As
filed with the Securities and Exchange Commission on May 2,
2008.
SEC
File No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
______________________
PURPLE
BEVERAGE COMPANY, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
2080
|
01-0670370
|
(State
or jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer Identification No.)
|
450
East Las Olas Blvd., Suite 830
Fort
Lauderdale, Florida 33301
(954)
462-8757
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Theodore
Farnsworth
Purple
Beverage Company, Inc.
450
East Las Olas Boulevard, Suite 830
Fort
Lauderdale, Florida 33301
(954)
462-8757
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
of all communications, including communications sent to agent for service,
should be sent to:
Harvey
J. Kesner, Esq.
Haynes
and Boone, LLP
153
East 53rd Street, Suite 4900
New
York, New York 10022
Tel
(212) 659-7300
Fax
(212) 918-8989
|
Randolf
W. Katz, Esq.
Bryan
Cave LLP
1900
Main Street, Suite 700
Irvine,
California 92614
Tel
(949) 223-7000
Fax
(949) 223-7100
|
Approximate
date of commencement of proposed sale to the public:
From
time to time after this Registration Statement becomes effective.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check
the
following box:
x
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
Large
accelerated filer
o
|
Accelerated
filed
o
|
|
|
Non-accelerated
filer
o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
x
|
CALCULATION
OF REGISTRATION FEE
TITLE OF EACH
CLASS OF SECURITIES
TO BE REGISTERED
|
|
AMOUNT TO BE
REGISTERED (1)
|
|
PROPOSED MAXIMUM
AGGREGATE OFFERING
PRICE
|
|
AMOUNT OF
REGISTRATION
FEE
|
|
Common
Stock, $.001 par value
|
|
|
4,463,235
|
|
$
|
11,872,205
|
(2)
|
$
|
466.58
|
|
Common
Stock underlying warrants
|
|
|
1,421,650
|
|
$
|
3,781,589
|
(3)
|
$
|
148.62
|
|
Total
|
|
|
5,884,885
|
|
|
15,653,794
|
|
$
|
615.20
|
|
(1)
|
Pursuant
to Rule 416 under the Securities Act, the shares of common stock
offered
hereby also include an indeterminate number of additional shares
of common
stock as may from time to time become issuable by reason of anti-dilution
provisions, stock splits, stock dividends, recapitalizations or other
similar transactions.
|
(2)
|
With
respect to the shares of common stock offered by the selling stockholders
named herein, estimated at $2.66 per share, the average of the high
and
low prices of the common stock as reported on the OTC Bulletin Board
regulated quotation service on April 30, 2008, for the purpose of
calculating the registration fee in accordance with Rule 457(c) under
the
Securities Act.
|
(3)
|
Estimated
at $2.66 per share, the average of the high and low prices of the
common
stock as reported on the OTC Bulletin Board regulated quotation service
on
April 30, 2008, for the purpose of calculating the registration fee
in
accordance with Rule 457(g)(3) under the Securities Act.
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and we are not soliciting an offer to buy these securities
in
any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED MAY 2, 2008
PRELIMINARY
PROSPECTUS
5,884,885
Shares
Purple
Beverage Company, Inc.
Common
Stock
_________________
This
prospectus relates to the sale by the selling stockholders identified in this
prospectus of up to 5,884,885 shares of our common stock, which includes (i)
4,463,235 shares issued to investors in private placements and through the
exercise of warrants and (ii) 1,421,650 shares issuable upon the exercise of
warrants with an exercise price of $2.00 per share. All of these shares of
our
common stock are being offered for resale by the selling
stockholders.
The
prices at which the selling stockholders may sell shares will be determined
by
the prevailing market price for the shares or in negotiated transactions. We
will not receive any proceeds from the sale of these shares by the selling
stockholders. However, we will receive proceeds from the exercise of the
warrants if they are exercised for cash by the selling
stockholders.
We
will
bear all costs relating to the registration of these shares of our common stock,
other than any selling stockholders’ legal or accounting costs or
commissions.
Our
common stock is quoted on the regulated quotation service of the OTC Bulletin
Board under the symbol “PPBV.OB”. The last reported sale price of our common
stock as reported by the OTC Bulletin Board on May 1, 2008, was $2.72 per
share.
Investing
in our common stock is highly speculative and involves a high degree of risk.
