<PAGE>
Form 10-QSB\A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
For Quarter Ended _______________ Commission File Number 33-53748C
BEV-TYME, INC. AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Delaware 36-3769323
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
134 Morgan Avenue, Brooklyn, New York 11237
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 894-4300
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
The number of shares outstanding of each of the issuer's classes of common
stock, as of May 16, 1996 was 9,242,209.
<PAGE>
Item 1. Financial Statements
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996.
[UNAUDITED]
Assets:
Current Assets:
Cash $ 305,035
Accounts Receivable - Net 800,196
Inventory 773,376
Prepaid Expenses 235,467
Stock Subscription Receivable 4,800
Note Receivable 60,000
----------
Total Current Assets 2,178,874
----------
Property and Equipment - Net 840,051
----------
Investments [3D] 250,000
----------
Other Assets:
Restricted Cash 5,073
Security Deposits 37,752
Goodwill - Net 2,820,404
Other Assets 3,751
Deferred Financing Costs [9] 1,500,000
Deferred Consulting Costs [8G][8H] 1,466,000
----------
Total Other Assets 5,832,980
----------
Total Assets $9,101,905
==========
See Notes to Consolidated Financial Statements.
1
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996.
[UNAUDITED]
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $1,828,367
Accrued Expenses 296,375
Payroll and Corporate Income Taxes Payable 154,291
Notes Payable 314,934
Loan Payable - Shareholder --
----------
Total Current Liabilities 2,593,967
----------
Long-Term Debt:
Notes Payable 322,952
----------
Minority Interest 1,550,000
----------
Commitments and Contingencies [12] --
----------
Stockholders' Equity:
Series C Convertible Preferred Stock - Authorized
5,800,000 Shares, Par Value of $.0001, 1,902,225
Shares Issued of which 400,000 are Deemed to be
Treasury Shares [3C] 190
Common Stock - Authorized 75,000,000 Shares, 7,292,209
Shares Issued and Outstanding, Par Value of $.0001 728
Additional Paid-in Capital 16,531,969
Accumulated [Deficit] (9,897,901)
----------
Total 6,634,986
Less: Treasury Stock [3C] (2,000,000)
----------
Total Stockholders' Equity 4,634,987
----------
Total Liabilities and Stockholders' Equity $9,101,906
==========
See Notes to Consolidated Financial Statements.
2
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
Three months ended
March 31,
1 9 9 6 1 9 9 5
------- -------
Sales - Net $ 2,397,908 $ 2,312,390
Cost of Goods Sold 1,912,337 1,739,995
----------- -----------
Gross Profit 485,571 572,395
----------- -----------
Selling, General and Administrative Expenses:
Selling, Advertising and Promotion 384,492 228,312
Amortization of Goodwill 104,459 85,000
General and Administrative Expenses 386,047 436,610
Amortization of Financing Costs -- 386,650
Amortization of Consulting Services 289,000 --
----------- -----------
Total Selling, General and Administrative
Expenses 1,163,998 1,136,572
----------- -----------
[Loss] from Operations (678,427) (564,177)
----------- -----------
Other [Income] Expense:
Interest Expense 10,303 7,877
Interest Income -- --
----------- -----------
Other Expense - Net 10,303 7,877
----------- -----------
[Loss] Before Provision for Income Taxes (688,730) (572,054)
Provision for Income Taxes -- --
----------- -----------
Net [Loss] $ (688,730) $ (572,054)
=========== ===========
Net [Loss] Per Share $ (.08) $ (.15)
=========== ===========
Weighted Average Number of Shares 8,117,209 3,765,537
=========== ===========
See Notes to Consolidated Financial Statements.
