<PAGE>
As filed with the Securities and Exchange Commission on July 26, 1996
Registration No. __________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
BEV-TYME, INC.
(Name of small business issuer in its charter)
Delaware 2085 36-3769323
- ---------------------- ---------------------------- ----------------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
134 Morgan Avenue
Brooklyn, New York 11237
(718) 894-4300
(Address and telephone number
of principal executive offices and principal place of business)
Robert Sipper
Chief Executive Officer
(Name, address and telephone number of agent for service)
134 Morgan Avenue
Brooklyn, New York 11237
(718) 894-4300
Copies to:
Hartley T. Bernstein, Esq.
Bernstein & Wasserman, LLP
950 Third Avenue
New York, NY 10022
(212) 826-0730
(212) 371-4730 (Fax)
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, check the following box:
[ ]
continued overleaf
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price Per Aggregate Offering Registration Fee
(1) Security (2) Price(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series "C" Preferred Stock, par 400,000 $5.25 $2,100,000 $724.08
value $.0001 per share
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $724.08
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In addition, pursuant to Rule 416 under the Securities Act of 1933, as
amended ("Securities Act"), this registration statement also covers an
indeterminate number of shares as may be required by reason of any stock
dividend, recapitalization, stock split, reorganization, merger,
consolidation, combination, or exchange of shares or other similar change
affecting the stock.
(2) Estimated solely for the purpose of calculating the registration fee
based upon the average of bid and asked closing prices of the shares of
Series C Preferred Stock on July 19, 1996 of $4.75 and $5.75 as reported on
the Nasdaq Small Cap Market.
<PAGE>
BEV-TYME, INC.
CROSS REFERENCE SHEET
(Showing Location in the Prospectus of
Information Required by Items 1 through
23, Part I, of Form SB-2)
Item in Form SB-2 Prospectus Caption
----------------- ------------------
1. Front of Registration
Statement and Outside Front
Cover of Prospectus................ Facing Page of Registration
Statement; Outside Front
Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.......... Inside Front Cover Page of
Prospectus; Outside Back Cover
Page of Prospectus
3. Summary Information and Risk
Factors............................ Prospectus Summary; Risk Factors
4. Use of Proceeds.................... Use of Proceeds
5. Determination of Offering Price.... Outside Front Cover Page of
Prospectus; Underwriting;
Risk Factors
6. Dilution........................... Dilution; Risk Factors
7. Selling Securityholders........... Description of Securities; Selling
Securityholders
8. Plan of Distribution............... Outside Front Cover Page of
Prospectus; Risk Factors;
Underwriting
9. Legal Proceedings.................. Business-Litigation
10. Directors, Executive Officers,
Promoters and Control Persons...... Management
11. Security Ownership of Certain
Beneficial Owners and Management... Principal Stockholders
i
<PAGE>
Item in Form SB-2 Prospectus Caption
----------------- ------------------
12. Description of Securities.......... Description of Securities;
13. Interest of Named Experts and
Counsel............................ Experts; Legal Matters
14. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities......... Description of Securities
15. Organization Within Last 5 Years... Prospectus Summary; The Company;
Business
16. Description of Business............ Business; Risk Factors
17. Management's Discussion and Analysis
or Plan of Operation............... Management's Discussion and
Analysis of Financial Condition
and Results of Operations
18. Description of Property............ Business - Facilities
19. Certain Relationships and
Related Transactions............... Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters........ Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Securities;
Underwriting
21. Executive Compensation............. Management - Executive
Compensation
22. Financial Statements............... Selected Financial Data;
Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosures.......... *
- ----------
* Omitted because Item is not applicable.
ii
<PAGE>
PROSPECTUS
BEV-TYME, INC.
400,000 shares of Series C Preferred Stock
-------------------
This Prospectus relates to the sale of 400,000 shares of Series C Preferred
Stock, par value $.0001 per share ("Series C Preferred Stock"), of Bev-Tyme,
Inc., a Delaware corporation (the "Company"), all of which are held by Perry's
Majestic Beer, Inc. ("Perry's" or the "Selling Securityholder"). See "Certain
Transactions". The Company will not receive any of the proceeds from the sale of
the securities by the Selling Securityholder. Perry's owns an aggregate of
400,000 shares of the Company's Series C Preferred Stock, or 18.2% of the total
number of Series C Preferred Stock outstanding. The resale of the securities of
the Selling Securityholder is subject to Prospectus delivery and other
requirements of the Securities Act of 1933, as amended (the "Act"). Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See "Selling
Securityholder".
The Preferred Stock offered by this Prospectus may be sold from time to
time by the Selling Securityholder, or by its transferees. No underwriting
arrangements have been entered into by the Selling Securityholder. The
distribution of the securities by the Selling Securityholder may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholder in connection with sales of such securities.
The Selling Securityholder and intermediaries through whom such securities
may be sold may be deemed "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Act"), with respect to the securities offered and
any profits realized or commissions received may be deemed underwriting
compensation.
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Securityholder. All costs incurred in the registration
of the securities of the Selling Securityholder are being borne by the Company.
See "Selling Securityholder."
The Company's Series C Preferred Shares, Series C Preferred Warrants, and
Common Stock are currently listed for quotation on The Nasdaq SmallCap Market
("NASDAQ") under the symbols "BEVT", "BEVTP," and "BEVTZ," respectively. As of
July 17, 1996 the last reported bid and ask prices of the Company's Series C
Preferred Shares, Series C Preferred Warrants, and Common Stock as reported by
NASDAQ on such date were $4.75, $5.75
<PAGE>
respectively, for Series C Preferred Shares, $1.3125, $2.00, respectively, for
Series C Preferred Warrants, and $1.00 and $1.50 respectively, for Common Stock.
No assurances may be given that any public market for the foregoing securities
will continue or be sustained. See "Market for the Company's Securities" and
"Risk Factors."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
OFFERED HEREBY AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
The date of this Prospectus is July 26, 1996
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith, files reports, proxy statements and other information including
annual and quarterly reports on Forms 10- KSB and 10-QSB (File No. 33-53748C)
(the "1934 Act Filings") with the Securities and Exchange Commission (the
"Commission"). The Company filed with the Commission in Washington, D.C. a
Registration Statement on Form SB-2 under the Securities Act of 1933, as amended
(the "Securities Act), with respect to the securities described herein. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information about the Company
and the securities described herein, reference is made to the Registration
Statement and to the exhibits filed therewith. The statements contained in this
Prospectus with respect to the contents of any agreement or other document
referred to herein are not necessarily complete and, in each instance, reference
is made to a copy of such agreement or document as filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
reference to the provisions of the relevant documents. The Registration
Statement, including the exhibits thereto, and the Company's 1934 Act Filings
may be inspected at: (i) the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; and (ii) the offices of the Commission located at Citicorp Center, 500
West Madison Street, Room 1400, Chicago, Illinois 60661, and the offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may also be obtained upon request and payment of
the appropriate fee from the Public Reference Section of the Commission located
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
3
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information (including financial
statements and notes thereto) contained in this Prospectus and is qualified in
its entirety by the more detailed information appearing elsewhere herein. Each
prospective investor is urged to read this Prospectus in its entirety. Unless
otherwise indicated, all per share information set forth in this Prospectus has
been adjusted to reflect a reverse stock split of 1-for-10 effected by the
Company as of July 17, 1996.
THE COMPANY
New Day Beverage, Inc. (the "Company") was incorporated in the State of
Delaware on August 6, 1992 and changed its name to Bev-Tyme, Inc. on January 11,
1996. The Company and its wholly owned subsidiaries are engaged in the business
of developing, marketing and distributing spring and carbonated water, soft
drinks and "New Age" beverages. In 1995, the Company also commenced distributing
beer and other malt beverages. Initially, the Company commenced its operations
by creating and marketing a line of "New Age" beverage products under the
trademark "Sunsprings." Because of increased competition in the "New Age"
beverage market and continuing operating losses in the sale of its
SunSprings(TM) beverage products, the Company has increased its focus on the
distribution business by acquiring Mootch & Muck, Inc. ("M&M"), a beverage
distributor. The Company then added "Taste of Jamaica", a Jamaican style soda.
Currently, the Company's principal activity is the distribution of beverage
products through M&M, its wholly owned subsidiary. See "Certain Transactions."
As of November 18, 1994, M&M entered into an Asset Purchase Agreement with
Sclafani Beer and Soda Distributors, Inc., a distributor of non-alcoholic
drinks, as well as beer and other malt beverages in the New York City boroughs
of Brooklyn and Queens ("SB&S"), pursuant to which M&M purchased in June, 1995,
substantially all of the assets of the SB&S business. M&M paid $500,000 in cash,
200,000 shares of Common Stock and issued options to purchase 75,000 shares of
the Company's Common Stock (collectively the "Purchase Price"). In June, 1995,
M&M entered into an employment agreement with John Sclafani, pursuant to which
Mr. Sclafani served as Vice President of Beer Sales for M&M. Mr. Sclafani
received an annual salary of $90,000. In August, 1995, the Company accepted Mr.
Sclafani's resignation.
On May 15, 1995, the Company completed a secondary public offering pursuant
to which the Company sold 460,000 Units ("Preferred Stock Units") to the public
at $5.00 per Unit. Each Preferred Stock Unit consisted of one (1) share of
Series C Convertible Preferred Stock ("Preferred Stock") and two (2) Series C
Preferred Stock Purchase Warrants ("Preferred Stock Purchase Warrants"). Each
share of Series C Preferred Stock is convertible at the option of the holder, at
any time after May 15, 1996, into 18 shares of the Company's Common Stock,
$.0001 par value per share. The Series C Warrants entitle the registered holder
thereof to purchase one (1) share of Series C Preferred Stock at an exercise
price of $6.00 per share through May 15, 2000 and may be redeemed by the Company
under certain conditions. To date, none of the Preferred Stock Warrants have
been exercised or redeemed. The Company used a significant portion of the
proceeds of the secondary public offering to expand the current business of M&M
into the beer and malt beverage
4
<PAGE>
distribution business.
In April 1996, the Company hired two (2) members of the former management
team from Triboro Beverage Distributors, Inc. and engaged a third member as a
consultant to the Company. In connection with this transaction, the Company
acquired the distribution rights to distribute City Club Soda in the New York
metropolitan area. See "Certain Transactions".
The Company's executive offices are currently located at 134 Morgan Avenue,
Brooklyn, New York 11237 and its telephone number is (718) 894-4300. The
Company's fiscal year end is December 31.
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating the Company and its business.
5
<PAGE>
THE OFFERING
The Offering
Securities Offered by the Company 400,000 shares of Series C Preferred
Stock
Capitalization Of The Company 1,902,225 shares of Series C
Preferred Stock
729,221 shares of Common Stock
810,500 Series C Warrants
Terms of the Series C Preferred Stock Subsequent to May 15, 1997, the
Series C Preferred Stock is
redeemable by the Company upon not
more than sixty (60) days and not
less than thirty (30) days prior
written notice for $.05 per share if
the closing price of the Company's
Common Stock has equaled or exceeded
$2.00 per share for 20 consecutive
days so long as the Share Increase
(as defined below) has been effected.
Each share of Series C Preferred
Stock has a voting power equivalent
to a number of shares of the Common
Stock equal to price of the Units
offered under this Prospectus divided
by the Fair Market Value (as defined
below) of Common Stock as of the
Effective Date (the "Conversion
Amount") and is convertible by its
holder into a number of shares of
Common Stock equal to the Conversion
Amount at any time commencing one (1)
year following the Effective Date;
provided however, that the holders of
Series C Preferred Stock may not
convert such shares into shares of
Common Stock until the Company has
increased the number of authorized
shares of Common Stock from
15,000,000 shares to 60,000,000
shares (the "Share Increase"). See
Risk Factors -- Insufficient Number
of Authorized Shares of Common
Stock". Dividends on the Series C
Preferred Stock will be $.50 per
share (the "Dividend Amount") paid on
each January
6
<PAGE>
1 (the "Dividend Date") commencing on
January 1, 1996, at the discretion of
the Company in cash or in shares of
Common Stock having a Fair Market
Value equal to the Dividend Amount.
The amount of dividends payable for
the initial dividend period shall be
computed on the basis of a 360 day
year from the Effective Date through
January 1, 1996. "Fair Market Value"
shall mean the average closing bid
price of the Common Stock for the ten
trading days ending five trading days
prior to the Dividend Date. The
Series C Preferred Stock has a
liquidation preference of $5.00 per
share. See "Description Of
Securities."
Current NASDAQ Small-Cap Series C Preferred Stock - BEVTP
Series C Warrants - BEVTZ
Common Stock - BEVT
Use of Proceeds................ The Company will receive no proceeds from
the sale of the 400,000 shares of Series C
Preferred Stock offered hereby.
Risk Factors................... Going Concern Report of Accountants;
Dependence Upon Key Personnel; Expenses and
Uncertainty of Expansion; M&M's Dependence
Upon Suppliers; Governmental Regulation;
Seasonality of Beverage Business;
Competition in Distribution Industry; Risks
Involved in the Beverage Industry; Evolving
Consumer Preferences; Potential Product
Liability; Dependence on Distributors and
Brokers; Potential Adverse Effect of Sales
of Selling Securityholders; Anti-Takeover
Provision; Lack of Dividends; Underwriter's
Unit Purchase Option; Rule 144 Sales; Future
Sales of Common Stock; No Assurance of
Public Trading Market or Qualification for
Continued NASDAQ Inclusion; "Penny Stock"
Regulations. An investment in the securities
offered hereby involves a high degree of
risk and immediate substantial dilution of
the book value of the Common Stock and
should be considered only by persons who can
afford the loss of their entire investment.
See "Dilution" and "Risk Factors."
7
<PAGE>
CAPITALIZATION
The Company is authorized to issue is 81,000,000 shares of stock,
75,000,000 of which are common shares, par value $.0001 per share, and 6,000,000
of which are preferred shares, par value $.0001 per share. Of the 6,000,000
preferred shares, 5,800,000 are designated as shares of "Series C Convertible
Preferred Stock". The following table sets forth the capitalization of the
Company at March 31, 1996.
March 31, 1996
--------------
Long term debt obligations, less current $ 322,952
maturities:
Stockholder's equity:
Preferred Stock $ 190
Common Stock $ 73
Additional paid-in capital $ 16,532,625
Accumulated deficit $ (9,897,901)
------------
Total $ 6,634,987
Less: Treasury Stock 2,000,000
------------
TOTAL STOCKHOLDERS EQUITY $ 4,634,987
TOTAL CAPITALIZATION $ 4,957,939
============
8
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary of financial data has been summarized from the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus. The information should be read in conjunction with the Consolidated
Financial Statements and the related Consolidated Notes thereto. See "Financial
Statements."
SUMMARY BALANCE SHEET DATA
March 31, 1996 December 31, 1995
===========================================================================
WORKING CAPITAL (DEFICIENCY) $ (415,094) $ (257,866)
- ---------------------------------------------------------------------------
TOTAL ASSETS $ 7,601,905 $ 7,848,012
- ---------------------------------------------------------------------------
TOTAL LIABILITIES $ 2,916,918 $ 3,424,295
- ---------------------------------------------------------------------------
LONG-TERM DEBT $ 322,952 $ 322,952
- ---------------------------------------------------------------------------
ACCUMULATED (DEFICIT) $ (9,897,901) $ (8,938,721)
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY $ 4,634,987 $ 4,423,717
===========================================================================
SUMMARY INCOME STATEMENT DATA
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS ENDED ----------------------------
------------------------------- December 31, December 31,
March 31, 1996 March 31, 1995 1995 1994
===================================================================================
<S> <C> <C> <C> <C>
SALES-NET 2,397,908 2,312,390 $12,730,722 $9,773,013
- -----------------------------------------------------------------------------------
GROSS PROFIT 485,571 572,395 $1,756,430 $2,043,291
(LOSS)
- -----------------------------------------------------------------------------------
OPERATING LOSS (678,427) (564,177) ($3,775,882) ($1,157,297)
- -----------------------------------------------------------------------------------
NET LOSS (688,730) (572,054) ($3,826,230) ($1,192,542)
- -----------------------------------------------------------------------------------
LOSS PER SHARE (3) ($.85) ($1.52) ($8.04) ($3.38)
- -----------------------------------------------------------------------------------
WEIGHTED 811,721 376,554 475,933 352,368
AVERAGE NUMBER
OF COMMON
SHARES
OUTSTANDING
DURING THE PERIOD
===================================================================================
</TABLE>
9
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and substantial dilution and should only be purchased by
investors who can afford to lose their entire investment. Prospective
purchasers, prior to making an investment, should carefully consider the
following risks and speculative factors, as well as other information set forth
elsewhere in this Prospectus, associated with this offering, including the
information contained in the Financial Statements herein.
1. Going Concern Report of Accountants. As a result of the Company's
current financial conditions, the Company's certified public accountants have
modified their report on the Company's financial statements for the year ended
December 31, 1995. The Company incurred net losses for the years ended December
31, 1995 and 1994 of $3,826,230 and $1,192,542, respectively. The Company's net
losses for the three months ended March 31, 1996 and 1995 was $688,730 and
$572,054, respectively. The Company's working capital deficit at March 31, 1996
and December 31, 1995 was $415,092 and $257,866, respectively. The Company
intends to pursue additional equity financing as a vehicle for financing future
operations and the continuation of the Company as a going concern is dependent
on these plans. These factors raise a substantial doubt about the Company's
ability to continue as a going concern. There can be no assurance that the
Company will not continue to incur net losses in the future. See "Management's
Discussion And Analysis of Financial Condition And Results Of Operations,"
"Business," and "Certain Transactions".
2. Dependence Upon Key Personnel. The success of the Company is highly
dependent upon the continued services of Robert Sipper, the Company's President,
and Alfred Sipper, the President of the Company's wholly owned subsidiary,
Mootch & Muck, Inc. The loss of the services from such individuals could have a
material adverse effect upon the business of the Company and its relationships
with its customers. The Company has entered into an employment agreement with
Robert Sipper and Mootch & Muck, Inc. has entered into an employment agreement
with Alfred Sipper. However, if the employment by the Company of either Robert
Sipper or by Mootch & Muck of Alfred Sipper is terminated, or if they are unable
to perform their duties, the Company may be negatively affected. The Company has
no key man life insurance on the lives of Robert Sipper or Alfred Sipper. There
can be no assurances that the Company will be able to replace either Robert
Sipper or Alfred Sipper in the event that their services become unavailable. The
Company has been advised that neither Robert Sipper nor Alfred Sipper currently
intends to devote significantly less time to the Company's affairs after the
Effective Date of this offering. See "Management."
3. Expenses and Uncertainty of Expansion. The Company currently has limited
marketing capabilities and resources. The Company intends to use a substantial
portion of the proceeds of this offering to expand its distribution business by
either acquiring another beverage distributor or entering into the beer and malt
beverage business directly. The additional distribution business may enable the
Company to develop a regional reputation. There can be no assurance, however,
that the increase in expenditures to establish new distribution routes and/or
10
<PAGE>
additional beverage product lines will result in significantly greater
recognition, market penetration, or increased levels of revenues. Further, there
can be no assurance that the Company's management will be able to successfully
implement the Company's plans for expansion or profitably manage the Company's
business as additional distribution routes are established. See
"Business-Acquisition of Certain Assets of SB&S", "Competition" and "Use of
Proceeds."
4. M&M's Dependence Upon Suppliers. As a distributor of many different
beverages, M&M does not distribute any single dominant brand, although at
present sparkling and spring water account for approximately 50% of M&M's sales.
M&M has exclusive distribution contracts with all of its significant suppliers
(except for Poland Spring with whom no contract exists). Such contracts grant
the suppliers the ability to terminate M&M as a distributor of their products
based upon a failure by M&M to meet certain annual sales quotas and for non
payment of invoices for delivered goods. Therefore, M&M could in a relatively
short period of time experience the loss of one or more significant suppliers.
M&M's ability to compete with other distributors is dependent upon its ability
to attract and retain competitive lines of beverages on favorable financial
terms. The loss of any significant line of beverages, or any combination of
lines, or any changes in payment terms required by such manufacturers, could
have a material adverse effect on M&M, and therefore, on the Company. The
Company is not aware of any beverage lines planning to cancel or terminate its
contract relationship with the Company. Although the Company believes that M&M
can obtain other product suppliers to replace the loss of its current lines,
there can be no assurance that such beverages will be as marketable or that they
can be obtained by the Company on similar payment terms.
5. Governmental Regulation. The distribution and sale of the Company's
products are subject to the U.S. Food, Drug and Cosmetic Act, and various other
federal, state and local laws governing the production, sale, safety,
advertising, labeling and ingredients of such products and the regulations
promulgated thereunder by the United States Food and Drug Administration and
other regulatory agencies. Although the Company believes it and its distributors
and sub-distributors are in compliance with all material federal, state, and
local governmental laws and regulations concerning the production, distribution
and sale of the Company's products, there can be no assurance that the Company
and its distributors and sub-distributors will be able to comply with such
regulations in the future or that new governmental regulations will be
introduced which would prevent or temporarily inhibit the sale of the Company's
products to consumers. The Company is not aware of any pending legislation or
regulation with which, if implemented, the Company would be unable to comply.
M&M is required to be licensed as wholesale beer distributor by the United
States Bureau of Alcohol, Tobacco and Firearms and the New York State Liquor
Authority. The Company obtained such licenses in March 1995. In addition, each
salesperson is required to obtain a solicitors permit from the New York State
Liquor Authority. There can be no assurance that M&M will be successful in
maintaining such licenses and permits, that M&M will be able to comply with
applicable regulations in the future, or that individual employees will be
successful in maintaining necessary licenses and permits.
11
<PAGE>
6. Seasonality of Beverage Business. Historically, the beverage industry in
the New York metropolitan area experiences significantly higher demand for its
products during the second and third quarters of the year. As a result, the
Company receives in excess of 60% of its revenue during this period. Large
variances in cash flow may make it more difficult at certain times to meet the
Company's fixed expenses in a timely manner which could have a material adverse
effect on the Company's relationships with its suppliers, and negatively impact
upon the Company's business.
7. Competition in Distribution Industry. The soft drink, beer and malt
beverage distribution industry in the metropolitan New York area is highly
competitive and includes several companies which are well-established and better
financed than M&M, including Coca Cola of New York, Inc., Pepsi of New York,
Inc., Canada Dry Bottling Co. of New York, Inc., Phoenix Beverages and Mr.
Natural (Snapple), Inc., as well as Anheuser-Busch, Inc., Manhattan Beer, Inc.,
and Prospect Beer Distributors, Inc. M&M currently competes, and following the
acquisition of SB&S assets will compete, against other distributors which
distribute products which have achieved significant national, regional and local
brand name recognition and consumer loyalty. The distributors of such product
and of many lesser known products have significantly greater financial,
marketing, personnel and other resources than the Company allowing such
competitors to implement costly advertising and promotional programs. There can
be no assurance that the Company will be able to complete successfully against
such companies.
8. Risks Involved in the Beverage Industry. The Company's business is
subject to all of the risks generally associated with the retail beverage
industry. These risks include, among other things, (i) that sales of retail
beverages are often seasonal, experiencing higher sales in warm weather months
and lower sales at other times of the year, (ii) that a food product may be
banned or its use limited or declared unhealthful, (iii) that product tampering
may occur which may require a recall of the product by the Company or (iv) that
sales of the product may decline due to perceived health concerns, changes in
consumer tastes or other reasons beyond the control of the Company.
9. Evolving Consumer Preferences. As in the case with other companies
marketing beverages, the Company is subject to evolving consumer preferences and
nutritional and health-related concerns. The Company's SunSprings(TM) product
line is dependent upon the public interest in beverages which are "natural," and
are generally perceived as "healthful." A significant shift in consumer demand
for such products would have a material adverse effect on the Company's
business. While the Company believes that the trend away from alcohol toward
non-alcoholic substitute beverages increases the attractiveness of its products
to consumers, there can be no assurance that this will remain the case in the
future. See "Business--Products" and "--Competition."
10. Potential Product Liability. The Company faces substantial potential
liability in connection with the sale and consumption of its beverages. The
Company has purchased product liability insurance in the amount of $1,000,000
per occurrence and $2,000,000 in the aggregate.
12
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In addition, the Company has a $3,000,000 umbrella liability policy. The Company
believes that its present insurance coverage is sufficient for its current level
of business operations although there is no assurance that the present level of
coverage will be available in the future or at a reasonable cost. Further, there
can be no assurance that such insurance will be sufficient to cover potential
claims, or that adequate, affordable insurance coverage will be available to the
Company in the future. A partially or completely uninsured successful claim
against the Company or a successful claim in excess of the liability limits or
relating to an injury excluded under the policy could have a material adverse
effect on the Company. See "Business--Product Liability Insurance."
11. Dependence on Distributors and Brokers. The Company's success in
marketing and selling the SunSprings(TM) and Taste of Jamaica(R) beverages is
dependent upon the establishment of a strong distribution network. Although the
Company currently distributes such products through Mootch & Muck, Inc., its
wholly owned subsidiary ("M&M"), there can be no assurances that the Company
will be able to enter into other distribution or broker agreements, or that it
will be able to do so on terms that are favorable to the Company and will permit
it to operate profitably. The inability to enter into such agreements, on
favorable terms, may inhibit the Company's ability to implement its business
plan or to establish markets necessary to successfully develop its products. See
"Business--Distribution."
12. Potential Adverse Effect of Sales by Selling Securityholder. At such
times as the Selling Securityholders effect sales of the securities held thereby
such sales may have an adverse effect on the market price of the Company's
Units, Series C Preferred Stock, Common Stock and Series C Warrants. The sales
of the shares by the Selling Securityholders may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary broker's transactions, previously negotiated transactions or through
sales to one or more dealers for resale of such shares as principals at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with sales of such securities. Certain of the
Selling Securityholders have paid significantly less for the securities held
thereby than the offering price of the Units and may elect to sell such
securities at prices below the market value on the date of sale. Such sales may
have an adverse effect on the market price of the Company's securities. See
"Selling Securityholders."
13. Anti-Takeover Provision. The Company is subject to a Delaware statute
regulating business combinations that may also hinder or delay a change in
control of the Company. Also, pursuant to the Certificate of Incorporation, the
Board of Directors of the Company may from time to time authorize the issuance
of shares of preferred stock, in one or more series having such preferences,
rights and other provisions as the Board of Directors may fix in providing for
the issuance of such series. Any issuances of shares of preferred stock could,
under certain circumstances, have the effect of delaying or preventing a change
in control of the Company and may adversely affect the rights of the holders of
the Company's Common Stock and the market for same.
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14. Lack of Dividends. The holders of the Series C Preferred stock are
entitled to a 10% annual cumulative dividend which are payable on the first day
of January. Such dividend is based on a liquidation price of $5.00 per share.
Each of such shares is entitled to an annual dividend of $.50. Based upon such
number of shares outstanding, the Company's total annual dividend obligation
will be approximately $1,101,112.50. The Company may pay such dividend in cash
or in shares of Common Stock having a Fair Market Value equal to the dividend
amount. In the event that the Company is unable to make dividend payments in
cash or in shares of Common Stock, such rights to dividends will be accrued
until the date on which the Company may make lawful dividend payments. The
Company has not paid any cash dividends since its incorporation and anticipates
that, for the foreseeable future, earnings if any, will be retained for use in
the Company's businesses and will continue to be used to fund its operations.
See "Dividends", "Description of Securities - Series C Preferred Stock" and
"Market for the Company' Securities."
15. Underwriter's Unit Purchase Option. In connection with its IPO, the
Company sold to the underwriters thereof, for nominal consideration, warrants to
purchase an aggregate of 50,000 IPO Units (the "IPO Unit Purchase Option"). The
IPO Unit Purchase Option will be exercisable until January 28, 1998 at an
exercise price of $15.00 per IPO Unit, subject to certain adjustments. In
connection with this offering, the Company will sell to the Underwriter a Unit
Purchase Option to purchase an aggregate of 40,000 Units (the "Unit Purchase
Option"). The Unit Purchase Option will be exercisable commencing in June of
1996 and for four years thereafter at an exercise price of $6.00 per Unit. The
holders of the IPO Unit Purchase Option and the Unit Purchase Option will have
the opportunity to profit from a rise in the market price of the IPO Units,
Warrants and/or the Common Stock, and the Units, Series C Preferred Stock and
Series C Warrants, without assuming the risk of ownership. The Company may find
it more difficult to raise additional equity capital if it should be needed for
the business of the Company while the IPO Unit Purchase Option or Unit Purchase
Option is outstanding. At any time when the holders thereof might be expected to
exercise them, the Company would probably be able to obtain additional capital
on terms more favorable than those provided by the IPO Unit Purchase Option or
the Unit Purchase Option.
In May of 1995, the Company agreed to sell to I.A. Rabinowitz & Co. and VTR
Capital, Inc. (collectively the "Underwriters"), or their designess, for an
aggregate purchase price of $40 an option (the "Unit Purchase Option") to
purchase up to an aggregate of 40,000 Units. Each Unit consisting of One Share
of Series C Convertible Preferred Stock and Two Series C Redeemable Preferred
Stock Purchase Warrants. The Underwriter's Unit Purchase Option is exercisable
for a four-year period commencing on May 15, 1995 at an exercise price of $6.00
per unit. The Unit Purchase Option may not be assigned, transferred, sold or
hypothecated by the Underwriters until May 15, 1996, except to officers or
partners of the Underwriters. For the life of the Unit Purchase Option, the
holders thereof are given, at nominal cost, the opportunity to profit from the
rise in the market price of the Company's Units, Series C preferred Stock and
Series C Warrants with a resulting dilution in the interest of other
securityholders.
16. Rule 144 Sales; Future Sales of Common Stock. The Company's outstanding
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unregistered Common Stock, may be deemed "restricted securities" as that term is
defined by Rule 144 of the Securities Act and, in the future, may be sold in
compliance with Rule 144 of the Securities Act. Ordinarily, under Rule 144, a
person who is an affiliate of the Company (as that term is defined in Rule 144)
and has beneficially owned restricted securities for a period of two (2) years
may, every three (3) months, sell in brokerage transactions an amount that does
not exceed the greater of (i) 1% of the outstanding number of shares of a
particular class of such securities or (ii) the average weekly trading volume of
trading in such securities on all national exchanges and/or reported through the
automated quotation system of a registered securities association during the
four weeks prior to the filing of a notice of sale by a securities holder. A
person who is not an affiliate of the Company who beneficially owns restricted
securities and who has held such securities for at least two (2) years is also
subject to the foregoing volume limitations but may, after the expiration of
three (3) years, sell such securities without limitation pursuant to Rule
144(k). Possible or actual sales of the Company's outstanding Common Stock by
certain of the present Securityholders under Rule 144 may, in the future, have
an adverse effect on the market price of the Company's Common Stock should a
public trading market develop for such shares.
