory note due to Atlanta Roasters, Inc., a Company
owned by two officers, bearing interest at 8% per annum,
with all principal and interest payable on December 5, $40,000
1999
Promissory note due in monthly principal installments of
$1,300, beginning November 15, 1999 through November 15, 22,114
2003, bearing 8% interest. -------
Total note payable, related parties 62,114
Less current portion (42,602)
-------
Noncurrent portion $19,512
-------
Maturities of note payable, related parties are as follows:
Years ending
December 31, Amount
1999 $42,602
2000 15,612
2001 3,900
-------
Total 62,114
-------
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(6) Capital lease obligations
Capital lease obligations consist of the following:
Captec Financial Group, Inc. - due in monthly installments
of $1,160 including interest at 8.729% per annum through $81,835
October 31, 2004. Secured by equipment.
Captec Financial Group, Inc. - due in monthly installments
of $1,837 including interest at 8.729% per annum through 112,495
October 31, 2004. Secured by equipment.
Total capital lease obligations 194,330
--------
Less current portion (23,888)
--------
Noncurrent portion $170,442
--------
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(6) Capital lease obligations (continued)
The minimum annual commitments under the leases are as follows:
Years ending December 31, Amount
1999 $43,128
2000 35,972
2001 35,972
2002 35,972
2003 35,972
2004 74,077
--------
Total minimum lease payments 261,093
Less amount representing interest (66,763)
--------
Present value of net minimum $194,330
--------
lease payments
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(7) Stockholders' equity
Potential issuance of additional preferred stock - The Company is authorized to
issue up to 1,000,000 shares of preferred stock, the rights and preferences of
which may be designated in series by the Board of Directors. To the extent of
such authorization, such designations may be made without stockholder approval.
On July 14, 1998, the Company effected a reverse acquisition by acquiring all of
the issued and outstanding stock of IC in exchange for 18,210,000 restricted
shares of the Company's common stock.
In July, 1998, the Board of Directors approved the issuance of shares of common
stock as follows: 100,000 shares in settlement of a pre-reverse acquisition
shareholder loan of $81,051; 50,000 shares as payment for legal services valued
at $25,000; 30,400 shares to pay a note on behalf of an officer; 113,600 shares
in payment of debt assumed to acquire franchise agreements; and 756,000 shares
to purchase franchise agreements valued at $378,000.
In October and November 1998, the Company issued convertible debentures totaling
$450,000 of which $375,000 was converted to 4,462,987 shares of common stock as
of December 31, 1998.
(8) Income taxes
The accompanying consolidated financial statements contain no provision for
income taxes due to net operating losses. The effective tax rate differs from
the U.S. statutory federal income tax rate of 34 percent since tax benefits have
been offset by the valuation allowance described below because of the
uncertainty of the Company's ability to utilize them in future periods.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(8) Income taxes (continued)
The tax effects of temporary differences related to deferred taxes were:
1998
Deferred tax assets
Net operating loss carry forwards $225,859
Tax over book basis of fixed assets 2,284
Leases with scheduled rent increases 4,962
Total 233,105
--------
Valuation allowance (233,105)
--------
Net deferred tax assets $ -
--------
As of December 31, 1998, the Company had approximately $664,000 of unused
operating loss carryforwards which expire by December 31, 2018.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(9) Lease commitments
The Company leases office space, restaurant locations, and various equipment
under operating leases.
The minimum annual commitments under the leases with remaining lease terms of
one year or more are as follows:
Years ending Amount
December 31,
1999 $268,035
2000 272,509
2001 273,630
2002 254,213
2003 159,303
Thereafter 688,199
----------
Total $1,915,889
----------
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(9) Lease commitments (Continued)
The Company is contingently liable on a lease agreement for its Midtown Atlanta
franchisee that expires December 31, 2005.
Rent expense of $180,268 and $18,521 was charged to operations in 1998 and 1997,
respectively.
(10) Potential litigation
The Company has operated certain restaurants using the "Kenny Rogers Roasters"
name and related trade dress. The Company did not have an agreement to use the
mark and did not pay royalties for its use. The Company may be liable for using
the mark. It is not possible to quantify the amount for which the Company may be
liable. The Company received a final demand letter dated October 14, 1999,
threatening legal action if the Company did not immediately de-identify its
restaurants and discontinue use of any marks, system or trade dress belonging to
NF Roasters Corporation. The Company may have defenses and offsets to any such
claim.
The Company has received demand letters from an attorney representing a
stockholder relating to the failure of the Company to deliver to the stockholder
100,000 shares of its common stock (now 1,000 shares after giving effect to
subsequent reverse stock splits) pursuant to a settlement reached in July 1998
of an account payable to the stockholder of $81,051. The Company refused to
deliver shares since the Company believes that the stockholder, or associates
thereof, have possession of corporate records and documents, which constitute
property of the Company.
(11) Related party transactions
On August 29, 1997, AR, a company owned by the stockholders of IC, assigned
portions of the Operating Agreement of AF to IC. On December 5, 1997, IC
purchased AR's security interest in the personal property of AF for $40,000.