You should carefully consider the risks and uncertainties described under the
heading “Risk Factors” beginning on page 3 of this prospectus before making
a decision to purchase our common stock.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is
,
2008
TABLE
OF CONTENTS
|
Page
|
Prospectus
Summary
|
1
|
Risk
Factors
|
3
|
Special
Note Regarding Forward Looking Statements
|
12
|
Use
of Proceeds
|
12
|
Market
for Our Common Stock and Related Stockholder Matters
|
12
|
Dividend
Policy
|
12
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
13
|
Business
|
18
|
Management
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23
|
Executive
Compensation
|
24
|
Certain
Relationships and Related Transactions
|
26
|
Security
Ownership of Certain Beneficial Owners and Management
|
26
|
Selling
Stockholders
|
28
|
Description
of Securities
|
35
|
Plan
of Distribution
|
40
|
Legal
Matters
|
41
|
Experts
|
41
|
Where
You Can Find Additional Information
|
41
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Index
to Financial Statements
|
F-1
|
You
should rely only on the information contained in this prospectus. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on
it. We are not making an offer to sell these securities in any jurisdiction
where an offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate only as of the date on the front cover
of this prospectus. Our business, financial condition, results of operations
and
prospects may have changed since that date.
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus.
It may not contain all the information that may be important to you. You should
read this entire prospectus carefully, including the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis or Plan of Operation,” and
our historical financial statements and related notes included elsewhere in
this
prospectus. In this prospectus, unless the context requires otherwise,
references to the “Company,” “we,” “our” and “us” for periods prior to the
closing of our reverse merger on December 12, 2007, refer to Venture Beverage
Company, a private Nevada corporation, and references to the “Company,” “we,”
“our” and “us” for periods subsequent to the closing of the reverse merger on
December 12, 2007, refer to Purple Beverage Company, Inc., a publicly traded
company.
Overview
We
develop, market, and distribute unique beverage brands and products that are
positioned as “better for you” beverages and are targeted to the growing
category of “new age/functional” beverage consumers. We own the rights to the
“
Purple
™”
brand,
a new functional beverage that contains a high level of anti-oxidants that
are
found in seven different natural fruit juices that combine to make our product.
We launched
Purple
in the
summer of 2007.
Our
proprietary brand is directed to consumers who prefer new age beverage products
to traditional carbonated soft drinks such as Coca-Cola®, Pepsi® and 7-Up®. The
new age beverage category is attractive to us because it is a growth segment
of
the beverage market and we believe that consumers will pay higher prices for
these products than carbonated soft drinks.
Our
principal executive office is located at 450 East Las Olas Boulevard, Suite
830,
Fort Lauderdale, Florida 33301 and our telephone number is (954) 462-8757.
Our
website address is http://www.drinkpurple.com. Information on or accessed
through our website is not incorporated into this prospectus and is not a part
of this prospectus.
Our
History
We
were
formed in the State of Nevada on April 8, 2002 as an independent film production
company. On December 12, 2007, Purple Acquisition Corp., a newly formed
wholly-owned subsidiary of ours, merged with and into Venture Beverage Company,
a private corporation. Upon closing of the merger, Venture Beverage Company
merged with and into us and we succeeded to the business of Venture Beverage
Company as our sole line of business. In connection with the merger, we changed
our name to Purple Beverage Company, Inc.
The
Offering
Common
stock offered by the selling stockholders:
|
|
5,884,885
shares, consisting of 4,463,235 shares issued to investors in private
placements and through the exercise of warrants and 1,421,650 shares
issuable upon the exercise of outstanding warrants.
|
|
|
|
Offering
price:
|
|
Market
price or privately negotiated prices.
|
|
|
|
Common
stock outstanding:
|
|
58,940,649
shares as of May 1, 2008, and after this offering, assuming that
no
warrants described herein are exercised.
|
|
|
|
Use
of proceeds:
|
|
We
will not receive any proceeds from the sale of the shares of common
stock
but may receive proceeds from the exercise of the warrants which
proceeds
will be used for working capital purposes.
|
|
|
|
OTC
Bulletin Board symbol:
|
|
PPBV.OB
|
Risk
Factors:
|
|
You
should carefully consider the information set forth in this prospectus
and, in particular, the specific factors set forth in the “Risk Factors”
section beginning on page 3 of this prospectus before deciding
whether or not to invest in shares of our common
stock.
|
The
number of shares of common stock outstanding after this offering
excludes:
|
·
|
4,422,850
shares of common stock issuable upon the exercise of currently outstanding
warrants with exercise prices ranging from $2.00 to $3.50 per share
and
having a weighted average exercise price of $2.16 per share;
|
|
·
|
19,330,112 shares
of common stock issuable upon the exercise of currently outstanding
options with exercise prices ranging from $0.01 to $3.10 and
having a weighted average exercise price of $0.94 per
share;
|
|
·
|
180,000 shares
of common stock available for future issuance under our 2007 Incentive
Plan; and
|
|
·
|
250,000
shares of common stock issuable upon the conversion of a $250,000
convertible term note.
|
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Before investing in our
common stock you should carefully consider the following risks, together with
the financial and other information contained in this prospectus. If any of
the
following risks actually occurs, our business, prospects, financial condition
and results of operations could be adversely affected. In that case, the trading
price of our common stock would likely decline and you may lose all or a part
of
your investment.
