UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1996 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
incorporation or organization) Identification No.)
134 Morgan Avenue
Brooklyn, New York 11237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (718) 894-4300
----------------------
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 13, 1996, was 9,242,209
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
INDEX
- ------------------------------------------------------------------------------
Page to Page
PART I
Item 1. Financial Statements
Consolidated Balance Sheet - Assets as of June 30, 1996
[Unaudited]................................................. 1
Consolidated Balance Sheet - Liabilities and Stockholders' Equity -
as of June 30, 1996 [Unaudited]............................. 2
Consolidated Statements of Operations for the three and six months
ended June 30, 1996 and 1995 [Unaudited].................... 3
Consolidated Statement of Stockholders' Equity for the six months
ended June 30, 1996 [Unaudited]............................. 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 [Unaudited].................... 5..... 6
Notes to Consolidated Financial Statements [Unaudited]...... 7..... 17
Item 2. Managements' Discussion and Analysis of the Financial
Condition and Results of Operations...................18......22
Signature......................................................23
. . . . . . . . . . . . . . .
<PAGE>
<TABLE>
Item 1. Financial Statements
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
<S> <C>
Assets:
Current Assets:
Cash $ 149,224
Accounts Receivable - Net 863,579
Inventory 939,589
Prepaid Expenses 215,800
Note Receivable 85,000
-----------
Total Current Assets 2,253,192
Property and Equipment - Net 912,973
-----------
Investments [3C] 250,000
Other Assets:
Restricted Cash 5,125
Security Deposits 27,408
Goodwill - Net 2,715,945
Other Assets 183,751
Deferred Financing Costs [9] 1,500,000
-----------
Total Other Assets 4,432,229
Total Assets $ 7,848,394
===========
See Notes to Consolidated Financial Statements.
1
</TABLE>
<PAGE>
<TABLE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996.
[UNAUDITED]
- ------------------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,456,022
Accrued Expenses 235,908
Payroll and Corporate Income Taxes Payable 54,912
Notes Payable 454,934
-----------
Total Current Liabilities 2,201,776
Long-Term Debt:
Notes Payable 389,552
Minority Interest 1,475,000
Commitments and Contingencies [12] --
Stockholders' Equity:
Series C Convertible Preferred Stock - Authorized 5,800,000 Shares,
Par Value of $.0001, 2,252,224 Shares Issued of which 400,000
are Deemed to be Treasury Shares [3C] 225
Common Stock - Authorized 75,000,000 Shares, 9,242,209 Shares
Issued and Outstanding, Par Value of $.0001 923
Additional Paid-in Capital 18,183,039
Accumulated [Deficit] (10,411,308)
Total 7,772,879
Less:Treasury Stock [3C] 2,000,000
Deferred Compensation 1,990,813
Total Stockholders' Equity 3,782,066
Total Liabilities and Stockholders' Equity $ 7,848,394
===========
See Notes to Consolidated Financial Statements.
2
</TABLE>
<PAGE>
<TABLE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
-------- --------
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales - Net $ 5,023,796 $ 3,285,933 $7,421,705 $ 5,598,323
Cost of Goods Sold 3,952,709 2,785,851 5,865,046 4,525,846
----------- ----------- ---------- -----------
Gross Profit 1,071,087 500,082 1,556,659 1,072,477
----------- ----------- ---------- -----------
Selling, General and Administrative
Expenses:
Selling, Advertising and Promotion335,633 305,713 568,302 534,025
Amortization of Goodwill 104,459 86,600 208,918 171,600
General and Administrative Expenses723,487 681,877 1,261,358 1,118,487
Amortization of Financing Costs -- -- -- 386,650
Amortization of Consulting Services408,187 -- 697,187 --
------- ----------- ---------- -----------
Total Selling, General and
Administrative Expenses 1,571,766 1,074,190 2,735,765 2,210,762
----------- ----------- ---------- -----------
[Loss] from Operations (500,679) (574,108) (1,179,106) (1,138,285)
----------- ----------- ---------- -----------
Other [Income] Expense:
Interest Expense 12,853 14,419 23,156 22,297
Interest Income (125) -- (125) --
----------- ----------- ---------- -----------