On April 16, 1998, IIM purchased from an officer and major stockholder of the
Company the area franchise rights for Grandma Lee's for the Quebec and Ottawa
areas by assuming notes of $34,100 and $22,700, respectively. On June 1, 1998,
IIM purchased from the same officer and major stockholder all the outstanding
stock of HS by issuing a note of $22,114 and by assuming $9,032 in liabilities.
On April 24, 1998, two officers of the Company personally guaranteed a real
estate lease for a restaurant location in Marietta, Georgia.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(11) Related party transactions (continued)
On July 15, 1998, the Company agreed to pay a note owed by an officer and major
shareholder of the Company by issuance of 30,400 shares of common stock valued
at $15,200. This amount is reflected on the balance sheet at December 31, 1998,
as a receivable due from officer.
On July 28, 1998, two officers of the Company personally guaranteed a promissory
note to Charter Bank & Trust Co. in the original amount of $12,500.
(12) Business segment
The restaurant business is the only business operated by the Company. Geographic
information is as follows:
<TABLE>
<CAPTION>
Revenues Long-Lived Assets
For the year ended As of
December 31, December 31,
1998 1997 1998
<S> <C> <C> <C>
United States $1,931,288 $ 142,084 $ 620,173
Canada 81,656 -- 74,804
Total $2,012,944 $ 142,084 $ 694,977
---------- ---------- ----------
</TABLE>
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(13) Subsequent events
Business developments
On April 7, 1999, the Company purchased certain assets of a restaurant known as
Broadway Steaks & Fries in Union City, Georgia, for a purchase price of $15,000.
Subsequently, the Company closed the restaurant and is considering redevelopment
alternatives.
On April 9, 1999, the Company sold the common stock of SCO. However, the
purchaser failed to make timely payments on the purchase note and the Company
took repossession of the restaurant operated by SCO on July 30, 1999.
Subsequently, the restaurant was closed.
In May, 1999, the Company opened a new restaurant, Dirty Bird Cafe, in Marietta,
Georgia.
On June 21, 1999, the Company entered into a lease agreement for a second Dirty
Bird Cafe location in Marietta, Georgia. The lease agreement provides for
monthly base rent payments which escalate over the 62-month term of the lease
and percentage rent of 5% of gross receipts. On August 5, 1999, the Company
purchased equipment with a purchase price of $42,000 for this restaurant. The
restaurant was opened during October 1999.
On June 21, 1999, the Company contracted with Arthouse, Inc. to design and
construct a food portal web site for a cost of $125,000, payable in four monthly
cash payments totaling $102,400 with a final payment of $22,600 in the Company's
common stock.
On August 18, 1999, the Company entered into a license agreement with BigCharts,
Inc. ("BCI") whereby the Company could display and use BCI's proprietary
database of financial and textual information pertinent to public companies. The
Company will pay BCI a monthly fee of $1,000 during the agreement's 12-month
term. The Company and BCI will split net advertizing revenue generated by the
guide equally.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(13) Subsequent events (continued)
On August 23, 1999, the Company entered into a license agreement with Culinary
Cafe ("CC") whereby the Company could display and use CC's proprietary database
of financial, pictorial, and textual information pertinent to the food business.
The Company will pay CC a monthly fee of $2,000 during the agreement's 36-month
term. The Company and CC will split net advertizing revenue generated by the
guide equally, when certain conditions are met.
On September 1, 1999, the Company entered into a license and co-branding
agreement with CNN Interactive ("CNN") whereby the parties will establish a
co-branded web site accessible via hyperlinks from CNN Food Central. In
consideration of the distribution and promotion provided by CNN, the Company
will pay the following annual payments over the three-year term of the
agreement, commencing on November 1, 1999:
Year 1 $ 900,000
Year 2 $1,200,000
Year 3 $1,500,000
Effective October 5, 1999, the Company entered into a license and co-branding
agreement with The Restaurant Report, Inc. ("RR") whereby the parties will
establish a co-branded web site accessible via hyperlinks from the Foodvision
portal. The Company will pay RR a monthly fee of $3,000 in the first year of the
three-year term, $4,000 per month in the second year, and $5,000 per month in
the third year. In addition, the Company will provide RR with 30,000 shares of
144 stock in annual installments over the three-year term of the agreement as
follows: 10,000 shares upon signing, 10,000 shares in year two on the
anniversary date, and 10,000 shares in year three on the anniversary date. The
Company will retain 100% of the advertising revenue generated by the co-branded
site.
Effective October 6, 1999, the Company entered into a license and co-branding
agreement with e.Harvest.com, Inc. ("EH") whereby the parties will establish a
co-branded web site accessible via hyperlinks from the Foodvision portal. The
Company will provide EH with 30,000 shares of 144 stock in annual installments
over the three-year term of the agreement as follows: 10,000 shares upon
signing, 10,000 shares in year two on the anniversary date, and 10,000 shares in
year three on the anniversary date. The Company will retain 100% of the
advertising revenue generated by the co-branded site.
