<PAGE>
As filed with the Securities and Exchange Commission on November 6, 1996
Registration No.333-9007
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
______________
AMENDMENT NO. 2
TO
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:
[ X ]
The Registrant hereby amends this Registration Statement on such date or
dates as
<PAGE>
may be necessary to delay its effective date until the Registrant shall file a
further Amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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
- -----------------------------------------------------------------------------------------------------------------------------
Amount Previously Paid $724.08
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT DUE $ 0.00
- -----------------------------------------------------------------------------------------------------------------------------
</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........................... Omitted because item is not
applicable.
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
i
<PAGE>
10. Directors, Executive Officers,
Promoters and Control Persons...... Management
11. Security Ownership of Certain
Beneficial Owners and Management... Principal Stockholders
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
ii
<PAGE>
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.
iii
<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
September 12, 1996 the last reported bid and ask prices of the Company's Series
C Preferred Shares, Series C
<PAGE>
Preferred Warrants, and Common Stock as reported by NASDAQ on such date
were $2.25 and $2.50 respectively, for Series C Preferred Shares, $.50, $.875,
respectively, for Series C Preferred Warrants, and $1 and $1.125 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 November 6, 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.
The Commission maintains a Web site on the Internet (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission through the
Electronic Data Gathering, Analysis, and Retrieval System (EDGAR).
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,
20,000 shares of Common Stock and issued options to purchase 7,500 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 1.8 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
4
<PAGE>
secondary public offering to expand the current business of M&M into the beer
and malt beverage 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".
On July 22, 1996, Perry's Majestic Beer, a subsidiary of the Company,
acquired the Riverosa Company, Inc. for an aggregate purchase price of $250,000.
Following the acquisition, Perry's Majestic completed an initial public offering
of 670,835 shares of its Common Stock for an aggregate offering amount of
$4,025,011. Perry's Majestic is engaged in the marketing and sale of microbrewed
beers and ales. See "Business - Perry's Majestic."
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........ 2,202,225 shares of Series C Preferred Stock
924,174 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 $20.00 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 1.8 shares of Common Stock.
Dividends on the Series C Preferred Stock
will be $.50 per share (the "Dividend
Amount") paid on each January 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 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
6
<PAGE>
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; 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 Securityholder; Anti-Takeover Provision;
Dividends; 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 "Risk Factors."
7
<PAGE>
CAPITALIZATION
The Company is authorized to issue 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 June
30, 1996.
June 30, 1996
-------------
Long term debt obligations, less current $ 389,552
maturities:
Stockholder's equity:
Preferred Stock $ 225
Common Stock $ 92
Additional paid-in capital $ 18,183,871
Accumulated deficit $ (10,411,308)
-------------
Total $ 7,772,880
Less: Treasury Stock 2,000,000
Deferred Compensation 1,990,813
-------------
TOTAL STOCKHOLDERS EQUITY $ 3,782,067
TOTAL CAPITALIZATION $ 4,171,619
=============
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
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
=====================================================================================================================
<S> <C> <C>
WORKING CAPITAL (DEFICIENCY) $ 76,417 $ (257,866)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 6,348,394 $ 7,848,012
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 2,566,327 $ 3,424,295
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT $ 389,552 $ 322,952
- ---------------------------------------------------------------------------------------------------------------------
ACCUMULATED (DEFICIT) $ (10,411,308) $ (8,938,721)
- ---------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY $ 3,782,067 $ 4,423,717
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY INCOME STATEMENT DATA
SIX MONTHS YEAR ENDED
---------- -----------------------------------------------
ENDED
-----
December 31, December 31,
June 30, 1996 June 30, 1995 1995 1994
=====================================================================================================================
<S> <C> <C> <C> <C>
SALES-NET 7,421,705 5,598,323 $ 12,730,722 $ 9,773,013
- ---------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,556,659 1,072,477 $ 1,756,430 $ 2,043,291
(LOSS)
- ---------------------------------------------------------------------------------------------------------------------
OPERATING LOSS (1,174,154) (1,138,285) ($3,775,882) ($1,157,297)
- ---------------------------------------------------------------------------------------------------------------------
NET LOSS (1,202,137) (1,160,582) ($3,826,230) ($1,192,542)
- ---------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE (3) ($1.48) ($2.85) ($8.04) ($3.38)
- ---------------------------------------------------------------------------------------------------------------------
WEIGHTED 810,979 407,837 475,933 352,368
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
working capital deficit at December 31, 1995 was $257,866. 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. 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
10
<PAGE>
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.
4. 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.
5. 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.
6. 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.,
11
<PAGE>
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.
7. 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.
8. 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."
9. 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. 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."
10. 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
12
<PAGE>
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."
11. Potential Adverse Effect of Sales by Selling Securityholder. At such
times as the Selling Securityholder effect sales of the securities held thereby
such sales may have an adverse effect on the market price of the Company's
Series C Preferred Stock, Common Stock and Series C Warrants. The sales of the
shares 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, 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 Securityholder in connection with
sales of such securities. Such sales may have an adverse effect on the market
price of the Company's securities. See "Selling Securityholders."
12. 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.
13. Dividends. The holders of the Series C Preferred stock are entitled to
a 10% annual cumulative dividend which is 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. The Company may pay such dividend in cash or in shares
of Common Stock having a Fair Market Value equal to the dividend amount. The
Company has paid such dividends, when they became due, in shares of its Common
Stock. 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"
13
<PAGE>
and "Market for the Company' Securities."
14. 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. 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 Preferred Stock 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, in connection with the Company's offering of Preferred
Stock Units (the "Preferred Stock Units"), the Company sold to I.A. Rabinowitz &
Co. and VTR Capital, Inc. (collectively the "Underwriters"), for an aggregate
purchase price of $40 an option (the "Unit Purchase Option") to purchase up to
an aggregate of 40,000 Preferred Stock Units. Each Unit consists of one share of
Series C Convertible Preferred Stock and two Series C Redeemable Preferred Stock
Purchase Warrants. The Unit Purchase Option is exercisable for a four-year
period commencing on May 15, 1996 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.
15. Rule 144 Sales; Future Sales of Common Stock. The Company's
outstanding 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.
14
<PAGE>
16. 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.
17. "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 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.
15
<PAGE>
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.
16
<PAGE>
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. The Company has paid such
dividends, when they became due, in shares of its Common Stock. 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."
17
<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"].
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.
Six months ended June 30, 1996 compared with the six months ended June 30, 1995
Results of Operations
For the six months ended June 30, 1996, the Company had a loss from operations
of $1,174,154 and a net loss of $1,202,137 as compared to a loss from operations
of $1,138,285 and a net loss of approximately $1,160,582 for the six months
ended June 30, 1995. The primary reason for the increase of approximately
$41,555 in net loss is the increase in expenses over the period.
For the six months ended June 30, 1996 and 1995, the Company's net sales were
$7,421,705 and $5,598,323, respectively. This represents an improvement of
approximately $1,800,000 or 32%. This improvement is primarily the result of
increased volume resulting from an increase in the Company's customer base and
to a smaller degree new products available for sale.
For the six months ended June 30, 1996, the Company's gross profit was
$1,556,659 or 21% as compared to $1,072,477 or 19% 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 six months ended June 30,
1996 and 1995 amounted to $568,302 and $534,025, respectively, and primarily
consisted of salesmen's salaries, commissions and related expenses of the
companies' distribution sales force.
18
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Six months ended June 30, 1996 compared with the six months ended June 30, 1995
Results of Operations [Continued]
General and administrative expenses for the six months ended June 30, 1996 were
$1,256,406 or 17% of net sales as compared to $1,118,487 or 20% of net sales in
1995. The Company incurred amortization of consulting costs for the six months
ended June 30,1996 of approximately $700,000. This is the result of the Company
compensating consultants with stock and options instead of cash payments. As of
June 30, 1996, the unamortized balance resulting from all options and shares
granted for services is approximately $2,000,000. This will be amortized in
future periods and will reduce the net income of the Company.
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. Subsequent to June
30, 1996, the Company commenced a drastic cutback program of operating expenses
that should improve the results of operations in future periods.
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 six months ended June 30, 1996, the Company utilized approximately
$1,860,000 in operating activities. This utilization was primarily attributable
to the net loss of approximately $1,200,000 and the decrease in liabilities of
approximately $1,000,000.
The Company utilized approximately $292,000 from net investing activities for
the six months ended June 30, 1996. This was primarily attributable to the
acquisition of the net assets of Riverosa for approximately $150,000, as well as
the purchase of capital equipment of approximately $167,000.