3
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
<TABLE>
<CAPTION>
Series C Total
Convertible Additional Deferred Stock-
Common Stock Preferred Stock Paid-in Accumulated Treasury Compensation holders
Shares Amount Shares Amount* Capital [Deficit] Stock Expense Equity
------ ------ ------ ------ ------- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 4,587,759 $ 458 1,352,224 $ 135 $13,361,844 $(8,938,721) $ -- $-- $4,423,716
Stock Issuance for Acquisition -- -- 400,000 40 1,999,960 -- (2,000,000) -- --
Exercise of Stock Options for
Preferred Stock - March 1996 -- -- 150,000 15 299,985 -- -- -- 300,000
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 2,704,450 270 -- -- 270,180 (270,450) -- -- --
Options Issued - Deferred
Consulting Costs [8G] -- -- -- -- 600,000 -- -- -- 600,000
Net [Loss] for the three months
ended March 31, 1996 -- -- -- -- -- (688,730) -- -- (688,730)
--------- ------- --------- ----- ------------ ----------- ----------- --- ----------
Balance - March 31, 1996
[Unaudited] 7,292,209 $ 728 1,902,225 $ 190 $ 16,531,969 $(9,897,901) $(2,000,000) $-- $4,634,986
========= ======= ========= ===== ============ =========== =========== === ==========
</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.
4
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
Three months ended
March 31,
1 9 9 6 1 9 9 5
------- -------
Operating Activities:
Net [Loss] $ (688,730) $ (572,054)
----------- ---------
Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation 30,000 21,400
Amortization of Intangibles -- 386,650
Amortization of Goodwill 104,459 85,000
Compensation Expense on Issuance of Options 289,000 --
Changes in Assets and Liabilities:
[Increase] Decrease in Assets:
Accounts Receivable (95,326) (81,427)
Inventory (117,438) (117,659)
Prepaid Expenses (81,512) 56,878
Prepaid Offering Cost -- (30,706)
Other Assets 10,344 --
Increase [Decrease] in Liabilities:
Accounts Payable and Accrued Expenses (498,438) 153,918
Payroll and Corporate Income Taxes Payable (100,408) --
----------- ---------
Total Adjustments (459,319) 474,054
----------- ---------
Net Cash - Operating Activities - Forward (1,148,049) (98,000)
----------- ---------
Investing Activities:
Equipment Acquisitions (43,708) (29,323)
Partial Payment on Acquisition [3D] (150,000) --
----------- ---------
Net Cash - Investing Activities - Forward $ (193,708) $ (29,323)
See Notes to Consolidated Financial Statements.
5
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
Three months ended
March 31,
1 9 9 6 1 9 9 5
------- -------
Net Cash - Operating Activities - Forwarded $(1,148,049) $(98,000)
----------- --------
Net Cash - Investing Activities - Forwarded (193,708) (29,323)
----------- --------
Financing Activities:
Proceeds from Bridge Loan 90,000 --
[Acquisition] Redemption of a Certificate of
Deposit -- --
Proceeds from Loan Payable -- 50,000
Payments of Capital Lease Obligations (26,719) (4,216)
Payments of Note Payable - Related Parties -- --
Proceeds of Note Payable - Related Parties -- 45,000
Payment of Bridge Loan Obligation -- --
Proceeds from Sale of Common Stock 45,200 --
Issuance of Preferred Stock from Exercise of
Options 1,650,000 --
Payments of Notes Payable (6,403) (8,603)
Proceeds from Shareholder - Loan Payable -- --
Repayment of Shareholder - Loan Payable (259,000) --
Proceeds from Exercise of Warrants -- --
----------- --------
Net Cash - Financing Activities 1,493,078 82,181
----------- --------
Net [Decrease] in Cash 151,321 (45,142)
Cash - Beginning of Years 153,714 68,377
----------- --------
Cash - End of Years $ 305,035 $ 23,235
=========== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid for the years for:
Interest $ 10,303 $ 7,877
Income Taxes $ -- $ --
Supplemental Schedule of Non-Cash Investing and Financing Activities:
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 700,000 shares of the
Company's common stock with a fair value of $196,000.
A deferred financing cost of $1,500,000 was recorded in conjunction with a
$150,000 bridge loan for Perry's Majestic Beer, Inc. in the quarter March 31,
1996.
See Notes to Consolidated Financial Statements.
6
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
Supplemental Schedule of Non-Cash Investing and Financing Activities
[Continued]:
In February of 1996, the Company issued options to purchase 300,000 shares of
the Company's Series C Preferred Stock at an exercise price of $2.00 per share
to a consultant to assist, the Company in connection with acquisitions,
divestitures, joint ventures, and other strategic business initiatives. The
Company recorded a deferred consulting cost of $600,000, which represents the
difference between the option price and the fair value of he preferred stock at
the time of grant to account for these future services.