17. No Assurance of Public Trading Market or Qualification for Continued
NASDAQ Inclusion. There can be no assurance that a trading market for the
Company's securities will be sustained. Generally, for continued listing on
NASDAQ, a company, among other things, must have $2,000,000 in total assets,
$1,000,000 in total capital and surplus, $1,000,000 in market value of public
float and a minimum bid price of $1.00 per share. On January 11, 1995, the
Company received a letter from The NASDAQ Stock Market, Inc. informing the
Company that the shares of the Company's Common Stock have failed to maintain a
closing bid price greater than or equal to $1.00. NASDAQ advised the Company
that to be eligible for continued listing the Company's shares of Common Stock
must maintain a minimum bid price of $1.00 or, as an alternative, if the bid
price is less than $1.00, maintain capital and surplus of $2,000,000 and a
market value of public float of $1,000,000. The Company was provided with ninety
days within which it must regain compliance. If for at least ten consecutive
trading days (i) the Company's Common Stock reports a closing bid price of $1.00
or greater or (ii) the Company's capital and surplus equals or exceeds
$2,000,000 and the market value of the public float equals or exceeds
$1,000,000, then the Company will be deemed to comply with the NASDAQ listing
requirements. If the Company is unable to satisfy the requirements for continued
quotation on NASDAQ, trading, if any, in the Company's Units, Common Stock and
Warrants would be conducted in the over-the-counter market in what are commonly
referred to as the "pink sheets" or on the NASD OTC Electronic Bulletin Board.
As a result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the securities offered hereby. The
above-described rules may materially adversely affect the liquidity of the
market for the Company's securities.
18. "Penny Stock" Regulations. The Securities and Exchange Commission (the
"Commission") has adopted regulations which generally define "penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less
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than $5.00 per share, subject to certain exceptions. If the Company's securities
are removed from NASDAQ, the Company's securities may become subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth 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 rules require the
delivery, prior to the transaction, of a disclosure schedule prepared 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, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and 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 and may affect the ability of purchasers in the offering to
sell the Company's securities in the secondary market.
DIVIDEND POLICY
The Company has not paid and does not anticipate paying any cash dividends
in the foreseeable future, but instead intends to retain all working capital and
earnings, if any, for use in the Company's business operations and in the
expansion of its business. Pursuant to the terms of the Company's Series C
Preferred Stock, the Company is obligated to pay an annual cumulative dividend
of 10% of the liquidation value of the Series C Preferred Stock ($5.00 per
share), or $.50 per share. The Company may, in its discretion, elect to pay
dividends on the Series C Preferred Stock in shares of Common Stock having a
Fair Market Value equal to the dividend amount. Under Delaware corporate law,
the Company may pay dividends either (i) out of its capital surplus (paid in
capital less the aggregate par value of the shares of capital stock outstanding)
or (ii) in the event that there shall be no such capital surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. If the dividend is to be paid in shares of Common Stock,
the directors shall, by resolution direct that there be designated an amount as
capital which is not less than the aggregate par value of the shares of Common
Stock being declared as a dividend. In the event that the Company has no capital
surplus or net profits for the fiscal year in which the dividend is declared
and/or the preceding fiscal year, then the Company shall be prohibited from
paying dividends for such fiscal year. However, such unpaid dividends shall be
accrued until the Company may lawfully pay dividends. See "Risk Factors,"
"Description of Securities."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Year ended December 31, 1995 compared with the year ended December 31, 1994
The following discussion of the Company's financial condition as of December 31,
1995 and results of operations for the years ended December 31, 1995 and 1994,
includes Bev-Tyme, Inc. and its wholly-owned subsidiaries [collectively, the
"Company"] and should be read in conjunction with the Consolidated Financial
Statements and Notes appearing elsewhere in this 10-KSB.
Business Structure
Bev-Tyme, Inc. ["Bev-Tyme"], is engaged in the business of developing and
marketing beverage products and is also engaged in the business of distributing
and selling beverage and snack products to grocery stores, supermarket chains,
restaurants and corporate cafeterias. In 1995, the Company also commenced
distributing beer and other malt beverages. Because of increased competition in
the "New Age" beverage market and continuing operating losses related to the
sale of its SunSprings(TM) beverage products, the Company increased its focus on
its beverage and snack food distribution. In March 1994, the Company acquired
the remaining 49% interest in the Combined Subsidiaries from Alfred Sipper, in
exchange for 60,000 newly issued shares of New Day's common stock and $250,000
payable at the Company's option in cash or common stock over a period of sixteen
months [the "M&M Debt"].
The Company believes that the purchase of M&M enhances its soft drink
distribution capabilities, gives the Company more control over distribution of
its own products in the significant New York City metropolitan area market, and
enables the Company to test new product concepts and remain abreast of current
market trends.
In June 1995, the Company purchased the net assets of SB&S, another beverage
distributor, which will increase its current customer distribution base,
territory and enable the Company to commence distribution of beer and other malt
beverages. The Company acquired the net assets of SB&S for $500,000 in cash,
20,000 shares of the Company's common stock valued at $31,250 and options to
purchase 7,500 shares of the Company's common stock.
As a result of the Company's recurring losses from operations, the Company's
auditors believed there was substantial doubt about the Company's ability to
continue as a going concern at December 31, 1995 and issued a going concern
qualification to their report dated March 21, 1996.
Results of Operations
For the year ended December 31, 1995, the Company had a loss from operations of
$3,775,882 and a net loss of $3,826,230 [$.90 per share], as compared to a loss
from operations of $1,157,297 and
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a net loss of $1,192,542 [$.34 per share] for the year ended December 31, 1994.
The primary reason for the increase of approximately $1,600,000 in net loss is
the compensation expense in 1995 of approximately $1,200,000 resulting from the
issuance of the Company's common and preferred stock and the Company's reduced
gross profit of approximately $300,000.
The change in the elements of revenues and expenses reflect the Company's shift
to primarily focusing on the distribution of beverage products rather than the
manufacturing and marketing of its SunSprings(TM) products.
For the year ended December 31, 1995, the Company's gross profit was $1,756,430
or 14% as compared to $2,043,291 or 21% in 1994. The change in the gross profit
percentage was attributable to a change in the Company's product mix, primarily
resulting from the beers and malt beverages. The Company intends to de-emphasize
the sale of common beer and increase the focus on the sale of imported and
microbrewed beers. Additionally, the Company liquidated a large amount of its
"closeout" products in 1995 and does not anticipate a large amount of closeouts
in 1996.
Selling, advertising and promotion expense for 1995 and 1994 amounted to
$1,128,782 and $913,762, respectively, and primarily consisted of salesmen's
salaries, commissions and related expenses of the companies' distribution sales
force.
General and administrative expenses in 1995 were $2,405,738 or 19% of net sales
as compared to $1,773,076 or 18% of net sales in 1994. General and
administrative expenses in 1995 included compensation and related payroll taxes
of approximately $900,000, rent and related office expenses of $250,000 and
insurance expense of approximately $260,000. General and administrative expenses
in 1994 included compensation and related payroll taxes of approximately
$492,600 [which included $269,000 of compensation related to stock options
recorded in the first quarter of 1994 offset by an adjustment of 340,000 due to
the relinquishment of these options], rent and related office expenses of
approximately $824,800 and insurance expense of approximately $303,300.
Because of the Company's severe cash shortages and numerous unsuccessful
attempts at finding traditional debt financing, the Company entered into bridge
financing which resulted in a total non-cash financing cost of $580,000
[$193,350 in 1994 and $386,650 in 1995]. This represented the fair value
assigned to the Bridge Units issued upon conversion of the Convertible Bridge
Notes. The effective annual interest rate on these Bridge Loans was
approximately 300%.
Interest expense relates primarily to commercial loans on the transportation
equipment.
Liquidity and Capital Resources
For the year ended December 31, 1995, the Company utilized approximately
$715,000 in operating activities. This utilization was primarily attributable to
the net loss of approximately $3,800,000 as adjusted for non-cash transactions
of approximately $2,100,000.
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The Company utilized approximately $800,000 from net investing activities during
1995. This was primarily attributable to the acquisition of the net assets of
SB&S for approximately $526,000 and acquisition of equipment for approximately
$250,000.
The Company generated $1,581,219 from net financing activities during 1995. This
was primarily attributable to the net proceeds of $1,688,787 from the Series C
Preferred Stock Offering.
At December 31, 1995, the Company had a working capital deficit of approximately
$260,000 reflecting primarily the excess of accounts payable, accrued expenses
over cash, accounts receivable and inventory. The Company's cash balance at
December 31, 1995 was $153,714.
For the year ended December 31, 1994, the Company utilized $1,176,523 in
operating activities, utilized $149,062 in investing activities and generated
$664,480 in net financing activities. The Company generated $416,503 from
financing activities during the first quarter 1994. This was attributable
primarily to the net proceeds of approximately $375,000 from the Company's
issuance of warrants. The Company also raised an additional $12,890 through the
exercise of bridge units and $118,171 from the proceeds from sale of its common
stock. This represented a decrease of $661,105 in cash and cash equivalents
since December 31, 1993. The funds utilized in operating activities were
attributable primarily to the $1,192,542 net loss for the period.
Year ended December 31, 1995 compared with the year ended December 31, 1994
In November and December 1994, the Company borrowed an aggregate of $200,000
from certain lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received two [2] promissory notes [the "Bridge
Notes"]. Certain Bridge Notes are in the aggregate principal amount of $180,000
[the "Principal Bridge Notes"] and the other Bridge Notes are in the aggregate
principal amount equal to $20,000 [the "Convertible Bridge Notes"]. Each of the
Bridge Notes bears interest at the rate of eight percent [8%] per annum. The
Principal Bridge Notes were due and payable upon the earlier of (i) June 15,
1995, or (ii) the closing of the Offering. The Convertible Bridge Notes are due
and payable on December 1, 1995. In addition, each Bridge Lender had the right
to convert a Convertible Bridge Note into a number of units ["Bridge Units"]
equal to the total dollar amount loaned to the Company by such Bridge Lender;
provided, however, that one Bridge Lender may convert its Convertible Bridge
Note into the total dollar amount loaned to the Company plus an additional
50,000 Bridge Units because such Bridge Lender surrendered 1,000,000 warrants
exercisable for 1,000,000 shares of Common Stock. In February 1995, the Bridge
Lenders converted the Convertible Bridge Notes into an aggregate of 250,000
Bridge Units at a conversion price of $.10 per Bridge Unit. The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
The conversion price to the Bridge Lenders is significantly less than the
offering price of the Units offered hereby because of the risk associated with
the repayment of the Bridge Loans. Further, the Company agreed to register such
Bridge Units in the first registration statement filed by the Company following
the date of the loan. The bridge notes were repaid on May 23, 1995, the close of
the Public Offering.
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On May 15, 1995, the Company completed a secondary public offering for sale
460,000 units, each consisting of one share of Series C Convertible Preferred
Stock, par value $.0001 per share and two Series C Redeemable Preferred Stock
purchase warrants. Each share of Series A Preferred Stock is convertible at the
option of the holder, at any time after May 15, 1996, into 18 shares of the
Company's common stock. The Series C Warrants entitle the holder to purchase one
share of Series C Preferred Stock at an exercise price of $6.00 per share
through May 15, 2000 and may be redeemed by the Company under certain
conditions. To date, none of the Preferred Stock Warrants have been exercised or
redeemed. The Company realized net proceeds of $1,688,787 after deducting, the
underwriters discount and other costs of the offering.
In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, recorded an expense of $1,076,250. In October 1995,
525,000 Series C Preferred Stock Options were exercised and the Company recorded
a stock subscription receivable of $1,050,000, which was paid in January and
February of 1996.
In November 1995, the Company issued to certain employees and the directors of
the Company options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services to be
rendered in 1996. None of such options have been exercised.
In February 1996, the Company engaged a consultant to assist the Company in
connection with acquisitions, divestitures, joint ventures and other strategic
business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 300,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.
Year ended December 31, 1995 compared with the year ended December 31, 1994
The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution
business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.
The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those
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plans change, or the costs or development of operations prove greater than
anticipated, the Company could be required to modify its operations, liquidate
inventory or seek additional financing. The Company has no current arrangements
with respect to such additional financing, and there can be no assurance that
such additional financing, if available, will be on terms acceptable to the
Company.
New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] has issued Statement of
Financial Accounting Standards ["SFAS"] No. 107, "Disclosure about Fair Value of
Financial Instruments," which is effective for fiscal years beginning after
December 15, 1995. The Company will adopt SFAS No. 107, as amended by FAS No.
119, "Disclosure About Derivative Financial Instruments in Debt and Equity
Securities," on January 1, 1996. Adoption of SFAS No. 107 and SFAS No. 119 is
not expected to have a material impact on the Company's financial position or
results of operations.
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of
1995. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
Adoption of SFAS No. 121 is not expected to have a material impact on the
Company's financial statements.
Year ended December 31, 1995 compared with the year ended December 31, 1994
The FASB has also issued SFAS No. 123, Accounting for Stock-Based Compensation,
in October 1995. SFAS No. 123 uses a fair value based method of accounting for
stock options and similar equity instruments as contrasted to the intrinsic
value based method of accounting prescribed by Accounting Principles Board
["APB"] Opinion No. 25, Accounting for Stock Issued to Employees. The Company
has not decided if it will adopt SFAS No. 123 or continue to apply APB Opinion
No. 25 for financial reporting purposes. SFAS No. 123 will have to be adopted
for financial statement note disclosure purposes in any event. The accounting
requirements of SFAS No. 123, are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure
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requirements of SFAS No. 123 are effective for financial statements for fiscal
years beginning after December 15, 1995.
Impact of Inflation
The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods. Increases in supplies or other
operating costs could adversely affect the Company's operations; however, the
Company believes it could increase prices to offset increases in costs of goods
sold or other operating costs.
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the directors and executive officers of the Company are
set forth below:
Name Age Position
- ---- --- --------
Robert Sipper............... 42 Chief Executive Officer,
President and Director
Hartley T. Bernstein........ 44 Director
Alfred Sipper............... 62 Director
Bruce Logan................. 64 Director
Joseph Vigliarolo(1)........ 34 Chief Financial Officer
Robert Forst(2)............. 46 Chief Financial Officer
- ----------
(1) Mr. Vigliarolo resigned in February 1996.
(2) Mr. Forst commenced working for the Company in March 1996.
Robert Sipper has been a director of the Company since November 1993 and
Chief Executive Officer and President of the Company since January, 1994. He
graduated with a J.D. degree from Vermont Law School in 1978 and entered private
practice, He was associated with Dubbs, Leopold, Davis & DePodwin, Attorneys at
Law from 1979-1981. He became a partner in the law firm of Leopold & Sipper.
Attorneys at Law, from 1981 to March 1989. In March, 1989, Mr. Sipper left the
private practice of law and became Chief Operating Officer/Executive Vice
President of Mootch & Muck, a position he holds today, which was the master
Evian distributor for the Metropolitan New York - New Jersey territory as well
as the distributor of many other beverages and selected specialty foods. Mr.
Sipper established a subdistributor network for Evian and other products in this
territory. In 1990, Mr. Sipper negotiated the sale of Mootch & Muck's Evian
Master
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Distributor Agreement to Canada Dry Bottling Company of New York.
Hartley T. Bernstein has been a Director since June, 1992 and is a member
of the law firm of Bernstein & Wasserman specializing in corporate and
securities law. Mr. Bernstein graduated from Columbia University with a B.A. in
1973 and received his J.D. from New York University School of Law in 1976. He
was associated with the firm of Parker Chapin Flattau & Klimpl from 1976-1977,
served as an Assistant District Attorney for New York County from 1977-1979 and
was associated with the law firm of Guggenheimer & Untermyer from 1979-1982. In
1982, Mr. Bernstein formed his own law practice which subsequently merged with
his present firm. Mr. Bernstein also serves as a director of PDK Labs Inc., and
Futurebiotics, Inc., each a public company. Mr. Bernstein has served as a
director of Celebrity Resorts, Inc. from November 20, 1989 to February 27, 1992.
Mr. Bernstein also served as a director of DreamCar Holdings, Inc., commencing
July 13, 1989 and ending as of August 1992. Mr. Bernstein is a member of the
adjunct faculty of Yale Law School where he teaches a course in securities law
and has served previously on the adjunct faculties of New York Law School and
Mercy College. He is also an instructor at the National Institute of Trial
Advocacy and a member of the Boards of Arbitration of the National Association
of Securities Dealers, Inc. and the New York Stock Exchange. Mr. Bernstein
serves as a commentator on securities law matters on the nationally syndicated
Business Radio Network and Money Radio. The law firm of Bernstein & Wasserman,
LLP of which Mr. Bernstein is a partner, has acted as legal counsel to the
Company.
Joseph Vigliarolo, a certified public accountant, was the Chief Financial
Officer, Senior Vice President and Secretary of the Company from May 1994 to
February 1996 when he resigned. He also held the position, since February of
1993, of Chief Financial Officer of the Company's wholly owned subsidiary,
Mootch and Muck, Inc.. He was associated with the accounting firm of Ganer &
Ganer from November 1983 to August 1985 and November 1990 to August 1991, was
with the accounting firm of Chassin, Levine and Rosen from August 1985 to
November 1986 and was a Manager at the accounting firm of Ernst & Young from
November 1986 to May 1989. Mr. Vigliarolo also worked at the New York
Chiropractic College as Controller and Assistant Treasurer from May 1989 to May
1990. Mr. Vigliarolo worked for the investment banking firm of Whyte Lyon & Co.
from August 1991 to February 1993. In 1991, Mr. Vigliarolo was declared
personally bankrupt by the United States Bankruptcy Court, Mr. Vigliarolo
received his undergraduate degree from Boston College.
Bruce Logan, has been a director of the Company since August 1994. Since
1991, Mr. Logan has been the chairman of New York Media, Inc., a New York City
based producer of custom publications, and newsletters for the restaurant
industry. Mr. Logan co-founded Magazine Networks and it was subsequently sold to
3M Corporation. Mr. Logan is currently Chairman of New York Hospital's Community
Advisory Board.
Alfred Sipper, has been a director of the Company since March 1994. Mr.
Sipper has been President of Mootch & Muck, Inc. since 1977 and was President of
PIK Groceries, Inc. from 1952 until 1983.
Robert Forst, has been the Chief Financial Officer of the Company since
March 1996. Mr.
23
<PAGE>
Forst was Controller of Empire Taxi and Limo Co. from August, 1985 through
August, 1995. Mr. Forst was the Assistant Controller of Value Line, Inc. from
July, 1979 through July, 1985. He also worked for Americana Hotels, Inc. from
June 1972 through July 1979. Mr. Forst received his undergraduate degree from
St. John's University.
There are no family relationships among any of the directors or executive
officers of the Company, except that Alfred Sipper, a director of the Company
and Chief Executive Officer of Mootch & Muck, Inc., is the father of Robert
Sipper, President and Chairman of the Board of the Company and Chief Operating
Officer of Mootch & Muck. The Company pays its directors who are not also
employees of the Company $500 for each meeting attended and reimburses such
directors for travel and other expenses incurred by them in connection with
attending Board of Directors meetings. In November 1993, the board suspended the
payment of director's fees indefinitely. Directors are elected annually at the
Company's regular annual meeting of Securityholders.
In May, 1995, the Company issued to certain of the Company's officers,
directors and employees options to purchase an aggregate of 525,000 shares of
Series C Preferred Stock at an exercise price of $2.00 per share, all of which
shares were registered with the Securities and Exchange Commission on Form S-8
for sale to the public. In October, 1995, all of such options were exercised.
In November 1995, the Company issued to certain employees and the directors
of the Company options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services to be
rendered in 1996. None of such options have been exercised.
In November 1995, the Company issued to certain employees and the directors
of the Company options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services to be
rendered in 1996. None of such options have been exercised.
EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid to the Named Executive
Officers for the calendar years ending December 31, 1995, December 31, 1994 and
December 31, 1993.
24
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Awards Long-Term Compensation
------------------------------ --------------------------
(a) (b) (c) (d) (e) (f)
Other Annual Restricted Stock Option
Name and Principal Position Year Salary Compensation Award Grants
- --------------------------- ---- ------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert Sipper, President and 1995 $ 95,457 15,000
Chief Executive Officer 1994 $ 87,333 -- -- 7,500
Marshall Becker, President 1993 $140,192 -- -- --
and Chief Executive 1992 62,790 -- -- 6,725
Officer(1) 1991 -- $41,052 $42,000 --
Alfred Sipper 1995 155,235 15,000
President and Chief 1994 $142,024 -- -- 75,000
Executive Officer of 1993 $124,685 -- -- --
Mootch & Muck, Inc. (2)
</TABLE>
(1) Resigned as Chairman of the Board and Chief Executive Officer on January 7,
1994. Of the 67,259 stock options granted 40,299 options did not vest as of
the date of Mr. Becker's resignation. Mr. Becker has waived all rights to
the remaining stock options. In April 1991, Mr. Becker received 84,996
shares of restricted stock in exchange for services rendered.
(2) Mootch & Muck, Inc. became a subsidiary when the Company acquired a 51%
interest in May 1993. Prior to that Mootch & Muck, Inc. was an unaffiliated
company.
The following table sets forth certain information with respect to options
granted during the last fiscal year to the Company's Chief Executive Officer and
the other executive officers named in the above Summary Compensation Table.
25
<PAGE>
Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Number of Securities
Underlying Percent of Total Exercise or
Options/SARS Options/SARS Granted to Base Price
Name Granted (#)(1) Employees in Fiscal Year ($/Sh) Expiration Date
- ---- --------------- ------------------------ -------- ---------------
<S> <C> <C> <C> <C>
Robert Sipper 75,000 9.1% 2.00 May 31, 2000
75,000 9.1% 2.00 Nov. 30, 2000
Alfred Sipper 75,000 9.1% 2.00 May 31, 2000
75,000 9.1% 2.00 Nov. 30, 2000
</TABLE>
- ----------
(1) Options are exercisable for shares of Series C Preferred Stock.
Aggregate Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End
Option/SAR Values
The following table sets forth certain information with respect to options
exercised during the last fiscal year by the Company's Chief Executive Officer
and the executive officers named in the Summary Compensation Table, and with
respect to unexercised options held by such persons at the end of the last
fiscal year:
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised in the
Acquired on Value Realized Underlying Unexercised Money Options/SARs at
Name Exercise (#)(1) $ Options/SARS at FY-End (#) FY-End ($) (2)
---- --------------- -------------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Sipper 75,000 168,750 ------- 75,000 ------ 375,000
------- ------ ------ -------
Alfred Sipper 75,000 168,750 ------- 75,000 ------ 375,000
------- ------ ------ -------
</TABLE>
- ----------------------
(1) Options are exercisable for shares of Series C Preferred Stock.
(2) Based upon a closing bid price December 29, 1995 of $7.00 per share as
reported by The Nasdaq Stock Market.
The Company pays its directors who are not also employees of the Company
$500 for each meeting attended and reimburses such directors for travel and
other expenses incurred by them in connection with attending Board of Directors
meetings. In November 1993, the board suspended the payment of director's fees
in order to conserve its working capital. Juan Metzger, formerly a director of
the Company, was paid $1,000 per month under a consulting arrangement with the
Company, pursuant to which Mr. Metzger advised the Company in the area of
product distribution. Mr. Metzger resigned from the Board of Directors in April,
1994.
On August 5, 1994, the Company issued options to purchase 75,000 shares of
Common Stock
26
<PAGE>
at $.69 per share (the fair market value of the Company's Common Stock on the
date of grant) to certain members of senior management and to each of the
members of the Company's Board of Directors.
In May 1995, the Company issued to certain officers and directors options
to purchase an aggregate of 525,000 shares of the Company's Series C Preferred
Stock at an exercise price of $2.00 per share, all of which shares were
registered with the Securities and Exchange Commission on Form S-8. In October,
1995, the holders thereof exercised such options.
In November 1995, the Company issued to certain employees and the directors
of the Company options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services rendered in
1996. None of such options have been exercised.
Employment Agreements
On May 12, 1993, Mootch & Muck, Inc., the Company's wholly owned
subsidiary, entered into a twelve (12) year full-time employment agreement with
Alfred Sipper, which may be extended for two years at Mr. Sipper's option.
Pursuant to the agreement, he will serve as President and Chief Executive
Officer of M&M at an annual compensation of $140,000 per year, subject to
cost-of-living adjustments, bonuses and salary increases based upon performance.
As of May 12, 1995, Alfred Sipper's employment agreement with Mootch & Muck,
Inc. was amended and restated. Pursuant to the terms of the amended and restated
employment, (i) Mr. Sipper has agreed to serve as President and Chief Executive
Officer of Mootch & Muck, Inc. until May 12, 2009, (ii) Mr. Sipper will receive
an annual salary of $165,200 per year, plus an annual salary increase of 5% or
such greater amount as determined by the Board of Directors of the Company based
upon reasonable criteria. The Company also agreed to provide (i) an annual bonus
of options to purchase (x) 75,000 shares of Series C Preferred Stock at an
exercise price equal to 80% of the fair market value of the Company's Series C
Preferred Stock at the time of grant and (y) 15,000 shares of Common Stock at
an exercise price equal to 80% of the fair market value of the Company's Common
Stock of the time of grant and (ii) to reimburse Mr. Sipper for all
out-of-pocket business expenses, including automobile expenses up to $800 per
month.
On May 12, 1993, the Company entered into Employment Agreements with Robert
J. Sipper, the Company's Chief Executive Officer and President, Khosrow
Foroughi, the Company's Executive Vice President, and William Swedelson, the
Company's Vice President of Sales. Each of the Agreements was for a period of
four years and contained customary provisions regarding termination,
confidentiality and reimbursement of bona fide business expenses. Mr. Sipper,
Mr. Foroughi and Mr. Swedelson each received an annual salary of $85,750,
$64,090 and $70,720, respectively, subject to increase by the Board of Directors
based upon the Company's performance and other reasonable criteria.
As of May 12, 1995, Robert Sipper's employment agreement with Mootch &
Muck, Inc. was
27
<PAGE>
amended and restated. Pursuant to the terms of the amended and restated
employment, (i) Mr. Sipper has agreed to serve as Senior Vice President and
Chief Operating Officer of Mootch & Muck, Inc. until May 12, 2001, (ii) Mr.
Sipper will receive an annual salary of $101,600 per year, plus an annual salary
increase of 5% or such greater amount as determined by the Board of Directors of
the Company based upon reasonable criteria. The Company also agreed to provide
(i) an annual bonus of options to purchase (x) 75,000 shares of Series C
Preferred Stock at an exercise price equal to 80% of the fair market value of
the Company's Series C Preferred Stock at the time of grant and (y) 15,000
shares of Common Stock at an exercise price equal to 80% of the fair market
value of the Company's Common Stock of the time of grant and (ii) to reimburse
Mr. Sipper for all out-of-pocket business expenses, including automobile
expenses up to $800 per month.
As of May 12, 1995, William Swedelson's employment agreement with Mootch &
Muck, Inc. was amended and restated. Pursuant to the terms of the amended and
restated employment, (i) Mr. Swedelson has agreed to serve as Vice President -
Sales of Mootch & Muck, Inc. until May 12, 2001, (ii) Mr. Swedelson will receive
an annual salary of $83,800 per year, plus an annual salary increase of 5% or
such greater amount as determined by the Board of Directors of the Company based
upon reasonable criteria. The Company also agreed to provide (i) an annual bonus
of options to purchase (x) 75,000 shares of Series C Preferred Stock at an
exercise price equal to 80% of the fair market value of the Company's Series C
Preferred Stock at the time of grant and (y) 15,000 shares of Common Stock at
an exercise price equal to 80% of the fair market value of the Company's Common
Stock of the time of grant and (ii) to reimburse Mr. Swedelson for all
out-of-pocket business expenses, including automobile expenses up to $800 per
month.
As of April 1, 1994, the Company entered into an Employment Agreement with
A. Alexander Watson. Pursuant to the terms of the agreement, Mr. Watson serves
as the Company's Manager of Marketing and Product Development on a full time
basis for a period of five years. Mr. Watson is entitled to receive a base
annual salary of $20,800 plus a monthly commission based upon sales of the
Company's Taste of Jamaica(R) products.
On April 25, 1996, the Company entered into an Employment Agreement with
Mel Feldman, pursuant to which the Company issued to Mr. Feldman 25,000 shares
of Common Stock in exchange for Mr. Feldman becoming Director of Sales for
Bronx, Brooklyn and Queens counties, for the Company. Mr. Feldman's employment
with the Company is for a term of three years. Mr. Feldman is receiving a base
salary of eighty thousand dollars ($80,000) and the 25,000 shares of Common
Stock of the Company.
On April 25, 1996, the Company entered into an Employment Agreement with
Aaron German, pursuant to which the Company issued to Mr.German 25,000 shares
of Common Stock in exchange for Mr. German becoming Assistant Director of Sales
for Bronx, Brooklyn and Queens counties, for the Company. Mr. German's
employment with the Company is for a term of three years. Mr. German is
receiving a base salary of eighty thousand dollars ($80,000) and the 25,000
shares of Common Stock of the Company.
28
<PAGE>
Stock Option Plans and Agreements
Incentive Option and Stock Appreciation Rights Plan--In November 1992, the
Directors of the Company adopted and the Securityholders of the Company approved
the adoption of the Company's 1992 Incentive Stock Option and Stock Appreciation
Rights Plan ("Incentive Option Plan"). The purpose of the Incentive Option Plan
is to enable the Company to encourage key employees and Directors to contribute
to the success of the Company by granting such employees and Directors incentive
stock options ("ISOs"), as well as non-qualified options and stock appreciation
rights ("SARs").
The Incentive Option Plan will be administered by the Board of Directors or
a committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs, non-qualified options or SARs (in tandem
with an option or freestanding) or a combination thereof, and the number of
shares to be subject to such options and SARs.
The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted. Non-qualified options and freestanding SARs may be
granted with any exercise price. SARs granted in tandem with an option have the
same exercise price as the related option.
The total number of shares with respect to which options and SARs may be
granted under the Incentive Option Plan is 7,500. ISOs may not be granted to an
individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option or SAR may be granted under
the Incentive Option Plan after November 24, 2002 and no option or SAR may be
outstanding for more than ten years after its grant. Additionally, no option or
SAR can be granted for more than five (5) years to a shareholder owning 10% or
more of the Company's outstanding Common Stock.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations. SARs
may be settled, in the Board of Directors' discretion, in cash, Common Stock, or
in a combination of cash and Common Stock. The exercise of SARs cancels the
corresponding number of shares subject to the related option, if any, and the
exercise of an option cancels any associated SARs. Subject to certain
exceptions, options and SARs may be exercised any time up to three months after
termination of the holder's employment.