The Company generated approximately $2,147,000 from net financing activities for
the six months ended June 30, 1996. This was primarily attributable to the sale
of common stock for $45,200 and the exercise of Series C Preferred Stock Options
for $1,300,000 and the collection of the stock subscription for $1,050,000 on
the Series C Preferred Stock Options exercised in 1995.
At June 30, 1996, the Company had a working capital surplus of approximately
$76,416 reflecting primarily the excess cash, accounts receivable and inventory
over accounts payable and accrued expenses. The Company's cash balance at June
30, 1996 was $149,224.
For the six months ended June 30, 1995, the Company utilized approximately
$(351,000) in operating activities, utilized approximately $(688,000) in
investing activities and generated approximately $1,403,000 in net financing
activities.
19
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Six months ended June 30, 1996 compared with the six months ended June 30, 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 if the proposed public
offering is unsuccessful, there is the risk for the Bridge Lenders of the
Company's ability of 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 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. 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.
20
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Six months ended June 30, 1996 compared with the six months ended June 30, 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. ["Perry's"] [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. 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. The purpose of this investment was to acquire a controlling interest in
a micro brewery which would allow the Company to produce and distribute a beer
product. Management believes that the increased revenues from this brewery,
along with an anticipated 30% gross profit on the beer sales will reduce the
Company's operating loses and cash flows. In August of 1996, Perry's filed a
registration statement for 583,335 shares of common stock and in August of 1996
Perry's realized net proceeds of approximately $2,548,009.
Also on March 29, 1996, Perry's 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 was payable with interest of 8% and was paid at the closing of Perry's
initial public offering.
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.
In August 1996, the Company issued to certain officers, directors and employees
options to purchase an aggregate of 630,000 shares of Series C Preferred Stock
at an exercise price of $1.00 per share and 700,000 shares of common stock at an
exercise price of $.25 per share for services to be rendered in 1997. None of
such options have been exercised. A deferred compensation cost for the excess of
the fair value of the shares over the exercise price will be recorded in the
period ended September 30, 1996. This could have a significant negative impact
on the net income of the Company.
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 financing 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.
21
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Six months ended June 30, 1996 compared with the six months ended June 30, 1995
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. The Company adopted SFAS No. 121 on January 1,
1996. Adoption of SFAS No. 121 did not have a material impact on the Company's
financial statements. In the future, if the sum of the expected undiscounted
cash flows is less than the carrying amount of the asset, an impairment loss
would be recognized.
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.
22
<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.
23
<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 if the proposed public
offering is unsuccessful, there is the risk for the Bridge Lenders of the
Company's ability of 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.
24
<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 C 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 financing 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.
25
<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 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.
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.
26
<PAGE>
BUSINESS
General
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 distribution business.
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
27
<PAGE>
December 31.
Recent Developments
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 paid
the sum of $250,000 to acquire Riverosa. Mark Butler, one of the principal
shareholders of Riverosa was appointed to the board of directors of Perry's
Majestic on April 1, 1996.
In March 1996, Perry's Majestic issued to the Company 500,000 shares of
its convertible Series A Preferred Stock and 7,000,000 shares of its 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.
On July 30, 1996, Perry's Majestic completed a public offering of 345,000
Units, each unit consisting of two (2) shares of Common Stock and one Class A
Warrant, and the concurrent offering of securities by certain selling
securityholders.
The Beverage Distribution Business
Since 1977, M&M has been engaged in the business of distributing
non-alcoholic beverages items to retail accounts in New York City, primarily in
Manhattan. Of the approximately 25 different brands sold by M&M to a variety of
retail and wholesale establishments, sparkling and spring water currently
account for approximately 60% of sales. M&M has approximately 81 full time
employees 26 of which are engaged in sales. See "Management's Discussion and
Analysis". M&M distributes a number of products, including the sparkling and
spring waters of Poland Spring and Spa Spring. Sales of waters accounted for
approximately 60% of M&M's sales. M&M also distributes Cloister Spring Water,
Glacier Ridge, Appollinaris Mineral Waster, Boruassa Glacial Water, Cinciano
Mineral Water, Glaceau, Loka Mineral Water, Mountain Valley Spring Water,
Everfresh Clearfruit and juices, SunSprings Sparkling Water w/Natural Flavor,
After The Fall Fruit Juices and Spritzers, Everfresh Fruit Juices and Drinks,
Martinelli Apple Juice & Ciders, Jamaican Gold Iced Coffee, Sioux City Iced Tea,
Punch & Lemonade, Sioux City Soda, White Rock Seltzer and Soda, Clearly
Canadian, Artisian Water,
28
<PAGE>
San Pellegrino, Vittel Spring Water, Clearly Canadian Beverages, China Tea, PEK,
Old Tyme Soda and Taste of Jamaica. In addition, M&M distributes some snack
products, including Dirty Potato Chips and Roberts American Gourmet Snacks. In
June 1995, M&M commenced distributing a number of beers and malt beverage
products.
M & M distributes products in Manhattan, Brooklyn and Queens through a
resale sales force consisting of 26 salespeople, including a sales manager and
four supervisors. Each salesperson visits his/her accounts once per week.
Additionally, M & M sells products in Manhattan, Brooklyn and Queens to other
beverage distributors and beer and soda stores. Sales are primarily divided into
four divisions: retail, chain stores, food service and distributor sales.
Retail sales consist of sales to deli's, bodega's, mom & pop retail
stores, gourmet stores, tobacco shops, health food stores, and convenience
stores. Most beverages that are sold in these stores are kept in refrigerators
for sale to retail customers. Approximately 55% of M&M's annual sales are sold
to retail sales accounts. Chain store sales consist of sales to food
supermarkets, drug store chains and department stores. Approximately 7% of M&M's
annual sales are sold to chain store accounts. Food service sales consist of
sales to corporate catering, corporate cafeterias, hotels, restaurants, gyms,
health clubs and dance studios. Approximately 16% of M&M's annual sales are sold
to food service accounts. Distributor sales consist of sales to other
distributors. Approximately 19% of M&M's annual sales are sold to other
distributors.
A sales manager oversees all three divisions which are managed by a
divisional supervisor. The sales manager and four sales supervisors meet every
morning with the sales force and check to ensure they are prepared to properly
service M&M customers.
Orders are taken by the salespeople on a daily basis. Upon receiving the
order it is input into a hand held computer. The orders are transmitted
telephonically twice a day, directly into a computer at the M & M office, where
the invoice is printed. The printed invoices are then sent to the routing
department where they are routed for shipping. Each salesperson makes
approximately 40 sales calls per day.
After the orders are routed and manifested for the warehouse, the
warehouse manager assigns warehouse employees to pull the products as set forth
on the manifests. After the products are pulled it is loaded onto the trucks.
All truck drivers are assigned a minimum of one helper on a daily basis.
The Beer Distribution Business
As a result of the acquisition of substantially all of the assets of SB&S,
M&M is currently the exclusive distributor in New York City of a number of beers
including Holsten, Perry's Majestic, Wild Goose, La Brasserie Binchoise, La
Brasserie Jeanne D'Arc, Brasal Bier, Maccabee and Zambezi. M&M also distributes
Budweiser, Coors, Miller High Life and other popular brands. M&M buys the
popular brands such as Budweiser, Coors and Miller High Life
29
<PAGE>
from authorized distributors and redistributes the product to its retail
customers. M&M is not an exclusive distributor of any of such popular brands.
M&M competes in the beer distributionbusiness with such distributors as Phoenix
Beverages, Budweiser, Coors of New York, Manhattan Beer and Prospect Beer. M&M
is a niche brand distributor which also distributes microbrewed beers which is
the fastest growing category in the beer industry.
Products
The Company has developed two distinct product lines, one under its
SunSprings(TM) trademark and one under its Taste of Jamaica(R) trademark. The
Company has ceased developing and marketing the SunSprings(TM) line of beverages
which was a sparkling water beverage with natural fruit and juice flavors.
In order to expand its product line and respond to consumer preferences,
the Company acquired, as of April 1, 1994, the Taste of Jamaica name and product
concept from A. Alexander Watson. No other assets or liabilities were acquired
from Mr. Watson. As consideration for these assets purchased from Mr. Watson,
the Company hired Mr. Watson as its Manager of Marketing and Product Development
and entered into a five year employment agreement with him. Under the terms of
the Employment Agreement, Mr. Watson is entitled to an annual salary of $20,800
and a commission based upon all sales of Taste of Jamaica(R) products.
Packaging
Previously, bottles were purchased from major glass manufacturers.
However, the Company believes that by switching its products to 20 ounce plastic
bottles, it can significantly reduce its bottling cost, while providing its
customers with a larger beverage.