On October 29, 1999. The Company entered into an agreement with DineCore, Inc.
("DCI") to develop and license an Affiliate Restaurant Guide. The Company and
DCI will split net advertizing revenue generated by the guide equally during the
agreement's twelve-month term.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(13) Subsequent events (continued)
Stockholders' equity
From January 4, 1999 through May 17, 1999, the remaining $75,000 of 3% Series B
Senior Subordinated Convertible Redeemable Debentures outstanding on December
31, 1998, was fully converted into 111,283 post-reverse split shares of the
Company's common stock.
On January 21, 1999, the Company effected a 1 for 50 reverse stock split, and on
January 26, 1999, it effected a 1 for 2 reverse stock split.
On January 22, 1999, the Company's Board of Directors approved the adoption of
an Employee Stock Option Plan (the "Plan"). The total number of shares of the
Company's common stock subject to the Plan shall not exceed 500,000 post-reverse
split shares. Options may be granted pursuant to the Plan to directors,
corporate officers, employees, and managers of the principal sales,
administrative, legal, and staff departments of the Company and its
subsidiaries. No option may be granted under the Plan after January 15, 2009,
and no option may be granted under the Plan to an employee who immediately after
such option is granted owns stock possessing more than 5% of the total combined
voting power or value of all classes of stock of the Company. The purchase price
per share of common stock purchasable under options granted pursuant to the Plan
shall not be less than 100% of fair market value of the common stock at the time
the stock is granted. No option granted pursuant to the Plan shall be
exercisable after the expiration of ten years from the date the option is first
granted.
Stock options were granted under the Plan to an employee on January 22, 1999, to
purchase 25,000 post-reverse split shares of common stock at $0.75 per share,
and 25,000 options per year for the next three years, each with an exercise
price of $0.75 per share. On August 20, 1999, stock options were granted under
the Plan to an employee to purchase 15,000 shares of common stock at $0.4375 per
share, and 15,000 options per year for the next four years, each with an
exercise price of $0.4375 per share.
The Company granted warrants to purchase 937,500 post-reverse split shares of
common stock on January 22, 1999, to two officers, legal counsel, and a director
with an exercise price of $0.75 per share based on the closing bid for the
Company's common stock on that date. The warrants shall be exercisable until
five years from the date of issuance.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(13) Subsequent events (continued)
The Company entered into subscription agreements on January 29, 1999, with two
officers of the Company for the issuance of 3,000,000 shares of common stock to
each as an employment incentive. The shares fully vest two years from the date
of the agreement.
On February 4, 1999, the Company entered into a subscription agreement to issue
1,000,000 shares of its common stock to Corporation De Inversiones Cades SRL,
pursuant to a consulting agreement, at a price of $0.05 per share.
On February 26, 1999 and March 4, 1999, the Company entered into subscription
agreements to issue a total of 1,000,000 shares of its common stock to
Corporation De Inversiones Cades SRL, at a price of $0.05 per share.
The Company entered into a subscription agreement on March 30, 1999, with
Inversiones Comerciales Z & VSA for the private placement of 500,000 shares of
common stock at $1 per share. The purchase price was payable by $45,000 in cash
upon execution of the agreement and with a note for $455,000. This agreement was
terminated in November 1999 due to the subscriber's failure to make timely note
payments.
On April 15, 1999, the Company granted stock warrants for the purchase of 10,000
shares of the Company's common stock at an exercise price of $0.80 per share.
The warrants are exercisable until October 15, 2000.
On June 9, 1999, the Company issued 3% Series C Senior Subordinated Convertible
Redeemable Debentures in the amount of $250,000 with interest only due in
monthly installments through June 9, 2001, at which time a final payment of
unpaid principal is due. Interest is computed at 3% per annum. The debenture is
convertible into shares of the Company's common stock at a conversion price of
75% of the average closing bid price of the common stock for five trading days
before the conversion date. The debentures were fully converted into 858,432
shares of the Company's common stock with the final conversion on October 7,
1999.
On June 25, 1999, in consideration for Corporation De Inversiones Cades SRL
agreeing to amend its consulting agreement with the Company, the Board of
Directors approved the issuance of 400,000 restricted shares of its common stock
to Corporation De Inversiones Cades SRL.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
(13) Subsequent events (continued)
The Company granted warrants to purchase 2,000,000 shares of common stock on
July 8, 1999, to two directors with an exercise price of $0.4375 per share based
on the closing bid for the Company's common stock on that date. The warrants
shall be exercisable until five years from the date of issuance.
On July 19, 1999, the Company issued 3% Series D Senior Subordinated Convertible
Redeemable Debentures in the amount of $200,000 with interest only due in
monthly installments through July 19, 2001, at which time a final payment of
unpaid principal is due. Interest is computed at 3% per annum. The debenture is
convertible into shares of the Company's common stock at a conversion price of
75% of the average closing bid price of the common stock for five trading days
before the conversion date. The debentures were fully converted into 595,587
shares of the Company's common stock with the final conversion on October 13,
1999.