The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without Securityholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
or SARs under the Incentive Option Plan or materially increase the benefits of
participants.
29
<PAGE>
The Company issued incentive options to purchase an aggregate of 60,000
shares of Common Stock to four sales management personnel. The options are
exercisable at $1.00 per share for a period of four years commencing in August
1994.
Non-Qualified Option Plan--In November 1992, the Directors and
Securityholders of the Company adopted the 1992 Non-Qualified Stock Option Plan
(the "Non-Qualified Option Plan"). The purpose of the Non-Qualified Option Plan
is to enable the Company to encourage key employees, Directors, consultants,
distributors, professionals and independent contractors to contribute to the
success of the Company by granting such employees, Directors, consultants,
distributors, professionals and independent contractors non-qualified options.
The Non-Qualified Option Plan will be administered by the Board of Directors or
the Committee in the same manner as the Incentive Option Plan.
The Non-Qualified Option Plan provides for the granting of non-qualified
options at such exercise price as may be determined by the Board of Directors,
in its discretion. The total number of shares with respect to which options may
be granted under the Non-Qualified Option Plan is 12,500.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations. Subject to certain exceptions, options may be exercised any time up
to three months after termination of the holder's employment.
The Non-Qualified Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without Securityholder approval, the
Non-Qualified Option Plan may not be amended to increase the number of shares
subject to the Non-Qualified Option Plan, change the class of persons eligible
to receive options under the Non-Qualified Option Plan or materially increase
the benefits of participants.
In August 1994, the Company issued to certain sales representatives an
aggregate of 25,000 non-qualified options under the Non Qualified Option Plan.
The options are exercisable at $1.00 per share for a period of four years
commencing in August 1994.
Other Options
In May, 1995, the Company issued to certain officers and directors options
to purchase an aggregate of 525,000 shares of the Company's Series C Preferred
Stock at an exercise price of $2.00 per share, all of which shares were
registered with the Securities and Exchange Commission on Form S-8. In October,
1995, the holders thereof exercised such options.
In November 1995, the Company issued to the directors of the Company
options to purchase an aggregate of 300,000 shares of Series C Preferred Stock
at an exercise price of $2.00 per share.
30
<PAGE>
None of such options have been exercised.
In April 1996, the Company issued to two (2) executive employees of the
Company, as additional compensation, each the option to purchase 100,000 shares
of Series C Preferred Stock of the Company at an exercise price of $1.50 per
share for three years following the employee becoming vested with the Company.
During an eighteen month period commencing July 1, 1996, one sixth of the
Initial Option Shares (16,666) vests with the employee on the first day of each
calendar quarter, until October 1, 1997.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of July 1, 1996, certain information with
respect to the beneficial ownership of Common Stock and Series C Preferred Stock
by each person or entity known by the Company to be the beneficial owner of 5%
or more of such shares, each officer and director of the Company, and all
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Shares of Common Stock Shares of Preferred Stock
---------------------- -------------------------
Amount Approximate Amount Approximate
Name and Address Beneficially Percentage (%) Beneficially Percentage (%)
of Beneficial Owner Owned of Class Owned of Class
- ------------------- ----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Robert Sipper 7,500(1) 1.0 75,000(2) 4.8
President and Chairman of
the Board
c/o New Day Beverage
134 Morgan Avenue
Brooklyn, NY 11237
Hartley T. Bernstein 7,500(1) 1.0 75,000(2) 4.8
Director
c/o Bernstein & Wasserman
950 Third Avenue
New York, NY 10022
Alfred Sipper 15,068(1) 2.0 75,000(2) 4.8
Director
c/o Mootch & Muck, Inc.
134 Morgan Avenue
Brooklyn, NY 11237
Bruce Logan 7,500(1) 1.0 75,000(2) 4.8
Director
25 Central Park West
New York, NY 10023
All Officers & Directors 37,567 4.9 300,000 16.6%
as a Group (4 Persons)
</TABLE>
- ----------
(1) Includes 7,500 shares of Common Stock issuable upon the exercise of 7,500
stock options at an
31
<PAGE>
exercise price of $0.69 per share.
(2) Includes 75,000 shares of Series C Preferred Stock issuable upon the
exercise of 75,000 stock options at an exercise price of $2.00 per share.
32
<PAGE>
CERTAIN TRANSACTIONS
In June 1991, M&M established a line of credit with Manufacturers Hanover
Trust Company in the aggregate amount up to $250,000. In connection therewith,
Alfred Sipper, a director of the Company and President of M&M, executed a
Guarantee in respect of such line of credit. The Company repaid in May 1995
approximately $130,000, the total outstanding amount, under such line of credit
with the proceeds from the secondary public offering.
In June of 1992, the Company sold to New Day Investors Corp., a
non-affiliated party ("New Day Investors") shares of its Common Stock equal to
sixty-five (65%) percent of all outstanding stock of the Company pursuant to a
stock sale agreement (the "Stock Sale Agreement") for $325,000 for the purpose
of raising capital for the Company. None of the shareholders of New Day
Investors were affiliated with the Company. In November 1992, New Day Investors
Corp. distributed all of the shares of Common Stock of the Company held by New
Day Investors Corp. to its shareholders on a prorated basis.
On June 5, 1992, the Company sold to M&M five (5%) percent of its then
outstanding stock for $25,000 for the purpose of raising capital for the
Company. Pursuant to that agreement, M&M executed a promissory note to the
Company, in consideration for the shares in the sum of $25,000 (the "Note"). M&M
satisfied the Note in September of 1992. As of March 23, 1993, the Chief
Executive Officer and President of M&M is also a director of the Company.
In June through August 1991, the Company borrowed $135,000 from Morris
Friedell, a principal shareholder of the Company, and the Company executed
demand notes pursuant thereto, with interest payable quarterly at the rate of
ten and one-half percent (10.5%) per annum.
On March 12, 1992, Mr. Friedell agreed to convert the outstanding demand
notes to promissory notes (the "Initial Notes") to be paid in equal quarterly
installments of interest and principal over a two (2) year period with the first
payment due on August 15, 1992, provided that all payments on said notes are to
be made each quarter prior to the payment of any salaries. The Company paid all
interest with respect to the Initial Notes up through June 30, 1992, and made
the August 15, 1992 principal payment. On October 19, 1992, the Company reached
an oral understanding with Mr. Friedell pursuant to which it shall deliver a
promissory note to Mr. Friedell in substitution of the Initial Notes (the
"Substitute Note") which provides that Mr. Friedell's loan shall be fully
amortized over eighteen (18) months and accordingly, commencing November 15,
1992, Mr. Friedell shall receive quarterly payments of principal and interest
with the final payment due on May 15, 1994. The promissory note provides further
that the Company will withhold payments of salaries and bonuses to its officers
if it fails to make any payment under the Substitute Note within ten (10) days
of when due.
In February 1992, Mr. Friedell agreed to pay the sum of $65,156.01, owed by
the Company to Continental Glass & Plastic, Inc., the Company's bottle supplier.
As a result, the Company executed a collateral note payable to Mr. Friedell
dated February 13, 1992 in the sum of $65,156.01 with interest payable at the
rate of eleven percent (11%) per annum until the debt is paid in full (the
"Second Note"). The Second Note was guaranteed jointly and severally by Marshall
E. Becker and
33
<PAGE>
Wilford L. Adkins, Jr. As further security, the Company agreed to assign to Mr.
Friedell the proceeds of certain purchase orders from M&M, in the amount of
$110,687.50. In addition, Mr. Friedell was granted a security interest with
respect to all of the Company's accounts receivable, as reflected by a UCC-1
financing statement filed in the State of Illinois. Any amount received by Mr.
Friedell over the $65,956 from the M&M purchase orders was to be applied to
reduce the outstanding interest and then principal due under the Initial Notes.
Pursuant to this Agreement, Mr. Friedell received payments from M&M in the
amount of $75,600 in 1992, which was used to satisfy the interest and principal
balance of the Second Note and the balance of which was applied to the Initial
Notes. In May 1993, the Company paid approximately $93,000 to Mr. Friedell in
full satisfaction of all outstanding notes.
In September 1992, the Company issued 200 shares of Series A Preferred
Stock to unaffiliated parties in consideration of $200,000 in connection with a
bridge financing. Upon the closing of the Public Offering, the Series A
Preferred Stock was redeemed by the Company, at a price of $1,000 per share. As
additional consideration, the Company issued to the purchasers of the Series A
Preferred Stock an aggregate of 250,000 bridge units, which upon exercise
thereof, entitled the holders to purchase an aggregate 250,000 bridge shares and
250,000 bridge warrants, for an aggregate purchase price of $125,000. All of the
bridge units were exercised and the Company registered all 250,000 bridge shares
and 250,000 bridge warrants and the shares of common stock underlying the bridge
warrants.
As of September 30, 1992, in order to raise capital, the Company sold to
unaffiliated parties four (4) units, each unit consisting of twenty-five (25)
shares of the Company's Series B Preferred Stock at a price of $25,000 per unit
(the "Series B Units"). The securities were sold pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933. The Series B Preferred
Stock had an annual dividend of 5% of the liquidation preference, or $50 per
share. In addition, the Series B Preferred Stock provided that each share of the
Series B Preferred Stock was convertible by its holder into one thousand (1,000)
shares of Common Stock at any time commencing ninety (90) days after receipt of
the Company of the subscription therefor. If the holder converted the Series B
Preferred Stock on or before six (6) months from the holder's subscription for
such Series B Preferred Stock, the holder was also entitled to receive 1,000
Warrants for each share of Series B Preferred Stock which was converted, which
Warrants would have the same terms and conditions as the Warrants included in
the Company's initial public offering. In accordance with its terms, the holders
of all of the Series B Preferred Stock converted their shares into an aggregate
of 100,000 common shares and 100,000 warrants in February 1993.
In December 1992, the Company borrowed an aggregate of $150,000 from 11
individual lenders. The loan proceeds were used by the Company for working
capital purposes. The loan bore interest at a rate of eight (8%) percent per
annum and was payable upon the earlier of (i) December 23, 1993 or (ii) the
closing of the Company's first public offering of securities. The loan was
repaid with interest of $1,472 on February 5, 1993. As additional consideration
for the Bridge Loan, the Company issued to the lenders an aggregate of 93,750
Bridge Units which upon exercise were issuable for an aggregate of 93,750 Bridge
Shares and 93,750 Bridge Warrants for an aggregate price of $46,875.
Simultaneously with the initial public offering, the Company registered all
93,750 Bridge
34
<PAGE>
Units, 93,750 Bridge Shares and 93,750 Bridge Warrants and the shares of Common
Stock underlying the Bridge Warrants.
On February 5, 1993 the Company completed an initial public offering of its
securities whereby the Company sold 575,000 Units at $10 per Unit. Each Unit
consists of two (2) shares of Common Stock and one Common Stock Purchase
Warrant. The components of the Units became transferrable immediately upon
completion of the initial public offering. Each Warrant entitles its holder to
purchase one (1) share of Common Stock at a price of $6.00 per share through
January 1996 and may be redeemed by the Company under certain conditions.
In May 1993, Mootch & Muck, Inc., the Company's primary distributor of its
SunsSprings products, approached the Company regarding a loan to fund certain of
it working capital needs. If the Company was unable to provide funds to Mootch &
Muck, Inc., the Company was advised that Mootch & Muck, Inc. would be forced to
approach a competitor for financing. In such event, any acquiring competitor
would have likely discontinued distribution of the Company's beverage products.
Rather than make an unsecured loan, the Company elected to make an equity
investment in Mootch & Muck, Inc., the primary distributor of its beverages.
On May 12, 1993, the Company acquired a 51% interest in each of the three
(3) companies: Mootch & Muck, Bev-Tyme, and Irving Food Center, all of which
were under the common control of Alfred Sipper who subsequently became, and
currently is, a director of the Company, for an aggregate purchase price of
$1,000,000 all the cash proceeds of which were invested in the Company. The
purchase price was as a result of arms length negotiations and consisted of the
conversion to equity of a $300,000 loan made by the Company to Mootch & Muck in
March 1993, bearing interest at the rate of 9%, scheduled to mature on September
12, 1993, the payment of an additional $600,000 in cash which the Company had
raised in its initial public offering and the issuance of a twelve-month note in
the principal amount of $100,000 bearing interest at the rate of six (6%)
percent per annum. The Company believes that the terms the Company received
under this transaction were not less favorable to the Company than terms
obtainable from an unaffiliated party, although it did not receive a valuation
from any third party. On March 23, 1994, the Company agreed to offset the
$100,000 note against a $100,000 loan made to M&M by the Company during 1993.
Because of increased competition in the "New Age" beverage market and
continuing operating losses in the sale of its SunSprings beverage products, the
Company has intensified its focus on the beverage and snack food distribution.
As a result, in March 1994, the Company acquired the remaining 49% interest in
its subsidiaries, in exchange for 60,000 newly issued shares of the Company's
Common Stock and $250,000 payable at the Company's option in cash or Common
Stock over a period of sixteen (16) months (the "M&M Debt"). In addition, the
seller, Alfred Sipper, the President and founder of M&M, was entitled to receive
an additional 20,000 shares of Common Stock if the Subsidiaries reported
positive earnings before the payment of taxes for the year ended December 31,
1994 and an additional 20,000 shares of Common Stock if the Company reported
not less than $100,000 in earnings before the payment of taxes for the year
ended December 31, 1995. On October 28, 1994, the Company issued 5,067 shares
of Common Stock as payment of $150,000 due and owing under the M&M Debt to Mr
Alfred Sipper, a director of the Company and President of M&M. Under the terms
of the original agreement, in the event that Mr. Sipper sold such shares
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and received less than $150,000 from the proceeds therefrom, the Company was
obligated to issue Mr. Sipper sufficient number of additional shares of Common
Stock so that the aggregate proceeds from both sales was not less than $150,000.
The Company was obligated to register such shares for public sale. On February
13, 1995, the Company and Mr. Sipper amended their agreement so that Mr. Sipper
would receive shares of Series C Preferred Stock and the Company would be
relieved from all of its obligations to make future payments to Mr. Sipper and
to register the shares of Common Stock previously issued to Mr. Sipper. Under
the amended agreement, the Company issued to Mr. Sipper 83,333 shares of Series
C Preferred Stock (the "Shares") (based upon an attributed value of $3.00 per
share) and Mr. Sipper has released the Company from all of its obligations,
include making payments in the future to Mr. Sipper. Further, in the event that
Mr. Sipper receives within two years following the Effective Date aggregate, net
proceeds in excess of $250,000, Mr. Sipper shall deliver such amount in excess
of $250,000 to the Company and surrender for cancellation all of the remaining
Shares held thereby, if any. The Company did not receive any valuation from any
third party with respect to this transaction. Mr. Sipper sold such shares in
1995 and did not receive proceeds from the sale thereof in excess of $250,000 in
the aggregate.
On February 15, 1994, the Company entered into a consulting agreement with
Marshall Becker, the Company's former Chief Executive Officer and director,
pursuant to which (i) Mr. Becker would serve as an outside consultant to the
Company in connection with the sale of the Company's SunSprings (TM) products
for six months commencing on January 10, 1994, at the rate of $1,000 per week,
(ii) Mr. Becker would be entitled to 50% of the net proceeds derived from
international licensing of the SunSprings(TM) products, and (iii) Mr. Becker
received an option exercisable before April 15, 1994 to purchase certain assets
of the Company used in connection with the manufacturing, marketing and sale of
the Registrant's SunSprings(TM) products for $1,150,000. The Company entered
into the Consulting Agreement with Mr. Becker in order to have Mr. Becker
continue his efforts to obtain international licensing agreements for the sale
and distribution of the SunSprings products. The Company has not received any
international licensing fees of any value, either as a result of Mr. Becker's
efforts, or otherwise. Mr. Becker did not exercise his option to acquire certain
assets of the Company, which option has expired. In addition, Mr. Becker's
Consulting Agreement with the Company expired in July 1994.
On February 2, 1994 the Company issued 1,500,000 warrants, at a price of
$.25 per warrant to Morgan Steel Ltd and Davstar II. The warrants possess the
same terms and conditions as those offered to the public in connection with the
Company's initial public offering. Of the 1,500,000 warrants issued, 1,000,000
warrants have been surrendered by Morgan Steel, Ltd. for cancellation by the
Company.
The Company issued in February 1994, 7,500 shares of Common Stock to the
law firm of Bernstein & Wasserman in consideration for legal services rendered.
Hartley T. Bernstein, a director of the Company, is a partner of the law firm.
On August 5, 1994, the Company issued an aggregate of 525,000 options to
purchase shares of Common Stock at $.69 per share (the fair market value of the
Company's Common Stock on the date of grant) to certain members of senior
management and to each of the members of the Company's Board of Directors in
order to compensate such persons for their contribution to the
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Company.
In November and December 1994, the Company borrowed an aggregate of
$200,000 from certain lenders (the "Bridge Lenders"), some of whom were
previously lenders to, or investors in, the Company, or customers of the
underwriter of the Company's initial public offering. In exchange for making
loans to the Company, each Bridge Lender received two (2) promissory notes (the
"Bridge Notes"). Certain Bridge Notes were in the aggregate principal amount of
$180,000 (the "Principal Bridge Notes") and the other Bridge Notes were in the
aggregate principal amount equal to $20,000 (the "Convertible Bridge Notes").
Each of the Bridge Notes bore interest at the rate of eight percent (8%) per
annum. The Principal Bridge Notes were due and payable upon the earlier of (i)
May 1, 1995 and (ii) the closing of the next underwritten public offering of the
Company's securities, or the closing of this offering. The Company used a
portion of the proceeds from its secondary offering to repay the Bridge Lenders.
Each Bridge Lender had a Convertible Bridge Note convertible into a number of
units ("Bridge Units") equal to the total dollar amount loaned to the Company by
such Bridge Lender; provided however, that one Bridge Lender converted its
Convertible Bridge Note into the total dollar amount loaned to the Company plus
an additional 50,000 Bridge Units because such Bridge Lender surrendered
1,000,000 warrants exercisable for 100,000 shares of Common Stock. Such
transaction was as a result of an arms length negotiation between the Company
and such Bridge Lender. In February 1995, the Bridge Lenders converted the
Convertible Bridge Notes into an aggregate of 25,000 Bridge Units. The
registration statement filed in connection with the Company's secondary offering
also related to the 25,000 Bridge Units held by the Bridge Lenders.
As of February 1995, holders of a majority of the shares of the Company's
outstanding Common Stock and Series C Preferred Stock voting together as a
class, delivered to the Company written consents in lieu of a meeting of the
Securityholders of the Company adopting an amendment to the Company's
certificate of incorporation (the "Amendment"). The Amendment authorized the
increase of the number of authorized shares of Series C Preferred Stock from
1,000,000 shares to 3,000,000 shares.
In February 1995, the Company agreed to issue 33,892 shares of Series C
Preferred Stock to Alfred Sipper in exchange for the cancellation by Mr. Sipper
of certain indebtedness of M&M in the aggregate principal amount of $101,675. In
February 1995, the Company also borrowed $45,000 from Alfred Sipper which the
Company repaid in June 1995.
On May 15, 1995, the Company completed a secondary public offering pursuant
to which the Company sold 460,000 Units ("Preferred Stock Units") to the public
at $5.00 per Unit. Each Preferred Stock Unit consisted of one (1) share of
Series C Convertible Preferred Stock ("Preferred Stock") and two (2) Series C
Preferred Stock Purchase Warrants ("Preferred Stock Purchase Warrants"). Each
share of Series C Preferred Stock is convertible at the option of the holder, at
any time after May 15, 1996, into a number of shares of the Company's Common
Stock, $.0001 par value per share, equal to the price of the Units offered in
the Secondary Public Offering divided by the fair market value of Common Stock
as of May 15, 1995. The Series C Warrants entitle the registered holder thereof
to purchase one (1) share of Series C Preferred Stock at an exercise price of
$6.00 per share through May 15, 2000 and may be redeemed by the Company under
certain conditions. To date, none of the Preferred Stock Warrants have been
exercised or redeemed.
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In May, 1995, the Company issued to the Company's officers, directors and
employees options to purchase an aggregate of 52,500 shares of Series C
Preferred Stock at an exercise price of $2.00 per share, all of which shares
were registered with the Securities and Exchange Commission on Form S-8 for sale
to the public. In October, 1995, all of such options were exercised.
In November 1995, the Company issued to certain employees and the directors
of the Company options to purchase an aggregate of 52,500 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services to be
rendered in 1996. None of such options have been exercised.
In December 1995, the Company borrowed $309,000 form Alfred Sipper, $50,000
of which was repaid in December 1995, and $259,000 plus 5.75% interest was
repaid in January 1996.
In February 1996, the Company engaged a consultant to assist the Company in
connection with acquisitions, divestitures, joint ventures and other strategic
business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 30,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.
On October 26, 1995, the Company entered into a letter of intent to acquire
Riverosa Company, Inc. ("Riverosa"), a corporation engaged in the sale and
marketing of Perry's Majestic Beer, for the sum of $250,000. As part of that
understanding, the Company agreed that Riverosa or its successors would enter
into a three (3) year employment agreement with Mark Butler, Riverosa's
President, at an annual salary of $25,000 year, subject to appropriate increase
in the event Riverosa (or it successors) successfully completes an initial
public offering of its securities resulting in net proceeds in excess of
$2,000,000. The Employment Agreement would also provide for an annual bonus as
well as stock options based upon performance. In January 1996, the Company
assigned its rights under the letter of intent to Perry's Majestic Beer, Inc., a
subsidiary of the Company ("Perry's Majestic"), which entered into a definitive
agreement with Riverosa on March 29, 1996, pursuant to which the Company agreed
to pay the sum of $250,000 to acquire Riverosa. The closing is contingent upon,
among other things, the receipt of all necessary consents, permits and
government approvals. Mark Butler, one of the principal shareholders of Riverosa
was appointed to the board of directors of Perry's Majestic on April 1, 1996. A
contract deposit of $150,000 was paid into escrow upon execution of the
agreement and the balance of $100,000 is payable by the issuance of a promissory
note. The promissory note is payable upon the earlier of (i) one year from the
date of issuance or (ii) the closing of the closing of initial public offering
of Perry's Majestic.
In January 1996, the Perry's Majestic issued an aggregate of 2,500,000
shares of its common stock to seven (7) parties for total consideration of
$50,000. In March 1996, Perry's Majestic issued to the Company 500,000 shares of
convertible Series A Preferred Stock and 7,000,000 shares of Series B Preferred
Stock for $150,000 and 400,000 shares of the Company's Series C Preferred Stock.
As a result of these transactions, the Company holds approximately 75% of the
voting stock of Perry's Majestic.
In March, 1996, Perry's Majestic borrowed an aggregate of $150,000 from
seven (7)
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unaffiliated lenders (the "Bridge Lenders"). In exchange for making loans to
Perry's Majestic, each Bridge Lender received a promissory note (the "Bridge
Note"). Each of the Bridge Notes bears interest at the rate of eight percent
(8%) per annum. The Bridge Notes are due and payable upon the earlier of (i)
July 31, 1996 or (ii) the closing of an initial underwritten public offering of
the Perry's Majestic's securities. Perry's Majestic intends to use a portion of
the proceeds of its initial public offering to repay the Bridge Lenders. The
Bridge Lenders have the right to receive a total of 3,000,000 Class A Warrants
of Perry's Majestic. Perry's Majestic entered into the bridge financing
transactions because it required additional financing and no other sources of
financing were available to it at that time. Further, Perry's Majestic agreed to
register the Class A Warrants issuable in connection with the Bridge Loans and
the shares of Common Stock underlying the Class A Warrants in the first
registration statement filed by the Company following the date of the loan.
On April 1, 1996 the Company entered into a Consulting Agreement with
Walter Miller, pursuant to which the Company issued to Mr. Miller an option to
purchase an aggregate of 10,000 shares of of the Company's Common Stock at an
exercise price of $1.50 per share.
On April 11, 1996, Perry's Majestic filed a registration statement on Form
SB-2 with the Securities and Exchange Commission which provided for the
registration of Units consisting of two (2) shares of Common Stock and one Class
A Warrant by Perry's Majestic and the concurrent offering of securities by
certain selling securityholders ("Selling Securityholders"). Perry's Majestic is
registering, under the primary prospectus, 345,000 Units (including 45,000 Units
subject to an over-allotment option granted to the underwriter), 690,000 shares
of Common Stock, 345,000 Class A Warrants and 345,000 shares of Common Stock
issuable upon the exercise of the Class A Warrants. Perry's Majestic is
registering on behalf of the Selling Securityholders, under an alternate
prospectus, (i) 1,850,000 shares of Common Stock, and (ii) 3,000,000 Class A
Warrants issuable upon conversion of the Bridge Notes.
On April 5, 1996, the Company entered into a Consulting Agreement with
Matthew L. Harriton, pursuant to which the Company issued to Mr. Harriton
40,000 shares of Common Stock in exchange for consulting services in connection
with business development. Mr. Harriton has agreed that for a period of two
years he will advise the Company on its food service and restaurant distribution
divisions and new product lines. The Company believes that the number of shares
of Common Stock issued to Mr. Harriton is fair consideration for the services to
be performed under the Consulting Agreement with the Company.
On April 11, 1996, the Company entered into a Consulting Agreement with
Mark Butler, pursuant to which the Company issued to Mr. Butler 35,000 shares
of Common Stock in exchange for consulting services in connection with beer and
ale sales. Mr. Harriton has agreed that for a period of two years he will advise
the Company relating to the distribution of the Company's beer and ale product
lines: the acquisition and development of new beer and ale products, and the
expansion of the Company's existing beer and ale product lines. The Company
believes that the number of shares of Common Stock issued to Mr. Butler is fair
consideration for the services to be performed under the Consulting Agreement
with the Company.
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On April 25, 1996, the Company entered into an Employment Agreement with
Mel Feldman, pursuant to which the Company issued to Mr. Feldman 25,000 shares
of Common Stock in exchange for Mr. Feldman becoming Director of Sales for
Bronx, Brooklyn and Queens counties, for the Company. Mr. Feldman's employment
with the Company is for a term of three years. Mr. Feldman is receiving a base
salary of eighty thousand dollars ($80,000) and the 25,000 shares of Common
Stock of the Company.
On April 25, 1996, the Company entered into an Employment Agreement with
Aaron German, pursuant to which the Company issued to Mr. German 25,000 shares
of Common Stock in exchange for Mr. German becoming Assistant Director of Sales
for Bronx, Brooklyn and Queens counties, for the Company. Mr. German's
employment with the Company is for a term of three years. Mr. German is
receiving a base salary of eighty thousand dollars ($80,000) and the 25,000
shares of Common Stock of the Company.
On April 22, 1996, Mootch & Muck, Inc. ("Distributor") entered into a
Distribution Agreement with Premium Beverage Packers Co. ("Premium") pursuant to
which Distributor purchased distribution rights to "City Club" soda, for one
hundred eighty thousand dollars ($180,000) and three hundred thousand (30,000)
shares of the Company's common stock.
On April 29, 1996 the Company entered into a Loan Agreement with Michael
Lulkin whereby Mr. Lulkin loaned the Company one hundred fifty thousand dollars
($150,000). As additional consideration solely for making the loan, the Company
issued to Mr. Lulkin 40,000 shares of Common Stock.
On July 17, 1996 the Company effected a 1-for-10 reverse stock split with
respect to its shares of Common Stock.
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DESCRIPTION OF SECURITIES
The Selling Securityholder are offering 400,000 shares of Series "C"
Preferred Stock, par value $.0001 per share.
Preferred Stock
The Certificate of Incorporation of the Company currently authorizes the
issuance of up to 5,800,000 shares of preferred stock, $.0001 par value per
share. Of such number, 200 shares of Series A Preferred Stock and 100 shares of
Series B Preferred Stock have been previously designated although they are no
longer outstanding. In November 1994, the Board of Directors approved an
amendment to the Company's Certificate of Incorporation increasing the number of
shares of Common Stock from 15,000,000 shares to 60,000,000 shares and the
number of shares of Preferred Stock from 1,000,000 shares to 3,000,000 shares.
The Board of Directors recommended at the meeting of the Company's
Securityholders, held on January 6, 1995, that the Securityholders approve such
amendment to the Company's Certificate of Incorporation. The Company failed to
receive the affirmative vote of a majority of the outstanding shares of Common
Stock at such Securityholder meeting. Under Delaware law, Securityholders may
approve by written consent any matters which if presented to a meeting of
Securityholders would be approved. In February 1995, holders of 35,067 shares
of Common Stock and 357,225 shares of Series C Preferred Stock, representing
53.3% of the voting shares outstanding delivered to the Company written consents
in lieu of a meeting of the Securityholders of the Company adopting an amendment
to the Company's certificate of incorporation (the "Amendment"). The Amendment
authorized the increase of the number of authorized shares of Series C Preferred
Stock from 1,000,000 shares to 3,000,000 shares. Pursuant to the Certificate of
Incorporation, the Company's Board of Directors is authorized to issue shares of
Preferred Stock from time to time in one or more series and, subject to the
limitations contained in the Certificate of Incorporation and any limitations
prescribed by law, to establish and designate any such series and to fix the
number of shares and the relative conversion rights, voting rights and terms of
redemption (including sinking fund provisions) and liquidation preferences. If
shares of Preferred Stock with voting rights are issued, such issuance could
affect the voting rights of the holders of the Company's Common Stock by
increasing the number of outstanding shares having voting rights, and by the
creation of class or series voting rights. If the Board authorizes the issuance
of shares of Preferred Stock with conversion rights, the number of shares of
Common Stock outstanding could potentially be increased by up to the authorized
amount. Issuance of Preferred Stock could, under certain circumstances, have the
effect of delaying or preventing a change in control of the Company and may
adversely affect the rights of holders of other classes of preferred stock or
holders of Common Stock. Also, Preferred Stock could have preferences over the
Common Stock (and other series of preferred stock) with respect to dividends and
liquidation rights.
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Series C Preferred Stock
Designation and Amount; Par Value. The shares of such series are designated
as Series C Preferred Stock and the number of shares constituting such series is
5,800,000, 1,902,225 of which are issued and outstanding prior to the Effective
Date of the offering hereof.