Risks
Relating to Our Business
Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.
We
have a
relatively limited operating history and no history as a public reporting
company. Such limited operating history and the unpredictability of the beverage
industry makes it difficult for investors to evaluate our businesses and future
operating results. An investor in our securities must consider the risks,
uncertainties, and difficulties frequently encountered by companies in new
and
rapidly evolving markets. The risks and difficulties we face include challenges
in accurate financial planning as a result of limited historical data and the
uncertainties resulting from having had a relatively limited time period in
which to implement and evaluate our business strategies as compared to older
companies with longer operating histories.
Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern, which may hinder our ability to obtain future
financing.
In
their
report dated December 3, 2007, our registered public accounting firm stated
that
our financial statements for the year ended September 30, 2007 were prepared
assuming that we would continue as a going concern, and that they have
substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is subject to our ability to generate a profit,
as we have experienced net operating losses since inception. Our continued
net
operating losses and our auditors’ doubts may hinder our ability to secure
financing in the future and our efforts to continue as a going concern may
not
prove successful.
We
may need additional financing to execute our business plan.
The
revenues from the sale of our beverage products and the projected revenues
from
these products are not adequate to support our expansion and product development
programs. We will need substantial additional funds to:
|
·
|
effectuate
our business plan; expand our product
line;
|
|
·
|
obtain
related regulatory approvals;
|
|
·
|
file,
prosecute, defend and enforce our intellectual property
rights;
|
|
·
|
and
produce and market our products.
|
We
will
seek additional funds through public or private equity or debt financing,
strategic transactions and other sources.
There
are
no assurances that future funding will be available on favorable terms or at
all. If additional funding is not obtained, we will need to reduce, defer or
cancel development programs, planned initiatives, or overhead expenditures
to
the extent necessary. The failure to fund our capital requirements could have
a
material adverse effect on our business, financial condition and results of
operations. Moreover, the sale of additional equity securities to raise
financing could result in additional dilution to our stockholders and the
incurrence of indebtedness would result in increased debt service obligations
that could result in operating and financing covenants that would restrict
our
operations.
The
lack of any significant market in future periods will adversely affect our
ability to increase our revenues and our margins.
A
key
element to our business model is the expansion of the distribution of our
proprietary brand. We face significant competition from other new age beverage
companies, the majority of which have greater brand recognition, a longer
operating history, and greater financial resources than we do. We cannot assure
you that we will ever be successful in developing a meaningful market for our
proprietary brand. Our inability to create demand in the marketplace for our
proprietary product will prevent us, in future periods, from both increasing
our
revenues from sales attributable to our proprietary product as well as
increasing our margins on our sales.
Increased
competition could hurt our business.
The
beverage industry is highly competitive. The principal areas of competition
are
pricing, packaging, development of new products and flavors, and marketing
campaigns. Our products compete with a wide range of drinks produced by a
relatively large number of manufacturers, most of which have substantially
greater financial, marketing, and distribution resources than we do.
Important
factors affecting our ability to compete successfully include:
|
·
|
the
taste and flavor of products; trade and consumer
promotions;
|
|
·
|
rapid
and effective development of new, unique cutting-edge
products;
|
|
·
|
attractive
and different packaging;
|
|
·
|
branded
product advertising; and
|
Our
product competes with all liquid refreshments and with products of much larger
and substantially better financed competitors, including the products of
numerous nationally and internationally known producers such as The Coca-Cola
Company, PepsiCo Inc., Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods Inc.,
Nestle Beverage Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc.
We
also compete with companies that are smaller or primarily local in operation
and
with private label brands such as those carried by grocery store chains,
convenience store chains and club stores. There can be no assurance that we
will
not encounter difficulties in maintaining our current revenues or market share
or position due to competition in the beverage industry. If our revenues
decline, our business, financial condition, and results of operations could
be
adversely affected.
Change
in consumer preferences may reduce demand for our product.