The Company develops and markets products under the Taste of Jamaica(R)
label. Taste of Jamaica is a Jamaican style soda produced in six island flavors:
Ginger Beer, Kola Champagne, Pineapple, Cream, Grapefruit and Fruit Punch. The
Company's products are distinctively packaged to attract consumer interest and
establish a strong identity. The Taste of Jamaica(R) is produced in 20 oz.
plastic bottles and has an "island" looking label giving it a friendly, relaxed
look.
Production
The Company owns the rights to all formulas utilized for its Taste of
Jamaica products. Consequently, the Company may in the future choose to
manufacture its products at different or additional production facilities.
Production will be accomplished on a contractual basis utilizing independent
bottlers ("packers") including those already providing such services to the
Company. The role of bottlers is critical to production of the Company's
beverages. The product is produced and bottled, packed in cases, and shipped to
distributors by the bottlers. The Company also purchases the various flavors for
its products from a third party.
30
<PAGE>
The Taste of Jamaica products are produced and bottled by Paul's
Beverages. Under the agreement with Paul's, the Company pays a flat per case fee
and Paul's provides the bottles, closures and labels and bottles the Company's
beverages as well. The Company may develop relationships with other bottlers
with such other facilities as it may find necessary in the future to produce its
products.
Competition
The Company faces significant competition in the marketing and sale of its
Taste of Jamaica products from D & G soda, Old Tyme Soda and Goodo Soda. The
Company's beverages compete with other beverages which have achieved significant
national, regional and local brand name recognition and consumer loyalty. These
products are marketed by companies with significantly greater financial,
marketing, distribution, personnel and other resources than the Company, thereby
permitting such companies to implement extensive advertising and promotional
programs, both generally and in response to efforts by new competitors or
products. Further, the beverage industry is also characterized by the frequent
introduction of new products, accompanied by substantial promotional campaigns.
M&M faces significant competition from other distributors such as Coca
Cola of New York, Pepsi Cola Bottling of New York, Canada Dry Bottling Company
of New York, 7 UP and Snapple Beverages, Inc. M&M depends upon its distribution
techniques and extensive product line to compete against other distributors. M&M
has the ability to provide most types of nonalcoholic and snack products to
retail establishments. M&M competes in the beer distribution business with such
distributors as Phoenix Beverages, Budweiser, Coors of New York, Manhattan Beer
and Prospect Beer. M&M is a niche brand distributor which also distributes
microbrewed beers which is the fastest growing category in the beer industry.
Marketing
The Company is currently focusing its consumer marketing efforts on the
single serve cold bottle market. Since specialty food/beverage outlets account
for a significant portion of beverage sales, the Company distributes its
products through M&M to that category of outlets in New York City, including
delicatessens, gourmet shops, grocery stores, discount clubs, vegetable markets,
restaurants, convenience outlets, corporate and institutional feeders and "mom
and pop" stores.
As a multibrand distributor, M&M depends upon beverage manufacturers to
market their beverages. When possible, M&M participates in promotional programs
initiated by beverage producers.
Government Regulation
The distribution and sale of the Company's products are subject to the
U.S. Food, Drug
31
<PAGE>
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.
Product Liability Insurance
The Company has purchased product liability insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate. 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.
Trademark
The trademark SunSprings(TM) is the property of the Company. Although such
trademark is not registered with the United States Patent and Trademark Office,
the Company has the common law right to the use of such trademark on its labels
and in the marketing of its products and the Company believes that such
trademark does not infringe upon existing trademarks in the United States. On
February 8, 1994, The Taste of Jamaica(R) trademark was registered with the
United States Patent and Trademark office.
Seasonality
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 for the Company to meet its fixed expenses in a timely manner. The
inability to pay such expenses or a delay in paying such expenses could have a
material adverse effect on the Company and its relationships with its suppliers.
Employees
32
<PAGE>
As of September, 1996, the Company employs 81 employees, 2 of whom are
executive officers and are also officers of M&M. One of the executive officers
is engaged in marketing, sales and operations and the other is the chief
financial officer of the Company. As of January 15, 1996, M&M and the
Subsidiaries employed 81 full time employees. None of the Company's employees
are represented by a labor organization. The Company believes its relations with
its employees are excellent.
Properties
The Company leases its executive offices and warehouse space from an
unaffiliated third party at 134 Morgan Avenue, Brooklyn, New York at an annual
base rent of $258,600 per year. The term of such lease expired in February,
1996. The Company is currently leasing the space on a month to month basis with
monthly rent of $20,500. The Company also leases on a month to month basis
office space at 141 West 41st Street in Manhattan for a monthly rent of $600.
Legal Proceedings
The Company is not presently a party to any material litigation nor are
any such proceedings pending or threatened.
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DIRECTORS AND EXECUTIVE OFFICERS
As of the date of this Prospectus, 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
Robert Forst.................... 46 Chief Financial Officer
______________
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 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
34
<PAGE>
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.
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. 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
35
<PAGE>
exercise price of $2.00 per share for services to be rendered in 1996. 150,000
of such options have been exercised by Alfred Sipper and Robert Sipper.
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.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
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 -- -- 6,726
Officer(1) 1991 -- $41,052 $42,000 --
Alfred Sipper 1995 155,235 15,000
President and Chief 1994 $142,024 -- -- 7,500
Executive Officer of 1993 $124,685 -- -- --
Mootch & Muck, Inc. (2)
</TABLE>
(1) Resigned as Chairman of the Board and Chief Executive Officer on January
7, 1994. Of the 6,726 stock options granted 4,299 options did not vest as
of the date of Mr. Becker's resignation. Mr. Becker has waived all rights
to the remaining stock options. In April 1991, Mr. Becker received 8,499
shares of restricted stock in exchange for services rendered.
(2) Mootch & Muck, Inc. became a subsidiary when the Company acquired a 51%
interest in May 1993. Prior to that Mootch & Muck, Inc. was an
unaffiliated company.
The following table sets forth certain information with respect to options
granted during the last fiscal year to the Company's Chief Executive Officer and
the other executive officers named in the above Summary Compensation Table.
Option/SAR Grants In Last Fiscal Year
-------------------------------------
36
<PAGE>
<TABLE>
<CAPTION>
Number of Securities
Underlying Percent of Total Exercise or
Options/SARS Options/SARS Granted to Base Price
Name Granted (#)(1) Employees in Fiscal Year ($/Sh) Expiration Date
- ---- -------------- ------------------------ ------ ---------------
<S> <C> <C> <C> <C> <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. The board reassumed the payment of
director's fees in August of 1996. 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.
37
<PAGE>
On August 5, 1994, the Company issued options to purchase 75,000 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 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. 150,000 of such options have been exercised by Alfred Sipper
and Robert Sipper.
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) 150,000 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.
38
<PAGE>
As of May 12, 1995, Robert 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 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) 150,000
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) 150,000 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 250,000 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 250,000 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 250,000 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
39
<PAGE>
term of three years. Mr. Feldman is receiving a base salary of eighty thousand
dollars ($80,000) and the 250,000 shares of Common Stock of the Company.
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 75,000. 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
40
<PAGE>
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.
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 125,000.
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.
41
<PAGE>
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. 150,000 of such options have been
exercised by Alfred Sipper and Robert Sipper.
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.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of November 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
---------------------- -------------------------
Name and Address Amount Approximate Amount Approximate
% Beneficially Percentage (%) Beneficially Percentage
of Beneficial Owner Owned of Class Owned of Class
- ------------------- ----------- ------------------ ----- --------
<S> <C> <C> <C> <C>
Robert Sipper............... 15,000(1)(2) 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......... 15,000(1)(2) 1.0 75,000(2) 4.8
Director
c/o Bernstein & Wasserman
950 Third Avenue
New York, NY 10022
Alfred Sipper................ 30,136(1)(2) 2.0 75,000(2) 4.8
Director
c/o Mootch & Muck, Inc.
134 Morgan Avenue
Brooklyn, NY 11237
Bruce Logan.................. 15,000(1)(2) 1.0 75,000(2) 4.8
Director
25 Central Park West
New York, NY 10023
Michael Lulkin 40,000 5.3
750 Lexington Avenue
27th Floor
New York, NY 10022
Premium Beverage Packers Co. 30,000 4.0
1090 Spring Street
Reading, PA 19610
All Officers & Directors 7,514 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 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. Each share of Series C Preferred Stock is
43
<PAGE>
convertible into 1.8 shares of Common Stock.
44
<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
45
<PAGE>
is paid in full (the "Second Note"). The Second Note was guaranteed jointly and
severally by Marshall E. Becker and 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
46
<PAGE>
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
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 600,000 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 200,000 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 200,000 shares of
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<PAGE>
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 50,676 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 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, 75,000 shares of Common Stock to the
law firm of Bernstein & Wasserman in consideration for legal services rendered.