Dividends. The Company shall pay preferential dividends to the holders of
the Series C Preferred Stock at a rate of ten percent (10%) per annum of the
liquidation preference, or $.50 per share. Such dividends shall accrue whether
or not they have been declared and whether or not there are profits, surplus or
other funds of the Company legally available for the payment of dividends. The
Company may in its discretion issue in lieu of a cash dividend shares of Common
Stock having a fair market value equal to the dividend amount.
Conversion. Each share of Series C Preferred Stock is convertible, at the
option of the holder at any time after May 15, 1996, into 1.8 shares of Common
Stock; provided that no fractional shares will be issued, such fraction to be
rounded to the nearest whole share.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, each share
of Series C Preferred Stock shall have a liquidation preference of $5.00 per
share plus unpaid annual dividends that have accrued to date of payment.
Voting Rights. The holders of Series C Preferred Shares shall have the
right to vote on all matters presented to the Securityholders of the Company
(including the holders of Common Stock), each share of Series C Preferred Stock
has 1.8 votes per share.
Redemption. The Series C Preferred Stock is subject to redemption by the
Company, upon thirty (30) days prior written notice at a price of $.05 per share
so long as the closing bid price of the Common Stock has equaled or exceeded
$2.00 per share for twenty (20) consecutive days.
Rank. The shares of Series C Preferred Stock rank senior to all series of
preferred stock in all respects.
Common Stock
Pursuant to the Certificate of Incorporation, the Company is presently
authorized to issue 75,000,000 shares of its Common Stock, $.0001 par value, of
which 729,220 shares were issued and outstanding as of the date hereof. In
November, 1994, the Board of Directors approved an amendment to the Company's
Certificate of Incorporation increasing the number of shares of Common Stock
from 15,000,000 shares to 60,000,000 shares and the number of shares of
Preferred Stock from 1,000,000 shares to 3,000,000 shares. The Board of
Directors recommended at the
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meeting of the Company's Securityholders held on January 6, 1995, that the
Securityholders approve such amendment to the Company's Certificate of
Incorporation. The Company failed to receive the affirmative vote of a majority
of the outstanding shares of Common Stock at such Securityholder meeting;
584,319 shares representing 15.8 % of the outstanding shares of Common Stock
voted in favor of the proposed amendment (of which management voted 300,000
shares of Common Stock) 199,720 shares representing 5.4% of the outstanding
shares voted against the proposed amendment and 2,903,720 shares representing
78.8% of the outstanding shares did not vote with respect to the proposed
amendment. The shares of Common Stock have no preemptive or other subscription
rights, have no conversion rights and are not subject to redemption. All shares
now outstanding are, and the Common Stock underlying the Series C Preferred
Stock and the Warrants will be, when and if issued, fully paid and
non-assessable. The holders of shares of Common Stock are entitled to one vote
for each share and do not have cumulative voting rights. The Company does not
intend to declare dividends on the Common Stock, but to retain earnings
otherwise available therefor to finance the growth of the Company. Subject to
the preferences, if any, applicable to any outstanding preferred stock
(including the Series C Preferred Stock), the holders of the outstanding shares
of Common Stock are entitled to receive pro rata such net assets of the Company
as are distributable upon liquidation after provision for the Company's
liabilities.
Series C Warrants
The Series C Warrants are separable commencing thirty days following the
Effective Date, unless released earlier by the Underwriter and are exercisable
for one share of Series C Preferred Stock at a price of $6.00 per share (the
"Exercise Price"). The Series C Warrants are subject to redemption by the
Company at any time after May 15, 1997 (two years after the Effective Date) at
$.05 per warrant, if the closing bid price per share of Common Stock has equaled
or exceeded $2.00 for 20 consecutive business days ending 10 days prior to the
Company's notice of redemption. The exercise price and maturity date of the
Series C Warrants are subject to adjustment at the discretion of the Company.
The Series C Warrants contain anti-dilution provisions providing for an
adjustment of the exercise price and the number of shares of Series C Preferred
Stock underlying such Series C Warrants and are subject to adjustment in the
event of (i) a stock dividend on, or a subdivision, combination or
reclassification of, the Series C Preferred Stock, (ii) the merger or
consolidation of the Company with or into another corporation or the sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, (iii) upon the Company's issuance of certain
rights or warrants to all holders of the Series C Preferred Stock to purchase
Series C Preferred Stock at less than the market price or (iv) upon other
distributions (other than cash dividends) to all holders of the Series C
Preferred Stock.
The Series C Warrant Holders will not be entitled to exercise the Series C
Warrants for fractional shares. No adjustments to reflect previously declared or
paid cash dividends will be made upon any exercise of the Series C Warrants. The
Series C Warrants do not confer upon the Holder any voting or preemptive rights,
or any other rights of a Securityholder of the Company.
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If, after May 15, 1997, the Series C Warrants are called for redemption by
the Company and the market price for the Company's Common Stock equals or
exceeds $2.00, the Company is required to pay a solicitation fee equal to four
percent (4%) of the exercise price to be paid to any representative registered
with the National Association of Securities Dealers, Inc. ("NASD") who, after
the Company gives notice of redemption of the Series C Warrants, causes the
exercise thereof prior to the expiration, as more fully set forth in the Series
C Warrant Agreement, subject, however, to the provisions of NASD Notice to
Members 81-38 (September 22, 1981). NASD Notice to Members 81-38 provides that
an NASD registered representative may not receive compensation as a result of
any of the following transactions: (1) the exercise of warrants where the market
price of the underlying security is lower than the exercise price; (2) the
exercise of warrants held in any discretionary account; (3) the exercise of
warrants where disclosure of compensation arrangements has not been made in
documents provided to customers both as part of the original offering and at the
time of exercise; and (4) the exercise of warrants in unsolicited transactions.
The Series C Warrant Agreement provides that the Company and the Series C
Warrant Agent, without the consent of the holders of the Warrants, may make
changes in the Series C Warrant agreement which do not adversely affect, alter
or change the rights of the registered holders of the Warrants.
In the absence of an applicable exemption, the Series C Warrants may not be
exercised unless the Company has a current registration statement on file with
the Securities and Exchange Commission and the shares of Series C Preferred
Stock underlying the Series C Warrants have been qualified by the securities
commissions of the states in which the holder seeking to exercise Series C
Warrants resides. The Company has agreed to maintain an effective registration
statement pursuant to the Securities Act for the shares of Series C Preferred
Stock underlying the Series C Warrants and to file post-effective amendments
when subsequent events require such amendments in order to continue the
registration under the Securities Act of the shares of Series C Preferred Stock
underlying the Series C Warrants. There can be no assurance that the Company
will be in a position to keep its Registration Statement current for the shares
of Series C Preferred Stock underlying the Series C Warrants or to register or
qualify the issuance of the Company's Series C Preferred Stock upon exercise of
the Warrants under the blue sky laws of all the states in which holders of
Series C Warrants may reside.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Units, Series C
Preferred Stock, Series C Warrants, IPO Units, Common Stock and IPO Warrants is
American Stock Transfer & Trust Company.
Registration Rights
The Underwriter has certain registration rights with respect to the
securities underlying the
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Unit Purchase Option for a period of four years commencing one (1) year from the
date of this Prospectus. The Bridge Lenders have the right to have 250,000 Units
registered by the Company. The Registration Statement of which this Prospectus
forms a part has registered such securities on behalf of the Bridge Lender. Any
exercise of such registration rights by the Underwriters or the sale of any
Bridge Units by the holders thereof may result in dilution in the interest of
the Company of the then present shareholders, hinder efforts by the Company to
arrange future financings of the Company and/or have an adverse effect on the
market price of the Company's Units, Series C Preferred Stock and Series C
Warrants.
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MARKET FOR THE COMPANY'S SECURITIES
The Company's Common Stock Units, Common Stock and Common Stock Purchase
Warrants commenced trading on the NASDAQ SmallCap Market system on the
effectiveness of the Company's initial public offering on January 29, 1993 in
the form of Units, under the symbol "SUNSU," each consisting of two (2) shares
of Common Stock (the "Common Stock") and one (1) redeemable Common Stock
Purchase Warrant (the "Common Stock Warrants"). Effective January 29, 1993, the
Common Stock and Warrant component parts of the Common Stock Units were
separated and began trading under the symbols "SUNS" and "SUNSW," respectively.
The Units, the Common Stock and the Common Stock Warrants are regularly quoted
and traded on the NASDAQ SmallCap Market system. As of March, 1996, these
securities traded under the symbols "BEVTU", "BEVT" and "BEVTW", respectively.
The Company's Preferred Stock Units, Series C Convertible Preferred Stock
(the "Preferred Stock") and Preferred Stock Purchase Warrants commenced trading
on the NASDAQ SmallCap Market on the effectiveness of the Company's secondary
public offering on May 15, 1995 in the form of Units, under the symbol
"SUNSL,"each Unit consisting of one (1) share of Series C Convertible Preferred
Stock and two (2) Series C Redeemable Preferred Stock Purchase Warrants.
Effective June 15, 1995, the Preferred Stock and Preferred Stock Warrant
components of the Preferred Stock Units were separated and began trading under
the symbols "SUNSP" and "SUNSZ," respectively. These Units, Series C Preferred
Stock and Preferred Stock Warrants are regularly quoted and traded in the Nasdaq
SmallCap Market System. As of March, 1996, these securities traded under the
symbols "BEVTL", "BEVTP" and "BEVTZ", respectively.
The following table indicates the high and low bid prices for the Company's
Common Stock Units, Common Stock and Warrants for the period from January 29,
1994 to December 31, 1995 and the Company Preferred Stock Units, Preferred Stock
and Warrants for the period from May 12, 1995 to December 31, 1995 based upon
information supplied by the NASDAQ system. Prices represent quotations between
dealers without adjustments for retail markups, markdowns or commissions, and
may not represent actual transactions. As of March 29, 1996, the Company had 25
holders of record of its shares of Preferred Stock and 414 holders of record of
its shares of Common Stock.
<TABLE>
<CAPTION>
==================================================================================================================================
Common Stock Common Stock Purchase Common Stock Units
Warrants
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 1994 High Low High Low High Low
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter* $4.625 $3.75 $2.375 $1.50 $12.50 $9.25
- ----------------------------------------------------------------------------------------------------------------------------------
Second Quarter $4.156 $1.875 $1.75 $0.49 $9.50 $4.75
- ----------------------------------------------------------------------------------------------------------------------------------
Third Quarter $1.875 $5.63 $1.25 $0.125 $5.00 $1.25
- ----------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter $0.9375 $0.281 $0.25 $0.0625 $1.25 $1.50
==================================================================================================================================
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Common Stock Common Stock Series C Series C Preferred Common Stock Preferred Stock
Purchase Preferred Stock Purchase Units(3) Units(2)
Warrants(1) Stock(2) Warrants(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 1995 High Low High Low High Low High Low High Low High Low
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $0.3125 $0.25 $0.0938 $0.0625 $0.875 $0.50
- ------------------------------------------------------------------------------------------------------------------------------------
Second Quarter $0.3438 $0.125 $0.0938 $0.0625 $7.8125 $5.00 $2.50 $1.375 $0.75 $0.625 $11.50 $5.50
- ------------------------------------------------------------------------------------------------------------------------------------
Third Quarter $0.3125 $0.0938 $0.0625 $0.0625 $8.125 $5.75 $2.375 $1.875 $10.375 $9.625
- ------------------------------------------------------------------------------------------------------------------------------------
Fourth Quarter $0.25 $0.125 $7.50 $5.75 $1.875 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
First Quarter, 1996 $0.22 $0.063 $9.50 $6.25 $2.6250 $1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Second Quarter, 1996 $0.25 $0.063 $6.25 $5.00 $2.0000 $1.00 $10.375 $8.50
====================================================================================================================================
</TABLE>
- ----------------
1 Common Stock Purchase Warrants ceased trading on August 2, 1995 and expired
on January 29, 1996.
2 Commenced trading on May 12, 1995.
3 Common Stock Units ceased trading on June 20, 1995.
On January 2, 1996, the Company issued to the holders of record of the
Series C Preferred Stock as of December 24, 1995 a dividend of two (2) shares of
the Company's Common Stock.
On July 17, 1996, the closing price of the Common Stock, Preferred Stock
and Preferred Stock Warrants as reported on the NASDAQ SmallCap Market System
were $1.00, $4.75 and $1.3125, respectively. The Company's Common Stock Units,
Common Stock Warrants and Preferred Stock Units were delisted from the NASDAQ on
June 20, 1995, August 2, 1995 and March 11, 1996 respectively.
On July 17, 1996 the Company effected a 1-for-10 reverse stock split with
respect to its shares of Common Stock.
Delaware Anti-Takeover Law
The Company is governed by the provisions of Section 203 of the General
Corporation Law of Delaware, an anti-takeover law enacted in 1988. In general,
the law prohibits a Delaware public corporation from engaging in a "business
combination" with an "interested Securityholder" for a period of three (3) years
after the date of the transaction in which the person became an interested
Securityholder, unless it is approved in a prescribed manner. As a result of
Section 203, potential acquirors of the Company may be discouraged from
attempting to effect acquisition transactions with the Company, thereby possibly
depriving holders of the Company's securities of certain opportunities to sell
or otherwise dispose of such securities at above-market prices pursuant to such
transactions
47
<PAGE>
Limitation on Liability of Directors
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its Securityholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Securityholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section 102
of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
Commission Policy
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and other agents of the Company, the Company
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
48
<PAGE>
SELLING SECURITYHOLDERS
This offering includes 400,000 shares of Series C Preferred Stock (the
"Shares") owned by Perry's Majestic Beer, Inc. (the "Selling Securityholder").
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Securityholder. The resale of the shares of the Selling
Securityholders are subject to Prospectus delivery and other requirements of the
Securities Act of 1933, as amended (the "Act"). Sales of such securities or the
potential of such sales at any time may have an adverse effect on the market
prices of the securities offered hereby.
At the time a particular offer of securities is made by or on behalf of a
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
Sales of securities by the Selling Securityholder or even the potential of
such sales would likely have an adverse effect on the market prices of the
securities offered hereby.
49
<PAGE>
PLAN OF DISTRIBUTION
The securities offered hereby may be sold from time to time directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of securities. The securities
offered by the Selling Securityholders may be sold by one or more of the
following methods, without limitations: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. The Selling Securityholders
and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
At the time a particular offer of securities is made by or on behalf of the
Selling Securityholder, to the extent required, a Prospectus will be distributed
which will set forth the number of shares being offered and the terms of the
Offering, including the name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for sales purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers and the proposed selling price to the public.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022.
Bernstein & Wasserman, LLP, Hartley T. Bernstein, a partner at Bernstein &
Wasserman, LLP, is one of the Directors of the Company. See "Management" and
"Principal Securityholders."
EXPERTS
Certain of the financial statements of the Company included in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been examined by Mortenson &
Associates, LLP, independent certified public accountants.
ADDITIONAL INFORMATION
This Prospectus constitutes part of a Registration Statement on Form SB-2
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act and omits certain information contained
in the Registration Statement. Reference is hereby made to the Registration
Statement and to its exhibits for further information with respect to the
Company and the Common Stock offered hereby. Statements contained herein
concerning provisions of documents are necessarily summaries of such documents,
and each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
The Registration Statement, including the exhibits thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at: 450 Fifth Street, Washington, D.C. 20549; and at the offices of
the Commission located at 7 World Trade Center, New York, NY 10048; and copies
of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, Washington, D.C. 20549 at prescribed rates.
50
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page to Page
------------
<S> <C>
Independent Auditor's Report............................................................. F-1........
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995....................... F-2........ F-3
Consolidated Statements of Operations for the three months ended March 31, 1996
and 1995 and the years ended December 31, 1995
and 1994................................................................................. F-4........
Consolidated Statements of Stockholders' Equity for the three months ended March
31, 1996 and 1995 and the years ended December 31, 1995
and 1994................................................................................. F-5........ F-7
Consolidated Statements of Cash Flows for the three months ended March 31, 1996
and 1995 and the for the years ended December 31,
1995 and 1994 ........................................................................... F-8........ F-10
Notes to Consolidated Financial Statements............................................... F-11....... F-21
</TABLE>
. . . . . . . . . . . . . . .
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Bev-Tyme, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Bev-Tyme,
Inc. and subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1995. These consolidated 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 audit 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
consolidated 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 consolidated financial position of
Bev-Tyme, Inc. and subsidiaries as of December 31, 1995, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that Bev-Tyme, Inc. and subsidiaries will continue as a going concern.
As discussed in Note 13 to the consolidated financial statements, the Company
has suffered recurring losses from operations and has a net working capital
deficiency that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 13. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
March 21, 1996
[Except for Note 17C
as to which the date is
April 11, 1996]
F-1
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
Assets:
Current Assets:
Cash $ 305,035 $ 153,714
Accounts Receivable - Net 800,196 704,870
Inventory 773,376 780,938
Prepaid Expenses 235,467 153,955
Stock Subscription Receivable 4,800 1,050,000
Note Receivable 60,000 --
--------------- ---------------
Total Current Assets 2,178,874 2,843,477
--------------- ---------------
Property and Equipment - Net 840,051 867,752
--------------- ---------------
Investments 250,000 --
--------------- ---------------
Other Assets:
Restricted Cash 5,073 5,073
Security Deposits 37,752 48,096
Goodwill - Net 2,820,404 2,924,863
Other Assets 3,751 3,751
Deferred Financing Costs -- 1,155,000
Deferred Consulting Costs 1,466,000 --
--------------- ---------------
Total Other Assets 4,332,980 4,136,783
--------------- ---------------
Total Assets $ 7,601,905 $ 7,848,012
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,828,367 $ 2,200,468
Accrued Expenses 296,374 289,239
Payroll and Corporate Income Taxes Payable 154,291 254,699
Notes Payable 314,934 97,937
Loan Payable - Shareholder -- 259,000
--------------- ---------------
Total Current Liabilities 2,543,966 3,101,343
--------------- ---------------
Long-Term Debt:
Notes Payable 322,952 322,952
--------------- ---------------
Minority Interest [17C] 50,000 --
Commitments and Contingencies [12] -- --
--------------- ---------------
Stockholders' Equity:
Series C Convertible Preferred Stock - Authorized 5,800,000 Shares, Par Value
of $.0001, 1,902,225 and 1,352,225 Shares Issued and Outstanding at March
31, 1996 and December 31, 1995, respectively 190 135
Common Stock - Authorized 75,000,000 Shares, Par Value of
$.0001, 729,221 and 458,776 Shares, Issued and Outstanding
at March 31, 1996 and December 31, 1995, respectively 73 46
Additional Paid-in Capital 16,530,625 13,362,257
Accumulated [Deficit] (9,897,901) (8,938,721)
--------------- ---------------
Totals 6,634,987 4,423,717
Less: Treasury Stock (2,000,000) --
--------------- ---------------
Total Stockholders' Equity 4,634,987 4,423,717
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 7,601,905 $ 7,848,012
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
--------- ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales - Net $ 2,397,908 $ 2,312,390 $ 12,730,722 $ 9,773,013
Total Cost of Goods Sold 1,912,337 1,739,995 10,974,292 7,729,722
--------------- ---------------- --------------- ---------------
Gross Profit 485,571 572,395 1,756,430 2,043,291
--------------- ---------------- --------------- ---------------
Selling, General and Administrative
Expenses:
Selling, Advertising and Promotion 384,492 228,312 1,128,782 913,762
Amortization of Goodwill 104,459 85,000 387,892 320,400
General and Administrative Expenses 386,047 436,610 2,405,738 1,773,076
Compensation Expense - Issuance of
Stock -- -- 1,223,250 --
Amortization of Financing Costs -- 386,650 386,650 193,350
Amortization of Consulting Services 289,000 -- -- --
--------------- ---------------- --------------- ---------------
Total Selling, General and
Administrative Expenses 1,163,998 1,136,572 5,532,312 3,200,588
--------------- ---------------- --------------- ---------------
[Loss] from Operations (678,427) (564,177) (3,775,882) (1,157,297)
--------------- ---------------- --------------- ---------------
Other [Income] Expense:
Interest Expense 10,303 7,877 50,422 41,454
Interest Income -- -- (74) (6,209)
--------------- ---------------- --------------- ---------------
Other Expense [Income] - Net 10,303 7,877 50,348 (35,245)
--------------- ---------------- --------------- ---------------
[Loss] Before Provision for Income
Taxes (688,730) (572,054) (3,826,230) (1,192,542)
Provision for Income Taxes -- -- -- --
--------------- ---------------- --------------- ---------------
Net [Loss] $ (688,730) $ (572,054) $ (3,826,230) $ (1,192,542)
=============== ================ =============== ===============
Weighted Average Number of
Shares 811,721 376,554 475,933 352,368
=============== ================ =============== ===============
Net [Loss] Per Share $ (.85) $ (1.52) $ (8.04) $ (3.38)
=============== ================ =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible Additional
Common Stock Preferred Stock Paid-in Accumulated
Shares Amount Shares Amount* Capital [Deficit]
------ ------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 293,630 $ 29 -- $ -- $ 5,345,791 $ (3,919,949)
Stock Issued in Exchange for
Services in February 1994 7,500 1 -- -- 302,277 --
Exercise of Bridge Units in February
1994 at $.50 Per Unit 781 -- -- -- 3,407 --
Issuance of Stock to Purchase the
remaining 49% Interest of
Subsidiaries in March 1994 at
$2.70 60,000 6 -- -- 1,619,994 --
Exercise of 1,500,000 Warrants in
February 1994 Net of Offering Costs -- -- -- -- 258,116 --
Exercise of Bridge Units in March 1994
at $.50 Per Unit 781 -- -- -- 3,906 --
Sale of Treasury Stock -- -- -- -- 93,171 --
Exercise of Bridge Units in April
1994 at $.50 Per Unit 1,016 -- -- -- 5,078 --
Deferred Compensation Adjustment
for Options in March 1994 -- -- -- -- -- --
Relinquishment of Stock Options in
June 1994 -- -- -- -- (340,000) --
Imputed Interest on Note Payable -
Stockholder -- -- -- -- 21,000 --
------------- ----------- ----------- ----------- --------------- -------------
Totals - Forward 363,708 $ 36 -- $ -- $ 7,213,440 $ (3,919,949)
</TABLE>
<TABLE>
<CAPTION>
Deferred Total
Treasury Compensation Stockholders'
Stock Expense Equity
----- ------- ------
<S> <C> <C> <C>
Balance at December 31, 1993 $ (25,000) $ (269,167) $ 1,131,904
Stock Issued in Exchange for
Services in February 1994 -- -- 202,278
Exercise of Bridge Units in February
1994 at $.50 Per Unit -- -- 3,907
Issuance of Stock to Purchase the
remaining 49% Interest of
Subsidiaries in March 1994 at
$2.70 -- -- 1,620,000
Exercise of 1,500,000 Warrants in
February 1994 Net of Offering Costs -- -- 258,116
Exercise of Bridge Units in March 1994
at $.50 Per Unit -- -- 3,906
Sale of Treasury Stock 25,000 -- 118,171
Exercise of Bridge Units in April
1994 at $.50 Per Unit -- -- 5,078
Deferred Compensation Adjustment
for Options in March 1994 -- 269,167 269,167
Relinquishment of Stock Options in
June 1994 -- -- (340,000)
Imputed Interest on Note Payable -
Stockholder -- -- 21,000
--- ----------- ----------- --------------
Totals - Forward $ -- $ -- $ 3,293,527
</TABLE>
* No allocation has been made to par value for the preferred stock because of
the insignificant dollar amounts.
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible Additional
Common Stock Preferred Stock Paid-in Accumulated
Shares Amount Shares Amount* Capital [Deficit]
------ ------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Totals - Forwarded 363,708 $ 36 -- $ -- $ 7,213,440 $ (3,919,949)
Stock Issued as Installment Payment
on Stockholder Note Payable 5,068 1 -- -- 145,889 --
Deferred Financing Costs on
Convertible Bridge Notes -- -- -- -- 580,000 --
Net [Loss] for the Year Ended
December 31, 1994 -- -- -- -- -- (1,192,542)
------------- ----------- ----------- ----------- --------------- -------------
Balance - December 31, 1994 368,776 37 -- -- 7,943,439 (5,112,491)
Issuance of Stock Upon Conversion
of Bridge Notes in February 1995 -- -- 250,000 25 19,975 --
Issuance of Stock Upon Cancellation
of Indebtness to a Shareholder in
February 1995 -- -- 117,225 12 201,663 --
Issuance of Stock in Exchange for
Services in March 1995 70,000 7 -- -- 195,493 --
Issuance of Stock to Purchase Net
Assets of SB&S 20,000 2 -- -- 31,248 --
Public Offering - Net of Offering
Expenses of $611,213 - May 1995 -- -- 460,000 46 1,688,741 --
Issuance of Series C Preferred
Stock Options - May 1995 -- -- -- -- 1,076,250 --
Issuance of Series C Preferred
Stock Options - November 1995 -- -- -- -- 1,155,000 --
Exercise of Series C Preferred
Stock Options in October 1995 -- -- 525,000 52 1,049,948 --
Net [Loss] for the year ended
December 31, 1995 -- -- -- -- -- (3,826,230)
------------- ----------- ----------- ----------- --------------- -------------
Balance - December 31, 1995
Forward 458,776 $ 46 1,352,225 $ 135 $ 13,362,257 $ (8,938,721)
</TABLE>
<TABLE>
<CAPTION>
Deferred Total
Treasury Compensation Stockholders'
Stock Expense Equity
----- ------- ------
<S> <C> <C> <C>
Totals - Forwarded $ -- $ -- $ 3,293,527
Stock Issued as Installment Payment
on Stockholder Note Payable -- -- 150,000
Deferred Financing Costs on
Convertible Bridge Notes -- -- 580,000
Net [Loss] for the Year Ended
December 31, 1994 -- -- (1,192,542)
----------- ----------- --------------
Balance - December 31, 1994 -- -- 2,830,985
Issuance of Stock Upon Conversion
of Bridge Notes in February 1995 -- -- 20,000
Issuance of Stock Upon Cancellation
of Indebtness to a Shareholder in
February 1995 -- -- 201,675
Issuance of Stock in Exchange for
Services in March 1995 -- -- 196,000
Issuance of Stock to Purchase Net
Assets of SB&S -- -- 31,250
Public Offering - Net of Offering
Expenses of $611,213 - May 1995 -- -- 1,688,787
Issuance of Series C Preferred
Stock Options - May 1995 -- -- 1,076,250
Issuance of Series C Preferred
Stock Options - November 1995 -- -- 1,155,000
Exercise of Series C Preferred
Stock Options in October 1995 -- -- 1,050,000
Net [Loss] for the year ended
December 31, 1995 -- -- (3,826,230)
----------- ----------- --------------
Balance - December 31, 1995
Forward $ -- $ -- $ 4,423,717
</TABLE>
* No allocation has been made to par value for the preferred stock because of
the insignificant dollar amounts. See Notes to Consolidated Financial
Statements.
F-6
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible Additional
Common Stock Preferred Stock Paid-in Accumulated
Shares Amount Shares Amount* Capital [Deficit]
------ ------ ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 -
Forwarded 458,776 $ 46 1,352,225 $ 135 $ 13,362,257 $ (8,938,721)
Stock Issuance for Acquisition -- -- 400,000 40 1,999,960 --
Exercise of Stock Options for
Preferred Stock - March 1996 -- -- 150,000 15 299,985 --
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 270,445 27 -- -- 270,483 (270,450)
Options Issued - Deferred Consulting
Costs [17B] -- -- -- -- 600,000 --
Net [Loss] for the three months
ended March 31, 1996 -- -- -- -- -- (688,730)
------------- ----------- ----------- ----------- --------------- -------------
Balance - March 31, 1996
[Unaudited] 729,221 $ 73 1,902,225 $ 190 $ 16,532,625 $ (9,897,901)
============= =========== =========== =========== =============== =============
</TABLE>
<TABLE>
<CAPTION>
Deferred Total
Treasury Compensation Stockholders'
Stock Expense Equity
----- ------- ------
<S> <C> <C> <C>
Balance - December 31, 1995 -
Forwarded $ -- $ -- $ 4,423,717
Stock Issuance for Acquisition (2,000,000) -- --
Exercise of Stock Options for
Preferred Stock - March 1996 -- -- 300,000
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 -- -- --
Options Issued - Deferred Consulting
Costs [17B] -- -- 600,000
Net [Loss] for the three months
ended March 31, 1996 -- -- (688,730)
------------- ----------- ------------
Balance - March 31, 1996
[Unaudited] $ (2,000,000) $ -- $ 4,634,987
============== =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating Activities:
Net [Loss] $ (688,730) $ (572,054) $ (3,826,230) $ (1,192,542)
--------------- ---------------- --------------- ---------------
Adjustments to Reconcile Net [Loss]
to Net Cash [Used for] Operating
Activities:
Depreciation 30,000 21,400 120,500 70,297
Amortization of Intangibles -- 386,650 386,650 193,350
Amortization of Goodwill 104,459 85,000 387,892 320,400
Bad Debt Expense -- -- 93,249 --
Compensation Expense on Issuance
of Common and Preferred Stock 289,000 -- 1,272,250 417
Imputed Interest on Stockholder
Note Payable -- -- -- 21,000
Changes in Assets and Liabilities:
[Increase] Decrease in Assets:
Accounts Receivable (95,326) (81,427) 33,406 (257,339)
Inventory (117,438) (117,659) 23,743 225,690
Prepaid Expenses (81,512) 56,878 63,446 (139,662)
Prepaid Offering Cost -- (30,706) 71,182 (71,182)
Other Assets 10,344 -- -- (21,141)
Increase [Decrease] in Liabilities:
Accounts Payable and Accrued
Expenses (498,438) 153,918 404,430 (325,811)
Payroll and Corporate Income
Taxes Payable (100,408) -- 254,699 --
--------------- ---------------- --------------- ---------------
Total Adjustments (459,319) 474,054 3,111,447 16,019
--------------- ---------------- --------------- ---------------
Net Cash - Operating Activities -
Forward (1,148,049) (98,000) (714,783) (1,176,523)
--------------- ---------------- --------------- ---------------
Investing Activities:
Equipment Acquisitions (43,708) (29,323) (249,464) (162,869)
Purchase of Subsidiaries - Net of
Cash Acquired -- -- (526,562) --
Acquisition Costs -- -- -- 250
Collections of Loans Receivable -
Stockholders -- -- -- 13,557
Restricted Cash -- -- (5,073) --
Partial Payment on Acquisition (150,000) -- -- --
--------------- ---------------- --------------- ---------------
Net Cash - Investing Activities -
Forward $ (193,708) $ (29,323) $ (781,099) $ (149,062)
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Cash - Operating Activities -
Forwarded $ (1,148,049) $ (98,000) $ (714,783) $ (1,176,523)
--------------- ---------------- --------------- ---------------
Net Cash - Investing Activities -
Forwarded (193,708) (29,323) (781,099) (149,062)
--------------- ---------------- --------------- ---------------
Financing Activities:
Proceeds from Public Offering -- -- 1,688,787 --
[Acquisition] Redemption of a
Certificate of Deposit -- -- -- 110,427
Proceeds from Loan Payable -- 50,000
Proceeds from Bridge Loan Payable 90,000 -- -- 200,000
Payments of Capital Lease Obligations (26,719) (4,216) (5,891) (16,865)
Payments of Note Payable - Related
Parties -- 45,000 (45,000) --
Proceeds of Note Payable - Related
Parties -- -- 45,000 --
Payment of Bridge Loan Obligation -- -- (180,000) --
Proceeds from Sale of Common Stock 45,200 -- -- 118,171
Issuance of Preferred Stock from
Exercise of Options 1,650,000 -- -- --
Exercise of Bridge Units -- 12,890
Payments of Notes Payable (6,403) (8,603) (180,677) (135,143)
Proceeds from Shareholder - Loan
Payable -- -- 309,000 --
Repayment of Shareholder - Loan
Payable (259,000) -- (50,000) --
Proceeds from Exercise of Warrants -- -- -- 375,000
--------------- ---------------- --------------- ---------------
Net Cash - Financing Activities 1,493,078 82,181 1,581,219 664,480
--------------- ---------------- --------------- ---------------
Net Increase [Decrease] in Cash 151,321 (45,142) 85,337 (661,105)
Cash - Beginning of Years 153,714 68,377 68,377 729,482
--------------- ---------------- --------------- ---------------
Cash - End of Years $ 305,035 $ 23,235 $ 153,714 $ 68,377
=============== ================ =============== ===============
Supplemental Disclosures of Cash Flow Information:
Cash paid for the years for:
Interest $ 39,665 $ 20,454 $ 39,665 $ 20,454
Income Taxes $ -- $ -- $ -- $ --
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In February 1994, the Company issued 7,500 shares of common stock to a law
firm in connection for certain legal services performed during 1993.