Consumers
are seeking greater variety in their beverages. Our future success will depend,
in part, upon our continued ability to develop and introduce different and
innovative beverages. In order to retain and expand our market share, we must
continue to develop and introduce different and innovative beverages and be
competitive in the areas of quality and health, although there can be no
assurance of our ability to do so. There is no assurance that consumers will
continue to purchase our product in the future. Additionally, our product is
considered a premium product, and to maintain market share during recessionary
periods, we may have to reduce profit margins which would adversely affect
our
results of operations. Product lifecycles for our beverage brand and/or product
and/or packages may be limited to a few years before consumers’ preferences
change. The beverage industry is subject to changing consumer preferences,
and
shifts in consumer preferences may adversely affect us if we misjudge such
preferences. We may be unable to achieve volume growth through product and
packaging initiatives. We also may be unable to penetrate new markets. If our
revenues decline, our business, financial condition, and results of operations
will be adversely affected.
There
is
increasing awareness and concern for the health consequences of obesity. Our
product contains sugar naturally occurring from a blend of seven natural fruit
juices. Since we do not offer a diet beverage, this could affect our
profitability.
We
rely on bottlers and other contract packers to manufacture our products. If
we
are unable to maintain good relationships with our bottlers and contract packers
and/or their ability to manufacture our products becomes constrained or
unavailable to us, our business could suffer.
We
do not
directly manufacture our product, but instead outsource such manufacturing
to
bottlers and other contract packers. Although our production arrangements are
generally of short duration or are terminable upon request, in the event of
a
disruption or delay, we may be unable to procure alternative packing facilities
at commercially reasonable rates and/or within a reasonably short time period.
In addition, there are limited packing facilities in the United States with
adequate capacity and/or suitable equipment for our product.
Increases
in cost or shortages of raw materials or increases in costs of co-packing could
harm our business.
The
principal raw materials used by us are glass bottles, as well as fruit pulp
and
fruit juice concentrates, the costs and availability of which are subject to
fluctuations. Due to the consolidations that have taken place in the glass
industry over the past few years, the prices of glass bottles continue to
increase. The prices of fruit pulp and certain juice concentrates, including
apple, increased in 2006 and certain of these ingredients continued to increase
in 2007. These increased costs, together with increased costs primarily of
energy, gas and freight, resulted in increases in our product costs, which
are
ongoing and are expected to continue to exert pressure on our gross margins
in
2007. In addition, certain of our co-pack arrangements allow such co-packers
to
increase their charges based on certain of their own cost increases. We are
uncertain whether the prices of any of the above or any other raw materials
or
ingredients will continue to rise in the future and whether we will be able
to
pass any of such increases on to our customers.
We
may
not accurately estimate the demand for our products, as our ability to do so
may
be imprecise, particularly since
Purple
is a new
product, and may be less precise during periods of rapid growth, particularly
in
new markets. If we materially underestimate the demand for our product or are
unable to secure sufficient ingredients or raw materials including, but not
limited to, glass bottles, labels, fruit pulp concentrates, fruit juice
concentrates or packing arrangements, we might not be able to satisfy the demand
on a short-term basis. Moreover, industry-wide shortages of certain fruit-pulp
and fruit-juice concentrates have been and could, from time to time in the
future, be experienced, which could interfere with and/or delay production
of
our product and could have a material adverse effect on our business and
financial results. We do not use hedging agreements or alternative instruments
to manage this risk.
The
costs of packaging supplies are subject to price increases from time to time
and
we may be unable to pass all or some of such increased costs on to our
customers.
The
majority of our packaging supplies contracts allow our suppliers to alter the
costs they charge us for packaging supplies based on changes in the costs of
the
underlying commodities that are used to produce those packaging supplies. These
changes in the prices we pay for our packaging supplies occur at certain
predetermined times that vary by product and supplier. Accordingly, we bear
the
risk of increases in the costs of these packaging supplies, including the
underlying costs of the commodities that comprise these packaging supplies.
We
do not use derivative instruments to manage this risk. If the costs of these
packaging supplies increase, we may be unable to pass these costs along to
our
customers through corresponding adjustments to the prices we charge, which
could
have a material adverse effect on our results of operations.
We
rely upon our on-going relationships with our key concentrate suppliers. If
we
are unable to source our concentrates on acceptable terms from our key
suppliers, we could suffer disruptions to our business.
We
do not
have certain of our concentrates readily available to us, and we may be unable
to obtain these concentrates from alternative suppliers on short notice.
Industry-wide shortages of certain fruit-pulp and juice concentrates have been
and could be, from time to time in the future, experienced, which could
interfere with and/or delay production of our product. If we have to replace
a
concentrate supplier, we could experience temporary disruptions in our ability
to deliver our product to our customers, which could have a material adverse
effect on our results of operations.