The Company granted warrants to purchase 10,000,000 shares of common stock on
August 4, 1999, to two officers with an exercise price of $0.4375 per share
based on the closing bid for the Company's common stock on that date. The
warrants shall be exercisable until five years from the date of issuance.
On August 16, 1999, the Company granted stock warrants for the purchase of
50,000 shares of the Company's common stock at an exercise price of $0.41 per
share. The warrants are exercisable until August 16, 2000.
The Company granted warrants to purchase 200,000 shares of common stock on
August 31, 1999, to an officer with an exercise price of $0.375 per share based
on the closing bid for the Company's common stock on that date. The warrants
shall be exercisable until five years from the date of issuance.
On September 6, 1999, the Company issued 3% Series E Senior Subordinated
Convertible Redeemable Debentures in the amount of $100,000 with interest only
due in monthly installments through September 6, 2001, at which time a final
payment of unpaid principal is due. Interest is computed at 3% per annum. The
debenture is convertible into shares of the Company's common stock at a
conversion price of 75% of the average closing bid price of the common stock for
five trading days before the conversion date. The debentures were fully
converted into 242,429 shares of the Company's common stock on October 14, 1999.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
13. Subsequent events (continued)
On September 21, 1999, the Company issued three 3% Series F Senior Subordinated
Convertible Redeemable Debentures, each in the amount of $100,000, with interest
only due in monthly installments through September 21, 2001, at which time a
final payment of unpaid principal is due. Each debenture is convertible into
shares of the Company's common stock at a conversion price of 75% of the average
closing bid price of the common stock for five trading days before the
conversion date. One of the Series F debentures was fully converted into 135,881
shares of the Company's common stock on October 26, 1999. The other two Series F
debentures were modified by an agreement dated November 8, 1999, to change the
conversion price to $0.20 per share.
On November 3, 1999, the Company issued 100,000 restricted shares of its common
stock each to Commonwealth Partners, L.P. and Portfolio Investment Strategies
Corp. as payment for consulting services and 65,000 free-trading shares of its
common stock each to Commonwealth Partners, L.P. and Portfolio Investment
Strategies Corp. as payment of commissions due.
The Company entered into a subscription agreement on November 8, 1999, with
Complete Development International, Inc. for the private placement of 750,000
shares of Series A Preferred Stock at $10 per share. Each share shall be
convertible into ten shares of common stock. If the price of the common shares
of the Company is below $1.00 per share at the conversion date, then the
conversion price will equal the previous day's closing price less 20% subject to
a minimum conversion price of $0.50 per share. The preferred stock will yield an
annual dividend rate of 8% cumulative, payable quarterly.
Litigation
On January 5, 1999, Charter Bank & Trust Co. filed an action against SCT, IC,
and officers of the Company seeking to recover amounts due under a promissory
note in the original principal amount of $12,500, plus interest, attorney's
fees, and court costs. On January 19, 1999, a Consent Order and Judgment was
entered into whereby the defendants agreed to pay the principal amount of
$12,500, interest in the amount of $561, and attorney fees of $1,959 in two
installments of $7,510 each. The initial payment was due on February 15, 1999
and the second payment on March 15, 1999.
RNA was named as a defendant in a lawsuit filed by a vendor that contended it
was owed approximately $15,000. The lawsuit was settled by a Mutual Settlement
Agreement dated July 14, 1999, whereby RNA agreed to pay $15,095 over a two-year
period with such debt secured by 23,000 shares of the common stock of the
Company.
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1998 and 1997
14. Subsequent events (continued)
SCO and IC were defendants in an action brought by a landlord seeking to recover
$43,461 for rent due under a lease agreement. The lawsuit was settled by an
agreement to pay the delinquent amount in installments. Subsequently, SCO was
named a defendant in a second action brought by the same landlord seeking
payment of $15,887 for additional rent due. The plaintiff obtained a judgment
for the $15,887 and a Writ of Possession. Although only SCO was named in the
action, IC was the original tenant under the lease and is still contingently
liable for amounts due thereunder. In addition to the amount of the judgment,
both subsidiaries may be liable for additional amounts accruing under the lease.
It is not possible at this time to estimate the amount to which the subsidiaries
may be liable.
A vendor threatened the Company with legal action to recover $27,183 for food
delivered to certain of its subsidiaries. A settlement was negotiated under
which the Company agreed to repay the amount claimed pursuant to a promissory
note dated May 28, 1999, which bears interest at 10% per annum and provides for
equal monthly payments of principal and interest sufficient to repay the full
amount in 24 months. The note is collateralized by 30,000 shares of common stock
of the Company.
GLUN settled a vendor's threatened legal action to recover $9,539 by agreeing to
make nine monthly payments of $1,000 and one final payment of $539. Payments
began on August 19, 1999.