Hartley T. Bernstein, a
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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 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 1,000,000 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 250,000 Bridge Units. The
registration statement filed in connection with the Company's secondary offering
also related to the 250,000 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
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<PAGE>
("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 theholder, 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.
In May, 1995, the Company issued to 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 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 300,000
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 Perry's majestic
paid the sum of $250,000 to acquire Riverosa.
In January 1996, the Perry's Majestic issued an aggregate of 2,500,000
shares of its
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<PAGE>
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.
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 100,000 shares of the Company's Common Stock at an
exercise price of $1.50 per share.
On April 11, 1996, Perry's Majestic completed a public offering of 345,000
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.
On April 5, 1996, the Company entered into a Consulting Agreement with
Matthew L. Harriton, pursuant to which the Company issued to Mr. Harriton
400,000 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 350,000 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 250,000 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 250,000 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 250,000 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 250,000
shares of Common Stock of the Company.
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<PAGE>
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 (300,000)
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 400,000 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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<PAGE>
DESCRIPTION OF SECURITIES
The Selling Securityholder is 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 350,676 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.
Series C Preferred Stock
Designation and Amount; Par Value. The shares of such series are
designated as Series C
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<PAGE>
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 into 1.8 shares of Common Stock, rounded up 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 two (2) votes per share and, after the Effective Date, will have the voting
power of a number of shares of Common Stock equal to Offering Price divided by
the Fair Market Value of the share of Common Stock as of the Effective Date.
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
$20.00 per share for twenty (20) consecutive days. To date, the closing bid
price for the Common Stock has never equaled or exceeded $20.00 per share.
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 924,174 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 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
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<PAGE>
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 $20.00 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. To
date, the closing bid price for the Common Stock has never equaled or exceeded
$20.00 per share.
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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<PAGE>
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
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<PAGE>
The Underwriter has certain registration rights with respect to the
securities underlying the Unit Purchase Option for a period of four years
commencing one (1) year from the effective date of the Company's Initial Public
Offering. The Bridge Lenders have the right to have 250,000 Units registered by
the Company. 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.
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.
57
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Common Stock Common Stock Purchase Common Stock Units
Warrants
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1994 High Low High Low High Low
- -----------------------------------------------------------------------------------------------------------------
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>
<TABLE>
<CAPTION>
=================================================================================================================
Common Stock Common Stock Series C Series C Preferred
Purchase Preferred Stock Purchase
Warrants(1) Stock(2) Warrants(2)
- -----------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 1995 High Low High Low High Low High Low
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $0.3125 $0.25 $0.0938 $0.0625
- -----------------------------------------------------------------------------------------------------------------
Second Quarter $0.3438 $0.125 $0.0938 $0.0625 $7.8125 $5.00 $2.50 $1.375
- -----------------------------------------------------------------------------------------------------------------
Third Quarter $0.3125 $0.0938 $0.0625 $0.0625 $8.125 $5.75 $2.375 $1.875
- -----------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------
Third Quarter, 1996 $1.125 $1.000 $4.00 $1.875 $1.5000 $0.50
=================================================================================================================
</TABLE>
================================================================
Common Stock Preferred Stock
Units(3) Units(2)
- ----------------------------------------------------------------
Year Ended
December 31, 1995 High Low High Low
- ----------------------------------------------------------------
First Quarter $0.875 $0.50
- ----------------------------------------------------------------
Second Quarter $0.75 $0.625 $11.50 $5.50
- ----------------------------------------------------------------
Third Quarter $10.375 $9.625
- ----------------------------------------------------------------
Fourth Quarter
- ----------------------------------------------------------------
First Quarter, 1996
- ----------------------------------------------------------------
Second Quarter, 1996 $10.375 $8.50
- ----------------------------------------------------------------
Third Quarter, 1996
================================================================
- --------------
(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.
58
<PAGE>
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
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.
59
<PAGE>
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.
SELLING SECURITYHOLDER
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
Securityholder 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.
The securities offered hereby may be sold from time to time directly by
the Selling Securityholder. Alternatively, the Selling Securityholder may from
time to time offer such securities through underwriters, dealers or agents. The
distribution of 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 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
Securityholder in connection with such sales of securities. The securities
offered by the Selling Securityholder 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 Securityholder may
arrange for other brokers or dealers to participate. The Selling Securityholder
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 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
60
<PAGE>
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.
PLAN OF DISTRIBUTION
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. The Company reasonably expects that the Securities being
registered hereunder, will be offered and sold within two (2) years of the
effective date of this Registration Statement.
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. Hartley T. Bernstein, a partner at Bernstein & Wasserman, LLP, is one of
the Directors of the Company. See "Management" and "Principal Stockholders."
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 Moore Stephens,
P.C. 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.
61
<PAGE>
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.
62
<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......... 3
Prospectus Summary.......... 4
The Company................... 4
The Offering.................... 6
Summary Financial
Information.................... 9
Risk Factors..................... 10
Use of Proceeds................. ----
Dilution............... ----
Capitalization...................... 8
Dividend Policy............... 16
Selected Financial Data....... ----
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations................... 17
Business...................... 25
Management.................... 32
Principal Stockholders........ 41
Certain Transactions.......... 43
Description of
Securities................... 51
Selling Securityholder....... 60
Underwriting.................. ----
Legal Matters................. 61
Experts....................... 61
Additional Information........ 61
Financial Statements.......... A-1
Until _______, 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
--------------
November 6, 1996
--------------
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Page to Page
------------
Bev-Tyme, Inc. - Historicals
Independent Auditor's Report...................... A-1........
Consolidated Balance Sheets - June 30,
1996 and December 31, 1995........................ A-2........ A-3
Consolidated Statements of Operations for
the six months ended June 30, 1996 and
1995 and the years ended December 31, 1995
and 1994.......................................... A-4........
Consolidated Statements of Stockholders'
Equity for the six months ended June
30, 1996 and 1995 and the years ended
December 31, 1995
and 1994.......................................... A-5........ A-7
Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and
1995 and the for the years ended December 31,
1995 and 1994 .................................... A-8........ A-10
Notes to Consolidated Financial Statements........ A-11....... A-22
Pro Formas
Pro Forma Combined Financial Statements........... B-1........
Pro Forma Combined Statement of Operations
for the year ended
December 31, 1995................................. B-2........
Pro Forma Combined Statement of Operations
for the three months ended
March 31, 1996.................................... B-3........
Perry's Majestic Beer, Inc.
Independent Auditor's Report...................... C-1........
Balance Sheets as of March 31, 1996
and June 30,1996 [Unaudited]...................... C-2........
Statements of Operations for the
period ended March 31, 1996 and for
the three months ended
June 30,1996 [Unaudited].......................... C-3........
Statements of Cash Flows for the
period ended March 31, 1996 and for the
three months ended June 30,1996 [Unaudited]....... C-4........
Notes to Financial Statements .................... C-5........C-7
. . . . . . . . . . . . . . .
<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.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
March 21, 1996
[Except for Note 17C
as to which the date is
April 11, 1996]
A-1
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
June 30, December 31,
1 9 9 6 1 9 9 5
[Unaudited]
Assets:
Current Assets:
Cash $ 149,224 $ 153,714
Accounts Receivable - Net 863,579 704,870
Inventory 939,589 780,938
Prepaid Expenses 215,800 153,955
Stock Subscription Receivable -- 1,050,000
Note Receivable 85,000 --
------ --
Total Current Assets 2,253,192 2,843,477
------------ ------------
Property and Equipment - Net 912,973 867,752
------------ ------------
Investments [17C] 250,000 --
------------ ------------
Other Assets:
Restricted Cash 5,125 5,073
Security Deposits 27,408 48,096
Goodwill - Net 2,715,945 2,924,863
Other Assets 183,751 3,751
------------ ------------
Total Other Assets 2,932,229 2,981,783
------------ ------------
Total Assets $ 6,348,394 $ 6,693,012
============ ============
See Notes to Consolidated Financial Statements.