In March 1994, in connection with the acquisition of the remaining 49%
interest in the subsidiaries, the Company exchanged 60,000 newly issued shares
of common stock and $250,000 payable at the Company's option in either cash or
common stock.
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Supplemental Schedule of Non-Cash Investing and Financing Activities
[Continued]:
On October 28, 1994, the Company issued 5,068 shares of common stock,
representing a $150,000 installment payment on the $250,000 stockholder note
payable.
During the year ended December 31, 1994, the Company incurred loan
obligations for transportation equipment, totaling $125,437.
In February 1995, the bridge lenders converted the convertible bridge notes
into an aggregate of 250,000 preferred bridge units.
In February 1995, the Company issued 117,225 shares of Series C Preferred
Stock to a stockholder in exchange for the cancellation by a stockholder who is
also an officer and director of certain indebtness of the Company in the
aggregate principal amount of $201,675.
In March 1995, the Company entered into three one-year consulting
agreements with three unaffiliated individuals and issued a total of 70,000
shares of the Company's common stock with a fair value of $196,000, which was
expensed in 1995.
In May 1995, the Company granted 525,000 Series C Preferred Stock Options
to directors, officers and employees of the Company at an exercise price of
$2.00 per share and, accordingly, has recorded an expense of $1,076,250. In
October 1995, the directors, officers and employees of the Company exercised the
525,000 Series C Preferred Stock Options and as a result, the Company recorded a
stock subscription receivable for $1,050,000, which was collected in January and
February 1996.
In June 1995, the Company issued 20,000 shares of common stock and utilized
$21,495 of other assets in connection with the acquisition of the net assets of
Sclafani Beer & Soda, Inc.
In November of 1995, the Company issued 525,000 options for the Company's
Series C Preferred Stock to seven directors exercisable at $2.00 per share for
services to be rendered in 1996. The Company recorded a deferred cost of
$1,155,000 in 1995 which represents the fair market value of the options and
$289,000 was amortized in the quarter of March 1996 as compensation to the
directors.
During the period ended December 31, 1995, the Company incurred loan
obligations for transportation equipment, totaling $343,465.
In February of 1996, the Company issued options to purchase 300,000 shares
of the Company's Series C Preferred Stock at an exercise price of $2.00 per
share to a consultant to assist, the Company in connection with acquisitions,
divestitures, joint ventures, and other strategic business initiatives. The
Company recorded a deferred consulting cost of $600,000, which represents the
difference between the option price and the fair value of the preferred stock at
the time of grant to account for these future services.
On January 2, 1996, the Company issued to the holders of record of the
Series C Preferred Stock as of December 24, 1995 a dividend of two shares of the
Company's common stock.
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[1] General Information and Summary of Significant Accounting Policies
General and Organization - New Day Beverage Co. was an Illinois corporation
originally established in April 1991 and maintained its principal place of
business in Chicago, Illinois. In August of 1992, New Day Beverage Co. changed
its name to New Day Beverage, Inc. and changed its state of incorporation to
Delaware and in February 1994, relocated its principal place of business to
Brooklyn, New York. On January 11, 1996, the Company changed its name to
Bev-Tyme, Inc.
Bev-Tyme, Inc. ["Bev-Tyme"], is engaged in the business of developing and
marketing beverage products and is also engaged in the business of distributing
and selling beverage and snack products to grocery stores, supermarket chains,
restaurants and corporate cafeterias. In 1995, the Company also commenced
distributing beer and other malt beverages. The Company markets beverages and
snack products to retail grocery stores, supermarket chains, restaurants,
corporate cafeterias and wholesale distributors, a substantial portion of which
is concentrated in the New York City metropolitan area.
Principles of Consolidation - The consolidated financial statements include the
accounts of Bev-Tyme and each of its majority-owned subsidiaries [the
"Company"]. Material intercompany transactions and balances have been eliminated
in consolidation. See Note 2 entitled "Acquisitions" for further information.
Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid debt investments with a maturity of three months or less when purchased.
At December 31, 1995, there were no cash equivalents.
Inventories - Inventories are stated at the lower of cost or market [net
realizable value]. Cost, which includes purchases, freight, raw materials,
direct labor and factory overhead, is determined on the first-in, first-out
basis. Management evaluates inventory obsolescence and impairment on a monthly
basis.
Property and Equipment - Property and equipment are stated at cost and are
depreciated over its estimated useful life of 5 to 10 years. Depreciation is
calculated using the straight-line method.
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.
Intangibles - For the year ended December 31, 1995, the Company charged to
operations $386,650 for amortization of financing cost relating to bridge
financing [See Note 8].
Goodwill - Amounts paid for securities of newly-acquired subsidiaries in excess
of the fair value of the net assets of such subsidiaries have been charged to
goodwill. Goodwill is related to revenues the Company anticipates realizing in
future years. These revenues are highly dependent upon current management of the
subsidiaries whose employment contracts cover periods up to seven years. The
Company has decided to amortize its goodwill over a period of up to ten years
under the straight-line method. In 1994, the Company changed its estimate of the
useful life of goodwill from seven to ten years because of the increased term of
the employment contracts and the increase in consolidated sales. Accumulated
amortization at December 31, 1995 was $837,292. The Company's policy is to
evaluate the periods of goodwill amortization to determine whether later events
and circumstances warrant revised estimates of useful lives. The Company also
evaluates whether the carrying value of goodwill has become impaired by
comparing the carrying value of goodwill to the value of projected undiscounted
cash flows from acquired assets or businesses. Impairment is recognized if the
carrying value of goodwill is less than the projected undiscounted cash flow
from the acquired assets or business.
F-11
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[1] General Information and Summary of Significant Accounting Policies
[Continued]
Risk Concentrations - Financial instruments that potentially subject the Company
to concentrations of credit risk include cash equivalents and accounts
receivable arising from its normal business activities. The Company places its
cash and cash equivalents with high credit quality financial institutions
located in the New York metropolitan area.
The Company maintains cash balances at a financial institution in New York.
Accounts at this institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1995, the Company's uninsured cash
balance totaled $27,640.
The Company performs certain credit evaluation procedures and does not require
collateral. The Company believes that credit risk is limited due to the large
number of entities comprising the Company's customer base. In addition, the
Company routinely assesses the financial strength of its customers, and based
upon factors surrounding the credit risk of its customers, establishes an
allowance for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowances is limited. The
Company established an allowance for doubtful accounts at December 31, 1995,
which amounted to approximately $180,000. The Company believes any credit risk
beyond this amount would be negligible.
With respect to purchases of inventory for each of the years ended December 31,
1995 and 1994, the Company purchased inventory from two suppliers which
comprised approximately 24% and 10%, respectively, of the Company's total cost
of sales.
Options and Warrants - Options and warrants issued to employees are recognized
in accordance with the intrinsic value method.
Revenue Recognition - Revenue is recognized at the time products are shipped and
title passes.
Net [Loss] Per Share - The net loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the period.
Shares issuable upon the exercise of stock options granted and the effect of
convertible securities are excluded from the computation because the effect on
the net loss per common share would be anti-dilutive. Equity instruments issued
at prices below fair value are included for all periods presented. All share
data have been adjusted to reflect the one-forten-reverse stock split in July
1996.
[2] Acquisitions
[A] Mootch & Muck, Inc. - In March 1994, the Company acquired the remaining 49%
interest in Mootch & Muck, Inc., subject to obtaining certain governmental
approvals, in exchange for 60,000 newly issued shares of common stock and
$250,000 payable at the Company's option in cash or common stock over a period
of sixteen [16] months.
F-12
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[2] Acquisition [Continued]
[A] Mootch & Muck, Inc. [Continued] - In addition, the seller was entitled to
receive an additional 20,000 shares of common stock if the subsidiaries reported
positive earnings before the payment of taxes for the year ended December 31,
1994, and an additional 20,000 shares of common stock if the Company reported
not less than $100,000 in earnings before the payment of taxes for the year
ended December 31, 1995. On October 28, 1994, the Company issued 5,068 shares of
common stock as payment of $150,000 due and owing under the debt to the seller,
a director of the Company. Under the terms of the original agreement, in the
event that the seller sold such shares and received less than $150,000 from the
proceeds therefrom, the Company was obligated to issue the seller a sufficient
number of additional shares of common stock so that the aggregate proceeds from
both sales was not less than $150,000. On February 13, 1995, the Company and the
seller amended their agreement so that the seller would receive shares of Series
C Preferred Stock and the Company would be relieved from all of its obligations
to make future payments to the seller. Under the amended agreement, the Company
issued to the seller 83,333 shares of Series C Preferred Stock and the seller
has released the Company from all of its obligations to make payments in the
future. Further, in the event that the seller receives within two years
following the effective date aggregate, net proceeds in excess of $250,000, the
seller will deliver such amount in excess of $250,000 to the Company and
surrender for cancellation all of the remaining shares held thereby, if any. In
connection with the Company acquiring the remaining 49% interest in the
subsidiaries, the Company was obligated to pay the seller $250,000 at the
Company's option in cash or common stock over a period of 16 months.
There was approximately $1,870,000 of additional goodwill recorded as a result
of this transaction.
[B] Sclafani Beer & Soda Distributors, Inc. ["SB&S"] - On June 2, 1995, the
Company purchased the assets and assumed certain liabilities of Sclafani Beer &
Soda Distributors, Inc. ["SBS"] for $500,000 in cash, 20,000 shares of the
Company's common stock valued at market value or $31,250, and options to
purchase 7,500 shares of the Company's common stock valued at $11,720. Goodwill
of approximately $450,000 was recognized for this acquisition.
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisitions had occurred as of January 1, 1995, after
giving effect to the amortization of goodwill. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made as of that date or of
results which may occur in the future.
Sales - Net $ 13,176,000
===============
Net [Loss] $ (3,832,800)
===============
Net [Loss] Per Common Share $ (8.84)
===============
Weighted Average Number of Shares 433,433
[3] Inventories
Inventories consisted of the following:
March 31, December 31,
1 9 9 6 1 9 9 5
------- -------
Raw Materials $ 17,749 $ 17,749
Finished Goods 755,627 763,189
-------------- --------------
Totals $ 773,376 $ 780,938
------ ============== ==============
F-13
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[3] Inventories [Continued]
The Company's inventory consists primarily of finished goods. The Company
evaluates inventory obsolescence and impairment on a monthly basis.
[4] Plant and Equipment and Depreciation and Amortization
Plant and equipment and accumulated depreciation and amortization are as
follows:
March 31, December 31,
1 9 9 6 1 9 9 5
------- -------
Warehouse Equipment $ 266,369 $ 224,070
Office Equipment 671,834 671,834
Leasehold Improvements 41,046 41,046
Transportation Equipment 1,118,858 1,118,858
-------------- --------------
Totals - At Cost 2,098,107 2,055,808
Less: Accumulated Depreciation and Amortization 1,258,056 1,188,056
-------------- --------------
Net $ 840,051 $ 867,752
--- ============== ==============
Depreciation and amortization for the years ended December 31, 1995 and 1994 was
$120,500 and $70,297, respectively.
[5] Debt
Debt as of December 31, 1995 consisted of the following:
Bank notes payable in monthly installments of principal and
interest at rates ranging from 8.5% to 13.9% per annum,
maturing October 1996 through September 2000 [A] $ 420,889
Less: Current Portion 97,937
Non-Current Portion $ 322,952
------------------- =============
[A] Collateralized by transportation equipment.
Maturities of the bank notes and loan payable as of December 31, 1995 are as
follows:
December 31,
------------
1996 $ 97,937
1997 $ 96,588
1998 $ 104,872
1999 $ 84,660
2000 $ 36,832
F-14
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[6] Income Taxes
No provision for income taxes has been made for 1995 and 1994 in the
accompanying consolidated financial statements because the Company incurred
losses for both financial reporting and income tax purposes. As of December 31,
1995, the Company had a net operating loss carryforward of approximately
$7,600,000 that is scheduled to expire between 2007 and 2008. Future tax
benefits related to those losses have not been recognized because their
realization is not assured.
In 1993, the Company adopted the method of accounting for income taxes pursuant
to Financial Accounting Standards No. 109, "Accounting for Income Taxes" ["SFAS
No. 109"]. SFAS No. 109 requires the asset and liability method for financial
accounting and reporting for income taxes. The impact of adopting SFAS No. 109
was not significant to the Company's financial position or results of
operations.
[7] Stock Option Plans, Stock Options and Warrants
[A] As of December 31, 1995, 52,500 common stock options that were issued in
August of 1994 are outstanding and have vested to directors, officers and
employees of the Company at an exercise price of $6.90 per share. The Company
also issued in 1995, 30,000 common stock options that vest in May of 1996 to
directors, officers and employees of the Company at an exercise price of $20.00
per share.
[B] As of December 31, 1995 and March 31, 1996, approximately 150,000 warrants
were outstanding, which entitle the holders to acquire shares of common stock at
a price of $60.00 per share which expire in January 1996.
[C] As of December 31, 1995, 1,420,000 Series C Warrants were outstanding which
entitled the holders to acquire shares of Series C Preferred Stock at a price of
$6.00 per share for a period of four years commencing May 15, 1996.
[D] In November of 1995, the Company issued 525,000 options for the Company's
Series C Preferred Stock to seven directors exercisable at $2.00 per share for
services to be rendered in 1996. The Company recorded a deferred cost of
$1,155,000 which represents the fair market value of the options and amortized
$289,000 as of March 31, 1996 as compensation to the directors.
[E] Incentive Stock Option Plan - In November of 1992, the Company adopted the
"Incentive Stock Option Plan". The total number of shares that may be granted
under this plan is 7,500 shares. The Company issued incentive options to
purchase an aggregate of 6,000 shares of common stock exercisable at $10.00 per
share for a period of four years commencing in August 1994.
[F] Non-Qualified Stock Option Plan -In November of 1992, the Company adopted
the "Non-Qualified Stock Option Plan". The total number of shares that may be
granted under this plan is 12,500 shares. In August of 1994, the Company issued
an aggregate of 2,500 non-qualified options that are exercisable at 10.00 per
share for a period of four years commencing in August 1994.
[G] Options to Underwriter - In June 1993, for a purchase price of $50, the
underwriters of the public offering acquired an option to purchase up to an
aggregate of 50,000 units for a five-year period expiring in February 1998. The
Company has agreed to register, at its expense, under the Securities Act, on one
occasion, the option and/or the underlying securities covered by the option upon
certain conditions.
F-15
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[8] Bridge Financing
On November 30, 1994, the Company borrowed an aggregate of $200,000. In exchange
for making a loan to the Company, the bridge lenders received two promissory
notes: one note in the aggregate principal amount of $180,000 and the other note
in the aggregate principal amount of $20,000. Each of the bridge notes bears
interest at the rate of eight percent [8%] per annum. The $180,000 bridge loans
were due and payable upon the earlier of (i) May 1, 1995, or (ii) the closing of
the proposed public offering of the Company's securities. The $20,000 bridge
loans are due on December 1, 1995. In addition, each bridge lender had the right
to convert a convertible bridge note into a number of units ["preferred bridge
units"] equal to the total dollar amount loaned to the Company by such bridge
lender; provided, however, that one bridge lender may convert his convertible
bridge note into the total dollar amount loaned to the Company plus an
additional 50,000 preferred bridge units because such bridge lender surrendered
100,000 warrants exercisable for 100,000 shares of common stock. In February,
the bridge lenders converted the convertible bridge notes into an aggregate of
250,000 preferred bridge units. Each unit is identical to the units being
offered in the proposed public offering. One bridge lender who loaned $65,000 to
the Company rescinded 100,000 warrants that were received in a private placement
on February 2, 1994. Further, the Company agreed to register such units in the
first registration statement filed by the Company following the date of the
loan. The cost of obtaining this bridge financing was $580,000, which represents
the fair value for the bridge units issued. As a result, the Company expensed
$386,650 and $193,350 in 1995 and 1994, respectively, as bridge financing costs.
In May of 1995, the Company was granted an extension for the maturity of the
principal bridge notes until the earlier of (i) June 15, 1995 or (ii) the
closing of the public offering. These bridge notes were repaid on May 23, 1995,
the date of the closing of the public offering [See Note 9A].
[9] Stockholders' Equity
[A] Registration Statement for Units - Series C Redeemable Preferred Stock - On
May 15, 1995, the Company completed a secondary public offering for sale 460,000
units, each consisting of one share of Series C Convertible Preferred Stock, par
value $.0001 per share and two Series C Redeemable Preferred Stock purchase
warrants. Each share of Series A Preferred Stock is convertible at the option of
the holder, at any time after May 15, 1996, into 18 shares of the Company's
common stock. The Series C Warrants entitle the holder to purchase one share of
Series C Preferred Stock at an exercise price of $6.00 per share through May 15,
2000 and may be redeemed by the Company under certain conditions. To date, none
of the Preferred Stock Warrants have been exercised or redeemed. The Company
realized net proceeds of $1,688,787 after deducting, the underwriters discount
and other costs of the offering.
[B] Registration Statement for Common Stock - On February 11, 1994, the
Securities and Exchange Commission declared effective a Registration Statement
filed by the Company for the purposes of registering 202,572 shares of common
stock, which included shares of common stock underlying certain stock options
and 160,000 warrants and the common stock issuable upon exercise of the
warrants. The Company did not receive any proceeds as a result of this filing.
The Registration Statement included 120,180 and 10,000, shares of common stock
and warrants, respectively, which were outstanding as of December 31, 1993 and
67,500 and 150,000 shares of common stock and warrants, respectively issued by
the Company subsequent to December 31, 1993. On February 2, 1994, the Company
engaged in a private placement of 150,000 unregistered warrants, at a price of
$2.50 per warrant. Each warrant entitles the holders to acquire shares of common
stock at a price of $60.00 per share for a period expiring in January 1996 [See
Notes 2 and 8].
[C] Series B - Preferred Stock - In September 1992, the Company sold to
unaffiliated parties four units, each unit consisting of twenty-five shares of
the Company's Series B Preferred Stock at a price of $25,000 per unit. The
Series B Preferred Stock had an annual dividend rate of 5%. In accordance with
its terms, the holders of all of the Series B Preferred Stock converted their
shares into an aggregate of 10,000 common shares and 10,000 warrants in February
1993, which were registered in February 1994 [See Note 9B].
F-16
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[9] Stockholders' Equity [Continued]
[D] Debt to Equity Conversions - On February 10, 1994, the Company issued 7,500
shares of common stock valued at $27.00 per share to the law firm of Bernstein &
Wasserman in consideration for certain legal services performed during 1993.
Hartley T. Bernstein, a director of the Company, is a partner of the law firm.
On October 28, 1994, the Company issued 5,068 shares of common stock,
representing a $150,000 installment payment on the $250,000 stockholder note
payable [See Note 2A].
In February 1995, the bridge lenders converted the convertible bridge notes into
an aggregate of 250,000 preferred bridge units.
In February 1995, the Company issued 117,225 shares of Series C Preferred Stock
to a stockholder in exchange for his cancellation of certain indebtedness of the
Company in the aggregate principal amount of $201,675. This stockholder is also
an officer and director of the Company.
[E] Acquisition of Mootch & Muck - In March 1994, in connection with the
acquisition of the remaining 49% interest in the subsidiaries, the Company
exchanged 60,000 newly issued shares of common stock and $250,000 payable at the
Company's option in either cash or common stock [See Note 2A].
[F] Authorized Shares - In November of 1995, stockholders of the Company adopted
an amendment to the Company's certificate of incorporation authorizing the
increase of the number of authorized shares of Preferred Stock from 3,000,000
shares to 6,000,000 shares, of which 5,800,000 shares are the Series C Preferred
Stock. In November 1995, the stockholders also approved and consented to amend
the Company's certificate of incorporation by increasing the number of
authorized shares of common stock from 15,000,000 shares to 75,000,000 shares.
[G] Consulting Agreements - In March 1995, the Company entered into three
one-year consulting agreements with three unaffiliated individuals and issued a
total of 70,000 shares of the Company's common stock. In 1995, the Company
recorded an expense of $196,000 for these consulting agreements, which
approximates the fair value of the stock issued.
[H] Series C Preferred Stock - In May 1995, the Company granted 525,000 Series C
Preferred Stock Options to directors, officers and employees of the Company at
an exercise price of $2.00 per share and, accordingly, recorded an expense of
$1,076,250. In October 1995, 525,000 Series C Preferred Stock Options were
exercised and the Company recorded a stock subscription receivable of
$1,050,000, which was paid in January and February of 1996.
[10] Related Party Transactions
Loan Payable - Stockholder - In February 1995, the Company received $45,000 from
a related party. This loan was repaid in June 1995. In December of 1995, the
Company received an additional $309,000 from the related party, of which $50,000
was repaid in 1995 and the balance of $259,000 was repaid in January 1996 with
interest at 5.75%.
[11] Employment Agreements
As of December 31, 1995, the Company has four employment agreements with senior
executives of the Company that expire in various years through 2009 for total
base annual compensation of approximately $435,000 subject to certain
adjustments plus bonuses of options for Series C Preferred Stock and common
stock.
F-17
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[12] Commitments and Contingencies
[A] The Company has entered into various operating lease agreements to lease
office space and warehouse space with initial terms ranging from less than one
to five years. Rent expense for the years ended December 31, 1995 and 1994 was
$246,925 and $262,750, respectively. This lease expired in February of 1996.
Commencing March of 1995, the Company revised the nature of this agreement to a
month-to-month arrangement for $20,500 a month.
In addition, the Company has non-cancelable operating leases for a variety of
office and warehouse equipment. Obligations under these leases for the periods
through 2000 are as follows:
1996 $ 121,419
1997 104,420
1998 45,827
1999 13,672
2000 9,039
--------------
Total $ 294,377
----- ==============
[B] The Company has minimum volume commitments on several of their distribution
contracts with vendors, whereby the vendor has the option to terminate an
agreement if certain volume targets are not met.
[C] Brewing Agreement - In November 1992, Perry's stockholders entered into an
agreement, on behalf of Perry's, with a brewery to brew and bottle beer under
the private label of "Perry's Majestic." As part of the agreement, Perry's
agrees to provides the brewery, at its own expense, all the necessary packaging
materials to allow the brewer to manufacture the product in accordance with
federal and state regulations.
The agreement automatically renews annually. Either party may terminate the
agreement by giving four month prior written notice to the other party.
[13] Going Concern
As shown in the accompanying financial statements, the Company incurred net
losses for the years ended December 31, 1995 and 1994. These factors create an
uncertainty about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The Company intends to
pursue additional equity financing as a vehicle for financing future operations
and to secure debt financing from related and unrelated entities. The
continuation of the Company as a going concern is dependent upon the success of
these plans.
[14] Litigation
The Company is subject to litigation in the normal course of business.
Management believes that such litigation will not have a material effect on the
Company's financial position, results of operations or cash flows.
F-18
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[15] New Authoritative Pronouncement
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. Adoption
of SFAS No. 121 is not expected to have a material impact on the Company's
financial statements.
The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995. SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity instruments issued to employees as contrasted
to the intrinsic valued based method of accounting prescribed by Accounting
Principles board ["APB"]Opinion No. 25, "Accounting for Stock Issued to
Employees." The recognition requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company adopted the disclosure requirements on January 1, 1996. SFAS 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. Those transactions must be
accounting for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
This requirement is effective for transactions entered into after December 15,
1995.
[16] Fair Value of Financial Instruments
Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standards ["SFAS"] No. 107, "Disclosure About Fair Value of Financial
Instruments" which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
classifications as of December 31, 1995:
Carrying Fair
Amount Value
------ -----
Long-Term Debt $ 322,952 $ 322,952
Stock Subscription Receivable $ 1,050,000 $ 1,050,000
F-19
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[16] Fair Value of Financial Instruments [Continued]
In assessing the fair value of financial instruments, the Company used a variety
of methods and assumptions, which were based on estimates of market conditions
and risks existing at that time. For certain instruments, including cash and
cash equivalents, trade receivables, related party payables, and trade payables,
it was assumed that the carrying amount approximated fair value for the majority
of these instruments because of their short maturities. The fair value of
long-term debt is estimated based on discounting expected cash flows at current
rates at which the Company could borrow funds with similar remaining maturities.
Management believes that the carrying value of the stock subscription receivable
for stock, approximates the fair value as this was collected in January and
February of 1996.
[17] Subsequent Events
[A] Stock Subscription Receivable - In January 1996, $750,000 of the
stockholders subscription receivable was paid and in February 1996 the remaining
$300,000 was repaid.
[B] Consulting Agreement - In February of 1996, the Company issued options to
purchase 300,000 shares of the Company's Series C Preferred Stock at an exercise
price of $2.00 per share to a consultant to assist, the Company in connection
with acquisitions, divestitures, joint ventures, and other strategic business
initiatives. The Company recorded a deferred consulting cost of $600,000, which
represents the difference between the option price and the fair value of the
preferred stock at the time of grant to account for these future services.
[C] Investment - On March 29, 1996, the Company acquired 500,000 shares of
convertible Class A Preferred Stock and 7,000,000 shares of non-convertible
Class B Preferred Stock of Perry's Majestic Beer, Inc. [valued at $2,000,000] in
exchange for 400,000 shares of the Company's Series C Preferred Stock and
$150,000. As of March 31, 1996, $75,000 of cash was paid and the balance of
$75,000, which was paid on April 4, 1996, is reflected as a note payable on the
financial statements as of March 31, 1996. Each share of Class A Preferred Stock
may be convertible by the Company into one [1] share of Common Stock. Each share
of Class A Preferred Stock and Class B Preferred Stock has attached to it the
right to vote on all matters submitted to the Company. Perry's Majestic Beer,
Inc. filed a registration statement for 583,335 shares of common stock at $6.00
per share. The anticipated net proceeds from this offering are approximately
$2,548,009. Minority interest on the balance sheet represents minority
shareholders equity in Perry's.
Also on March 29, 1996, Perry's Majestic Beer, Inc. entered into an agreement to
acquire all of the stock of Riverosa Company, Inc. for $250,000 of which
$150,000 in cash was put into escrow as of March 31, 1996 and a note payable was
issued for $100,000. The note is payable with interest of 8% and is due the
earlier of one year from the date of issuance or the closing of the Perry's
Majestic Beer, Inc.'s initial public offering.
F-20
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the three months ended March 31, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[17] Subsequent Events [Continued]
[D] Exercise of Preferred Stock Options - In March of 1996, 150,000 Series C
Preferred Options were exercised at $2.00 per share whereby the Company received
proceeds of $300,000.
[E] Stock Dividend - On January 2, 1996, the Company issued to the holders of
record of the Series C Preferred Stock as of December 24, 1995 a dividend of two
tenths of a share of the Company's common stock.
[18] Interim Financial Statements
The interim financial statements as of and for the three months ended March 31,
1996 and 1995 include all adjustments which in the opinion of management are
necessary in order to make the financial statements not misleading.
[19] Subsequent Events [Unaudited]
[A] Consulting Fees - Stock Issuance - On March 29, 1996, in conjunction with
the acquisition agreement with Perry's, the Company entered into a two year
consulting agreement with the former principal of Perry's to assist in
developing and enhancing the distribution of other beers and ales. As a part of
the consulting agreement he was issued 35,000 shares of the Company's common
stock on April 11, 1996. A deferred compensation cost of $33,000 was recorded in
April of 1996 for the fair value of these shares.
[B] Acquisition - On April 29, 1996, the Company entered into an agreement to
acquire certain assets and assume certain leases for twenty-two trucks and
eighteen sales people. Simultaneously with this transaction, the Company entered
into an agreement with a company to be an exclusive distributor. The Company
issued 30,000 shares of the Company's common stock and paid cash of $200,000 for
this agreement. The Company also entered into two employment agreements whereby
the two individuals were issued a total of 50,000 shares of the Company's common
stock and options for 300,000 Series C Preferred Stock, subject to an increasing
number of shares under certain circumstances, exercisable at $1.50 per share. A
total of $850,000 was recorded as a deferred compensation cost in April of 1996
for the fair value of the 80,000 shares of common stock and the 300,000 Series C
Preferred Stock Options.
[C] Consulting Agreement - On April 5, 1996, the Company entered into a two year
agreement with a consultant to assist the expansion of the distribution of its
products to restaurants and the food service industry by issuing 40,000 shares
of Company's common stock. A deferred compensation cost of $25,000 was recorded
in April of 1996 for the fair value of these shares.
[D] Loan - On April 23, 1996, the Company received a $150,000 loan from an
individual whereby the Company issued 40,000 shares of the Company's common
stock. The loan was repaid in May of 1996. A deferred financing cost of $25,000
was recorded in April of 1996 for the fair value of these shares.