<PAGE>
Unaudited Balance Sheet, Consolidated Statement of Operations, Consolidated
Statement of Cash Flows period ended September 30, 1999.
FOODVISION.COM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 153,797 44,208
Accounts Receivable 7,408 2,790
Inventories 52,408 34,978
Prepaid expenses and other current assets 30,396 9,825
TOTAL CURRENT ASSETS 244,009 91,801
=========== ===========
PROPERTY AND EQUIPMENT, AT COST
Equipment under capital leases 213,455 213,455
Furniture, fixtures, and equipment 518,841 92,962
Vehicle 29,388 29,388
Leasehold improvements 52,491 31,867
814,175 367,672
Less accumulated depreciation (158,867) (88,946)
PROPERTY AND EQUIPMENT, NET $ 655,308 $ 278,726
=========== ===========
OTHER ASSETS
Loan receivable, officer 3,925 42,566
Franchise agreement and other intangibles, net of 379,835 416,251
accumulated amortization of $33,012
Deposits 44,715 11,382
TOTAL OTHER ASSETS 428,475 470,199
TOTAL ASSETS $ 1,327,792 $ 840,726
</TABLE>
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 303,195 $ 168,390
Accrued Expenses 10,952 31,854
Notes payable, short term 283,582 87,500
Other current liabilities 58,539 34,116
Notes payable, related parties 9,584
Current portion of note payable 12,979 3,223
Current portion of note payable, related parties 16,311 42,602
Current portion of capital lease obligations 23,888 23,888
TOTAL CURRENT LIABILITIES $ 709,446 $ 401,157
LONG-TERM DEBT
Notes payable, less current portion 776,336 18,165
Notes, payable, related parties, less current portion -- 19,512
Capital lease obligations, less current portion 153,507 170,442
Deferred lease obligations 14,593 14,595
TOTAL LONG-TERM DEBT 944,436 222,714
TOTAL LIABILITIES $ 1,653,881 $ 623,871
=========== ===========
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 50,000,000 shares 10,824 30,056
authorized, 10,822,820 shares issued and
outstanding
Additional paid-in capital 1,340,129 944,964
Accumulated deficit (1,677,040) (759,950)
Accumulated other comprehensive income (1) 1,785
TOTAL STOCKHOLDERS' EQUITY (326,088) 216,855
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,327,793 $ 840,726
</TABLE>
<PAGE>
FOODVISON.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
<S> <C> <C>
REVENUES
Beverage and food sales 1,294,453 1,524,795
Other revenues 10,197 498
TOTAL REVENUES 1,304,650 1,525,293
COSTS AND EXPENSES
Cost of goods sold 614,378 507,706
General and administrative expense 1,465,926 1,123,923
Depreciation 69,920 56,821
Amortization 37,035 12,309
Interest 36,362 1,769
TOTAL COSTS AND EXPENSES 2,223,621 1,702,528
NET LOSS (918,971) (177,235)
NET LOSS PER COMMON SHARE (0.08) (0.01)
</TABLE>
<PAGE>
FOODVISION.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998
<S> <C> <C>
REVENUES
Beverage and food sales 469,557 491,195
Other revenues 3,098 498
TOTAL REVENUES 472,655 491,693
COSTS AND EXPENSES
Cost of goods sold 238,155 136,479
General and administrative expense 594,453 394,320
Depreciation 25,310 20,654
Amortization 12,345 12,309
Interest 20,579 6,219
TOTAL COSTS AND EXPENSES 890,842 569,981
NET LOSS (418,187) (78,288)
NET LOSS PER COMMON SHARE (0.04) (0.00)
</TABLE>
<PAGE>
FOODVISION.COM, INC
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (918,971) (177,235)
Adjustments to reconcile net loss to net cash used
by operating activities
Depreciation and amortization 106,955 66,559
Changes in assets
-----------------
(Increase) in accounts receivable (4,618) (1,927)
(Increase) in inventories (17,250) (42,109)
(Increase) in deposits and other assets (17,764) (7,620)
Changes in liabilities
----------------------
Increase in accounts payable 141,283 115,053
Increase in accrued expenses (20,911) 1,234
Increase in other payables 306,818 0
------- ------
NET CASH (USED BY OPERATING (424,458) (46,045)
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (438,548) (688,995)
Loans to stockholder (4,474) 11,936
-------- --------
NET CASH (USED) BY INVESTING (443,022) (677,058)
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances from related
parties
Collection of subscription receivable 585,000 0
Proceeds from sale of common stock 375,925 656,549
Proceeds from notes payable 34,762 23,415
Repayments of capital lease obligations (16,935) 10,521
-------- --------
NET CASH PROVIDED (USED) BY FINANCING 978,752 690,485
ACTIVITIES
EFFECT OF EXCHANGE RATES ON CASH (1,684) (1,260)
NET INCREASE (DECREASE) IN CASH 109,588 (33,879)
CASH, BEGINNING OF YEAR 44,208 (9,208)
CASH, END OF PERIOD 153,796 (43,086)
</TABLE>
<PAGE>
FOODVISION.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD ENDING SEPTEMBER 30, 1999 (UNAUDITED)
(15) Nature of business and organization
Foodvision.com, Inc. (the Company) is a Delaware corporation whose operations
consist primarily of operating fast-food and full-service restaurants on the
metropolitan Atlanta, Georgia, area through its wholly owned subsidiaries
Investco Corporation ("IC") formerly known as Anne Ryan, Inc., Restaurant North
Atlanta Inc. ("RNA), Sports Cantina One, Inc. ("SCO"), Sports Cantina Two, Inc.