A-2
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1996 1995
---- ----
(Unaudited)
-----------
Liabilities and Stockholders' Equity:
Current Liabilities:
<S> <C> <C>
Accounts Payable $ 1,456,022 $ 2,200,468
Accrued Expenses 210,907 289,239
Payroll and Corporate Income Taxes Payable 54,912 254,699
Notes Payable 454,934 97,937
Loan Payable - Shareholder -- 259,000
----------- -----------
Total Current Liabilities 2,176,775 3,101,343
----------- -----------
Long-Term Debt:
Notes Payable 389,552 322,952
----------- -----------
Commitments and Contingencies [12] -- --
----------- -----------
Stockholders' Equity:
Series C Convertible Preferred Stock -
Authorized 5,800,000 Shares, Par Value
of $.0001, 2,252,225 and 1,352,225
Shares Issued and Outstanding at June
30, 1996 and December 31,
1995, respectively (400,000 are
deemed to be Treasury Stock) 225 135
Common Stock - Authorized 75,000,000
Shares, Par Value of
$.0001, 924,221 and 458,776
Shares, Issued and Outstanding
at June 30, 1996 and
December 31, 1995, respectively [19F] 92 46
Additional Paid-in Capital 18,183,871 13,362,257
Accumulated [Deficit] (10,411,308) (8,938,721)
----------- -----------
Totals 7,772,880 4,423,717
Less: Treasury Stock (2,000,000) --
Deferred Compensation (1,990,813) (1,155,000)
----------- -----------
Total Stockholders' Equity 3,782,067 3,268,717
----------- -----------
Total Liabilities and Stockholders' Equity $ 6,348,394 $ 6,693,012
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
A-3
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
------------------------- ---------------------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Sales - Net $ 7,421,705 $ 5,598,323 $ 12,730,722 $ 9,773,013
Total Cost of Goods Sold 5,865,046 4,525,846 10,974,292 7,729,722
------------ ------------ ------------- ------------
Gross Profit 1,556,659 1,072,477 1,756,430 2,043,291
------------ ------------ ------------- ------------
Selling, General and Administrative
Expenses:
Selling, Advertising and Promotion 568,302 534,025 1,128,782 913,762
Amortization of Goodwill 208,918 171,600 387,892 320,400
General and Administrative Expenses 1,256,406 1,118,487 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 697,187 -- -- --
------------ ------------ ------------- ------------
Total Selling, General and
Administrative Expenses 2,730,813 2,210,762 5,532,312 3,200,588
------------ ------------ ------------- ------------
[Loss] from Operations (1,174,154) (1,138,285) (3,775,882) (1,157,297)
------------ ------------ ------------- ------------
Other [Income] Expense:
Interest Expense 28,108 22,297 50,422 41,454
Interest Income (125) -- (74) (6,209)
------------ ------------ ------------- ------------
Other Expense [Income] - Net 27,983 22,297 50,348 35,245
------------ ------------ ------------- ------------
[Loss] Before Provision for Income
Taxes (1,202,137) (1,160,582) (3,826,230) (1,192,542)
Provision for Income Taxes -- -- -- --
------------ ------------ ------------- ------------
Net [Loss] (1,202,137) (1,160,582) (3,826,230) (1,192,542)
Stock Dividend to Preferred
Stockholders 270,450 -- -- --
------------ ------------ ------------- ------------
Net [Loss] Applicable to Common
Stock $ (1,472,587) $ (1,160,582) $ (3,826,230) $ (1,192,542)
============ ============ ============= =============
Weighted Average Number of
Shares 810,979 407,837 475,933 352,368
============ ============ ============= =============
Net [Loss] Per Share $ (1.82) $ (2.85) $ (8.04) $ (3.38)
============ ============ ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
A-4
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible
Common Stock Preferred Stock Additional
-------------------- ----------------------- Paid-in
Shares Amount Shares Amount* Capital
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 293,630 $ 29 -- $ -- $ 5,345,991
Stock Issued in Exchange for
Services in February 1994 7,500 1 -- -- 202,277
Exercise of Bridge Units in February
1994 at $.50 Per Unit 781 -- -- -- 3,907
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
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
<CAPTION>
Total
Accumulated Treasury Deferred Stockholders'
[Deficit] Stock Compensation Equity
--------- ----- ------------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ (3,919,949) $ (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 $ (3,919,949) $ -- $ -- $ 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.
A-5
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible
Common Stock Preferred Stock Additional
-------------------- ----------------------- Paid-in
Shares Amount Shares Amount* Capital
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Totals - Forwarded 363,708 $ 36 -- $ -- $ 7,213,440
Stock Issued as Installment Payment
on Stockholder Note Payable 5,068 1 -- -- 149,999
Deferred Financing Costs on
Convertible Bridge Notes -- -- -- -- 580,000
Net [Loss] for the Year Ended
December 31, 1994 -- -- -- -- --
-- -- -- -- --
----------- -------- ------- ------- ------------
Balance - December 31, 1994 368,776 37 -- -- 7,943,439
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 -- -- 195,993
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 -- -- -- -- --
----------- -------- ------- ------- ------------
Balance - December 31, 1995
Forward 458,776 $ 46 1,352,225 $ 135 $ 13,362,257
<CAPTION>
Total
Accumulated Treasury Deferred Stockholders'
[Deficit] Stock Compensation Equity
--------- ----- ------------ ------
<S> <C> <C> <C> <C>
Totals - Forwarded $ (3,919,949) $ -- $ -- $ 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) -- -- (1,192,542)
------------- -------- ----------- ------------
Balance - December 31, 1994 (5,112,491) -- -- 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) -- -- (3,826,230)
------------- -------- ----------- ------------
Balance - December 31, 1995
Forward $ (8,938,721) $ -- $(1,155,000) $ 3,268,717
</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.
A-6
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series C Convertible
Common Stock Preferred Stock Additional
-------------------- ----------------------- Paid-in
Shares Amount Shares Amount* Capital
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1995 458,776 $ 46 1,352,225 $ 135 $ 13,362,257
Options Issued - Deferred Consulting
Costs - February 1996 [17B] -- -- -- -- 600,000
Stock Issuance for Acquisition of
Perry's Majestic Beer [17C] -- -- 400,000 40 1,999,960
Exercise of Stock Options for Series C
Preferred Stock [17B][19E] -- -- 500,000 50 999,950
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 [17D] 270,445 27 -- -- 270,423
Consulting Agreement - April 1996 [19A] 35,000 3 -- -- 32,997
Stock Issued for Distributor Rights and
Services in April 1996 [19B] 80,000 8 -- -- 868,292
Consulting Agreement - April 1996 [19C] 40,000 4 -- -- 24,996
Financing Costs [19D] 40,000 4 -- -- 24,996
Amortization of Deferred Compensation
Costs -- -- -- -- --
Net [Loss] for the six months
ended June 30, 1996 -- -- -- -- --
------- ----------- --------- ----------- ----------------
Balance - June 30, 1996
[Unaudited] 924,221 $ 92 2,252,225 $ 225 $ 18,183,871
======= =========== ========= =========== ===============
<CAPTION>
Total
Accumulated Treasury Deferred Stockholders'
[Deficit] Stock Compensation Equity
--------- ----- ------------ ------
<S> <C> <C> <C> <C>
Balance - December 31, 1995 $ (8,938,721) $ -- $(1,155,000) $ 3,268,717
Options Issued - Deferred Consulting
Costs - February 1996 [17B] -- -- (600,000) --
Stock Issuance for Acquisition of
Perry's Majestic Beer [17C] -- (2,000,000) -- --
Exercise of Stock Options for Series C
Preferred Stock [17B][19E] -- -- -- 1,000,000
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 [17D] (270,450) -- -- --
Consulting Agreement - April 1996 [19A] -- -- (33,000) --
Stock Issued for Distributor Rights and
Services in April 1996 [19B] -- -- (850,000) 18,300
Consulting Agreement - April 1996 [19C] -- -- (25,000) --
Financing Costs [19D] -- -- (25,000) --
Amortization of Deferred Compensation
Costs -- -- 697,187 697,187
Net [Loss] for the six months
ended June 30, 1996 (1,202,137) -- -- (1,202,137)
------------- ----------- ----------- --------------
Balance - June 30, 1996
[Unaudited] $ (10,411,308) $(2,000,000) $(1,990,813) $ 3,782,067
============= ============ =========== ==============
</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.