[E] Exercise of Series C Preferred Options - In May of 1996, 100,000 stock
options were exercised by consultants whereby proceeds of $200,000 were received
by the Company.
[F] Reverse Stock Split - On July 16, 1996, the Company's common stockholders
approved a one-for-ten reverse stock split. The financial statements have been
adjusted retroactively for the reverse stock split.
. . . . . . . . . . . . . . . . . . .
F-21
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion of the Company's financial condition and results of
operations includes Bev-Tyme, Inc. and its subsidiaries [collectively, the
"Company"] and should be read in conjunction with the Consolidated Financial
Statements and Notes appearing elsewhere in Form 10-QSB.
Business Structure
Bev-Tyme, Inc. ["Bev-Tyme"], is engaged in the business of developing and
marketing beverage products and is also engaged in the business of distributing
and selling beverage and snack products to grocery stores, supermarket chains,
restaurants and corporate cafeterias. In 1995, the Company also commenced
distributing beer and other malt beverages. Because of increased competition in
the "New Age" beverage market and continuing operating losses related to the
sale of its SunSprings(TM) beverage products, the Company increased its focus on
its beverage and snack food distribution.
In June 1995, the Company purchased the net assets of SB&S, another beverage
distributor, which will increase its current customer distribution base,
territory and enable the Company to commence distribution of beer and other malt
beverages. The Company acquired the net assets of SB&S for $500,000 in cash,
20,000 shares of the Company's common stock valued at $31,250 and options to
purchase 7,500 shares of the Company's common stock.
As a result of the Company's recurring losses from operations, the Company's
auditors believed there was substantial doubt about the Company's ability to
continue as a going concern at December 31, 1995 and issued a going concern
qualification to their report dated March 21, 1996.
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Results of Operations
For the three months ended March 31, 1996, the Company had a loss from
operations of $678,427 and a net loss of approximately $700,000 as compared to a
loss from operations of $564,177 and a net loss of approximately $600,000 for
the three months ended March 31, 1995. The primary reason for the increase of
approximately $100,000 in net loss is the Company's reduced gross profit of
approximately $100,000.
The change in the elements of revenues and expenses reflect the Company's shift
to primarily focusing on the distribution of beverage products rather than the
manufacturing and marketing of its SunSprings(TM) products.
F-22
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Results of Operations [Continued]
For the three months ended March 31, 1996, the Company's gross profit was
$485,571 or 20% as compared to $572,395 or 25% in 1995. The change in the gross
profit percentage was attributable to a change in the Company's product mix,
primarily resulting from the beers and malt beverages. The Company intends to
de-emphasize the sale of common beer and increase the focus on the sale of
imported and microbrewed beers. Additionally, the Company liquidated a large
amount of its "closeout" products in 1995 and does not anticipate a large amount
of closeouts in 1996.
Selling, advertising and promotion expense for the three months ended March 31,
1996 and 1995 amounted to $384,492 and $228,312, respectively, and primarily
consisted of salesmen's salaries, commissions and related expenses of the
companies' distribution sales force.
General and administrative expenses for the three months ended March 31, 1996
were $384,492 or 16% of net sales as compared to $228,312 or 10% of net sales in
1995.
Because of the Company's severe cash shortages and numerous unsuccessful
attempts at finding traditional debt financing, the Company entered into bridge
financing which resulted in a total non-cash financing cost $386,650 in 1995.
This represented the fair value assigned to the Bridge Units issued upon
conversion of the Convertible Bridge Notes. The effective annual interest rate
on these Bridge Loans was approximately 300%.
Interest expense relates primarily to commercial loans on the transportation
equipment.
Liquidity and Capital Resources
For the three months ended March 31, 1996, the Company utilized approximately
$1,150,000 in operating activities. This utilization was primarily attributable
to the net loss of approximately $400,000 and the increase in liabilities of
approximately $600,000.
The Company utilized approximately $200,000 from net investing activities for
the three months ended March 31, 1996. This was primarily attributable to the
acquisition of the net assets of Riverosa for approximately $150,000.
The Company generated $1,493,078 from net financing activities for the three
months ended March 31, 1996. This was primarily attributable to the sale of
common stock for $45,200 and the exercise of Series C Preferred Stock Options
for $300,000 and the collection of the stock subscription for $1,050,000 on the
Series C Preferred Stock Options exercised in 1995.
At March 31, 1996, the Company had a working capital deficit of approximately
$415,000 reflecting primarily the excess of accounts payable, accrued expenses
over cash, accounts receivable and inventory. The Company's cash balance at
December 31, 1995 was $305,035.
For the quarter ended March 31, 1995, the Company utilized $98,000 in operating
activities, utilized $29,323 in investing activities and generated $82,181 in
net financing activities.
F-23
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
In November and December 1994, the Company borrowed an aggregate of $200,000
from certain lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received two [2] promissory notes [the "Bridge
Notes"]. Certain Bridge Notes are in the aggregate principal amount of $180,000
[the "Principal Bridge Notes"] and the other Bridge Notes are in the aggregate
principal amount equal to $20,000 [the "Convertible Bridge Notes"]. Each of the
Bridge Notes bears interest at the rate of eight percent [8%] per annum. The
Principal Bridge Notes were due and payable upon the earlier of (i) June 15,
1995, or (ii) the closing of the Offering. The Convertible Bridge Notes are due
and payable on December 1, 1995. In addition, each Bridge Lender had the right
to convert a Convertible Bridge Note into a number of units ["Bridge Units"]
equal to the total dollar amount loaned to the Company by such Bridge Lender;
provided, however, that one Bridge Lender may convert its Convertible Bridge
Note into the total dollar amount loaned to the Company plus an additional
50,000 Bridge Units because such Bridge Lender surrendered 100,000 warrants
exercisable for 100,000 shares of Common Stock. In February 1995, the Bridge
Lenders converted the Convertible Bridge Notes into an aggregate of 250,000
Bridge Units at a conversion price of $.10 per Bridge Unit. The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
The conversion price to the Bridge Lenders is significantly less than the
offering price of the Units offered hereby because of the risk associated with
the repayment of the Bridge Loans. Further, the Company agreed to register such
Bridge Units in the first registration statement filed by the Company following
the date of the loan. The bridge notes were repaid on May 23, 1995, the close of
the Public Offering.
On May 15, 1995, the Company completed a secondary public offering for sale
460,000 units, each consisting of one share of Series C Convertible Preferred
Stock, par value $.0001 per share and two Series C Redeemable Preferred Stock
purchase warrants. Each share of Series A Preferred Stock is convertible at the
option of the holder, at any time after May 15, 1996, into 1.8 shares of the
Company's common stock. The Series C Warrants entitle the holder to purchase one
share of Series C Preferred Stock at an exercise price of $6.00 per share
through May 15, 2000 and may be redeemed by the Company under certain
conditions. To date, none of the Preferred Stock Warrants have been exercised or
redeemed. The Company realized net proceeds of $1,688,787 after deducting, the
underwriters discount and other costs of the offering.
In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, recorded an expense of $1,076,250. In October 1995,
525,000 Series C Preferred Stock Options were exercised and the Company recorded
a stock subscription receivable of $1,050,000, which was paid in January and
February of 1996.
In November 1995, the Company issued to the directors of the Company options to
purchase an aggregate of 300,000 shares of Series C Preferred Stock at an
exercise price of $2.00 per share. None of such options have been exercised.
In February 1996, the Company engaged a consultant to assist the Company in
connection with acquisitions, divestitures, joint ventures and other strategic
business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 300,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.
F-24
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
On March 29, 1996, the Company acquired 500,000 shares of convertible Class A
Preferred Stock and 7,000,000 shares of non-convertible Class B Preferred Stock
of Perry's Majestic Beer, Inc. [valued at $2,000,000] in exchange for 400,000
shares of the Company's Series C Preferred Stock and $150,000. The 400,000
shares of Series C Preferred are presented as treasury stock. As of March 31,
1996, $75,000 of cash was paid and the balance of $75,000, which was paid on
April 4, 1996, is reflected as a note payable on the financial statements as of
March 31, 1996. Each share of Class A Preferred Stock may be convertible by the
Company into one [1] share of Common Stock. Each share of Class A Preferred
Stock and Class B Preferred Stock has attached to it the right to vote on all
matters submitted to the Company. On April 11, 1996, Perry's Majestic Beer, Inc.
filed a registration statement on Form SB-2 with the Securities and Exchange
Commission. Minority interest on the balance sheet represents minority
shareholders equity in Perry's.
Also on March 29, 1996, Perry's Majestic Beer, Inc. entered into an agreement to
acquire all of the stock of Riverosa Company, Inc. for $250,000 of which
$150,000 in cash was put into escrow as of March 31, 1996 and a note payable was
issued for $100,000. The note is payable with interest of 8% and is due the
earlier of one year from the date of issuance or the closing of the Perry's
Majestic Beer, Inc.'s initial public offering.
Perry's Majestic Beer, Inc. has filed a registration statement for 583,335
shares of common stock at $6.00 per share. The anticipated net proceeds from
this offering are approximately $2,548,009
On March 31, 1996, Perry's Majestic Beer, Inc. borrowed an aggregate of $150,000
from nine [9] unaffiliated lenders [the "Bridge Lenders"]. In exchange for
making loans to Perry's Majestic Beer, Inc., each Bridge Lender received a
promissory note [the "Bridge Note"]. Each of the Bridge Notes bears interest at
the rate of eight percent [8%] per annum. The Bridge Notes are due an payable
upon the earlier of (i) July 31, 1996 and (ii) the closing of an initial
underwritten public offering of Perry's Majestic Beer, Inc.'s securities.
Perry's Majestic Beer, Inc. intends to use a portion of the proceeds of the
offering to repay the Bridge Lenders. As of March 31, 1996, $90,000 was received
in cash from the bridge loan and $60,000, received April 4, 1996, is reflected
on the financial statements as a note receivable at March 31, 1996.
In March of 1996, 150,000 Series C Preferred Options were exercised at $2.00 per
share whereby the Company received proceeds of $300,000.
The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution
business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.
F-25
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those plans change, or the costs or
development of operations prove greater than anticipated, the Company could be
required to modify its operations, liquidate inventory or seek additional
financing. The Company has no current arrangements with respect to such
additional financing, and there can be no assurance that such additional
financing, if available, will be on terms acceptable to the Company.
New Authoritative Accounting Pronouncements
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. SFAS No.
121 may have a material impact on the Company's financial statements.
The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995. SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity instruments issued to employees as contrasted
to the intrinsic valued based method of accounting prescribed by Accounting
Principles board ["APB"]Opinion No. 25, "Accounting for Stock Issued to
Employees." The recognition requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company adopted the disclosure requirements on January 1, 1996. SFAS 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. Those transactions must be
accounting for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
This requirement is effective for transactions entered into after December 15,
1995.
Impact of Inflation
The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods. Increases in supplies or other
operating costs could adversely affect the Company's operations; however, the
Company believes it could increase prices to offset increases in costs of goods
sold or other operating costs.
F-26
<PAGE>
BEV-TYME, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year ended December 31, 1995 compared with the year ended December 31, 1994
Results of Operations
For the year ended December 31, 1995, the Company had a loss from operations of
$3,775,882 and a net loss of $3,826,230 [$.90 per share], as compared to a loss
from operations of $1,157,297 and a net loss of $1,192,542 [$.34 per share] for
the year ended December 31, 1994. The primary reason for the increase of
approximately $1,600,000 in net loss is the compensation expense in 1995 of
approximately $1,200,000 resulting from the issuance of the Company's common and
preferred stock and the Company's reduced gross profit of approximately
$300,000.
The change in the elements of revenues and expenses reflect the Company's shift
to primarily focusing on the distribution of beverage products rather than the
manufacturing and marketing of its SunSprings(TM) products.
For the year ended December 31, 1995, the Company's gross profit was $1,756,430
or 14% as compared to $2,043,291 or 21% in 1994. The change in the gross profit
percentage was attributable to a change in the Company's product mix, primarily
resulting from the beers and malt beverages. The Company intends to de-emphasize
the sale of common beer and increase the focus on the sale of imported and
microbrewed beers. Additionally, the Company liquidated a large amount of its
"closeout" products in 1995 and does not anticipate a large amount of closeouts
in 1996.
Selling, advertising and promotion expense for 1995 and 1994 amounted to
$1,128,782 and $913,762, respectively, and primarily consisted of salesmen's
salaries, commissions and related expenses of the companies' distribution sales
force.
General and administrative expenses in 1995 were $2,405,738 or 19% of net sales
as compared to $1,773,076 or 18% of net sales in 1994. General and
administrative expenses in 1995 included compensation and related payroll taxes
of approximately $900,000, rent and related office expenses of $250,000 and
insurance expense of approximately $260,000. General and administrative expenses
in 1994 included compensation and related payroll taxes of approximately
$492,600 [which included $269,000 of compensation related to stock options
recorded in the first quarter of 1994 offset by an adjustment of 340,000 due to
the relinquishment of these options], rent and related office expenses of
approximately $824,800 and insurance expense of approximately $303,300.
Because of the Company's severe cash shortages and numerous unsuccessful
attempts at finding traditional debt financing, the Company entered into bridge
financing which resulted in a total non-cash financing cost of $580,000
[$193,350 in 1994 and $386,650 in 1995]. This represented the fair value
assigned to the Bridge Units issued upon conversion of the Convertible Bridge
Notes. The effective annual interest rate on these Bridge Loans was
approximately 300%.
Interest expense relates primarily to commercial loans on the transportation
equipment.
F-27
<PAGE>
BEV-TYME, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
For the year ended December 31, 1995, the Company utilized approximately
$715,000 in operating activities. This utilization was primarily attributable to
the net loss of approximately $3,800,000 as adjusted for non-cash transactions
of approximately $2,100,000.
The Company utilized approximately $800,000 from net investing activities during
1995. This was primarily attributable to the acquisition of the net assets of
SB&S for approximately $526,000 and acquisition of equipment for approximately
$250,000.
The Company generated $1,581,219 from net financing activities during 1995. This
was primarily attributable to the net proceeds of $1,688,787 from the Series C
Preferred Stock Offering.
At December 31, 1995, the Company had a working capital deficit of approximately
$260,000 reflecting primarily the excess of accounts payable, accrued expenses
over cash, accounts receivable and inventory. The Company's cash balance at
December 31, 1995 was $153,714.
For the year ended December 31, 1994, the Company utilized $1,176,523 in
operating activities, utilized $149,062 in investing activities and generated
$664,480 in net financing activities. The Company generated $416,503 from
financing activities during the first quarter 1994. This was attributable
primarily to the net proceeds of approximately $375,000 from the Company's
issuance of warrants. The Company also raised an additional $12,890 through the
exercise of bridge units and $118,171 from the proceeds from sale of its common
stock. This represented a decrease of $661,105 in cash and cash equivalents
since December 31, 1993. The funds utilized in operating activities were
attributable primarily to the $1,192,542 net loss for the period.
In November and December 1994, the Company borrowed an aggregate of $200,000
from certain lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received two [2] promissory notes [the "Bridge
Notes"]. Certain Bridge Notes are in the aggregate principal amount of $180,000
[the "Principal Bridge Notes"] and the other Bridge Notes are in the aggregate
principal amount equal to $20,000 [the "Convertible Bridge Notes"]. Each of the
Bridge Notes bears interest at the rate of eight percent [8%] per annum. The
Principal Bridge Notes were due and payable upon the earlier of (i) June 15,
1995, or (ii) the closing of the Offering. The Convertible Bridge Notes are due
and payable on December 1, 1995. In addition, each Bridge Lender had the right
to convert a Convertible Bridge Note into a number of units ["Bridge Units"]
equal to the total dollar amount loaned to the Company by such Bridge Lender;
provided, however, that one Bridge Lender may convert its Convertible Bridge
Note into the total dollar amount loaned to the Company plus an additional
50,000 Bridge Units because such Bridge Lender surrendered 100,000 warrants
exercisable for 100,000 shares of Common Stock. In February 1995, the Bridge
Lenders converted the Convertible Bridge Notes into an aggregate of 250,000
Bridge Units at a conversion price of $.10 per Bridge Unit. The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
The conversion price to the Bridge Lenders is significantly less than the
offering price of the Units offered hereby because of the risk associated with
the repayment of the Bridge Loans. Further, the Company agreed to register such
Bridge Units in the first registration statement filed by the Company following
the date of the loan. The bridge notes were repaid on May 23, 1995, the close of
the Public Offering.
F-28
<PAGE>
BEV-TYME, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year ended December 31, 1995 compared with the year ended December 31, 1994
Liquidity and Capital Resources [Continued]
On May 15, 1995, the Company completed a secondary public offering for sale
460,000 units, each consisting of one share of Series C Convertible Preferred
Stock, par value $.0001 per share and two Series C Redeemable Preferred Stock
purchase warrants. Each share of Series A Preferred Stock is convertible at the
option of the holder, at any time after May 15, 1996, into 1.8 shares of the
Company's common stock. The Series C Warrants entitle the holder to purchase one
share of Series C Preferred Stock at an exercise price of $6.00 per share
through May 15, 2000 and may be redeemed by the Company under certain
conditions. To date, none of the Preferred Stock Warrants have been exercised or
redeemed. The Company realized net proceeds of $1,688,787 after deducting, the
underwriters discount and other costs of the offering.
In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, recorded an expense of $1,076,250. In October 1995,
525,000 Series C Preferred Stock Options were exercised and the Company recorded
a stock subscription receivable of $1,050,000, which was paid in January and
February of 1996.
In November 1995, the Company issued to the directors of the Company options to
purchase an aggregate of 300,000 shares of Series C Preferred Stock at an
exercise price of $2.00 per share. None of such options have been exercised.
In February 1996, the Company engaged a consultant to assist the Company in
connection with acquisitions, divestitures, joint ventures and other strategic
business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 300,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.
The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution
business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.
The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those plans change, or the costs or
development of operations prove greater than anticipated, the Company could be
required to modify its operations, liquidate inventory or seek additional
financing. The Company has no current arrangements with respect to such
additional financing, and there can be no assurance that such additional
financing, if available, will be on terms acceptable to the Company.
F-29
<PAGE>
BEV-TYME, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year ended December 31, 1995 compared with the year ended December 31, 1994
New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] has issued Statement of
Financial Accounting Standards ["SFAS"] No. 107, "Disclosure about Fair Value of
Financial Instruments," which is effective for fiscal years beginning after
December 15, 1995. The Company will adopt SFAS No. 107, as amended by SFAS No.
119, "Disclosure About Derivative Financial Instruments in Debt and Equity
Securities," on January 1, 1996. Adoption of SFAS No. 107 and SFAS No. 119 is
not expected to have a material impact on the Company's financial position or
results of operations.
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. Adoption
of SFAS No. 121 is not expected to have a material impact on the Company's
financial statements.
The FASB has also issued SFAS No. 123, Accounting for Stock-Based Compensation,
in October 1995. SFAS No. 123 uses a fair value based method of accounting for
stock options and similar equity instruments as contrasted to the intrinsic
value based method of accounting prescribed by Accounting Principles Board
["APB"] Opinion No. 25, Accounting for Stock Issued to Employees. The Company
has not decided if it will adopt SFAS No. 123 or continue to apply APB Opinion
No. 25 for financial reporting purposes. SFAS No. 123 will have to be adopted
for financial statement note disclosure purposes in any event. The accounting
requirements of SFAS No. 123, are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.
Impact of Inflation
The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods. Increases in supplies or other
operating costs could adversely affect the Company's operations; however, the
Company believes it could increase prices to offset increases in costs of goods
sold or other operating costs.
F-30
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any Underwriter. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer of
any securities other than the securities to which it relates or an offer to any
person in any jurisdiction in which such an offer would be unlawful.
----------
TABLE OF CONTENTS
Page
----
Available Information.........
Prospectus Summary............
The Company...................
The Offering..................
Summary Financial
Information.................
Risk Factors..................
Use of Proceeds...............
Dilution......................
Capitalization................
Dividend Policy...............
Selected Financial Data.......
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................
Business......................
Management....................
Principal Stockholders........
Certain Transactions..........
Description of
Securities...................
Selling Securityholders.......
Underwriting..................
Legal Matters.................
Experts.......................
Additional Information........
Financial Statements..........
- ----------
Until August 18, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
400,000 shares of
Series C Preferred Stock
BEV-TYME, INC.
----------
PROSPECTUS
----------
July 24, 1996
----------
<PAGE>
[MISSING]
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its Securityholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Securityholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
"ARTICLE X"
INDEMNIFICATION
The Corporation shall (a) indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement or such
action or suit, (b) indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right
II-2
<PAGE>
of the Corporation), by reason of the fact that he is or was a director or
officer of the Corporation, or served at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any such action, suit or proceeding, in each case to
the fullest extent permissible under subsections (a) through (f) of Section 145
of General Corporation Law of the State of Delaware of the indemnification
provisions of any successor statute and (c) advance reasonable and necessary
expenses in connection with such actions or suits, and not seek reimbursement of
such expenses unless there is a specific determination that the officer or
director is not entitled to such indemnification. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which any such persons may be entitled, under any by-law,
agreement, vote of shareholders or disinterest directors or otherwise, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this Offering are as follows:
SEC filing fee*........................... $
NASD filing fee........................... $
Accounting fees and expenses*............. $
Legal fees and expenses*.................. $
Blue Sky fees and expenses*............... $
Printing and engraving*................... $
Transfer Agent's and Registrar's fees*.... $
Miscellaneous expenses*................... $
Total..................................... $
- ---------------
* Estimated
Item 26. Recent Sales of Unregistered Securities.
The following shares of unregistered securities have been issued by the
Registrant since its inception. There were no underwriting discounts and
commissions paid in connection with the issuance of any of said securities.
In connection with its formation in April 1991, the Company issued an
aggregate of 7,378 shares of Common Stock to Mr. Morris Friedell and Mr. Edgar
Gettleman for an aggregate consideration of $35,000 and an additional 8,499
shares to each of its President and Vice President for services rendered, the
cost of which services were charged to operations.
In May of 1991, the Company sold an additional 12,089 shares of Common
Stock to Morris Friedell for $48,000.
In June of 1992, the Company sold to New Day Investors Corp. an aggregate
of 87,777 shares of Common Stock for $325,000.
In June of 1992, the Company sold 6,753 shares of Common Stock to Mootch &
Muck, Inc. for $25,000.
As of September 30, 1992, as part of a bridge financing, the Company sold
to K.A.M. Group, Inc., Morgan Steel Limited, Diego Corp. and Elliot Lavigne, an
aggregate of 200 shares of Series A Preferred Stock for
II-3
<PAGE>
$200,000 (50 shares to each purchaser). In connection with this bridge
financing, the Company also issued an aggregate of 25,000 Bridge Units, which
Bridge Units are exercisable for an aggregate exercise price of $125,000 for
25,000 shares of Common Stock and 25,000 Warrants to purchase an additional
25,000 shares of Common Stock. Upon the closing of the public offering, the
Series A Preferred Stock was redeemable by the Company.
As of September 30, 1992, the Company also sold an aggregate of 100 shares
of Series B Preferred Stock to Mr. Harvey Greenfield (50 shares), Pompano
Associates, Inc. (25 shares) and Mr. John Mariucci (25 shares) in exchange for
$100,000. The Series B Preferred Stock was convertible into shares of Common
Stock of the Company at the rate of 1,000 shares of Common Stock for each share
of Series B Preferred Stock within ninety (90) days after receipt by the Company
of the subscription therefor. In addition, in the event the holder of the Series
B Preferred Stock on or before six (6) months from the subscription therefor
converted the Series B Preferred Stock, such holder shall also receive 1,000
Warrants to purchase 1,000 shares of Common Stock for each share of Series B
Preferred Stock. All of the Series B Preferred Stock has been converted.
In December 1992, in connection with a bridge financing wherein the Company
borrowed $150,000 from 11 individual lenders, the Company issued an aggregate of
93,750 Bridge Units, which Bridge Units are exercisable for an aggregate
exercise price of $46,875 for 9,375 shares of Common Stock, and 9,375 Warrants
to purchase an additional 9,375 shares of Common Stock. The 11 individual
Bridge Lenders and the number of Bridge Units acquired by each of them are as
follows: Abingdon Farms, Inc. (3,125 Bridge Units); Philip J. Facchina, Barry
M. Peltz and Leo Palatnik (781 Bridge Units each); Broad Capital, Robert
Lewis, Robert Moccobeccnio, Joel San Antonio, Carol Scibelli (625 Bridge Units
each); David Gold (391 Bridge Units); and Louis Wohl (391 Bridge Units). As
of December 1, 1993, 30,625 bridge units have been exercised.
In April 1993, in payment of services rendered by unrelated parties, the
Company issued 18,833 unregistered shares of Common Stock.
On January 31, 1994 the Company engaged in a private placement of 1,500,000
warrants, at a price of $.25 per warrant. The warrants possess the same terms
and conditions as those offered to the public in connection with the Company's
initial public offering.
In November and December, 1994, the Company borrowed an aggregate of
$200,000 from certain lenders (the "Bridge Lenders"). In exchange for making
loans to the Company, each Bridge Lender received two (2) promissory notes (the
"Bridge Notes"). Certain Bridge Notes are in the aggregate principal amount of
$180,000 (the "Principal Bridge Notes") and the other Bridge Notes are in the
aggregate principal amount equal to $20,000 (the "Convertible Bridge Notes").
Each of the Bridge Notes bears interest at the rate of eight percent (8%) per
annum. The Principal Bridge Notes are due and payable upon the earlier of (i)
May 1, 1995 and (ii) the closing of the next underwritten public offering of the
Company's securities, or the closing of this offering. The Convertible Bridge
Notes are due and payable on December 1, 1995. The Company intends to use a
portion of the proceeds of this offering to repay the Bridge Lenders. See "Use
of Proceeds." In addition, each Bridge Lender has the right to convert a
Convertible Bridge Note into a number of units ("Bridge Units") equal to the
total dollar amount loaned to the Company by such Bridge Lender; provided
however, that one Bridge Lender may convert its Convertible Bridge Note into the
total dollar amount loaned to the Company plus an additional 5,000 Bridge Units
because such Bridge Lender surrendered 100,000 warrants exercisable for
100,000 shares of Common Stock. In February 1995, the Bridge Lenders converted
the Convertible Bridge Notes into an aggregate of 25,000 Bridge Units. Each
Bridge Unit is identical to each Unit being offered hereby. Further, the Company
agreed to register such Bridge Units in the first registration statement filed
by the Company following the date of the loan. Therefore, the Registration
Statement of which this Prospectus forms a part relates to the 25,000 Bridge
Units held by the Bridge Lenders. See "Selling Securityholder" "Certain
Transactions" and "Underwriting."
II-4
<PAGE>
The Company believes that the transactions set forth above were exempt from
registration with the Securities and Exchange Commission pursuant to Section
4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not
involving any public offering. All certificates representing the shares issued
and currently outstanding by the Registrant herein have been or will be
appropriately legended.
In March 1995, the Company entered into a Consulting Agreement with James
Solakian, pursuant to which the Company issued to Mr. Solakian 10,000 shares of
Common Stock in exchange for financial consulting services. Mr. Solakian has
agreed that for a period of one year he will assist the Company on financial
matters, including obtaining debt financing, assessing acquisitions (if any),
cash management, receivables management and investor public relations. Mr.
Solakian serves as a consultant to a number of companies. The Company believes
that the number of shares of Common Stock issued to Mr. Solakian is fair
consideration (based upon a fair market value of $.28 per share on the date of
issuance) for the services to be performed under the Consulting Agreement with
the Company.
In March 1995, the Company entered into a Consulting Agreement with Jack
Maguire, pursuant to which the Company issued to Mr. Maguire 35,000 shares of
Common Stock in exchange for marketing consulting services. Mr. Maguire has
agreed that for a period of one year he will assist the Company in expanding the
market presence of its Taste of Jamaica brand. From 1980 through 1989, Mr.
Maguire was the President of Vermont Pure, and from 1991 through 1994 he was the
President of Great Waters of France, Inc., the exclusive importer of Evian water
in the United States. The Company believes that the number of shares of Common
Stock issued to Mr. Maguire is fair consideration (based upon a fair market
value of $.28 per share on the date of issuance) for the services to be
performed under the Consulting Agreement with the Company.
In March 1995, the Company entered into a Consulting Agreement with Harold
Yordy, pursuant to which the Company issued to Mr. Yordy 25,000 shares of
Common Stock in exchange for consulting services in connection with new product
development. Mr. Yordy has agreed that for a period of one year he will assist
the Company in assessing the viability of various new products and counseling
the Company with respect to the marketing thereof. The Company believes that the
number of shares of Common Stock issued to Mr. Yordy is fair consideration
(based upon a fair market value of $.28 per share on the date of issuance) for
the services to be performed under the Consulting Agreement with the Company.
On April 5, 1996, the Company entered into a Consulting Agreement with
Matthew L. Harriton, pursuant to which the Company issued to Mr. Harriton
40,000 shares of Common Stock in exchange for consulting services in connection
with business development. Mr. Harriton has agreed that for a period of two
years he will advise the Company on its food service and restaurant distribution
divisions and new product lines. The Company believes that the number of shares
of Common Stock issued to Mr. Harriton is fair consideration for the services to
be performed under the Consulting Agreement with the Company.
On April 11, 1996, the Company entered into a Consulting Agreement with
Mark Butler, pursuant to which the Company issued to Mr. Butler 35,000 shares
of Common Stock in exchange for consulting services in connection with beer and
ale sales. Mr. Harriton has agreed that for a period of two years he will advise
the Company relating to the distribution of the Company's beer and ale product
lines: the acquisition and development of new beer and ale products, and the
expansion of the Company's existing beer and ale product lines. The Company
believes that the number of shares of Common Stock issued to Mr. Butler is fair
consideration for the services to be performed under the Consulting Agreement
with the Company.
On April 25, 1996, the Company entered into an Employment Agreement with
Mel Feldman, pursuant to which the Company issued to Mr. Feldman 25,000 shares
of Common Stock in exchange for Mr. Feldman becoming Director of Sales for
Bronx, Brooklyn and Queens counties, for the Company. Mr.
II-5
<PAGE>
Feldman's employment with the Company is for a term of three years. Mr. Feldman
is receiving a base salary of eighty thousand dollars ($80,000) and the 25,000
shares of Common Stock of the Company.