Other Expense - Net 12,728 14,419 23,031 22,297
----------- ----------- ---------- -----------
[Loss] Before Provision for
Income Taxes (513,407) (588,527) (1,202,137) (1,160,582)
Provision for Income Taxes -- -- -- --
----------- ----------- ---------- -----------
Net [Loss] $ (513,407) $ (588,527) $(1,202,137) $(1,160,582)
=========== =========== =========== ===========
Net [Loss] Per Share $ (.06) $ (.13) $ (.15) $ (.28)
=========== =========== ========== ===========
Weighted Average Number
of Shares 9,242,209 4,387,759 8,109,791 4,078,367
=========== =========== ========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
- ------------------------------------------------------------------------------
Series C ConvertibAdditional Deferred Total
Common Stock Preferred Stock Paid-in AccumulateTreasury CompensatiStockholders'
Shares Amount Shares Amount* Capital [Deficit] Stock Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 4,587,$59 458 1,352,224$ 135 $13,361,844 $(8,938,721$ -- $(1,155,000)3,268,716
Stock Issuance for Acquisition of
Perry's Majestic Beer [3C] -- -- 400,000 40 1,999,960 -- (2,000,000) -- --
Exercise of Stock Options for Series C
Preferred Stock - March 1996 [10H-- -- 500,000 50 999,950 -- -- -- 1,000,000
Common Stock Dividend to Holders
of Series C Preferred Stock -
January 1996 [10I] 2,704,450 270 -- -- 270,180 (270,450) -- -- --
Consulting Agreement - April 1996
[13D] 400,000 40 -- -- 24,960 -- -- (25,000) --
Consulting Agreement - April 1996
[10J] 350,000 35 -- -- 32,965 -- -- (33,000) --
Financing Costs [10K] 400,000 40 -- -- 24,960 -- -- (25,000) --
Stock Issued for Distributor Rights
in April 1996 [3D] 300,000 30 -- -- 18,270 -- -- -- 18,300
Stock Issued in Exchange for Services -
April 1996 [3D] 500,000 50 -- -- 399,950 -- -- (400,000) --
Issuance of Series C Preferred Stock
Options - April 1996 [3D] -- -- -- -- 450,000 -- -- (450,000) --
Options Issued - Deferred Consulting
Costs - February 1996 [8E] -- -- -- -- 600,000 -- -- (600,000) --
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] 9,242,209 $ 923 2,252,224$ 225 $18,183,039$(10,411,30$)(2,000,0$0)(1,990$813)3,782,066
========= ======= ================ ======================= ===================== =========
* 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
</TABLE>
<PAGE>
<TABLE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
June 30,
1 9 9 6 1 9 9 5
<S> <C> <C>
------- -------
Operating Activities:
Net [Loss] $(1,202,137) $(1,160,582)
----------- -----------
Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation 64,500 45,800
Amortization of Intangibles -- 386,600
Amortization of Goodwill 208,918 171,600
Compensation Expense on Issuance of Options 697,187 --
Changes in Assets and Liabilities:
[Increase] Decrease in Assets:
Accounts Receivable (243,709) (128,240)
Inventory (158,651) (284,460)
Prepaid Expenses (61,845) 167,573
Prepaid Offering Cost -- 71,182
Other Assets (159,364) --
Increase [Decrease] in Liabilities:
Accounts Payable and Accrued Expenses (779,672) 379,603
Payroll and Corporate Income Taxes Payable (199,787) --
---------- -----------
Total Adjustments (632,423) 809,708
---------- -----------
Net Cash - Operating Activities - Forward (1,834,560) (350,874)
---------- -----------
Investing Activities:
Acquisition Costs -- (161,060)
Equipment Acquisitions (167,107) --
Partial Payment on Riverosa Acquisition [3C] (150,000) --
Acquisition of Subsidiary - Net of Cash Acquired -- (526,562)
---------- -----------
Net Cash - Investing Activities - Forward (317,107) (687,622)
---------- -----------
Financing Activities:
Proceeds from Bridge Loan 90,000 --
[Acquisition] Redemption of a Certificate of Deposit -- --
Proceeds from Loan Payable 138,750 (88,381)
Payments of Capital Lease Obligations (31,732) (4,216)
Payments of Note Payable - Related Parties -- --
Proceeds of Note Payable - Related Parties -- --
Payment of Bridge Loan Obligation -- (180,000)
Proceeds from Sale of Common Stock 45,200 --
Exercise of Options and Proceeds from Stock Subscription 2,350,000 --
Payments of Notes Payable (186,041) (12,918)
Repayment of Shareholder - Loan Payable (259,000) --
Proceeds of Public Offering - Net of Offering Costs -- 1,688,787
---------- -----------
Net Cash - Financing Activities - Forward $2,147,177 $ 1,403,272
See Notes to Consolidated Financial Statements.