Our
intellectual property rights are critical to our success and the loss of such
rights could materially adversely affect our business.
We
own
trademarks that are very important to our business. We regard our trademarks,
or
similar intellectual property, as critical to our success and attempt to protect
such property with registered and common law trademarks, restrictions on
disclosure, and other actions to prevent infringement. Product packages,
mechanical designs, and artwork are important to our success, and we take action
to protect against imitation of our packaging and trade dress and to protect
our
trademarks as necessary. However, there can be no assurance that other
third-parties will not infringe or misappropriate our trademarks and similar
proprietary rights. If we lose some or all of our intellectual property rights,
our business may be materially adversely affected.
Significant
changes in government regulation may hinder sales.
The
production, distribution and sale in the United States of our products is
subject to the Federal Food, Drug and Cosmetic Act and various other federal,
state, and local statutes and regulations applicable to the production,
transportation, sale, safety, advertising, labeling, and ingredients of our
product. New statutes and regulations may also be instituted in the future.
If a
regulatory authority finds that a current or future product or production run
is
not in compliance with any of these regulations, we may be fined, or our product
may have to be recalled and/or reformulated and/or repackaged, thus adversely
affecting our financial condition and operations.
If
we are unable to maintain brand image or product quality, or if we encounter
product recalls, our business may suffer.
Our
success depends on our ability to build and maintain brand image for our
products. We have no assurance that our advertising, marketing, and promotional
programs will have the desired impact on our products’ brand image and on
consumer preferences. Product quality issues, real or imagined, or allegations
of product contamination, even if fake or unfounded, could tarnish the image
of
the affected brand and may cause consumers to choose other products. We may
be
required from time to time to recall products entirely or from specific
co-packers, markets, or batches. Product recalls could adversely affect our
profitability and our brand image. We do not maintain recall insurance at this
time.
While
we
have to-date not experienced any credible product liability litigation, there
is
no assurance that we will not experience such litigation in the future. In
the
event we were to experience product liability claims or a product recall, our
financial condition and business operations could be materially adversely
affected.
If
we do not maintain sufficient inventory levels or if we are unable to deliver
our products to our customers in sufficient quantities, or if our retailer’s
inventory levels are too high, our operating results will be adversely affected.
If
we do
not accurately anticipate the future demand for a particular product or the
time
it will take to obtain new inventory, our inventory levels will not be
appropriate and our results of operations may be negatively impacted. If we
fail
to meet our delivery schedules, we could damage our relationships with
distributors and/or retailers, increase our shipping costs or cause sales
opportunities to be delayed or lost. In order to be able to deliver our products
on a timely basis, we need to maintain adequate inventory levels of the desired
products. If the inventory of our products held by our distributors and/or
retailers is too high, they will not place orders for additional products,
which
would unfavorably impact our future sales and adversely affect our operating
results.
If
we are not able to retain the full-time services of senior management, there
may
be an adverse effect on our operations and/or our operating performance until
we
find suitable replacements.
Our
business is dependent, to a large extent, upon the services of our senior
management. We do not maintain key person life insurance for any members of
our
senior management at this time. We currently have a three year employment
agreement with Theodore Farnsworth, our chief executive officer and president,
and an at-will employment agreement with Michael Wallace, our chief financial
officer. The loss of services of either of these persons, or any other key
members of our senior management, could adversely affect our business until
suitable replacements can be found. There may be a limited number of personnel
with the requisite skills to serve in these positions, and we may be unable
to
locate or employ qualified personnel on acceptable terms.
Weather
could adversely affect our supply chain and demand for our products.
With
regard to fruit juice and natural flavors, the beverage industry is subject
to
variability of weather conditions, which may result in higher prices and/or
the
non-availability of any of such items. Sales of our products may also be
influenced to some extent by weather conditions in the markets in which we
operate. Weather conditions may influence consumer demand for certain of our
beverages, which could have an adverse effect on our results of operations.
We
rely on distributors to sell our products. Any delays in delivery or poor
handling by distributors and third-party transport operators may affect our
sales and damage our reputation.
We
rely
on distributors for the distribution of our product pursuant to a series of
exclusive territory, multi-year agreements. The distribution service provided
by
these distributors could be suspended and could cause interruption to the supply
of our product to retailers in the case of unforeseen events. Delivery
disruptions may occur for various reasons beyond our control, including poor
handling by distributors or third-party transport operators, transportation
bottlenecks, natural disasters and labor strikes, and could lead to delayed
or
lost transportation seasons. Poor handing by distributors and third-party
transport operators could also result in damage to our products. If our products
are not delivered to retailers on time, or are delivered damaged, we could
lose
business and our reputation could be harmed.