On April 25, 1996, the Company entered into an Employment Agreement with
Aaron German, pursuant to which the Company issued to Mr. German 25,000 shares
of Common Stock in exchange for Mr. Feldman becoming Assistant Director of Sales
for Bronx, Brooklyn and Queens counties, for the Company. Mr. German's
employment with the Company is for a term of three years. Mr. Feldman is
receiving a base salary of eighty thousand dollars ($80,000) and the 25,000
shares of Common Stock of the Company.
On April 22, 1996, Mootch & Muck, Inc. ("Distributor") entered into a
Distribution Agreement with Premium Beverage Packers Co. ("Premium") pursuant to
which Distributor purchased distribution rights to "City Club" soda, for one
hundred eighty thousand dollars ($180,000) and three hundred thousand (30,000)
shares of the Company's common stock.
On April 29, 1996 the Company entered into a Loan Agreement with Michael
Lulkin whereby Mr. Lulkin loaned the Company one hundred fifty thousand dollars
($150,000). As additional consideration solely for making the loan, the Company
issued to Mr. Lulkin 40,000 shares of Common Stock.
Item 27. Exhibits.
*1.01 Revised Form of Underwriting Agreement.
*1.02 Revised Form of Agreement Among Underwriters.
*1.03 Revised Form of Selected Dealers Agreement.
++1.04 Form of Series C Preferred Unit Underwriting Agreement.
++1.05 Agreement Among Underwriters
++1.06 Selected Dealers Agreement
*3.01 Certificate of Incorporation of the Company filed on August 6,
1992.
*3.02 Certificate of Amendment of Certificate of Incorporation of
the Company filed August 31, 1992.
*3.03 By-Laws of the Company.
++3.04 Form of Certificate of Designation of Series C Preferred
Stock.
*3.05 Form of Certificate of Designation of Series B Preferred
Stock.
*4.01 Specimen Certificate for Shares of Common Stock.
*4.02 Specimen Certificate for Shares of Series A Preferred Stock.
*4.03 Specimen Certificate for Shares of Series B Preferred Stock.
+4.04 Specimen Certificate for Shares of Series C Preferred Stock.
II-6
<PAGE>
*4.05 Revised Form of Warrant Agreement by and among the Company, J.
Gregory & Company, Inc. and American Stock Transfer & Trust
Company.
*4.06 Specimen Certificate for Warrants.
*4.07 Revised Form of Underwriters' Unit Purchase Option.
*4.08 Form of Lockup Letter with Selling Securityholders.
*4.09 Form of Lockup Letter with Officers, Directors and other
Shareholders.
++4.10 Form of Series C Preferred Stock Warrant Agreement.
++4.11 Series C Preferred Unit Purchase Option
+4.12 Specimen Certificate for Series C Preferred Warrants.
*5.01 Opinion of Brandeis, Bernstein & Wasserman.
****5.02 Opinion of Bernstein & Wasserman
*10.01 Form of Distribution Agreement of Mootch & Muck, Inc. dated
October 30, 1991, as amended by letter dated February 26,
1992.
*10.02 Stock Sale Agreement by and between Company and the Company
Investors dated June 8, 1992.
*10.03 Form of Employment Agreement of Marshall Becker.
*10.04 Form of Employment Agreement of Gary Kaufman.
*10.05 Form of Employment Agreement of Wilford Adkins, Jr.
*10.06 Form of Brokerage Agreement with H & H Day Brokerage.
*10.07 Form of Option Agreement by and between the Company and
Marshall Becker.
*10.08 Form Option Agreement by and between the Company and Wilford
Adkins, Jr.
*10.09 Form of Option Agreement by and between the Company and Gary
Kaufman.
*10.10 Loan Documents with respect to $135,000 Loan from Morris
Friedell.
*10.11 Loan Documents with respect to $65,956.01 Loan from Morris
Friedell.
*10.12 Revised Form of Financial Consulting Agreement by and between
the Company and J. Gregory & Company, Inc.
*10.14 Lease for office space at 625 Michigan Avenue, Chicago,
Illinois.
*10.15 Form of Incentive Stock Option Plan.
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*10.16 Form of Non-Qualified Stock Option Plan.
*10.17 Form of Voting Trust Agreement with respect to the Company's
Common Stock owned by Kial, Ltd.
*10.18 Form of Voting Trust Agreement with respect to the Company's
Common Stock owned by K.A.M. Group, Inc.
*10.19 Stock Purchase Agreement by and between the Company and Mootch
& Muck dated June 5, 1992.
*10.20 Form of Bridge Loan Documents.
*10.21 Form of Amendment to Option Agreement by and between the
Company and Marshall Becker.
*10.22 Form of Amendment to Option Agreement by and between the
Company and Wilford Adkins, Jr.
*10.23 Form of Amendment to Stock Sale Agreement by and between
Company and the Company Investors dated June 8, 1992
**10.24 Form of Employment Agreement of Howard Shapiro.
**10.25 Form of Option Agreement by and between the Company and Howard
Shapiro.
**10.26 Agreement of Subordination and Security Agreement dated March
12, 1993 by Alfred Sipper.
**10.27 Shareholder's Agreement and Irrevocable Proxy dated as of May
12, 1993 by and between Alfred Sipper, M&M and the Registrant.
**10.29 Letter Agreement and Irrevocable Proxy dated as of May 12,
1993 by and between the Registrant and M&M.
*10.30 Form of Employment Agreement with Alfred Sipper.
o10.31 Consulting Agreement by and between the Company and Marshall
E. Becker, dated February 15, 1994.
o10.32 License Agreement by and between the Company and Ahmadi
Industries, W.C.C. dated November 30, 1993.
o10.33 Agreement and Plan of Merger by and between the Company M&M
Acquisition Corp., Alfred Sipper, Bev-Tyme, Inc. and Mootch &
Muck, Inc., dated March 1994.
**10.34 Secured Convertible Loan Agreement dated March 12, 1993 by and
between New Day Beverage, Inc. and Mootch & Muck, Inc.
**10.35 Guarantee of Payment dated March 12, 1993 by Alfred Sipper.
**10.36 Non-Negotiable Note in the principal amount of $300,000 dated
March 12, 1993 from New Day Beverage, Inc. to Mootch & Muck,
Inc.
**10.37 Security Agreement dated March 12, 1993 by and among New Day
Beverage, Inc., Mootch & Muck, Inc. and Bev-Tyme, Inc.
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<PAGE>
**10.38 Agreement of Subordination and Security Agreement dated March
12, 1993 by Alfred Sipper.
@10.39 Purchase Agreement among M&M, Sclafani Beer and Soda
Distributors, Inc. and John Sclafani.
#10.40 Amendment No. 1 to Agreement and Plan of Merger by and among
the Company, Mootch & Muck, Inc. and Alfred Sipper.
#10.41 Consulting Agreement between the Company and Harold Yordy.
#10.42 Consulting Agreement between the Company and James Solakian.
#10.43 Consulting Agreement between the Company and Jack Maguire.
10.44 Consulting Agreement between the Company and Walter Miller.
10.45 Stock Option Agreement between the Company and Walter Miller.
10.46 Employment Agreement between the Company and Mel Feldman.
10.47 Stock Option Agreement between the Company and Mel Feldman.
10.48 Employment Agreement between the Company and Aaron German.
10.49 Stock Option Agreement between the Company and Aaron German.
*21.01 List of Subsidiaries of the Registrant as of December 31,
1993.
23.1 Consent of Moore Stephens, P.C.
- ----------
* Incorporated by reference to Registrant's Registration Statement on Form
SB-2, and amendments thereto, Registration No. 33-53748C declared
effective on January 29, 1993.
** Incorporated by reference to Registrant's Form 8-K, dated March 17, 1993.
*** Incorporated by reference to Registrant's Form 8-K, dated May 1993.
o Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 declared effective in February 1994.
@ Incorporated by reference to the Registrant's Form 8-K filed with
Securities and Exchange Commission on December 2, 1994.
+ Incorporated by reference Form SB-2 filed with the Securities and Exchange
Commission on December 15, 1994
# Incorporated by reference to Form SB-2 filed with the Securities and
Exchange Commission on December 15, 1994.
++ Incorporated by reference to Form SB-2 filed with the Securities and
Exchange Commission on May 1, 1995.
Item 28. Undertakings.
(a) Rule 415 Offering
The undersigned Registrant will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Act;
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<PAGE>
(ii) Reflect in the prospectus any facts or events which, individually
or in the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Act, treat each such post-effective
amendment as a new registration statement of the securities offered, and the
Offering of such securities at that time shall be deemed to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers
The undersigned Registrant will provide to the Underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
(c) Indemnification
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the provisions referred to in Item 22 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Rule 430A
The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the small business issuer under Rule 424(b)(1) or (4) or 497(h) under the Act as
part of this Registration Statement as of the time the Commission declared it
effective.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
executed on this 24th day of July, 1996.
BEV-TYME, INC.
By: /s/ Robert J. Sipper
Robert J. Sipper
Chairman of the Board, and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities and on the dates
indicated
Signature Title Date
--------- ----- ----
/s/ Robert J. Sipper Chairman of the , 1996
Robert J. Sipper Board and President
/s/ Hartley T. Bernstein Director
Hartley T. Bernstein
/s/ Robert Forst Vice President, , 1996
Robert Forst Chief Financial Officer,
Principal Accounting
Officer and Secretary
Bruce Logan Director , 1996
Bruce Logan
/s/ Alfred Sipper Director , 1996
Alfred Sipper
<PAGE>
EXHIBIT
10.44
<PAGE>
CONSULTING AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1996, by and between Mootch &
Muck, Inc., a New York corporation (the "Company"), and Walter Miller, an
individual residing at __________________________________________ (the
"Consultant").
W I T N E S E T H :
WHEREAS, the Company desires to secure the services of the Consultant upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Consultant desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Consulting Services. The Company hereby engages Consultant and
the Consultant hereby accepts such engagement, as a consultant to the Company,
subject to the terms and conditions set forth in this Agreement. The Consultant
shall provide advice to the Company regarding the sales and distribution of its
products in Nassau, Suffolk and Westchester counties, when and as requested by
the Company; provided however, that in no event shall the Consultant be required
to devote more than 10 hours per week to his duties as a consultant to the
Comapny.
Section 2. Term of Agreement.
The term of this Agreement shall be for a period of thirty six (36) months
commencing on the date hereof (the
<PAGE>
"Term"), subject to earlier termination by the parties pursuant to Section 4.
Section 3. Payments to Consultant.
The Company shall (i) pay to Consultant an initial payment of three
thousand three hundred thirty three dollars ($3,333) and (ii) grant to the
Consultant options (the "Options") to purchase one hundred thousand (100,000)
shares of Common Stock of Bev-Tyme, Inc., the parent corporation of the Company
(the "Shares"), a form of such option is attached hereto as Exhibit A. The
Options shall be exercisable at $1.50 per share for a three year period
following the date of vesting. One sixth of the Options shall vest on the first
day of each calendar quarter commencing on July 1, 1996. Bev-Tyme agrees to file
a registration statement with the Securities and Exchange Commission covering
the Shares thereby permitting the sale of the Shares to the public.
Upon the sale of the Shares by the Consultant, the Consultant shall provide
the Company with evidence of the aggregate sale price. In the event that the
Consultant has not received net proceeds (after the payment of the exercise
price) of at least three hundred thousand dollars ($300,000) (the "Target
Amount") from the sale of the Shares, the Company shall pay to the Consultant in
cash, shares of Bev-Tyme Common Stock or options to purchase shares of Bev-Tyme
Common Stock (at the Company's option) having a fair market value equal to the
difference between the Target Amount and the net proceeds
2
<PAGE>
actually received by the Consultant from the sale of the Shares. In the event
the Options expire despite the Executive's attempts to exercise the Options and
sell the Shares in accordance with the terms of this Agreement, the Company
shall issue additional securities in accordance with the preceding sentence
whether or not the Executive is a consultant to the Company.
In addition, the Company agrees to loan to the Consultant on the date
hereof on aggregate amount equal to $25,000. In exchange for such loan the
Consultant agrees to deliver to the Company a promissory note substantially in
the form of Exhibit B attached hereto.
During the Term, the Company shall not reimburse the Consultant for any
expenses unless the Executive obtains the prior written consent of the President
of the Company which consent shall not be unreasonably withheld or delayed.
Section 4. Termination.
The Company may terminate the services of the Consultant at any time
upon sixty (60) days prior written notice.
Section 5. Disclosure of Confidential Information.
Consultant recognizes that he has had and will continue to have access to
secret and confidential information regarding the Company, including but not
limited to its customer list, products, know-how, and business plans. Consultant
acknowledges that such information is of great value to the Company, is the sole
property of the Company, and has been and will be acquired by him in confidence.
In consideration of the obligations
3
<PAGE>
undertaken by the Company herein, Consultant will not, at any time, during or
after his engagement hereunder, reveal, divulge or make known to any person, any
information acquired by Consultant during the course of his employment, which is
treated as confidential by the Company, including but not limited to its
customer list, not otherwise in the public domain. The provisions of this
Section 5 shall survive Consultant's engagement hereunder.
Section 6. Covenant Not To Compete.
(a) Consultant recognizes that the services to be performed by him
hereunder are special, unique and extraordinary. The parties confirm that it is
reasonably necessary for the protection of Company that Consultant agree, and
accordingly, Consultant does hereby agree, that he shall not, directly or
indirectly, at any time during the term of the Agreement and the "Restricted
Period" (as defined in Section 6(e) below):
(i) except as provided in Subsection (c) below, be engaged in
sale, distribution or marketing of beverage products or
provide technical assistance, advice or counseling regarding
the beverage industry in the New York City boroughs of
Bronx, Brooklyn and Queens, either on his own behalf or as
an officer, director, stockholder, partner, consultant,
associate, employee, owner, agent, creditor, independent
contractor, or co-venturer of any third party; or
4
<PAGE>
(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf of
himself or any third party, any employee or agent of Company
or any affiliate thereof.
(b) Consultant hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement and during the Restricted Period solicit any customers of the Company
or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 6 shall not be construed to prevent Consultant from
owning, directly or indirectly, in the aggregate, an amount not exceeding five
percent (5%) of the issued and outstanding voting securities of any class of any
company whose voting capital stock is traded on a national securities exchange
or on the over-the-counter market other than securities of the Company.
5
<PAGE>
(e) The term "Restricted Period," as used in this Section 6, shall mean the
period of Consultant's actual engagement hereunder.
(f) The provisions of this Section 6 shall survive the end of the
Restricted Period as provided in Section 6(e) hereof.
Section 7. Miscellaneous.
7.1 Injunctive Relief. Consultant acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Consultant agrees that any breach or threatened
breach by him of Sections 5 or 6 of this Agreement shall entitle Company, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by Consultant
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and that one or
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which Company
seeks enforcement thereof, such restriction shall be limited to the extent
permitted by law.
6
<PAGE>
7.2 Assignments. Neither Consultant nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express written
consent of the other.
7.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to Consultant's
engagement by the Company, supersedes all prior understandings and agreements,
whether oral or written, between the Consultant and the Company, and shall not
be amended, modified or changed except by an instrument in writing executed by
the party to be charged. The invalidity or partial invalidity of one or more
provisions of this Agreement shall not invalidate any other provision of this
Agreement. No waiver by either party of any provision or condition to be
performed shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or any prior or subsequent time.
7.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
7.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
7.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall
7
<PAGE>
be in writing and shall be deemed to have been duly given when personally
delivered, sent by registered or certified mail, return receipt requested,
postage prepaid, or by private overnight mail service (e.g. Federal Express) to
the party at the address set forth on the books and records of the Company or to
such other address as either party may hereafter give notice of in accordance
with the provisions hereof. Notices shall be deemed given on the sooner of the
date actually received or the third business day after sending.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to such
State's conflicts of laws provisions and each of the parties hereto irrevocably
consents to the jurisdiction and venue of the federal and state courts located
in the State of New York, County of New York.
7.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
MOOTCH & MUCK, INC.
By:_______________________________
Name:
Title:
_______________________________
Walter Miller
8
<PAGE>
With respect to Section 3 only:
BEV-TYME, INC.
By:____________________________
Name:
Title:
9
<PAGE>
EXHIBIT
10.45
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 25th day of April, 1996, (the "Grant Date")
is made and entered into by and between Bev-Tyme, Inc., a Delaware corporation
with its principal offices located at 134 Morgan Avenue, Brooklyn, New York (the
"Company"), and Walter Miller (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved the granting to
the Optionee of the option to purchase certain shares of the Company's Series C
Convertible Preferred Stock, par value $.0001 per share ("Series C Preferred
Stock"); and
WHEREAS, the Optionee desires to accept the grant of such option, subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
Section 1. Grant of Option; Vesting. Subject to the provisions of this
Agreement, the Company hereby grants to the Optionee an option (the "Option") to
purchase from the Company a total of One Hundred Thousand (100,000) shares of
the Company's Series C Preferred Stock (the "Option Shares") at an exercise
price of $1.50 per share (the "Exercise Price"). During the eighteen (18) month
period commencing on July 1, 1996, one sixth of the Initial Option Shares (or
16,666 shares) shall vest in the optionee on the first day of each calendar
quarter, the final vesting date to be October 1, 1997. Optionee agrees to use
its best efforts to sell the Option Shares in a timely manner at the best price
and on the best terms available to Optionee. The Company agrees to use its best
efforts to register for sale to the public the Option Shares with the
<PAGE>
Securities and Exchange Commission.
Section 2. Termination of Options. To the extent not exercised, the Option
shall terminate on July 1, 2000 (the "Termination Date").
Section 3. Corporate Events. In the event of a proposed liquidation of the
Company, a proposed sale of all or substantially all of its assets or its Common
Stock, a proposed merger or consolidation, or a proposed separation or
reorganization, the Board of Directors may declare that the Option shall
terminate as of a date to be fixed by the Board of Directors; provided however,
that not less than thirty (30) days preceding the date of such termination, the
Optionee may exercise the Option in whole or in part and the Company represents
that such Options shall be exercisable. However, nothing set forth herein shall
(i) extend the term set for purchasing the Option Shares or (ii) give the
Optionee any rights or privileges as a stockholder of the Company prior to
Optionee's exercise of any of the Option Shares.
Section 4. Exercise of Option. The Option may be exercised in whole or in
part in accordance with the provisions of this Agreement by the Optionee's
tendering the Exercise Price (or a proportionate part thereof if the Option is
partially exercised) in immediately available funds or other consideration
reasonably acceptable to the Board of Directors of the Company. The Company
shall cooperate to the extent reasonably possible with the Optionee in an
exercise pursuant to which all or part of the Optionee Shares will be sold
simultaneously with the exercise of this Option with the broker-dealer
participating in such sale being irrevocably instructed to remit the proceeds
from the exercise of the Option to the Company upon settlement of the sale of
the underlying Option Shares.
The Optionee may exercise part or all of the Option by tender to the
Company of a written notice of exercise together with advice of the delivery of
an order to a broker to sell part
2
<PAGE>
or all of the Option Shares, subject to such exercise notice and an irrevocable
order to such broker to deliver to the Company (or its transfer agent)
sufficient proceeds from the sale of such Option Shares to pay the exercise
price and any withholding taxes. All documentation and procedures to be followed
in connection with such a "cashless exercise" shall be approved in advance by
the Company, which approval shall be expeditiously provided and not unreasonably
withheld or delayed.
Section 5. Shares Certificates. Upon receipt of payment in full of the
Exercise Price, and after taking such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government, the
Company will cause one or more stock certificates evidencing the Optionee's
ownership of the Option Shares so purchased by the Optionee to be issued to the
Optionee.
Section 6. Restrictions. The Option and the Option Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"). Optionee
understands that, unless registered with the Securities and Exchange Commission
for sale to the public, all Option Shares acquired upon the exercise of the
Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the Option Shares shall
bear an appropriate legend restricting their transfer. Such Option Shares cannot
be sold, transferred, assigned or otherwise hypothecated without registration
under the Act or unless a valid exemption from registration is then available
under applicable federal and state securities laws and the Optionee has
furnished the Company with an opinion of counsel satisfactory in form and
substance to the Company's counsel that such registration is not required.
Section 7. Default of Optionee. Should the Optionee at any time fail to pay
the Exercise Price in accordance with the terms of this Agreement, the Option
granted hereunder shall be null
3
<PAGE>
and void. The provision shall be in addition and not in lieu of any other
remedies which the Company may have at law and/or in equity.
Section 8. Share Adjustments. If there is any change in the number of
shares of Common Stock on account of the declaration of stock dividends,
recapitalization resulting in stock splits, or combinations or exchanges of
shares of Common Stock, or otherwise, the number of Option Shares available for
purchase by the exercise of the Option, and the Exercise Price, shall be
proportionately adjusted by the Company.
Section 9. Miscellaneous Provisions.
(a) Notices. Unless otherwise specifically provided herein, all notices to
be given hereunder shall be in writing and sent to the parties by certified
mail, return receipt requested, which shall be addressed to each party's
respective address, as set forth in the first paragraph of this Agreement, or to
such other address as such party shall give to the other party hereto by a
notice given in accordance with this Section and, except as otherwise provided
in this Agreement, shall be effective when deposited in the United States mail
properly addressed and postage prepaid. If such notice is sent other than by the
United States mail, such notice shall be effective when actually received by the
party being noticed.
(b) Assignment. This Agreement and the rights granted hereunder may not be
assigned in whole or in part by Optionee except by will or the laws of descent
and distribution, and the Option is exercisable during Optionee's lifetime only
by the Optionee. This Agreement may be assigned by the Company without the
consent of the Optionee.
(c) Further Assurances. Both parties hereto shall execute and deliver such
other instruments and do such other acts as may be necessary to carry out the
intent and purposes of this Agreement.
4
<PAGE>
(d) Gender. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular form of nouns and pronouns shall include the plural and vice versa.
(e) Captions. The captions contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, extend or prescribe the
scope of this Agreement or the intent of any of the provisions hereof.
(f) Completeness and Modification. This Agreement constitutes the entire
understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the grant of stock options to the Optionee. This Agreement shall not terminated,
except in accordance with its terms, or amended in writing executed by all of
the parties hereto.
(g) Waiver. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
(h) Severability. The invalidity or enforceability, in whole or in part, of
any covenant, promise or undertaking, or any section, subsection, paragraph,
sentence, clause phrase or word or of any provision of this Agreement shall not
affect the validity or enforceability of the remaining portions thereof.
(i) Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(j) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors, estate and personal representatives of the
Optionee and upon the successors and assigns of the Company.
5
<PAGE>
(k) Litigation-Attorney' Fees. In connection with any litigation arising
out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, at the trial and all appellate levels form the other party
hereto, who was an adverse party to such litigation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth in the first paragraph of this Agreement above.
BEV-TYME, INC.
BY:___________________________________
Robert Sipper
President
___________________________________
Walter Miller
6
<PAGE>
EXHIBIT
10.46
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 25, 1996, by and between Mootch &
Muck, Inc., a New York corporation (the "Company"), and Mel Feldman, an
individual residing at 521 Hungry Harbor Road, North Woodmere, New York 11581
(the "Executive").
W I T N E S E T H :
WHEREAS, the Company desires to secure the services of the Executive upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as the Director of Sales - Bronx,
Brooklyn, Queens of the Company, subject to the terms and conditions set forth
in this Agreement.
Section 2. Duties. The Executive shall serve as Director of Sales - Bronx,
Brooklyn, Queens and shall properly perform such duties as may be lawfully
assigned to him from time to time by the President, and the Board of Directors
of the Company. If requested by the Company, the Executive shall serve on the
Board of Directors or any committee thereof without additional compensation.
During the term of this Agreement, the Executive shall devote all of his
business time to the
<PAGE>
performance of his duties hereunder unless otherwise authorized by the Board of
Directors.
Section 3. Term of Employment; Vacation.
The term of the Executive's employment shall be for a period of thirty six
(36) months commencing on the date hereof (the "Term"), subject to earlier
termination by the parties pursuant to Sections 5 and 6 hereof. The Executive
shall be entitled to two (2) weeks vacation during each year of the Term.
Section 4. Compensation of Executive.
4.1 Salary. The Company shall pay to Executive a base salary of Eighty
Thousand ($80,000) Dollars per annum (the "Base Salary"), less such deductions
as shall be required to be withheld by applicable law and regulations. All
salaries payable to Employee shall be paid at such regular weekly, biweekly or
semi-monthly time or times as the Company makes payment of its regular payroll
in the regular course of business. Commencing on January 1, 1997, and on each
January 1 thereafter during the term of this Agreement, the Base Salary shall
increase by 5% in the event that the Company reports a net profit on its annual
financial statements.
4.2 Signing Bonus. Upon the execution of this Agreement, the Executive
shall receive a signing bonus equal to (a) three thousand three hundred thirty
three dollars ($3,333) and (b) the issuance of two hundred fifty thousand
(250,000) shares of Common Stock of Bev-Tyme, Inc. ("Bev-Tyme"), the parent
corporation of the Company.
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4.3 Performance Bonus. As additional compensation to the Executive, the
Company and its parent corporation, Bev-Tyme, hereby grants to the Executive
options (the "Options") to purchase one hundred thousand (100,000) shares of
Common Stock of Bev-Tyme (the "Shares"), a form of such option is attached
hereto as Exhibit A. The Options shall be exercisable at $1.50 per share for a
three year period following the date of vesting. One sixth of the Options shall
vest on the first day of each calendar quarter commencing on July 1, 1996.
Bev-Tyme agrees to file a registration statement with the Securities and
Exchange Commission covering the Shares thereby permitting the sale of the
Shares to the public.
Upon the sale of the Shares by the Executive, the Executive shall provide
the Company with evidence of the aggregate sale price. In the event that the
Executive has not received net proceeds (after the payment of the exercise
price) of at least three hundred thousand dollars ($300,000) (the "Target
Amount") from the sale of the Shares, the Company shall pay to the Executive in
cash, shares of Bev-Tyme Common Stock or options to purchase shares of Bev-Tyme
Common Stock (at the Company's option) having a fair market value equal to the
difference between the Target Amount and the net proceeds actually received by
the Executive from the sale of the Shares. In the event the Options expire
despite the Executive's attempts to exercise the Options and sell the Shares in
accordance with the terms of this Agreement, the Company shall issue additional
securities in
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accordance with the preceding sentence whether or not the Executive is employed
by the Company.
4.4 Loans. The Company agrees to loan to the Executive on the date hereof
on aggregate amount equal to $25,000. In exchange for such loan the Executive
agrees to deliver to the Company a promissory note substantially in the form of
Exhibit B attached hereto.
4.5 Expenses. During the Term, the Company shall reimburse the Executive
for all reasonable and necessary travel expenses and other disbursements
incurred by the Executive on behalf of the Company, in performance of the
Executive's duties hereunder, assuming Executive has received prior approval for
such travel expenses and disbursements by the Company's President to the extent
possible. With the respect to Executive's use of an automobile in connection
with the performance of his duties hereunder, the Company shall, at the
direction of the Executive, either reimburse Executive for, or directly pay the
costs of, the use of an automobile during the term of this Agreement and all
usual expenditures in connection therewith, i.e., fuel, parking, etc. in an
amount not to exceed $400 per month or such greater amount so long as the
Executive has received prior written approval by the President of the Company
for such additional expenses which approval shall not be unreasonably withheld
or delayed.
4.6 Benefits. The Executive shall be permitted during the Term to
participate in any hospitalization or disability
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insurance plans, health programs, pension plans, bonus plans or similar benefits
that may be available to other executives of the Company or Bev-Tyme to the
extent the Executive is eligible under the terms of such plans or programs. The
Company agrees to provide the Executive with a paid health insurance plan
comparable to insurance courage granted to Executives of BevTyme. In lieu of
receiving coverage under such healthcare insurance plan, the Executive may elect
to receive a cash payment equal to the Company's cost for such coverage less
ordinary withholding amounts.
5. Disability of the Executive. If the Executive is incapacitated or
disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of 60 consecutive days or 90 days in
any period of 180 consecutive days (a "Disability"), the Company may, at the
time or any time thereafter, at its option, terminate the employment of the
Executive under this Agreement immediately upon giving the Executive written
notice to that effect.
6. Termination.
(a) The Company may terminate the employment of the Executive and all of
the Company's obligations under this Agreement at any time for Cause (as
hereinafter defined) by giving the Executive notice of such termination, with
reasonable specificity of the details thereof. "Cause" shall mean (i) the
Executive's misconduct could reasonably be expected to have a
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material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of
Directors, President or Director of Operations consistent with the Executive's
position relating to the business of the Company or neglect of duties or failure
to act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of the Company, (iii) the commission
by the Executive of an act constituting common law fraud, or a felony, or
criminal act against the Company or any affiliate thereof or any of the assets
of any of them, (iv) the Executive's abuse of alcohol or other drugs or
controlled substances, or conviction of a crime involving moral turpitude, (v)
the Executive's material breach of any of the agreements contained herein or
(vi) the Executive's death or resignation hereunder. A termination pursuant to
Section 6(a)(i), (ii), (iv) (other than as a result of a conviction of a crime
involving moral turpitude) or (v) shall take effect 30 days after the giving of
the notice contemplated hereby unless the Executive shall, during such 30-day
period, remedy to the reasonable satisfaction of the Board of Directors of the
Company the misconduct, disregard, abuse or breach specified in such notice;
provided, however, that such termination shall take effect immediately upon the
giving of such notice if the Board of Directors of the Company shall, in its
sole discretion, have reasonably determined that such misconduct, disregard,
abuse or breach is not remediable (which determination
6
<PAGE>
shall be stated in such notice). A termination pursuant to Section 6(a)(iii),
(iv) (as a result of a conviction of a crime involving moral turpitude) or (vi)
shall take effect immediately upon the giving of the notice contemplated hereby.
(b) The Company may terminate the employment of the Executive and all of
the Company's obligations under this Agreement (except as hereinafter provided)
at any time during the Employment Period without Cause by giving the Executive
written notice of such termination, to be effective 15 days following the giving
of such written notice. For convenience of reference, the date upon which any
termination of the employment of the Executive pursuant to Sections 5 or 6 shall
be effective shall be hereinafter referred to as the "Termination Date".
7. Effect of Termination of Employment.
(a) Upon the termination of the Executive's employment (i) for Cause or
(ii) a Disability, neither the Executive nor the Executive's beneficiaries or
estate shall have any further rights under this Agreement or any claims against
the Company arising out of this Agreement, except the right to receive (i) the
unpaid portion of the Base Salary provided for in Section 4.1, computed on a pro
rata basis to the Termination Date (the "Unpaid Salary Amount"), and (ii)
reimbursement for any expenses for which the Executive shall not have
theretofore been reimbursed, as provided in Section 4.6 (the "Expense
Reimbursement Amount").