A-7
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
-------- ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
[Unaudited] [Unaudited]
----------- -----------
<S> <C> <C> <C> <C>
Operating Activities:
Net [Loss] $ (1,202,137) $ (1,160,582) $ (3,826,230) $ (1,192,542)
--------------- ---------------- --------------- ---------------
Adjustments to Reconcile Net [Loss]
to Net Cash [Used for] Operating
Activities:
Depreciation 64,500 45,800 120,500 70,297
Amortization of Intangibles -- 386,650 386,650 193,350
Amortization of Goodwill 208,918 171,600 387,892 320,400
Bad Debt Expense -- -- 93,249 --
Compensation Expense on Issuance
of Common and Preferred Stock 697,187 -- 1,272,250 417
Imputed Interest on Stockholder
Note Payable -- -- -- 21,000
Changes in Assets and Liabilities:
[Increase] Decrease in Assets:
Accounts Receivable (243,709) (128,240) 33,406 (257,339)
Inventory (158,651) (284,460) 23,743 225,690
Prepaid Expenses (61,845) 167,573 63,446 (139,662)
Prepaid Offering Cost -- 71,182 71,182 (71,182)
Other Assets (159,364) -- -- (21,141)
Increase [Decrease] in Liabilities:
Accounts Payable and Accrued
Expenses (804,672) 370,603 404,430 (325,811)
Payroll and Corporate Income
Taxes Payable (199,787) -- 254,699 --
--------------- ---------------- --------------- ---------------
Total Adjustments (657,423) 809,708 3,111,447 16,019
--------------- ---------------- --------------- ---------------
Net Cash - Operating Activities -
Forward (1,859,560) (350,874) (714,783) (1,176,523)
--------------- ---------------- --------------- ---------------
Investing Activities:
Equipment Acquisitions (142,107) -- (249,464) (162,869)
Purchase of Subsidiaries - Net of
Cash Acquired -- (526,562) (526,562) --
Acquisition Costs -- (161,060) -- 250
Collections of Loans Receivable -
Stockholders -- -- -- 13,557
Restricted Cash -- -- (5,073) --
Partial Payment on Acquisition (150,000) -- -- --
--------------- ---------------- --------------- ---------------
Net Cash - Investing Activities -
Forward $ (292,107) $ (687,622) $ (781,099) $ (149,062)
</TABLE>
See Notes to Consolidated Financial Statements.
A-8
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
-------- ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
Net Cash - Operating Activities -
<S> <C> <C> <C> <C>
Forwarded $ (1,859,560) $ (350,874) $ (714,783) $ (1,176,523)
------------- -------------- ------------- -------------
Net Cash - Investing Activities -
Forwarded (292,107) (687,622) (781,099) (149,062)
------------- -------------- ------------- -------------
Financing Activities:
Proceeds from Public Offering -- 1,688,787 1,688,787 --
[Acquisition] Redemption of a
Certificate of Deposit -- -- -- 110,427
Proceeds from Loan Payable 138,750 --
Proceeds from Bridge Loan Payable 90,000 -- -- 200,000
Payments of Capital Lease Obligations (31,732) (4,216) (5,891)
(16,865)
Payments of Note Payable - Related
Parties -- (12,918) (45,000) --
Proceeds of Note Payable - Related
Parties -- -- 45,000 --
Payment of Bridge Loan Obligation -- (180,000) (180,000) --
Proceeds from Sale of Common Stock 45,200 -- -- 118,171
Issuance of Preferred Stock from
Exercise of Options 2,350,000 -- -- --
Exercise of Bridge Units -- 12,890
Payments of Notes Payable (186,041) (88,381) (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 2,147,177 1,403,272 1,581,219 664,480
------------- -------------- ------------- -------------
Net Increase [Decrease] in Cash (4,490) 364,776 85,337 (661,105)
Cash - Beginning of Years 153,714 68,377 68,377 729,482
------------- -------------- ------------- -------------
Cash - End of Years $ 149,224 $ 433,153 $ 153,714 $ 68,377
============= ============== ============= =============
Supplemental Disclosures of Cash Flow Information:
Cash paid for the years for:
Interest $ 23,156 $ 22,297 $ 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.
A-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.
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.
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. These options were
exercised for $600,000 in 1996.
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 which realized net proceeds of $2,548,009 in August of 1996 [See Note
17C for details of stock issued in the Perry's Majestic Beer, Inc. business
combination on March 29, 1996].
See Notes to Consolidated Financial Statements.
A-10
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Information as of and for the six months ended June 30, 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.
A-11
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the six months ended June 30, 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. All share data have been
adjusted to reflect the one-for-ten-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.
A-12
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the six months ended June 30, 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 and is being
amortized on a straight-line method over ten years.
[3] Inventories
Inventories consisted of the following:
June 30, December 31,
-------- ------------
1 9 9 6 1 9 9 5
------- -------
Raw Materials $ 17,749 $ 17,749
Finished Goods 921,840 763,189
-------------- --------------
Totals $ 939,589 $ 780,938
------ ============== ==============
The Company's inventory consists primarily of finished goods. The Company
evaluates inventory obsolescence and impairment on a monthly basis.
A-13
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[Information as of and for the six months ended June 30, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[4] Plant and Equipment and Depreciation and Amortization
Plant and equipment and accumulated depreciation and amortization are as
follows:
June 30, December 31,
1 9 9 6 1 9 9 5
------- -------
Warehouse Equipment $ 239,256 $ 224,070
Office Equipment 672,734 671,834
Leasehold Improvements 41,046 41,046
Transportation Equipment 1,208,858 1,118,858
-------------- --------------
Totals - At Cost 2,161,894 2,055,808
Less: Accumulated Depreciation 1,248,921 1,188,056
-------------- --------------
Net $ 912,973 $ 867,752
--- ============== ==============
Depreciation expense 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
A-14
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[Information as of and for the six months ended June 30, 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
$578,000 as of June 30, 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. No additional non-qualified options were issued through December
31, 1995.
[G] Options to Underwriter - In June 1993, for a purchase price of $500, the
underwriters of the public offering acquired an option to purchase up to an
aggregate of 5,000 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.
A-15
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[Information as of and for the six months ended June 30, 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].
A-16
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[Information as of and for the six months ended June 30, 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 qualified options for Series C Preferred Stock and
common stock.
A-17
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the six months ended June 30, 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 1996, 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 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.
A-18
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[Information as of and for the six months ended June 30, 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. The Company adopted SFAS No. 121 on January 1,
1996. Adoption of SFAS No. 121 did not have a material impact on the Company's
financial statements. In the future, if the sum of the expected undiscounted
cash flows is less than the carrying amount of the asset, an impairment loss
would be recognized.
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
A-19
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the six months ended June 30, 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 estimated fair value of the preferred stock at the time of grant
to account for these future services. As of June 30, 1996, these options were
exercised with the Company receiving proceeds of $600,000. The Company recorded
compensation expense of $37,500 for June 30, 1996.
[C] Business Combination - 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 net proceeds from this offering were
approximately $2,548,000 [See Note 12C]. The investment in Perry's is accounted
for under the purchase method. The total purchase price of Perry's is
$2,150,000, of which $2,000,000 is deemed to be treasury stock and no goodwill
was recorded. Operations of Perry's are included with those of the Company from
April 1, 1996 onward. Minority interest is not represented on the balance sheet
because the amount is deemed immaterial.
The following unaudited pro forma combined results of operations account for the
acquisition as if it had occurred at the beginning of the periods presented.
Six months Ended Year ended
June 30, December 31,
1 9 9 6 1 9 9 5
------- -------
Total Revenues $ 7,400,000 $ 12,730,722
============ ============
Net [Loss] $ (1,200,000) $ (3,826,230)
============ ============
Net [Loss] Per Common Share $ (1.48) $ (8.04)
============ ============
Weighted Average Number of Shares Outstanding 810,979 475,933
============ ============
A-20
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the six months ended June 30, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[17] Subsequent Events [Continued]
[C] Business Combination [Continued] - These pro forma amounts may not be
indicative of results that actually would have occurred if the combination had
been in effect on the date indicated or which may be obtained in the future.
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 was 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. The note payable was paid in
August of 1996.
[D] 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 six months ended June 30,
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 estimated 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 at an estimated fair value of
$18,300 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 estimated fair value of these shares and compensation
expense of $1,500 was recorded for the six months ended June 30, 1996.
[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 and expensed in the second quarter of 1996 for the estimated fair
value of these shares.
A-21
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the six months ended June 30, 1996 and 1995 is
Unaudited]
- --------------------------------------------------------------------------------
[19] Subsequent Events [Unaudited] [Continued]
[E] Exercise of Series C Preferred Options - In May of 1996, 200,000 Series C
Preferred stock options [Granted Per Note 7D] were exercised by consultants
whereby proceeds of $400,000 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.
[G] Options Issued in August of 1996 - In August 1996, the Company issued to
certain officers, directors and employees options to purchase an aggregate of
630,000 shares of Series C Preferred Stock at an exercise price of $1.00 per
share and 700,000 shares of common stock at an exercise price of $.25 per share
for services to be rendered in 1997. None of such options have been exercised. A
deferred compensation cost for the excess of the fair value of the shares over
the exercise price will be recorded in the period ended September 30, 1996. This
could have a significant negative impact on the net income of the Company.
. . . . . . . . . . . . . . . . . . .