("SPT"), and Grandma Lee's USA Northpoint, Inc. ("GLUN") and in Ontario Canada
through its wholly owned subsidiaries Investco International Management, Inc.
("IIM") d/b/a Hillbilly Shack ("HS").
(16) Significant Accounting Policies
The company's financial statements are prepared using the accrual method of
accounting in accordance with generally accepted accounting principles and have
been prepared on a going concern basis which contemplates the realization of
assets and the settlement of liabilities in the normal course of business.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
five wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Inventories
Inventories consist of liquor, wine, beer and food items. Inventories are state
at the lower of cost or market determined by the first-in, first-out method.
<PAGE>
Depreciation and amortization
Property and equipment are stated at cost. Depreciation is provided using an
accelerated method for equipment, furniture and fixtures, and vehicles over the
assets' estimated useful lives as follows: equipment, furniture and fixtures,
seven years; vehicles, five years. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful lives of the improvements.
Equipment under capital lease obligations is being depreciated over the
seven-year lease term.
Intangibles
Franchise agreements and the AT & T service agreement are amortized over the
term of the agreement from 65 months to 120 months. Purchase goodwill is
amortized over 65 months. Costs related to the issuance of subordinated
debentures are amortized over the one-year life of the debentures.
Repairs and maintenance
Repairs and maintenance are charged to expense as incurred. Improvements are
capitalized. When assets are retired or otherwise disposed of, appropriate
adjustments are made to the related cost and accumulated depreciation accounts
and resulting gains and losses are reflected in operations.
Income taxes
Income taxes are accounted for by the asset/liability approach in accordance
with FAS-109 (Accounting for Income Taxes). Deferred taxes represent the
expected future tax consequences when the reported amounts of assets and
liabilities are recovered or paid. They arise from net operating loss
carryforwards and differences between the financial reporting and tax basis of
assets and liabilities and are adjusted for changes in tax laws and tax rates
when those changes are enacted. The provision for income taxes represents the
total of income taxes paid or payable for the current year, plus the change in
deferred taxes during the year. The Company provides deferred taxes for
differences in the timing of deductions for book and tax reporting purposes
principally related to depreciation and net operating loss carry forwards.
Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates in determining assets,
liabilities, revenues and expenses. Actual results may differ from those
estimates.
Cash and cash equivalents
The Company considers all cash and highly liquid investments, with original
maturities of less than ninety days, to be cash and cash equivalents.
<PAGE>
(17) Notes payable
On June 9, 1999, the Company issued its 3% Series C Senior Subordinated
Convertible Redeemable Debentures in the amount of $250,000 with interest only
due in monthly installments through June 9, 2001, at which time a final payment
of unpaid principal is due. Interest is computed at 3% per annum. The debenture
is convertible into shares of the Company's common stock at a conversion price
of 75% of the average closing bid price of the common stock for five trading
days before the conversion date. The debentures were subsequently fully
converted into 858,432 shares of the Company's common stock, with the final
conversion on October 7, 1999.
On July 19, 1999, the Company issued 3% Series D Senior Subordinated Convertible
Redeemable Debentures in the amount of $200,000 with interest only due in
monthly installments of interest through July 19, 2001, at which time a final
payment of unpaid principal is due. Interest is computed at 3% per annum. The
debenture is convertible into shares of the Company's common stock at a
conversion price of 75% of the average closing bid price of the common stock for
five trading days before the conversion date. The debentures were subsequently
fully converted into 595,587 shares of the Company's common stock with the final
conversion on October 13, 1999.
On September 6, 1999, the Company issued 3% Series E Senior Subordinated
Convertible Redeemable Debentures in the amount of $100,000 with interest only
due in monthly installments through September 6, 2001, at which time a final
payment of unpaid principal is due. Interest is computed at 3% per annum. The
debenture is convertible into shares of the Company's common stock at a
conversion price of 75% of the average closing bid price of the common stock for
five trading days before the conversion date. The debentures were fully
converted into 242,429 shares of the Company's common stock on October 14, 1999.