On January 2, 1996, the Company issued to the holders of record of the Series
C Preferred Stock as of December 24, 1995 a dividend of two shares of the
Company's common stock.
In November of 1995, the Company issued options to purchase 525,000 shares of
the Company's Series C Preferred Stock at an exercise price of $2.00 per share
to seven directors. The Company recorded in 1995 a deferred consulting cost of
$1,155,000 which represents the fair value of the options issued. For the three
months ended March 31, 1996, the Company recorded compensation expense of
$289,000.
See Notes to Consolidated Financial Statements.
7
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[1] Basis of Presentation
The accompanying interim financial statements are unaudited and have been
prepared in accordance with the requirements of Regulation S-B and Form 10-QSB
and, therefore, do not include all information and footnotes required by
generally accepted accounting principles; however, in the opinion of the
management of the Company, all adjustments consisting only of normal recurring
adjustments necessary for a fair presentation of financial position, results of
operations and cash flows for the three months ended March 31, 1996 and 1995
have been made. The results of operations for any interim period are not
necessarily indicative of the results for the full year. These financial
statements should be read in conjunction with the financial statements and
notes, thereto, contained in the annual report on Form 10-KSB for the year ended
December 31, 1995.
[2] 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 3 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].
Options and Warrants - Options and warrants issued to employees are recognized
in accordance with the intrinsic value method.
8
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
[2] General Information and Summary of Significant Accounting Policies
[Continued]
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 March 31, 1996 was $941,751. 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.
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.
Revenue Recognition - Revenue is recognized at the time products are shipped and
title passes.
Net [Loss] Per Share - The net loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the period.
Shares issuable upon the exercise of stock options granted and the effect of
convertible securities are excluded from the computation because the effect on
the net loss per common share would be anti-dilutive. Equity instruments issued
at prices below fair value are included for all periods presented.
[3] 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 600,000 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.
9
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
[3] Acquisition [Continued]
[A] Mootch & Muck, Inc. [Continued] - In addition, the seller 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 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
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, 200,000 shares of the
Company's common stock valued at market value or $31,250, and options to
purchase 75,000 shares of the Company's common stock valued at $11,720. Goodwill
of approximately $450,000 was recognized for this acquisition.
[C] Perry's Majestic Beer, Inc. - On March 29, 1996, the Company acquired
500,000 shares of convertible Class A Preferred Stock and 7,000,000 shares of
non-convertible Class B Preferred Stock of Perry's Majestic Beer, Inc. [valued
at $2,000,000] in exchange for 400,000 shares of the Company's Series C
Preferred Stock and $150,000. The 400,000 shares of Series C Preferred are
presented as treasury stock. As of March 31, 1996, $75,000 of cash was paid and
the balance of $75,000, which was paid on April 4, 1996, is reflected as a note
payable on the financial statements as of March 31, 1996. Each share of Class A
Preferred Stock may be convertible by the Company into one [1] share of Common
Stock. Each share of Class A Preferred Stock and Class B Preferred Stock has
attached to it the right to vote on all matters submitted to the Company. On
April 11, 1996, Perry's Majestic Beer, Inc. filed a registration statement on
Form SB-2 with the Securities and Exchange Commission. Minority interest on the
balance sheet represents minority shareholders equity in Perry's.
[D] Also on March 29, 1996, Perry's Majestic Beer, Inc. entered into an
agreement to acquire all of the stock of Riverosa Company, Inc. for $250,000 of
which $150,000 in cash was put into escrow as of March 31, 1996 and a note
payable was issued for $100,000. The note is payable with interest of 8% and is
due the earlier of one year from the date of issuance or the closing of the
Perry's Majestic Beer, Inc.'s initial public offering.
Perry's Majestic Beer, Inc. has filed a registration statement for 300,000 units
at $10.00 per unit. Each unit consists of two shares of common stock and one
Class A Redeemable Common Stock purchase warrant exercisable at $4.00 per share
for a four year period commencing one year from the effective date. The
anticipated net proceeds from this offering are approximately $2,113,000.