Further,
under certain circumstances, the termination or non-renewal of any of such
agreements could have a material adverse effect upon our sales and gross
profits, as well as potentially subjecting us to the payment of material amounts
of funds to our then-former distributors.
Our
results of operations may fluctuate due to seasonality.
Our
sales
are subject to seasonality. For example, we typically experience higher sales
in
summer time in coastal cities while sales remain constant throughout the entire
year in some inland cities. In general, we believe our sales will be higher
in
the second and third quarter of the year when the weather is hot and dry, and
lower in the fourth and first quarter of the year when the weather is cold
and
wet. Sales peak during the months from June to September. Sales can also
fluctuate during the course of a financial year for a number of other reasons,
including the timing of advertising and promotional campaigns. As a result
of
these reasons, our operating results may fluctuate. In addition, the seasonality
of our results may be affected by other unforeseen circumstances, such as
production interruptions. Due to these fluctuations, comparison of sales and
operating results between the same periods within a single year, or between
different periods in different financial years, are not necessarily meaningful
and should not be relied on as indicators of our performance.
Our
inability to diversify our operations may subject us to economic fluctuations
within our industry.
Our
limited financial resources reduce the likelihood that we will be able to
diversify our operations. Our probable inability to diversify our activities
into more than one business area will subject us to economic fluctuations within
the beverage industry and therefore increase the risks associated with our
operations.
We
may not be able to achieve the benefits we expect to result from becoming a
public company.
On
December 12, 2007, we became a public company through consummation of a reverse
merger. We may not realize the benefits that we presently hope to receive as
a
result of the merger, which includes:
|
·
|
access
to the capital markets of the United
States;
|
|
·
|
the
increased market liquidity;
|
|
·
|
the
ability to use registered securities to make acquisition of assets
or
businesses;
|
|
·
|
increased
visibility in the financial
community;
|
|
·
|
enhanced
access to the capital markets;
|
|
·
|
improved
transparency of operations; and
|
|
·
|
perceived
credibility and enhanced corporate image of being a publicly traded
company.
|
There
can
be no assurance that any of the anticipated benefits of our reverse merger
will
be realized in respect to our business operations. In addition, the attention
and effort devoted to achieving the benefits of the reverse merger and attending
to the obligations of being a public company, such as reporting requirements
and
securities regulations, could significantly divert management’s attention from
other important issues, which could materially and adversely affect our
operating results or stock price in the future.
Past
activities of our and our affiliates may lead to future liability for
us.
Prior
to
our reverse merger on December 12, 2007, we engaged in a business unrelated
to
that which we are engaged in today. Although certain of our former stockholders
have provided us with certain indemnifications against any loss, liability,
claim, damage or expense arising out of or based on any breach of or inaccuracy
in any of their representations and warranties made regarding such acquisition,
any liabilities relating to such prior business against which we are not
completely indemnified may have a material adverse effect on us.
Risks
Relating to Our Organization
Theodore
Farnsworth, our chief executive officer and president, owns a substantial
portion of our outstanding common stock, which enables him to influence many
significant corporate actions and in certain circumstances may prevent a change
in control that would otherwise be beneficial to our stockholders.
Theodore
Farnsworth beneficially owns approximately 26.04% of our outstanding shares
of
common stock, or approximately 32.25% of our common stock should Mr. Farnsworth
exercise all of his stock options. As such, Mr. Farnsworth has a substantial
impact on matters requiring the vote of the stockholders, including the election
of our directors and most of our corporate actions. This control could delay,
defer, or prevent others from initiating a potential merger, takeover or other
change in our control, even if these actions would benefit our stockholders
and
us. This control could adversely affect the voting and other rights of our
other
stockholders and could depress the market price of our common stock.
Because
we became public by means of a reverse merger, we may not be able to attract
the
attention of major brokerage firms.
There
may
be risks associated with us becoming public through a reverse merger.
Specifically, securities analysts of major brokerage firms may not provide
coverage of us because there is no incentive to brokerage firms to recommend
the
purchase of our common stock. No assurance can be given that brokerage firms
will, in the future, want to conduct any secondary offerings on our
behalf.
We
are subject to financial reporting and other requirements for which our
accounting, internal audit and other management systems and resources may not
be
adequately prepared.