On September 21, 1999, the Company issued its 3% Series F Senior Subordinated
Convertible Redeemable Debentures to three subscribers, each in the amount of
$100,000, with interest at 3% per annum only due in monthly installments of
interest through September 21, 2001, at which time a final payment of unpaid
principal is due. Each debenture was convertible into shares of the Company's
common stock at a conversion price of 75% of the average closing bid price of
the common stock for five trading days before the conversion date. One Series F
debenture was fully converted into 135,881 shares of common stock in October
1999. The balance of Series F Debentures were each modified by an agreement
dated November 8, 1999 to change the conversion price to $0.20 per share, and on
November 24, 1999 each was converted into 500,000 shares of common stock.
The Company entered into a short-term loan agreement with Actrade Capital, Inc.
for interim working capital during completion of subscription agreement with
Complete Development International, Inc. Borrowings under this agreement at
September 30, 1999 were $268,950. The Company will eliminate this loan upon the
completion of the subscription agreement with Complete Development
International, Inc.
<PAGE>
(18) Business Developments
Restaurant Division
On April 7, 1999, the Company purchased certain assets of a restaurant known as
Broadway Steaks & Fries in Union City, Georgia, for a purchase price of $15,000.
Subsequently, the Company closed the restaurant and is considering redevelopment
alternatives.
On April 9, 1999, the Company sold the common stock of Sports Cantina One, Inc.
("SCO"), a wholly-owned subsidiary which was formed to own and operate a
restaurant in Stone Mountain, Georgia. However, the purchaser failed to make
timely payments on the purchase note and the Company repossessed the restaurant
operated by SCO on July 30, 1999. Subsequently, the restaurant was closed.
In May 1999, the Company opened a new restaurant, Dirty Bird Cafe, in Marietta,
Georgia.
On June 21, 1999, the Company entered into a lease agreement for a second Dirty
Bird Cafe location in Marietta, Georgia. The lease agreement provides for
monthly base rent payments that escalate over the 62-month term of the lease and
percentage rent of 5% of gross receipts. On August 5, 1999, the Company
purchased equipment with a purchase price of $42,000 for this restaurant. The
restaurant was opened during October 1999.
Internet Division
On June 21, 1999, the Company contracted with Arthouse, Inc. to design and
construct a food portal web site for a cost of $125,000, payable in four monthly
cash payments totaling $102,400, with a final payment of $22,600 payable in
shares of the Company's common stock.
On August 18, 1999, the Company entered into a license agreement with BigCharts,
Inc. ("BCI") whereby the Company could display and use BCI's proprietary
database of financial and textual information pertinent to public companies. The
Company agreed to pay BCI a monthly fee of $1,000 during the agreement's
12-month term. The Company and BCI also agreed to split net advertising revenue
generated by the guide equally.
On August 23, 1999, the Company entered into a license agreement with Culinary
Cafe ("CC") whereby the Company could display and use CC's proprietary database
of financial, pictorial, and textual information pertinent to the food business.
The Company agreed to pay CC a monthly fee of $2,000 during the agreement's
36-month term. The Company and CC also agreed to split net advertising revenue
generated by the guide equally when certain conditions are met.
On September 1, 1999, the Company entered into a license and co-branding
agreement with CNN Interactive ("CNN") whereby the parties agreed to establish a
co-branded web site accessible via hyperlinks from CNN Food Central. In
consideration of the distribution and promotion provided by CNN, the Company
agreed to pay the following annual payments over the three-year term of the
agreement, commencing on November 1, 1999:
Year 1 $ 900,000
Year 2 $ 1,200,000
Year 3 $ 1,500,000
<PAGE>
Effective October 5, 1999, the Company entered into a license and co-branding
agreement with The Restaurant Report, Inc. ("RR") whereby the parties agreed to
establish a co-branded web site accessible via hyperlinks from the FoodVision
portal. The Company agreed to pay RR a monthly fee of $3,000 in the first year
of the three-year term, $4,000 per month in the second year, and $5,000 per
month in the third year. In addition, the Company agreed to provide RR with
30,000 shares of restricted stock in annual installments over the three-year
term of the agreement as follows: 10,000 shares upon signing, 10,000 shares in
year two on the anniversary date, and 10,000 shares in year three on the
anniversary date. Under the agreement, the Company retains 100% of the
advertising revenue generated by the co-branded site.
Effective October 6, 1999, the Company entered into a license and co-branding
agreement with e.Harvest.com, Inc. ("EH") whereby the parties agreed to
establish a co-branded web site accessible via hyperlinks from the FoodVision
portal. The Company agreed to provide EH with 30,000 shares of 144 stock in
annual installments over the three-year term of the agreement as follows: 10,000
shares upon signing, 10,000 shares in year two on the anniversary date, and
10,000 shares in year three on the anniversary date. Under the agreement, the
Company retains 100% of the advertising revenue generated by the co-branded
site.
On October 29, 1999. The Company entered into an agreement with DineCore, Inc.
("DCI") to develop and license an Affiliate Restaurant Guide. The Company and
DCI agreed to split net advertising revenue generated by the guide equally
during the agreement's twelve-month term.
(19) Capital Transactions
From January 4, 1999 through May 17, 1999, the remaining $75,000 of 3% Series B
Senior Subordinated Convertible Redeemable Debentures outstanding on December
31, 1998, was fully converted into 111,283 post-reverse split shares of the
Company's common stock.