10
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[UNAUDITED]
[4] Inventories
Inventories as of March 31, 1996 consisted of the following:
Raw Materials $ 17,749
Finished Goods 755,627
----------
Total $ 773,376
==========
The Company's inventory consists primarily of finished goods. The Company
evaluates inventory obsolescence and impairment on a monthly basis.
[5] Plant and Equipment and Depreciation and Amortization
Plant and equipment and accumulated depreciation and amortization as of March
31, 1996 are as follows:
Warehouse Equipment $ 266,369
Office Equipment 671,834
Leasehold Improvements 41,046
Transportation Equipment 1,118,858
----------
Total - At Cost 2,058,107
Less: Accumulated Depreciation and
Amortization 1,218,056
----------
Net $ 840,051
==========
Depreciation and amortization for the three months ended March 31, 1996
and 1995 was $30,000 and $21,400, respectively.
[6] Debt
Debt as of March 31, 1996 consisted of the following:
Bridge Notes - [Note 9] $ 150,000
Note Payable - [Note 3D] 100,000
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] 387,886
---------
Total 637,886
Less: Current Portion 314,934
---------
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 $ 314,934
1997 96,588
1998 104,872
1999 84,660
2000 36,832
---------
Total $ 637,886
=========
11
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[UNAUDITED]
[7] Income Taxes
No provision for income taxes has been made for 1996 and 1995 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.
[8] Stock Option Plans, Stock Options and Warrants
[A] As of December 31, 1995, 525,000 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 $.69 per share. The Company
also issued in 1995, 300,000 common stock options that vest in May of 1996 to
directors, officers and employees of the Company at an exercise price of $2.00
per share.
[B] As of December 31, 1995, approximately 1,500,000 warrants were outstanding,
which entitle the holders to acquire shares of common stock at a price of $6.00
per share which expired in January 1996.
[C] As of March 31, 1996, 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] 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 75,000 shares. The Company issued incentive options to
purchase an aggregate of 60,000 shares of common stock exercisable at $1.00 per
share for a period of four years commencing in August 1994.
[E] 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 125,000 shares. In August of 1994, the Company issued
an aggregate of 25,000 non-qualified options that are exercisable at 1.00 per
share for a period of four years commencing in August 1994.
[F] Options to Underwriter - In June 1993, for a purchase price of $50, the
underwriters of the public offering acquired an option to purchase up to an
aggregate of 50,000 units for a five-year period expiring in February 1998. The
Company has agreed to register, at its expense, under the Securities Act, on one
occasion, the option and/or the underlying securities covered by the option upon
certain conditions.
[G] Consulting Agreement - In February of 1996, the Company issued options to
purchase 300,000 shares of the Company's Series C Preferred Stock at an exercise
price of $2.00 per share to a consultant to assist, the Company in connection
with acquisitions, divestitures, joint ventures, and other strategic business
initiatives. The Company recorded a deferred consulting cost of $600,000, which
represents the difference between the option price and the fair value of he
preferred stock at the time of grant to account for these future services.
[H] In November of 1995, the Company issued options to purchase 525,000 shares
of the Company's Series C Preferred Stock at an exercise price of $2.00 per
share to seven directors. The Company recorded in 1995 a deferred consulting
cost of $1,155,000 which represents the fair value of the options issued. For
the three months ended March 31, 1996, the Company recorded compensation expense
of $289,000.
12
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[UNAUDITED]
[9] 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
1,000,000 warrants exercisable for 1,000,000 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 1,000,000 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].
On March 31, 1996, Perry's Majestic Beer, Inc. borrowed an aggregate of $150,000
from nine [9] unaffiliated lenders [the "Bridge Lenders"]. In exchange for
making loans to Perry's Majestic Beer, Inc., each Bridge Lender received a
promissory note [the "Bridge Note"]. Each of the Bridge Notes bears interest at
the rate of eight percent [8%] per annum. The Bridge Notes are due an payable
upon the earlier of (i) July 31, 1996 and (ii) the closing of an initial
underwritten public offering of Perry's Majestic Beer, Inc.'s securities.