A-22
<PAGE>
BEV-TYME, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED FINANCIAL STATEMENTS [UNAUDITED]
- --------------------------------------------------------------------------------
The following pro forma combined statements of operations for the year ended
December 31, 1995 and for the three months ended March 31, 1996 give effect to
Bev-Tyme, Inc. [the "Company"] acquiring on March 29, 1996, 500,000 shares of
Convertible Class A Preferred Stock and 7,000,000 shares of NonConvertible Class
B Preferred stock of Perry's Majestic Beer, Inc. ["Perry's"] in exchange for
400,000 shares of the Company's Series C Preferred Stock and $150,000
The pro forma information is based on the historical financial statements of
Perry's Majestic Beer, Inc. and Bev-Tyme, Inc. giving effect to the transaction
under the purchase method of accounting and the assumptions and adjustments in
the accompanying notes to the pro forma financial statements.
The acquisition will be accounted for using the purchase method. The pro forma
statements of operations give effect to these transactions as if they had
occurred at the beginning of the fiscal year presented. The historical
statements of operations will reflect the effects of these transactions from the
date on which they occurred. There were no revenue or expense activities for the
period ended March 31, 1996 for Perry's Majestic Beer, Inc. Perry's began
operations in April of 1996. The pro forma combined statements are based on the
historical financial statements of Perry's Majestic Beer, Inc. and Bev-Tyme,
Inc. The balance sheet of Perry's Majestic Beer, Inc. is included in the
consolidated balance sheet of Bev-Tyme, Inc. as of March 31, 1996. Therefore, no
pro forma combined balance sheet as of March 31, 1996 is deemed necessary.
B-1
<PAGE>
BEV-TYME, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31 1995
[UNAUDITED]
- --------------------------------------------------------------------------------
Historical Financial Statements
<TABLE>
<CAPTION>
Perry's Majestic
Beer, Inc.
For the Period
Bev-Tyme, Inc. December
For the 1995 [Date of
Year Ended Inception] to
December 31, December 31, Pro Forma
1995 1995 Adjustments Combined
------------ --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sales - Net $ 12,730,722 $ -- $ -- $ 12,730,722
Cost of Goods Sold 10,974,292 -- 10,974,292
------------ --------------- ----------- --------------
Gross Profit 1,756,430 -- -- 1,756,430
------------ --------------- ----------- --------------
Selling, General and
Administrative Expenses 5,532,312 -- -- 5,532,312
------------ --------------- ----------- --------------
Income [Loss] from Operations (3,775,882) -- -- (3,775,882)
------------ --------------- ----------- --------------
Other [Income] Expense:
Interest Expense 50,422 -- -- 50,422
Interest Income (74) -- -- (74)
------------ --------------- ----------- --------------
Other Expense - Net 50,348 -- -- 50,348
------------ --------------- ----------- --------------
[Loss] Before Income Taxes (3,826,230) -- -- (3,826,230)
Provision for Income Taxes -- -- -- --
------------ --------------- ----------- --------------
Net [Loss] $ (3,826,230) $ -- $ -- $ (3,826,230)
============ =============== =========== ==============
Number of Shares 475,933 $ 475,933
============ =============== =========== ==============
Net [Loss] Per Share $ (8.04) $ -- $ (8.04)
============ =============== =========== ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
B-2
<PAGE>
BEV-TYME, INC.
- --------------------------------------------------------------------------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
1996.
[UNAUDITED]
- --------------------------------------------------------------------------------
Historical Financial Statements
<TABLE>
<CAPTION>
Perry's Majestic
Beer, Inc.
Bev-Tyme, Inc. For the
For the Three Three months
Months ended ended
March 31, March 31, Pro Forma
1996 1996 Adjustments Combined
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales - Net $ 2,397,908 $ -- $ -- $ 2,397,908
Cost of Goods Sold 1,912,337 -- -- 1,912,337
----------- ------------- ----------- ------------
Gross Profit 485,571 -- -- 485,571
----------- ------------- ----------- ------------
Selling, General and
Administrative Expenses 1,163,998 -- -- 1,163,998
----------- ------------- ----------- ------------
Income [Loss] from Operations (678,427) -- -- (678,427)
----------- ------------- ----------- ------------
Other [Income] Expense:
Interest Expense 10,303 -- -- 10,303
Interest Income -- -- -- --
----------- ------------- ----------- ------------
Other Expense - Net 10,303 -- -- 10,303
----------- ------------- ----------- ------------
[Loss] Before Income Taxes (688,730) -- -- (688,730)
Provision for Income Taxes -- -- -- --
----------- ------------- ----------- ------------
Net [Loss] $ (688,730) $ -- $ -- $ (688,730)
=========== ============= =========== ============
Number of Shares $ 811,721 -- 811,721
=========== ============= =========== ============
Net [Loss] Per Share $ (.84) $ -- $ (.84)
=========== ============= =========== ============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
B-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders of
Perry's Majestic Beer, Inc.
New York, New York
We have audited the accompanying balance sheet of Perry's Majestic
Beer, Inc. as of March 31, 1996, and the related statements of stockholders'
equity, and cash flows for the period from inception [December 1995] through
March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Perry's Majestic
Beer, Inc. as of March 31, 1996, and its cash flows for the period from
inception to March 31, 1996, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company had no revenue or expense operations and has
negative working capital. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
April 4, 1996
C-1
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
1996 March 31,
[Unaudited] 1996
------------ ------------
Assets:
Current Assets:
<S> <C> <C>
Cash $ 38,816 $ 60,200
Inventory 125,141 --
Accounts Receivable 40,822 --
Subscription Receivable -- 60,000
Note Receivable - Related Party [3] 75,000 75,000
Note Receivable - Bridge Loan -- 4,800
------------ ------------
Total Current Assets 279,779 200,000
------------ ------------
Non-Current Assets:
Investment in Riverosa [2] 250,000 250,000
Investment in Bev-Tyme, Inc. -
Preferred Stock - Related Party [3] 2,000,000 2,000,000
------------ ------------
Total Non-Current Assets 2,250,000 2,250,000
------------ ------------
Total Assets $ 2,529,779 $ 2,450,000
============ ============
Liabilities and Stockholders' Equity:
Current Liabilities:
Bridge Loan Payable [6] $ 150,000 $ 150,000
Note Payable Acquisition [2] 100,000 100,000
Accounts Payable 79,189 --
------------ ------------
Total Current Liabilities 329,189 250,000
------------ ------------
Commitments and Contingencies -- --
------------ ------------
Stockholders' Equity:
Preferred Stock, $.001 Par Value Per
Share, 15,000,000 Blank Check Shares
Authorized, Convertible Class A -
Issued and Outstanding, 500,000 Shares;
Non-Convertible Class B - Issued and
Outstanding, 7,000,000 Shares [3] 7,500 7,500
Additional Paid-in Capital - Preferred Stock [3] 2,142,500 2,142,500
Common Stock - $.0001 Par Value, Authorized
25,000,000 Shares, Issued and Outstanding,
2,500,000 Shares [1B] 250 250
Additional Paid-in Capital - Common Stock [1B] 49,750 49,750
Retained Earnings 590 --
------------ ------------
Total Stockholders' Equity $ 2,200,590 $ 2,200,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 2,529,779 $ 2,450,000
============ ============
</TABLE>
See Notes to Financial Statements.
C-2
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three months
ended For the
June 30, Period Ended
1996 March 31,
[Unaudited] 1996
------------ ------------
<S> <C> <C>
Sales - Net $ 255,293 $ --
Cost of Goods Sold 209,341 --
------------ ------------
Gross Profit 45,952 --
Selling, General and Administrative Expenses 41,594 --
------------ ------------
Income from Operations 4,358 --
------------ ------------
Other [Income] Expense:
Interest Expense 4,952 --
Interest Income (1,184) --
------------ ------------
Other Expense - Net 3,768 --
------------ ------------
Income Before Income Taxes 590 --
Provision for Income Taxes -- --
------------ ------------
Net Income $ 590 $ --
============ ============
Number of Shares 3,000,000 --
============ ============
Net Income Per Share $ -- $ --
============ ============
</TABLE>
See Notes to Financial Statements.