(b) Upon the termination of the Executive's employment for other than Cause
or a Disability, neither the Executive nor
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the Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense
Reimbursement Amount, and (iii) severance compensation equal to the Base Salary
for the term of this Agreement (as if this Agreement was not terminated), 50% of
which is payable on the Termination Date and 50% of which is payable in equal
monthly installments during the period commencing on the first day of January
following the Termination Date and ending on the following December 1.
Section 8. Disclosure of Confidential Information. Executive recognizes
that he has had and will continue to have access to secret and confidential
information regarding the Company, including but not limited to its customer
list, products, know-how, and business plans. Executive acknowledges that such
information is of great value to the Company, is the sole property of the
Company, and has been and will be acquired by him in confidence. In
consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, not otherwise in the public
domain. The provisions of this Section 8 shall survive Executive's employment
hereunder.
8
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Section 9. Covenant Not To Compete.
(a) Executive recognizes that the services to be performed by him hereunder
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of Company that Executive agree, and accordingly,
Executive does hereby agree, that he shall not, directly or indirectly, at any
time during the term of the Agreement and the "Restricted Period" (as defined in
Section 9(e) below):
(i) except as provided in Subsection (c) below, be engaged in
sale, distribution or marketing of beverage products or
provide technical assistance, advice or counseling regarding
the beverage industry in the New York City boroughs of
Bronx, Brooklyn and Queens, either on his own behalf or as
an officer, director, stockholder, partner, consultant,
associate, employee, owner, agent, creditor, independent
contractor, or co-venturer of any third party; or
(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf of
himself or any third party, any employee or agent of Company
or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement and during the
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Restricted Period solicit any customers of the Company or any affiliate
thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 9 shall not be construed to prevent Executive from owning,
directly or indirectly, in the aggregate, an amount not exceeding five percent
(5%) of the issued and outstanding voting securities of any class of any company
whose voting capital stock is traded on a national securities exchange or on the
over-the-counter market other than securities of the Company.
(e) The term "Restricted Period," as used in this Section 9, shall mean the
period of Executive's actual employment hereunder up to date of termination
plus: (i) in the event that the Executive is terminated for Cause, the twelve
(12) months after the Termination Date or (ii) in the event that the Executive
is terminated without Cause or for a Disability, the term of actual employment
through the Termination Date.
(f) The provisions of this Section 9 shall survive the end of the
Restricted Period as provided in Section 9(e) hereof.
Section 10. Miscellaneous.
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10.1 Injunctive Relief. Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Executive agrees that any breach or threatened
breach by him of Sections 8 or 9 of this Agreement shall entitle Company, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by Executive
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and that one or
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which Company
seeks enforcement thereof, such restriction shall be limited to the extent
permitted by law.
10.2 Assignments. Neither Executive nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express written
consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to Executive's
employment by Company, supersedes all prior understandings and agreements,
whether oral
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or written, between Executive and Company, and shall not be amended, modified or
changed except by an instrument in writing executed by the party to be charged.
The invalidity or partial invalidity of one or more provisions of this Agreement
shall not invalidate any other provision of this Agreement. No waiver by either
party of any provision or condition to be performed shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
10.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by registered or
certified mail, return receipt requested, postage prepaid, or by private
overnight mail service (e.g. Federal Express) to the party at the address set
forth above or to such other address as either party may hereafter give notice
of in accordance with the provisions hereof. Notices shall be deemed given on
the sooner of the date actually received or the third business day after
sending.
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10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to such
State's conflicts of laws provisions and each of the parties hereto irrevocably
consents to the jurisdiction and venue of the federal and state courts located
in the State of New York, County of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
MOOTCH & MUCK, INC.
By:________________________________
Name:
Title:
________________________________
Mel Feldman
With respect to Section 4.3 only:
BEV-TYME, INC.
By:______________________________
Name:
Title:
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EXHIBIT
10.47
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 25th day of April, 1996, (the "Grant Date")
is made and entered into by and between Bev-Tyme, Inc., a Delaware corporation
with its principal offices located at 134 Morgan Avenue, Brooklyn, New York (the
"Company"), and Mel Feldman (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved the granting to
the Optionee of the option to purchase certain shares of the Company's Series C
Convertible Preferred Stock, par value $.0001 per share (" Series C Preferred
Stock"); and
WHEREAS, the Optionee desires to accept the grant of such option, subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
Section 1. Grant of Option; Vesting. Subject to the provisions of this
Agreement, the Company hereby grants to the Optionee an option (the "Option") to
purchase from the Company a total of One Hundred Thousand (100,000) shares of
the Company's Series C Preferred Stock (the "Option Shares") at an exercise
price of $1.50 per share (the "Exercise Price"). During the eighteen (18) month
period commencing on July 1, 1996, one sixth of the Initial Option Shares (or
16,666 shares) shall vest in the optionee on the first day of each calendar
quarter, the final vesting date to be October 1, 1997. Optionee agrees to use
its best efforts to sell the Option Shares in a timely manner at the best price
and on the best terms available to Optionee. The Company agrees to use its best
efforts to register for sale to the public the Option Shares with the
<PAGE>
Securities and Exchange Commission.
Section 2. Termination of Options. To the extent not exercised, the Option
shall terminate on July 1, 2000 (the "Termination Date").
Section 3. Corporate Events. In the event of a proposed liquidation of the
Company, a proposed sale of all or substantially all of its assets or its Common
Stock, a proposed merger or consolidation, or a proposed separation or
reorganization, the Board of Directors may declare that the Option shall
terminate as of a date to be fixed by the Board of Directors; provided however,
that not less than thirty (30) days preceding the date of such termination, the
Optionee may exercise the Option in whole or in part and the Company represents
that such Options shall be exercisable. However, nothing set forth herein shall
(i) extend the term set for purchasing the Option Shares or (ii) give the
Optionee any rights or privileges as a stockholder of the Company prior to
Optionee's exercise of any of the Option Shares.
Section 4. Exercise of Option. The Option may be exercised in whole or in
part in accordance with the provisions of this Agreement by the Optionee's
tendering the Exercise Price (or a proportionate part thereof if the Option is
partially exercised) in immediately available funds or other consideration
reasonably acceptable to the Board of Directors of the Company. The Company
shall cooperate to the extent reasonably possible with the Optionee in an
exercise pursuant to which all or part of the Optionee Shares will be sold
simultaneously with the exercise of this Option with the broker-dealer
participating in such sale being irrevocably instructed to remit the proceeds
from the exercise of the Option to the Company upon settlement of the sale of
the underlying Option Shares.
The Optionee may exercise part or all of the Option by tender to the
Company of a written notice of exercise together with advice of the delivery of
an order to a broker to sell part
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or all of the Option Shares, subject to such exercise notice and an irrevocable
order to such broker to deliver to the Company (or its transfer agent)
sufficient proceeds from the sale of such Option Shares to pay the exercise
price and any withholding taxes. All documentation and procedures to be followed
in connection with such a "cashless exercise" shall be approved in advance by
the Company, which approval shall be expeditiously provided and not unreasonably
withheld or delayed.
Section 5. Shares Certificates. Upon receipt of payment in full of the
Exercise Price, and after taking such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government, the
Company will cause one or more stock certificates evidencing the Optionee's
ownership of the Option Shares so purchased by the Optionee to be issued to the
Optionee.
Section 6. Restrictions. The Option and the Option Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"). Optionee
understands that, unless registered with the Securities and Exchange Commission
for sale to the public, all Option Shares acquired upon the exercise of the
Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the Option Shares shall
bear an appropriate legend restricting their transfer. Such Option Shares cannot
be sold, transferred, assigned or otherwise hypothecated without registration
under the Act or unless a valid exemption from registration is then available
under applicable federal and state securities laws and the Optionee has
furnished the Company with an opinion of counsel satisfactory in form and
substance to the Company's counsel that such registration is not required.
Section 7. Default of Optionee. Should the Optionee at any time fail to pay
the Exercise Price in accordance with the terms of this Agreement, the Option
granted hereunder shall be null
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and void. The provision shall be in addition and not in lieu of any other
remedies which the Company may have at law and/or in equity.
Section 8. Share Adjustments. If there is any change in the number of
shares of Common Stock on account of the declaration of stock dividends,
recapitalization resulting in stock splits, or combinations or exchanges of
shares of Common Stock, or otherwise, the number of Option Shares available for
purchase by the exercise of the Option, and the Exercise Price, shall be
proportionately adjusted by the Company.
Section 9. Miscellaneous Provisions.
(a) Notices. Unless otherwise specifically provided herein, all notices to
be given hereunder shall be in writing and sent to the parties by certified
mail, return receipt requested, which shall be addressed to each party's
respective address, as set forth in the first paragraph of this Agreement, or to
such other address as such party shall give to the other party hereto by a
notice given in accordance with this Section and, except as otherwise provided
in this Agreement, shall be effective when deposited in the United States mail
properly addressed and postage prepaid. If such notice is sent other than by the
United States mail, such notice shall be effective when actually received by the
party being noticed.
(b) Assignment. This Agreement and the rights granted hereunder may not be
assigned in whole or in part by Optionee except by will or the laws of descent
and distribution, and the Option is exercisable during Optionee's lifetime only
by the Optionee. This Agreement may be assigned by the Company without the
consent of the Optionee.
(c) Further Assurances. Both parties hereto shall execute and deliver such
other instruments and do such other acts as may be necessary to carry out the
intent and purposes of this Agreement.
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<PAGE>
(d) Gender. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular form of nouns and pronouns shall include the plural and vice versa.
(e) Captions. The captions contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, extend or prescribe the
scope of this Agreement or the intent of any of the provisions hereof.
(f) Completeness and Modification. This Agreement constitutes the entire
understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the grant of stock options to the Optionee. This Agreement shall not terminated,
except in accordance with its terms, or amended in writing executed by all of
the parties hereto.
(g) Waiver. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
(h) Severability. The invalidity or enforceability, in whole or in part, of
any covenant, promise or undertaking, or any section, subsection, paragraph,
sentence, clause phrase or word or of any provision of this Agreement shall not
affect the validity or enforceability of the remaining portions thereof.
(i) Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(j) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors, estate and personal representatives of the
Optionee and upon the successors and assigns of the Company.
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<PAGE>
(k) Litigation-Attorney' Fees. In connection with any litigation arising
out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, at the trial and all appellate levels form the other party
hereto, who was an adverse party to such litigation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth in the first paragraph of this Agreement above.
BEV-TYME, INC.
BY:________________________________
Robert Sipper
President
________________________________
Mel Feldman
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EXHIBIT
10.48
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 25, 1996, by and between Mootch &
Muck, Inc., a New York corporation (the "Company"), and Aaron German, an
individual residing at 2517 Mill Avenue, Brooklyn, New York 11234 (the
"Executive").
W I T N E S E T H :
WHEREAS, the Company desires to secure the services of the Executive upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Executive desires to render services to the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties mutually agree as follows:
Section 1. Employment. The Company hereby employs Executive and the
Executive hereby accepts such employment, as the Assistant Director of Sales -
Bronx, Brooklyn, Queens of the Company, subject to the terms and conditions set
forth in this Agreement.
Section 2. Duties. The Executive shall serve as Assistant Director of Sales
- - Bronx, Brooklyn, Queens and shall properly perform such duties as may be
lawfully assigned to him from time to time by the President, and the Board of
Directors of the Company. If requested by the Company, the Executive shall serve
on the Board of Directors or any committee thereof without additional
compensation. During the term of this Agreement, the Executive shall devote all
of his business time to the
<PAGE>
performance of his duties hereunder unless otherwise authorized by the Board of
Directors.
Section 3. Term of Employment; Vacation.
The term of the Executive's employment shall be for a period of thirty six
(36) months commencing on the date hereof (the "Term"), subject to earlier
termination by the parties pursuant to Sections 5 and 6 hereof. The Executive
shall be entitled to two (2) weeks vacation during each year of the Term.
Section 4. Compensation of Executive.
4.1 Salary. The Company shall pay to Executive a base salary of Eighty
Thousand ($80,000) Dollars per annum (the "Base Salary"), less such deductions
as shall be required to be withheld by applicable law and regulations. All
salaries payable to Employee shall be paid at such regular weekly, biweekly or
semi-monthly time or times as the Company makes payment of its regular payroll
in the regular course of business. Commencing on January 1, 1997, and on each
January 1 thereafter during the term of this Agreement, the Base Salary shall
increase by 5% in the event that the Company reports a net profit on its annual
financial statements.
4.2 Signing Bonus. Upon the execution of this Agreement, the Executive
shall receive a signing bonus equal to (a) three thousand three hundred thirty
three dollars ($3,333)and (b) two hundred fifty thousand (250,000) shares of
Common Stock of Bev-Tyme, Inc. ("Bev-Tyme"), the parent corporation of the
Company.
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4.3 Performance Bonus. As additional compensation to the Executive, the
Company and its parent corporation, Bev-Tyme, hereby grants to the Executive
options (the "Options") to purchase one hundred thousand (100,000) shares of
Common Stock of Bev-Tyme (the "Shares"), a form of such option is attached
hereto as Exhibit A. The Options shall be exercisable at $1.50 per share for a
three year period following the date of vesting. One sixth of the Options shall
vest on the first day of each calendar quarter commencing on July 1, 1996.
Bev-Tyme agrees to file a registration statement with the Securities and
Exchange Commission covering the Shares thereby permitting the sale of the
Shares to the public.
Upon the sale of the Shares by the Executive, the Executive shall provide
the Company with evidence of the aggregate sale price. In the event that the
Executive has not received net proceeds (after the payment of the exercise
price) of at least three hundred thousand dollars ($300,000) (the "Target
Amount") from the sale of the Shares, the Company shall pay to the Executive in
cash, shares of Bev-Tyme Common Stock or options to purchase shares of Bev-Tyme
Common Stock (at the Company's option) having a fair market value equal to the
difference between the Target Amount and the net proceeds actually received by
the Executive from the sale of the Shares. In the event the Options expire
despite the Executive's attempts to exercise the Options and sell the Shares in
accordance with the terms of this Agreement, the Company shall issue additional
securities in
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<PAGE>
accordance with the preceding sentence whether or not the Executive is employed
by the Company.
4.4 Loans. The Company agrees to loan to the Executive on the date hereof
on aggregate amount equal to $25,000. In exchange for such loan the Executive
agrees to deliver to the Company a promissory note substantially in the form of
Exhibit B attached hereto.
4.5 Expenses. During the Term, the Company shall reimburse the Executive
for all reasonable and necessary travel expenses and other disbursements
incurred by the Executive on behalf of the Company, in performance of the
Executive's duties hereunder, assuming Executive has received prior approval for
such travel expenses and disbursements by the Company's President to the extent
possible. With the respect to Executive's use of an automobile in connection
with the performance of his duties hereunder, the Company shall, at the
direction of the Executive, either reimburse Executive for, or directly pay the
costs of, the use of an automobile during the term of this Agreement and all
usual expenditures in connection therewith, i.e., fuel, parking, etc. in an
amount not to exceed $400 per month or such greater amount so long as the
Executive has received prior written approval by the President of the Company
for such additional expenses which approval shall not be unreasonably withheld
or delayed.
4.6 Benefits. The Executive shall be permitted during the Term to
participate in any hospitalization or disability
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<PAGE>
insurance plans, health programs, pension plans, bonus plans or similar benefits
that may be available to other executives of the Company or Bev-Tyme to the
extent the Executive is eligible under the terms of such plans or programs. The
Company agrees to provide the Executive with a paid health insurance plan
comparable to insurance courage granted to Executives of BevTyme. In lieu of
receiving coverage under such healthcare insurance plan, the Executive may elect
to receive a cash payment equal to the Company's cost for such coverage less
ordinary withholding amounts.
5. Disability of the Executive. If the Executive is incapacitated or
disabled by accident, sickness or otherwise so as to render the Executive
mentally or physically incapable of performing the services required to be
performed under this Agreement for a period of 60 consecutive days or 90 days in
any period of 180 consecutive days (a "Disability"), the Company may, at the
time or any time thereafter, at its option, terminate the employment of the
Executive under this Agreement immediately upon giving the Executive written
notice to that effect.
6. Termination.
(a) The Company may terminate the employment of the Executive and all of
the Company's obligations under this Agreement at any time for Cause (as
hereinafter defined) by giving the Executive notice of such termination, with
reasonable specificity of the details thereof. "Cause" shall mean (i) the
Executive's misconduct could reasonably be expected to have a
5
<PAGE>
material adverse effect on the business and affairs of the Company, (ii) the
Executive's disregard of lawful instructions of the Company's Board of
Directors, President or Director of Operations consistent with the Executive's
position relating to the business of the Company or neglect of duties or failure
to act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of the Company, (iii) the commission
by the Executive of an act constituting common law fraud, or a felony, or
criminal act against the Company or any affiliate thereof or any of the assets
of any of them, (iv) the Executive's abuse of alcohol or other drugs or
controlled substances, or conviction of a crime involving moral turpitude, (v)
the Executive's material breach of any of the agreements contained herein or
(vi) the Executive's death or resignation hereunder. A termination pursuant to
Section 6(a)(i), (ii), (iv) (other than as a result of a conviction of a crime
involving moral turpitude) or (v) shall take effect 30 days after the giving of
the notice contemplated hereby unless the Executive shall, during such 30-day
period, remedy to the reasonable satisfaction of the Board of Directors of the
Company the misconduct, disregard, abuse or breach specified in such notice;
provided, however, that such termination shall take effect immediately upon the
giving of such notice if the Board of Directors of the Company shall, in its
sole discretion, have reasonably determined that such misconduct, disregard,
abuse or breach is not remediable (which determination
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shall be stated in such notice). A termination pursuant to Section 6(a)(iii),
(iv) (as a result of a conviction of a crime involving moral turpitude) or (vi)
shall take effect immediately upon the giving of the notice contemplated hereby.
(b) The Company may terminate the employment of the Executive and all of
the Company's obligations under this Agreement (except as hereinafter provided)
at any time during the Employment Period without Cause by giving the Executive
written notice of such termination, to be effective 15 days following the giving
of such written notice. For convenience of reference, the date upon which any
termination of the employment of the Executive pursuant to Sections 5 or 6 shall
be effective shall be hereinafter referred to as the "Termination Date".
7. Effect of Termination of Employment.
(a) Upon the termination of the Executive's employment (i) for Cause or
(ii) a Disability, neither the Executive nor the Executive's beneficiaries or
estate shall have any further rights under this Agreement or any claims against
the Company arising out of this Agreement, except the right to receive (i) the
unpaid portion of the Base Salary provided for in Section 4.1, computed on a pro
rata basis to the Termination Date (the "Unpaid Salary Amount"), and (ii)
reimbursement for any expenses for which the Executive shall not have
theretofore been reimbursed, as provided in Section 4.6 (the "Expense
Reimbursement Amount").
(b) Upon the termination of the Executive's employment for other than Cause
or a Disability, neither the Executive nor
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the Executive's beneficiaries or estate shall have any further rights under this
Agreement or any claims against the Company arising out of this Agreement,
except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense
Reimbursement Amount, and (iii) severance compensation equal to the Base Salary
for the term of this Agreement (as if this Agreement was not terminated), 50% of
which is payable on the Termination Date and 50% of which is payable in equal
monthly installments during the period commencing on the first day of January
following the Termination Date and ending on the following December 1.
Section 8. Disclosure of Confidential Information.
Executive recognizes that he has had and will continue to have access to
secret and confidential information regarding the Company, including but not
limited to its customer list, products, know-how, and business plans. Executive
acknowledges that such information is of great value to the Company, is the sole
property of the Company, and has been and will be acquired by him in confidence.
In consideration of the obligations undertaken by the Company herein, Executive
will not, at any time, during or after his employment hereunder, reveal, divulge
or make known to any person, any information acquired by Executive during the
course of his employment, which is treated as confidential by the Company,
including but not limited to its customer list, not otherwise in the public
domain. The provisions of this Section 8 shall survive Executive's employment
hereunder.
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Section 9. Covenant Not To Compete.
(a) Executive recognizes that the services to be performed by him hereunder
are special, unique and extraordinary. The parties confirm that it is reasonably
necessary for the protection of Company that Executive agree, and accordingly,
Executive does hereby agree, that he shall not, directly or indirectly, at any
time during the term of the Agreement and the "Restricted Period" (as defined in
Section 9(e) below):
(i) except as provided in Subsection (c) below, be engaged in
sale, distribution or marketing of beverage products or
provide technical assistance, advice or counseling regarding
the beverage industry in the New York City boroughs of
Bronx, Brooklyn and Queens, either on his own behalf or as
an officer, director, stockholder, partner, consultant,
associate, employee, owner, agent, creditor, independent
contractor, or co-venturer of any third party; or
(ii) employ or engage, or cause or authorize, directly or
indirectly, to be employed or engaged, for or on behalf of
himself or any third party, any employee or agent of Company
or any affiliate thereof.
(b) Executive hereby agrees that he will not, directly or indirectly, for
or on behalf of himself or any third party, at any time during the term of the
Agreement and during the
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Restricted Period solicit any customers of the Company or any affiliate thereof.
(c) If any of the restrictions contained in this Section 9 shall be deemed
to be unenforceable by reason of the extent, duration or geographical scope
thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.
(d) This Section 9 shall not be construed to prevent Executive from owning,
directly or indirectly, in the aggregate, an amount not exceeding five percent
(5%) of the issued and outstanding voting securities of any class of any company
whose voting capital stock is traded on a national securities exchange or on the
over-the-counter market other than securities of the Company.
(e) The term "Restricted Period," as used in this Section 9, shall mean the
period of Executive's actual employment hereunder up to date of termination
plus: (i) in the event that the Executive is terminated for Cause, the twelve
(12) months after the Termination Date or (ii) in the event that the Executive
is terminated without Cause or for a Disability, the term of actual employment
through the Termination Date.
(f) The provisions of this Section 9 shall survive the end of the
Restricted Period as provided in Section 9(e) hereof.
Section 10. Miscellaneous.
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10.1 Injunctive Relief. Executive acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services. Accordingly, Executive agrees that any breach or threatened
breach by him of Sections 8 or 9 of this Agreement shall entitle Company, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to seek to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by Executive
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and that one or
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which Company
seeks enforcement thereof, such restriction shall be limited to the extent
permitted by law.
10.2 Assignments. Neither Executive nor the Company may assign or delegate
any of their rights or duties under this Agreement without the express written
consent of the other.
10.3 Entire Agreement. This Agreement constitutes and embodies the full and
complete understanding and agreement of the parties with respect to Executive's
employment by Company, supersedes all prior understandings and agreements,
whether oral
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or written, between Executive and Company, and shall not be amended, modified or
changed except by an instrument in writing executed by the party to be charged.
The invalidity or partial invalidity of one or more provisions of this Agreement
shall not invalidate any other provision of this Agreement. No waiver by either
party of any provision or condition to be performed shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
10.4 Binding Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted assigns.
10.5 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
10.6 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by registered or
certified mail, return receipt requested, postage prepaid, or by private
overnight mail service (e.g. Federal Express) to the party at the address set
forth above or to such other address as either party may hereafter give notice
of in accordance with the provisions hereof. Notices shall be deemed given on
the sooner of the date actually received or the third business day after
sending.
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10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to such
State's conflicts of laws provisions and each of the parties hereto irrevocably
consents to the jurisdiction and venue of the federal and state courts located
in the State of New York, County of New York.
10.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one of the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
MOOTCH & MUCK, INC.
By:________________________________
Name:
Title:
________________________________
Aaron Garman
With respect to Section 4.3 only:
BEV-TYME, INC.
By:______________________________
Name:
Title:
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STOCK OPTION AGREEMENT
THIS AGTREEMENT dated as of the 22nd day of April, 1996, (the "Grant Date")
is made and entered into by and between Bev-Tyme, Inc., a Delaware corporation
with its principal offices located at 134 Morgan Avenue, Brooklyn, New York (the
"Company"), and Aaron German (the "Optionee").
WITNESSETH:
WHEREAS, the Board of Directors of the Company has approved the granting to
the Optionee of the option to purchase certain shares of the Company's Series C
Convertible Preferred Stock, par value $.0001 per share ("Series C Preferred
Stock"); and
WHEREAS, the Optionee desires to accept the grant of such option, subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
Section 1. Grant of Option: Vesting. Subject to the provisions of this
Agreement, the Company hereby grants to the Optionee an option (the "Option") to
purchase from the Company a total of One Hundred Thousand (100,000) shares of
the Company's Series C Preferred Stock (the "Option Shares") at an exercise
price of $1.50 per share (the "Exercise Price"). During the eighteen (18) month
period commencing on July 1, 1996, one sixth of the Initial Option Shares (or
16,666 shares) shall vest in the optionee on the first day of each calendar
quarter, the final vesting date to be October 1, 1997. Optionee agrees to use
its best efforts to sell the Option Shares in a timely manner at the best price
and on the best terms available to Optionee. The Company agrees to use its best
efforts to register for sale to the public the Option Shares with the
<PAGE>
Securities and Exchange Commission.
Section 2. Termination of Options. To the extent not exercised, the Option
shall terminate on July 1, 2000 (the "Termination Date").
Section 3. Corporate Events. In the event of a proposed liquidation of the
Company, a proposed sale of all or substantially all of its assets or its Common
Stock, a proposed merger or consolidation, or a proposed separation or
reorganization, the Board of Directors may declare that the Option shall
terminate as of a date to be fixed by the Board of Directors; provided however,
that not less than thirty (30) days preceding the date of such termination, the
Optionee may exercise the Option in whole or in part and the Company represents
that such options shall be exercisable. However, nothing set forth herein shall
(i) extend the term set for purchasing the Option Shares or (ii) give the
Optionee any rights or privileges as a stockholder of the Company prior to
Optionee's exercise of any of the Option Shares.
Section 4. Exercise of Option. The Option may be exercised in whole or in
part in accordance with the provisions of this Agreement by the Optionee's
tendering the Exercise Price (or a proportionate part thereof if the Option is
partially exercised) in immediately available funds or other consideration
reasonably acceptable to the Board of Directors of the Company. The Company
shall cooperate to the extent reasonably possible with the Optionee in an
exercise pursuant to which all or part of the Optionee Shares will be sold
simultaneously with the exercise of this Option with the broker-dealer
participating in such sale being irrevocably instructed to remit the proceeds
from the exercise of the Option to the Company upon settlement of the sale of
the underlying Option Shares.
The Optionee may exercise part or all of the Option by tender to the
Company of a written notice of exercise together with advice of the delivery of
an order to a broker to sell part
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or all of the Option Shares, subject to such exercise notice and an irrevocable
order to such broker to deliver to the Company (or its transfer agent)
sufficient proceeds from the sale of such Option Shares to pay the exercise
price and any withholding taxes. All documentation and procedures to be followed
in connection with such a "cashless exercise" shall be approved in advance by
the Company, which shall be expeditiously provided and not unreasonably withheld
or delayed.
Section 5. Shares Certificates. Upon receipt of payment in full of the
Exercise Price, and after taking such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government, the
Company will cause one or more stock certificates evidencing the Optionee's
ownership of the Option Shares so purchased by the Optionee to be issued to the
Optionee.
Section 6. Restrictions. The Option and the Option Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"). Optionee
understands that, unless registered with the Securities and Exchange Commission
for sale to the public, all Option Shares acquired upon the exercise of the
Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the Option Shares shall
bear an appropriate legend restricting their transfer. Such Option Shares cannot
be sold, transferred, assigned or otherwise hypothecated without registration
under the Act or unless a valid exemption from registration is then available
under applicable federal and state securities laws and the Optionee has
furnished the Company with an opinion of counsel satisfactory in form and
substance to the Company's counsel that such registration is not required.
Section 7. Default of Optionee. Should the Optionee at any time fail to pay
the Exercise Price in accordance with the terms of this Agreement, the Option
granted hereunder
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shall be null and void. The provision shall be in addition and not in lieu of
any other remedies which the Company may have at law and/or in equity.
Section 8. Share Adjustments. If there is any change in the number of
shares of Common Stock on account of the declaration of stock dividends,
recapitalization resulting in stock splits, or combinations or exchanges of
shares of Common Stock, or otherwise, the number of Option Shares available for
purchase by the exercise of the Option, and the Exercise Price, shall be
proportionately adjusted by the Company.
Section 9. Miscellaneous Provisions.
(a) Notices. Unless otherwise specifically provided herein, all notices to
be given hereunder shall be in writing and sent to the parties by certified
mail, return receipt requested, which shall be addressed to each party's
respective address, as set forth in the first paragraph of this Agreement, or to
such other address as such party shall give to the other party hereto by a
notice given in accordance with this Section and, except as otherwise provided
in this Agreement, shall be effective when deposited in the United States mail
properly addressed and postage prepaid. If such notice is sent other than by the
United States mail, such notice shall be effective when actually received by the
party being noticed.
(b) Assignment. This Agreement and the rights granted hereunder may not be
assigned in whole or in part by Optionee except by will or the laws of descent
and distribution, and the Option is exercisable during Optionee's lifetime only
by the Optionee. This Agreement may be assigned by the Company without the
consent of the Optionee.
(c) Further Assurances. Both parties hereto shall execute and deliver such
other instruments and do such other acts as may be necessary to carry out the
intent and purposes of this Agreement.
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(d) Gender. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular form of nouns and pronouns shall include the plural and vice versa.
(e) Captions. The captions contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, extend or prescribe the
scope of this Agreement or the intent of any of the provisions hereof.
(f) Completeness and Modification. This Agreement constitutes the entire
understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the grant of stock options to the Optionee. This Agreement shall not terminated,
except in accordance with its terms, or amended in writing executed by all of
the parties hereto.
(g) Waiver. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
(h) Severability. The invalidity or enforceability, in whole or in part, of
any covenant, promise or undertaking, or any section, subsection, paragraph,
sentence, clause phrase or word or of any provision of this Agreement shall not
affect the validity or enforceability of the remaining portions thereof.
(i) Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(j) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors, estate and personal representatives of the
Optionee and upon the successors and assigns of the Company.
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<PAGE>
(k) Litigation-Attorney' Fees. In connection with any litigation arising
out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, at the trial and all appellate levels form the other party
hereto, who was an adverse party to such litigation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth in the first paragraph of this Agreement above.
BEV-TYME, INC.
BY:
----------------------------------
Robert Sipper
President
----------------------------------
Aaron German
<PAGE>
EXHIBIT
23.1
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Bev-Tyme, Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our report dated March 21, 1996 [except
for Note 17C as to which the date is April 11, 1996], relating to the
consolidated financial statements of Bev-Tyme, Inc. which is contained in the
Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
July 22, 1996