Perry's Majestic Beer, Inc. intends to use a portion of the proceeds of this
offering to repay the Bridge Lenders. As of March 31, 1996, $90,000 was received
in cash from the bridge loan and $60,000, received April 4, 1996, is reflected
on the financial statements as a note receivable at March 31, 1996. The Bridge
Lenders have the right to receive a total of 3,000,000 Class A Warrants. Perry's
Majestic Beer, Inc. has recorded a deferred financing cost of $1,500,000, which
will be amortized over the life of the bridge loan.
[10] 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.
13
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[UNAUDITED]
[10] Stockholders' Equity [Continued]
[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 2,025,720 shares of common
stock, which included shares of common stock underlying certain stock options
and 1,600,000 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 1,201,800 and 100,000, shares of common
stock and warrants, respectively, which were outstanding as of December 31, 1993
and 675,000 and 1,500,000 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 1,500,000 unregistered warrants, at a
price of $.25 per warrant. Each warrant entitles the holders to acquire shares
of common stock at a price of $6.00 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 100,000 common shares and 100,000 warrants in
February 1993, which were registered in February 1994 [See Note 9B].
[D] Debt to Equity Conversions - On February 10, 1994, the Company issued 75,000
shares of common stock valued at $2.70 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 50,676 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] 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.
[F] Consulting Agreements - In March 1995, the Company entered into three
one-year consulting agreements with three unaffiliated individuals and issued a
total of 700,000 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.
14
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[UNAUDITED]
[10] Stockholders' Equity [Continued]
[G] 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.
[H] Exercise of Preferred Stock Options - In March of 1996, 150,000 Series C
Preferred Options were exercised at $2.00 per share whereby the Company received
proceeds of $300,000.
[I] Stock Subscription Receivable - In January 1996, Perry's Majestic Beer, Inc.
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, received April 4, 1996, is reflected as a stock subscription
receivable.
[J] 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
shares of the Company's common stock.
[K] Consulting Fees - Stock Issuance - On March 29, 1996, in conjunction with
the acquisition agreement with Perry's [See Note 3C] 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 350,000 shares of the Company's common
stock on April 11, 1996. A deferred compensation cost of $33,000 was recorded in
April of 1996 for the fair value of these shares.
[11] 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%.
[12] Employment Agreements
As of December 31, 1995, the Company has four employment agreements with senior
executives of the Company that expire in various years through 2009 for total
base annual compensation of approximately $435,000 subject to certain
adjustments plus bonuses of options for Series C Preferred Stock and common
stock.
[13] Commitments and Contingencies
[A] The Company has entered into various operating lease agreements to lease
office space and warehouse space with initial terms ranging from less than one
to five years. Rent expense for the years ended December 31, 1995 and 1994 was
$246,925 and $262,750, respectively. This lease expired in February of 1996.
Commencing March of 1995, the Company revised the nature of this agreement to a
month-to-month arrangement for $20,500 a month.
15
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[UNAUDITED]
[13] Commitments and Contingencies [Continued]
[A] [Continued] - In addition, the Company has non-cancelable operating leases
for a variety of office and warehouse equipment. Obligations under these leases
for the periods through 2000 are as follows:
1996 $ 121,419
1997 104,420
1998 45,827
1999 13,672
2000 9,039
----------
Total $ 294,377
----- ==========
[B] The Company has minimum volume commitments on several of their distribution
contracts with vendors, whereby the vendor has the option to terminate an
agreement if certain volume targets are not met.
[C] Brewing Agreement - In November 1992, Perry's stockholders entered into an
agreement, on behalf of Perry's, with a brewery to brew and bottle beer under
the private label of "Perry's Majestic." As part of the agreement, Perry's
agrees to provides the brewery, at its own expense, all the necessary packaging
materials to allow the brewer to manufacture the product in accordance with
federal and state regulations.
The agreement automatically renews annually. Either party may terminate the
agreement by giving four month prior written notice to the other party.
[14] 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.
[15] 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.
[16] 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.
16
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
[UNAUDITED]
[16] New Authoritative Pronouncement [Continued]
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. SFAS No.
121 may have a material impact on the Company's financial statements.