5
<PAGE>
</TABLE>
<TABLE>
BEV-TYME, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
June 30,
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
Net Cash - Operating Activities - Forwarded $(1,834,560) $ (350,874)
Net Cash - Investing Activities - Forwarded (317,107) (687,622)
Net Cash - Financing Activities - Forwarded 2,147,177 1,403,272
---------- -----------
Net [Decrease] in Cash (4,490) 364,776
Cash - Beginning of Periods 153,714 68,377
---------- -----------
Cash - End of Periods $ 149,224 $ 433,153
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid for the periods for:
Interest $ 23,156 $ 22,297
Income Taxes $ -- $ --
See Notes to Consolidated Financial Statements.
6
</TABLE>
<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 which are necessary in order to make
the interim financial statements not misleading. 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 June 30, 1996, 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.
7
<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 June 30, 1996 was $1,046,210. 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 June 30, 1996, the Company's uninsured cash
balance totaled $49,224.
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 June 30, 1996, 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 six months ended June 30,
1996 and 1995, the Company purchased inventory from two suppliers which
comprised approximately 23% and 9%, 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.
8
<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.
["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. Perry's filed a
registration statement for 583,335 shares of common stock at $6.00 per share.
The proceeds from this offering were approximately $2,500,000. Minority interest
on the balance sheet represents minority shareholders equity in Perry's.
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 is payable with interest of 8% and is due the earlier of one year from the
date of issuance or the closing of Perry's initial public offering.
9
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[UNAUDITED]
- ------------------------------------------------------------------------------
[3] Acquisition [Continued]
[D] 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 500,000 shares of common stock
and the 300,000 Series C Preferred Stock Options.
[4] Inventories
Inventories as of June 30, 1996 consisted of the following:
Raw Materials $ 17,749
Finished Goods 921,840
----------
Total $ 939,589
----- ==========
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 June 30,
1996 are as follows:
Warehouse Equipment $ 239,256
Office Equipment 672,734
Leasehold Improvements 41,046
Transportation Equipment 1,208,858
----------
Total - At Cost 2,161,894
Less: Accumulated Depreciation and Amortization1,248,921
Net $ 912,973
--- ==========
Depreciation and amortization for the six months ended June 30, 1996 and 1995
was $64,500 and $45,800, respectively.
[6] Debt
Debt as of June 30, 1996 consisted of the following:
Bridge Notes - [Note 9] $ 150,000
Note Payable 328,501
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] 365,985
---------
Total 844,486
Less: Current Portion 454,934
Non-Current Portion $ 389,552
------------------- =========
10
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[UNAUDITED]
- ------------------------------------------------------------------------------
[6] Debt [Continued]
[A] Collateralized by transportation equipment.
Maturities of the bank notes and loan payable as of June 30, 1996 are as
follows:
June 30,
1996 $ 454,934
1997 163,188
1998 104,872
1999 84,660
2000 36,832
---------
Total $ 844,486
----- =========
[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] 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.
[C] 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.
[D] 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.
11
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[UNAUDITED]
- ------------------------------------------------------------------------------
[8] Stock Option Plans, Stock Options and Warrants [Continued]
[E] Consulting Agreement - In February of 1996, the Company issued options to
purchase 300,000 shares of the Company's Series C Preferred Stock at an exercise
price of $2.00 per share to a consultant to assist, the Company in connection
with acquisitions, divestitures, joint ventures, and other strategic business
initiatives. The Company recorded a deferred consulting cost of $600,000, which
represents the difference between the option price and the fair value of the
preferred stock at the time of grant to account for these future services. For
the six months ended June 30, 1996, the Company recorded compensation expense of
$37,500.
[F] Directors' Stock Options - 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 six months ended June 30, 1996, the Company recorded
compensation expense of $578,000.
[G] Exercise of Series C 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. In the second quarter of 1996, a total of 350,000
Series C stock options were exercised by consultants whereby proceeds of
$700,000 were received by the Company.