C-3
<PAGE>
PERRY'S MAJESTIC BEER, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three months
ended For the
June 30, Period Ended
1 9 9 6 March 31,
[Unaudited] 1996
----------- ------------
<S> <C> <C>
Net Cash - Operating Activities $ (86,184) $ --
----------- ------------
Investing Activities:
Loan to Bev-Tyme, Inc. (75,000) --
Acquisition of Riverosa Company -- (150,000)
----------- ------------
Net Cash - Investing Activities (75,000) (150,000)
----------- ------------
Financing Activities:
Proceeds from Sale of Preferred
Stock to Bev-Tyme, Inc. 75,000 75,000
Proceeds from Sale of Common Stock
- Stock Subscription 4,800 45,200
Proceeds from Bridge Loans 60,000 90,000
----------- ------------
Net Cash - Financing Activities 139,800 210,200
----------- ------------
Net [Decrease] in Cash (21,384) 60,200
Cash - Beginning of Period 60,200 --
----------- ------------
Cash - End of Period $ 38,816 $ 60,200
=========== ============
Supplemental Disclosures of Cash
Flow Information:
Cash paid for the period for:
Interest $ -- $ --
Income Taxes $ -- $ --
Supplemental Disclosures of Non-Cash
Investing and Financing Activities:
None
</TABLE>
See Notes to Financial Statements.
C-4
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS
[Information as of and for the three months ended June 30,1996 is Unaudited]
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
[A] Nature of Operations - Perry's Majestic Beer, Inc., a Delaware corporation
[the "Company" or "Perry's"], was formed in December 1995. There were no revenue
or expense activities through March 31, 1996. The Company became a subsidiary of
Bev-Tyme, Inc. as of March 29, 1996 [See Note 3].
[B] Capital Stock - In January 1996, the Company issued 2,500,000 shares of
common stock to seven [7] parties for a total consideration of $50,000. At March
31, 1996, $45,200 was collected and the balance of $4,800 was received April 4,
1996.
[C] Earnings Per Share - The number of shares to be used for earnings per share
calculation purposes is based on the number of shares issued and outstanding for
the period presented. Convertible Preferred Stock shares are included if
dilutive.
[D] Cash Equivalents - The Company's policy is to classify all highly liquid
debt instruments purchased with an initial maturity of three months or less to
be cash equivalents. There were no cash equivalents at June 30, 1996.
[E] 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.
[F] Goodwill - Amounts paid in excess of the estimated value of net assets
acquired of Riverosa will be charged to goodwill. Goodwill relates to revenues
the Company anticipates realizing in future years. The Company has decided to
amortize its goodwill over a period of up to five years under the straight-line
method. 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 will also evaluate 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.
[G] Stock Options and Similar Equity Instruments Issued to Employees - The
Company uses the intrinsic value method to recognize cost for stock issued to
employees.
[2] Business Combination
On March 29, 1996, the Company 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 was payable with interest of 8% and was paid in August of 1996 with
proceeds from the Company's initial public offering. The combination will be
accounted for by the purchase method.
Goodwill of approximately $246,000 will be amortized over five years under the
straight-line method.
Interest expense for the three months ended June 30, 1996 was $2,000.
C-5
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the three months ended June 30,1996 is Unaudited]
- --------------------------------------------------------------------------------
[2] Business Combination [Continued]
The Company completed this acquisition in August of 1996. The following
unaudited pro forma results of operations account for the acquisition as if it
had occurred on April 1, 1996. The pro forma results give effect to the
amortization of goodwill.
Three months ended
June 30,
1996
Total Revenues $ 278,979
=========
Net [Loss] $ (20,563)
=========
[Loss] Per Share $ (.01)
=========
Results of operations of Riverosa will be included with those of the Company
from date of acquisition onward.
[3] Investment - Related Party
On March 29, 1996, the Company issued to Bev-Tyme, Inc. [a public corporation]
500,000 shares of convertible Class A Preferred Stock and 7,000,000 shares of
non-convertible Class B Preferred Stock for 400,000 shares of Series C Preferred
Stock of Bev-Tyme, Inc. [valued at $2,000,000] and $150,000. As of March 31,
1996, $75,000 of cash was collected and the balance of $75,000 was received on
April 4, 1996. Each share of Class A Preferred Stock may be convertible by the
holder 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 19, 1996, the Company lent $75,000 to Bev-Tyme, Inc., which was repaid
September 9, 1996.
Interest income for this loan for the period ended June 30, 1996 was $1,184.
The investment in Bev-Tyme, Inc. is classified as "available for sale" and is
presented at estimated fair value.
[4] 1996 Stock Option Plan
In March 1996, the Board of Directors of the Company adopted, and the
stockholders of the Company approved the adoption of the 1996 Stock Option Plan.
The maximum number of shares of common stock with respect to which awards may be
granted pursuant to the 1996 Plan is initially 2,000,000 shares.
[5] Public Offering of Common Stock
The Company filed a registration statement for 583,335 shares of common stock at
$6.00 per share. The net proceeds from this offering of $2,548,009 were paid in
August of 1996.
[6] Bridge Loan
On March 31, 1996, the Company borrowed an aggregate of $150,000 from seven [7]
unaffiliated lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, 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 were paid at the closing of the initial public offering of the
Company's securities in August of 1996. As of March 31, 1996, $90,000 was
received in cash from the bridge loan and $60,000 was received April 4, 1996.
Interest expense for the three months ended June 30, 1996 was $2,952 and was
paid in August of 1996.
C-6
<PAGE>
PERRY'S MAJESTIC BEER, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the three months ended June 30,1996 is Unaudited]
- --------------------------------------------------------------------------------
[7] New Authoritative Pronouncements
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. The adoption of SFAS No. 123 could have a material impact on the Company's
financial statements.
[8] Financial Instruments
The carrying amount of cash, notes receivable and payable approximates fair
value because of their short maturities.
[9] Employment Agreements
In April of 1996, the Company entered into a three [3] year employment agreement
with Mark Butler pursuant to which Mr. Butler serves as the Company's Vice
President of Sales. The agreement provides for Mr. Butler to receive a salary of
$25,000 per annum until the closing of this offering and thereafter $75,000 per
annum. In addition, on each of March 31, 1997, March 31, 1988, and March 31,
1999, the Company has agreed to grant Mr. Butler an option to purchase 100,000
shares of common stock exercisable at fair market value on the date of issuance.
Also in April of 1996, the Company entered into a three [3] year employment
agreement with Robert Sipper pursuant to which Mr. Sipper serves as the
Company's President. The agreement provides for Mr. Sipper to receive a salary
of $52,000 per annum.
[10] Subsequent Event [Unaudited]
In August of 1996, the Company entered into a letter of intent to acquire a
brewery for $50,000.
. . . . . . . . . . . . . . . . . . .
C-7
<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 wqhich the date is April 11, 1996], relating to the
consolidated financial statements of Bev-Tyme, Inc. and our report dated April
4, 1996 for Perry's Majestic Beer, Inc. which are contained in the Prospectus.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
On July 1, 1996, the firm of Mortenson and Associates, P.C. changed
its name to Moore Stephens, P.C.
MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
November , 1996
<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 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,
<PAGE>
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 in the past three (3) years. There were no underwriting discounts
and commissions paid in connection with the issuance of any of said securities.
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
<PAGE>
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. 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 250,000 Bridge Units held by the Bridge Lenders. See
"Selling Securityholder" "Certain Transactions" and "Underwriting."
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 100,000
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 350,000 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 250,000 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
400,000 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 350,000
shares of Common Stock in
<PAGE>
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 250,000
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 250,000
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 250,000
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 250,000
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 (300,000)
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 400,000 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 Areement Among Underwriters
++1.06 Slected 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.
<PAGE>
*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.
*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.
<PAGE>
*10.14 Lease for office space at 625 Michigan Avenue, Chicago, Illinois.
*10.15 Form of Incentive Stock Option Plan.
*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.
<PAGE>
**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.
**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 Form of Consulting Agreement between the Company and Walter Miller
+++10.45 Form of Stock Option Agreement between the Company and Walter Miller
+++10.46 Form of Employment Agreement between the Company and Mel Feldman
+++10.47 Form of Stock Option Agreement between the Company and Mel Feldman
+++10.48 Form of Employment Agreement between the Company and Aaron German
+++10.49 Form of Stock Option Agreement between the Company and Aaron German
*21.01 List of Subsidiaries of the Registrant as of December 31, 1993.
- -----------
* 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.
<PAGE>
++ Incorporated by reference to Form SB-2 filed with the Securities and
Exchange Commission on May 1, 1995.
+++ Previously filed.
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;
(ii) Reflect in the prospectus any facts or events arising after the
effective date 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
<PAGE>
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.
<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 5th day of November, 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 November 5, 1996
- ------------------------ Board and President
Robert J. Sipper
/s/Hartley T. Bernstein Director November 5, 1996
- ------------------------
Hartley T. Bernstein
/s/Robert Forst Vice President, November 5, 1996
- ------------------------ Chief Financial Officer,
Robert Forst Principal Accounting
Officer and Secretary
- ------------------------ Director
Bruce Logan
/s/Alfred Sipper Director November 5, 1996
- ------------------------
Alfred Sipper