The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995. SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity instruments issued to employees as contrasted
to the intrinsic valued based method of accounting prescribed by Accounting
Principles board ["APB"]Opinion No. 25, "Accounting for Stock Issued to
Employees." The recognition requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company adopted the disclosure requirements on January 1, 1996. SFAS 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. Those transactions must be
accounting for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
This requirement is effective for transactions entered into after December 15,
1995.
[17] 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 March 31, 1996:
Carrying Fair
Amount Value
Long-Term Debt $ 322,952 $ 322,952
Stock Subscription Receivable $ 4,800 $ 4,800
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 April 4, 1996.
17
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
[UNAUDITED]
[18] Subsequent Events
[A] 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 300,000 shares of the Company's common stock and paid cash of $200,000
for this agreement. The Company also entered into two employment agreements
whereby the two individuals were issued a total of 500,000 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 800,000 shares of common stock
and the 300,000 Series C Preferred Stock Options.
[B] 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 400,000 shares
of Company's common stock. A deferred compensation cost of $25,000 was recorded
in April of 1996 for the fair value of these shares.
[C] Loan - On April 23, 1996, the Company received a $150,000 loan from an
individual whereby the Company issued 400,000 shares of the Company's common
stock. The loan was repaid in May of 1996. A deferred financing cost of$25,000
was recorded in April of 1996 for the fair value of these shares.
[D] Exercise of Series C Preferred Options - In May of 1996, 100,000 stock
options were exercised by consultants whereby proceeds of $200,000 were received
by the Company.
.....................
18
<PAGE>
Item 2:
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
The following discussion of the Company's financial condition as of March 31,
1996 and results of operations for the three months ended March 31, 1996 and
1995, includes Bev-Tyme, Inc. and its subsidiaries [collectively, the "Company"]
and should be read in conjunction with the Consolidated Financial Statements and
Notes appearing elsewhere in this 10-QSB.
Business Structure
Bev-Tyme, Inc. ["Bev-Tyme"], is engaged in the business of developing and
marketing beverage products and is also engaged in the business of distributing
and selling beverage and snack products to grocery stores, supermarket chains,
restaurants and corporate cafeterias. In 1995, the Company also commenced
distributing beer and other malt beverages. Because of increased competition in
the "New Age" beverage market and continuing operating losses related to the
sale of its SunSprings(Trademark) 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,
200,000 shares of the Company's common stock valued at $31,250 and options to
purchase 75,000 shares of the Company's common stock.
As a result of the Company's recurring losses from operations, the Company's
auditors believed there was substantial doubt about the Company's ability to
continue as a going concern at December 31, 1995 and issued a going concern
qualification to their report dated March 21, 1996.
Results of Operations
For the three months ended March 31, 1996, the Company had a loss from
operations of $678,427 and a net loss of approximately $700,000 as compared to a
loss from operations of $564,177 and a net loss of approximately $600,000 for
the three months ended March 31, 1995. The primary reason for the increase of
approximately $100,000 in net loss is the Company's reduced gross profit of
approximately $100,000.
The change in the elements of revenues and expenses reflect the Company's shift
to primarily focusing on the distribution of beverage products rather than the
manufacturing and marketing of its SunSprings(Trademark) products.
19
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Results of Operations [Continued]
For the three months ended March 31, 1996, the Company's gross profit was
$485,571 or 20% as compared to $572,395 or 25% in 1995. The change in the gross
profit percentage was attributable to a change in the Company's product mix,
primarily resulting from the beers and malt beverages. The Company intends to
de-emphasize the sale of common beer and increase the focus on the sale of
imported and microbrewed beers. Additionally, the Company liquidated a large
amount of its "closeout" products in 1995 and does not anticipate a large amount
of closeouts in 1996.
Selling, advertising and promotion expense for the three months ended March 31,
1996 and 1995 amounted to $384,492 and $228,312, respectively, and primarily
consisted of salesmen's salaries, commissions and related expenses of the
companies' distribution sales force.
General and administrative expenses for the three months ended March 31, 1996
were $384,492 or 16% of net sales as compared to $228,312 or 10% of net sales
in 1995.
Because of the Company's severe cash shortages and numerous unsuccessful
attempts at finding traditional debt financing, the Company entered into bridge
financing which resulted in a total non-cash financing cost $386,650 in 1995.