[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 were 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 borrowed an aggregate of $150,000 from nine [9]
unaffiliated lenders [the "Bridge Lenders"]. In exchange for making loans to
Perry's, 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 repaid at the closing of the public offering of Perry's
securities in August of 1996.
12
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[UNAUDITED]
- ------------------------------------------------------------------------------
[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.
[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.
13
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[UNAUDITED]
- ------------------------------------------------------------------------------
[10] Stockholders' Equity [Continued]
[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.
[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. In the second quarter of 1996, a total of 350,000 Series C
stock options were exercised by consultants whereby proceeds of $700,000 were
received by the Company.
[I] 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.
[J] 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. Compensation expense of $2,062
was recorded for the six months ended June 30, 1996.
[K] 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 and expensed for the fair value of these shares in the quarter
ended June 30, 1996.
[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.
14
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[UNAUDITED]
- ------------------------------------------------------------------------------
[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.
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.
[D] 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. Compensation expense of
$1,500 was recorded for the six months ended June 30, 1996.
[14] Going Concern
The Company incurred net losses of $3,826,230 and $1,192,542, respectively, 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.
15
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
[UNAUDITED]
- ------------------------------------------------------------------------------
[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.
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 June 30, 1996:
Carrying Fair
Amount Value
Long-Term Debt $ 389,552 $ 389,552
Stock Subscription Receivable $ -- $ --
16
<PAGE>
BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
[UNAUDITED]
- ------------------------------------------------------------------------------
[17] 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.
. . . . . . . . . . . . . . . . . . .
17
<PAGE>
Item 2:
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
The following discussion of the Company's financial condition as of June 30,
1996 and results of operations for the six months ended June 30, 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(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,
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 six months ended June 30, 1996, the Company had a loss from operations
of $1,179,106 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.
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 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
$1,261.358 or 17% of net sales as compared to $1,118,487 or 20% 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 six months ended June 30, 1996, the Company utilized approximately
$1,835,000 in operating activities. This utilization was primarily attributable
to the net loss of approximately $1,200,000 and the decrease in liabilities of
approximately $980,000.
The Company utilized approximately $317,000 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
$51,416 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 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.
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. In August of 1996, Perry's filed a registration statement on Form SB-2
was declared effective by the Securities and Exchange Commission and the Company
realized net proceeds of approximately $2,548,009. Minority interest on the
balance sheet represents minority shareholders equity in Perry's.
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 the 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.
The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution
business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.
The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those plans change, or the costs or
development of operations prove greater than anticipated, the Company could be
required to modify its operations, liquidate inventory or seek additional
financing. The Company has no current arrangements with respect to such
additional financing, and there can be no assurance that such additional
financing, if available, will be on terms acceptable to the Company.
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. 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.
22
<PAGE>
SIGNATURE
- ------------------------------------------------------------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB to be signed on its behalf
by the undersigned thereon duly authorized.
BEV-TYME, INC.
By: /s/ Robert J. Forst
Robert J. Forst
Chief Financial Officer
August 16, 1996
23
<PAGE>
SIGNATURE
- ------------------------------------------------------------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB to be signed on its behalf
by the undersigned thereon duly authorized.
BEV-TYME, INC.
By:
Robert J. Forst
Chief Financial Officer
August 16, 1996
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
this schedule contains summary financial informatrion extracted from the
consoliodated balance sheet and ythe consolidated statements of operations
and is qualfied in its entiret by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-END> jun-30-1996
<CASH> 149,224
<SECURITIES> 0
<RECEIVABLES> 863,579
<ALLOWANCES> 0
<INVENTORY> 939,589
<CURRENT-ASSETS> 2,253,192
<PP&E> 912,973
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,848,394
<CURRENT-LIABILITIES> 2,201,776
<BONDS> 0
0
225
<COMMON> 923
<OTHER-SE> 3,780,918
<TOTAL-LIABILITY-AND-EQUITY> 7,848,394
<SALES> 5,023,796
<TOTAL-REVENUES> 5,023,796
<CGS> 3,952,709
<TOTAL-COSTS> 1,571,766
<OTHER-EXPENSES> 125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,853)
<INCOME-PRETAX> (513,407)
<INCOME-TAX> 0
<INCOME-CONTINUING> (513,407)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (513,407)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