On November 3, 1999, the Company issued 100,000 restricted shares of its common
stock each to Commonwealth Partners, L.P. and Portfolio Investment Strategies
Corp. as payment for consulting services and 65,000 free-trading shares of its
common stock each to Commonwealth Partners, L.P. and Portfolio Investment
Strategies Corp. as payment of commissions due.
The Company entered into a subscription agreement on November 8, 1999, with
Complete Development International, Inc. for the private placement of 750,000
shares of Series A Preferred Stock at $10 per share. Each share shall be
convertible into ten shares of common stock. If the price of the common shares
of the Company is below $1.00 per share at the conversion date, then the
conversion price will equal the previous day's closing price less 20% subject to
a minimum conversion price of $0.50 per share. The preferred stock will yield an
annual dividend rate of 8% cumulative, payable quarterly.
On February 4, 1999, the Company entered into a subscription agreement to issue
1,000,000 shares of its common stock to Corporation De Inversiones Cades SRL,
pursuant to a consulting agreement, at a price of $0.05 per share.
<PAGE>
On February 26, 1999 and March 4, 1999, the Company entered into subscription
agreements to issue a total of 1,000,000 shares of its common stock to
Corporation De Inversiones Cades SRL, at a price of $0.05 per share.
The Company entered into a subscription agreement on March 30, 1999, with
Inversiones Comerciales Z & VSA for the private placement of 500,000 shares of
common stock at $1 per share. The purchase price was payable by $45,000 in cash
upon execution of the agreement and with a note for $455,000. This agreement was
terminated in November 1999 due to the subscriber's failure to make timely note
payments. A total of 100,000 shares were issued for $100,000 which was paid
under the note.
On June 25, 1999, in consideration for Corporation De Inversiones Cades SRL
agreeing to amend its consulting agreement with the Company, the Board of
Directors approved the issuance of 400,000 restricted shares of its common stock
to Corporation De Inversiones Cades SRL.
On December 20, 1999, the Company issued 200,000 shares of Common Stock for
$10,000 to an individual, accredited investor pursuant to Rule 504.
(20) Reverse Split
On January 21, 1999, the Company effected a 1 for 50 reverse stock split, and on
January 26, 1999, it effected a 1 for 2 reverse stock split.
(21) Employee Stock Option Plan
On January 22, 1999, the Company's Board of Directors approved the adoption of
an Employee Stock Option Plan (the "Plan"). The total number of shares of the
Company's common stock subject to the Plan shall not exceed 500,000 post-reverse
split shares. Options may be granted pursuant to the Plan to directors,
corporate officers, employees, and managers of the principal sales,
administrative, legal, and staff departments of the Company and its
subsidiaries. No option may be granted under the Plan after January 15, 2009,
and no option may be granted under the Plan to an employee who immediately after
such option is granted owns stock possessing more than 5% of the total combined
voting power or value of all classes of stock of the Company. The purchase price
per share of common stock purchasable under options granted pursuant to the Plan
shall not be less than 100% of fair market value of the common stock at the time
the stock is granted. No option granted pursuant to the Plan shall be
exercisable after the expiration of ten years from the date the option is first
granted.
(22) Stock and Warrants Issued to Officers and Employees
The Company granted warrants to purchase 937,500 post-reverse split shares of
common stock on January 22, 1999, to two officers, legal counsel, and a director
with an exercise price of $0.75 per share based on the closing bid for the
Company's common stock on that date. The warrants are exercisable at any time
until five years from the date of issuance.
The Company entered into subscription agreements on January 29, 1999, with two
officers of the Company for the issuance of 3,000,000 shares of common stock to
each as an employment incentive. The shares fully vest two years from the date
of the agreement.
<PAGE>
On April 15, 1999, the Company granted stock warrants for the purchase of 10,000
shares of the Company's common stock at an exercise price of $0.80 per share.
The warrants are exercisable until October 15, 2000.
The Company granted warrants to purchase 2,000,000 shares of common stock on
July 8, 1999, to two directors with an exercise price of $0.4375 per share based
on the closing bid for the Company's common stock on that date. The warrants are
exercisable at any time for five years from the date of issuance.
The Company granted warrants to purchase 10,000,000 shares of common stock on
August 4, 1999, to two officers with an exercise price of $0.4375 per share
based on the closing bid for the Company's common stock on that date. The
warrants are exercisable at any time until five years from the date of issuance.
On August 16, 1999, the Company granted stock warrants for the purchase of
50,000 shares of the Company's common stock at an exercise price of $0.41 per
share. The warrants are exercisable at any time until August 16, 2000.
The Company granted warrants to purchase 200,000 shares of common stock on
August 31, 1999, to an employee of the Company, who is also a relative of an
officer, with an exercise price of $0.375 per share based on the closing bid for
the Company's common stock on that date. The warrants shall be exercisable at
any time for five years from the date of issuance.