This represented the fair value assigned to the Bridge Units issued upon
conversion of the Convertible Bridge Notes. The effective annual interest rate
on these Bridge Loans was approximately 300%.
Interest expense relates primarily to commercial loans on the transportation
equipment.
Liquidity and Capital Resources
For the three months ended March 31, 1996, the Company utilized approximately
$1,150,000 in operating activities. This utilization was primarily attributable
to the net loss of approximately $400,000 and the increase in liabilities of
approximately $600,000.
The Company utilized approximately $200,000 from net investing activities for
the three months ended March 31, 1996. This was primarily attributable to the
acquisition of the net assets of Riverosa for approximately $150,000.
The Company generated $1,493,078 from net financing activities for the three
months ended March 31, 1996. This was primarily attributable to the sale of
common stock for $45,200 and the exercise of Series C Preferred Stock Options
for $300,000 and the collection of the stock subscription for $1,050,000 on the
Series C Preferred Stock Options exercised in 1995.
At March 31, 1996, the Company had a working capital deficit of approximately
$415,000 reflecting primarily the excess of accounts payable, accrued expenses
over cash, accounts receivable and inventory. The Company's cash balance at
December 31, 1995 was $305,035.
For the quarter ended March 31, 1995, the Company utilized $98,000 in operating
activities, utilized $29,323 in investing activities and generated $82,181 in
net financing activities.
20
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
In November and December 1994, the Company borrowed an aggregate of $200,000
from certain lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received two [2] promissory notes [the "Bridge
Notes"]. Certain Bridge Notes are in the aggregate principal amount of $180,000
[the "Principal Bridge Notes"] and the other Bridge Notes are in the aggregate
principal amount equal to $20,000 [the "Convertible Bridge Notes"]. Each of the
Bridge Notes bears interest at the rate of eight percent [8%] per annum. The
Principal Bridge Notes were due and payable upon the earlier of (i) June 15,
1995, or (ii) the closing of the Offering. The Convertible Bridge Notes are due
and payable on December 1, 1995. In addition, each Bridge Lender had the right
to convert a Convertible Bridge Note into a number of units ["Bridge Units"]
equal to the total dollar amount loaned to the Company by such Bridge Lender;
provided, however, that one Bridge Lender may convert its Convertible Bridge
Note into the total dollar amount loaned to the Company plus an additional
50,000 Bridge Units because such Bridge Lender surrendered 1,000,000 warrants
exercisable for 1,000,000 shares of Common Stock. In February 1995, the Bridge
Lenders converted the Convertible Bridge Notes into an aggregate of 250,000
Bridge Units at a conversion price of $.10 per Bridge Unit. The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
The conversion price to the Bridge Lenders is significantly less than the
offering price of the Units offered hereby because of the risk associated with
the repayment of the Bridge Loans. Further, the Company agreed to register such
Bridge Units in the first registration statement filed by the Company following
the date of the loan. The bridge notes were repaid on May 23, 1995, the close of
the Public Offering.
On May 15, 1995, the Company completed a secondary public offering for sale
460,000 units, each consisting of one share of Series C Convertible Preferred
Stock, par value $.0001 per share and two Series C Redeemable Preferred Stock
purchase warrants. Each share of Series A Preferred Stock is convertible at the
option of the holder, at any time after May 15, 1996, into 18 shares of the
Company's common stock. The Series C Warrants entitle the holder to purchase one
share of Series C Preferred Stock at an exercise price of $6.00 per share
through May 15, 2000 and may be redeemed by the Company under certain
conditions. To date, none of the Preferred Stock Warrants have been exercised or
redeemed. The Company realized net proceeds of $1,688,787 after deducting, the
underwriters discount and other costs of the offering.
In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, recorded an expense of $1,076,250. In October 1995,
525,000 Series C Preferred Stock Options were exercised and the Company recorded
a stock subscription receivable of $1,050,000, which was paid in January and
February of 1996.
In November 1995, the Company issued to 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.
21
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
On March 29, 1996, the Company acquired 500,000 shares of convertible Class A
Preferred Stock and 7,000,000 shares of non-convertible Class B Preferred Stock
of Perry's Majestic Beer, Inc. [valued at $2,000,000] in exchange for 400,000
shares of the Company's Series C Preferred Stock and $150,000. The 400,000
shares of Series C Preferred are presented as treasury stock. As of March 31,
1996, $75,000 of cash was paid and the balance of $75,000, which was paid on
April 4, 1996, is reflected as a note payable on the financial statements as of
March 31, 1996. Each share of Class A Preferred Stock may be convertible by the
Company into one [1] share of Common Stock. Each share of Class A Preferred
Stock and Class B Preferred Stock has attached to it the right to vote on all
matters submitted to the Company. On April 11, 1996, Perry's Majestic Beer, Inc.
filed a registration statement on Form SB-2 with the Securities and Exchange
Commission. Minority interest on the balance sheet represents minority
shareholders equity in Perry's.
Also on March 29, 1996, Perry's Majestic Beer, Inc. entered into an agreement to
acquire all of the stock of Riverosa Company, Inc. for $250,000 of which
$150,000 in cash was put into escrow as of March 31, 1996 and a note payable was
issued for $100,000. The note is payable with interest of 8% and is due the
earlier of one year from the date of issuance or the closing of the Perry's
Majestic Beer, Inc.'s initial public offering.
Perry's Majestic Beer, Inc. has filed a registration statement for 300,000 units
at $10.00 per unit. Each unit consists of two shares of common stock and one
Class A Redeemable Common Stock purchase warrant exercisable at $4.00 per share
for a four year period commencing one year from the effective date. The
anticipated net proceeds from this offering are approximately $2,113,000.
On March 31, 1996, Perry's Majestic Beer, Inc. borrowed an aggregate of $150,000
from nine [9] unaffiliated lenders [the "Bridge Lenders"]. In exchange for
making loans to Perry's Majestic Beer, Inc., each Bridge Lender received a
promissory note [the "Bridge Note"]. Each of the Bridge Notes bears interest at
the rate of eight percent [8%] per annum. The Bridge Notes are due an payable
upon the earlier of (i) July 31, 1996 and (ii) the closing of an initial
underwritten public offering of Perry's Majestic Beer, Inc.'s securities.
Perry's Majestic Beer, Inc. intends to use a portion of the proceeds of this
offering to repay the Bridge Lenders. As of March 31, 1996, $90,000 was received
in cash from the bridge loan and $60,000, received April 4, 1996, is reflected
on the financial statements as a note receivable at March 31, 1996. The Bridge
Lenders have the right to receive a total of 3,000,000 Class A Warrants. Perry's
Majestic Beer, Inc. has recorded a deferred financing cost of $1,500,000, which
will be amortized over the life of the bridge loan.
In March of 1996, 150,000 Series C Preferred Options were exercised at $2.00 per
share whereby the Company received proceeds of $300,000.
The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution
business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.
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BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared with the three months ended March 31,
1995
Liquidity and Capital Resources [Continued]
The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those plans change, or the costs or
development of operations prove greater than anticipated, the Company could be
required to modify its operations, liquidate inventory or seek additional
financing. The Company has no current arrangements with respect to such
additional financing, and there can be no assurance that such additional
financing, if available, will be on terms acceptable to the Company.
New Authoritative Accounting Pronouncements
The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. SFAS No.
121 may have a material impact on the Company's financial statements.
The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995. SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity instruments issued to employees as contrasted
to the intrinsic valued based method of accounting prescribed by Accounting
Principles board ["APB"]Opinion No. 25, "Accounting for Stock Issued to
Employees." The recognition requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company adopted the disclosure requirements on January 1, 1996. SFAS 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. Those transactions must be
accounting for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
This requirement is effective for transactions entered into after December 15,
1995.
Impact of Inflation
The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods. Increases in supplies or other
operating costs could adversely affect the Company's operations; however, the
Company believes it could increase prices to offset increases in costs of goods
sold or other operating costs.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB/A to be signed on its
behalf by the undersigned thereunto duly authorized.
BEV-TYME, INC.
/s/ Robert Forst
Robert Forst
Vice President, Chief Financial Officer,
Principal Accounting Officer and Secretary
DATE: MAY 29, 1996