We
are
subject to reporting and other obligations under the Securities Exchange Act
of
1934, as amended, including the requirements of Section 404 of the
Sarbanes-Oxley Act. Section 404 requires us to conduct an annual management
assessment of the effectiveness of our internal controls over financial
reporting and to obtain a report by our independent auditors addressing these
assessments. The requirements of these rules and regulations will increase
our
legal and financial compliance costs, make some activities more difficult,
time-consuming or costly and will place significant demands on our management,
administrative, operational, internal audit and accounting systems and
resources. In connection with these requirements, we anticipate that we will
need to:
|
·
|
implement
additional financial and management controls, reporting systems and
procedures;
|
|
·
|
implement
an internal audit function; and
|
|
·
|
hire
additional accounting, internal audit and finance staff.
|
If
we are
unable to accomplish these objectives in a timely and effective fashion, our
ability to comply with our financial reporting requirements and other rules
that
apply to reporting companies could be impaired. Any failure to maintain
effective internal controls could have a negative impact on our ability to
manage our business and on our stock price.
If
securities or industry analysts do not publish research or publish inaccurate
or
unfavorable research about our business, our stock price and trading volume
could decline.
The
trading market for our common stock will depend in part on the research and
reports that securities or industry analysts publish about us or our business.
We do not currently have research coverage by securities and industry analysts.
If we obtain securities or industry analyst coverage and if one or more of
the
analysts who covers us downgrades our stock or publishes inaccurate or
unfavorable research about our business, our stock price would likely decline.
If one or more of these analysts ceases coverage of us or fails to publish
reports on us regularly, demand for our stock could decrease, which could cause
our stock price and trading volume to decline.
Risks
Relating to Our Common Stock
Our
stock price may be volatile, so investors could lose their
investment.
The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:
|
·
|
new
products introduced by us or our competitors;
|
|
·
|
additions
or departures of key personnel;
|
|
·
|
sales
of the common stock, particularly following effectiveness of the
resale
registration statement of which this prospectus forms a part;
|
|
·
|
our
ability to execute our business plan;
|
|
·
|
operating
results that fall below expectations;
|
|
·
|
economic
and other external factors; and
|
|
·
|
period-to-period
fluctuations in our financial results.
|
In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance
of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.
There
may be a limited market for our securities and we may fail to qualify for a
listing on a national securities exchange such as the NASDAQ Stock Market or
the
American Stock Exchange.
Although
we plan on applying for listing of our common stock on a national stock exchange
such as the NASDAQ Stock Market or the American Stock Exchange once we meet
the
qualifications, there can be no assurance that our initial listing application
will be granted, when the required listing criteria will be met or when, or
if,
our application will be granted. Thereafter, there can be no assurance that
trading of our common stock on such a market will be sustained or desirable.
In
the event that our common stock fails to qualify for initial or continued
inclusion, our common stock could thereafter only be quoted on the OTC Bulletin
Board or in what are commonly referred to as the “pink sheets.” Under such
circumstances, a stockholder may find it more difficult to dispose of, or to
obtain accurate quotations, for our common stock, and our common stock would
become substantially less attractive to certain purchasers, such as financial
institutions, hedge funds, and large investors.
Furthermore,
for companies whose securities are quoted on the OTC Bulletin Board, it is
more
difficult to obtain coverage for significant news events because major wire
services generally do not publish press releases about such companies, and
to
obtain needed capital.
Our
common stock may be affected by limited trading volume and price fluctuations,
each of which could adversely impact the value of our common
stock.
There
has
been limited trading in our common stock and there can be no assurance that
an
active trading market in our common stock will be maintained. Our common stock
has experienced, and is likely to experience in the future, significant price
and volume fluctuations, which could adversely affect the market price of our
common stock without regard to our operating performance. In addition, we
believe that factors such as quarterly fluctuations in our financial results
and
changes in the overall economy or the condition of the financial markets could
cause the price of our common stock to fluctuate substantially. These
fluctuations may also cause short sellers to enter the market from time to
time
in the belief that we will have poor results in the future. We cannot predict
the actions of market participants and, therefore, can offer no assurances
that
the market for our stock will be stable or appreciate over time.
Our
common stock is subject to penny stock rules, which may make it more difficult
for our stockholders to sell their common stock.
Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by
certain penny stock rules adopted by the Securities and Exchange Commission.
Penny stocks generally are equity securities with a price of less than $5.00
per
share. The penny stock rules require a broker-dealer, prior to a purchase or
sale of a penny stock not otherwise exempt from the rules, to deliver to the
customer a standardized risk disclosure document that provides information
about
penny stocks and the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer’s account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock the broker-dealer
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules.
Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.
If
our
stockholders sell substantial amounts of common stock in the public market,
including shares issued upon the effectiveness of the registration statement
of
which this prospectus forms a part, upon the expiration of any statutory holding
period under Rule 144 of the Securities Act of 1933, as amended or upon any
contractual holding or trading limitation periods, it could create a
circumstance commonly referred to as an “overhang” and in anticipation of which
the market price of our common stock could fall. The existence of an overhang,
whether or not sales have occurred or are occurring, also could make it more
difficult for us to secure additional financing through the sale of equity
or
equity-related securities in the future at a time and price that we deem
reasonable or appropriate.
The
elimination of monetary liability against our directors under Nevada law and
the
existence of indemnification rights to our directors may result in substantial
expenditures by us and may discourage lawsuits against our directors.
Our
bylaws provides that, to the fullest extent that the Nevada Revised Statutes
permits, none of our directors shall be personally liable to either us or our
stockholders for any breach in his or her fiduciary duties as a director. This
provision creates an indemnification obligation by us that could ultimately
cause us to incur substantial expenditures to cover the cost of settlement
or
damage awards against our directors. This provision and resultant costs may
also
discourage us from bringing a lawsuit against directors for breaches of their
fiduciary duties and may similarly discourage the filing of derivative
litigation by our stockholders against our directors even though such actions,
if successful, might otherwise benefit us and our stockholders.
We
do not anticipate paying any cash dividends.
We
have
never paid cash dividends on our common stock and do not anticipate doing so
for
the foreseeable future. The payment of dividends, if any, would be contingent
upon our revenues and earnings, if any, capital requirements, and general
financial condition. The payment of any dividends will be within the discretion
of our board of directors. We presently intend to retain all earnings, if any,
to implement our business plan; accordingly, we do not anticipate the
declaration of any dividends in the foreseeable future.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains “forward-looking statements,” which include information
relating to future events, future financial performance, strategies,
expectations, competitive environment and regulations. Words such as “may,”
“should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,”
“anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and
similar expressions, as well as statements in future tense, identify
forward-looking statements. Forward-looking statements should not be read as
a
guarantee of future performance or results and will probably not be accurate
indications of when such performance or results will be achieved.
Forward-looking statements are based on information we have when those
statements are made or our management’s good faith belief as of that time with
respect to future events, and are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those expressed
in
or suggested by the forward-looking statements. You should review carefully
the
section entitled “Risk Factors” beginning on page 3 of this prospectus for
a discussion of the risks that relate to our business and investing in shares
of
our common stock.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of common stock by the selling
stockholders.
A
portion
of the shares covered by this prospectus are issuable upon exercise of warrants
to purchase our common stock, which warrants have a cashless exercise option.
If, however, a selling stockholder were to exercise its warrants for cash,
the
selling stockholder would pay us the exercise price of the
warrants.
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our
common stock has been quoted on the OTC Bulletin Board since April 25, 2007.
From April 25, 2007 through January 6, 2008, our trading symbol was REDZ.OB
and
since January 7, 2008 our trading symbol has been PPBV.OB. Prior to December
13,
2007, there was no active market for our common stock. The following table
sets
forth the high and low bid prices for our common stock for the periods
indicated, as reported by the OTC Bulletin Board. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
Fiscal
Year Ending September 30, 2008
|
|
High
|
|
Low
|
|
Third
Quarter (through May 1, 2008)
|
|
$
|
3.30
|
|
$
|
2.35
|
|
Second
Quarter
|
|
$
|
8.00
|
|
$
|
1.25
|
|
First
Quarter (from December 13, 2007)
|
|
$
|
1.70
|
|
$
|
1.30
|
|
The
last
reported sales price of our common stock on the OTC Bulletin Board on May 1,
2008, was $2.72 per share. As of May 1, 2008, there were approximately 127
holders of record of our common stock. The number of stockholders of record
does
not include beneficial owners of our common stock whose shares are held in
the
names of various dealers, clearing agencies, banks, brokers and other
fiduciaries.
DIVIDEND
POLICY
In
the
past, we have not declared or paid cash dividends on our common stock, and
we do
not intend to pay any cash dividends on our common stock. Rather, we intend
to
retain future earnings, if any, to fund the operation and expansion of our
business and for general corporate purposes.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATION
Recent
Events
Prior
to
December 12, 2007, we were a public shell company, as defined by the Securities
and Exchange Commission, without material assets or activities. On December
12,
2007, we completed a reverse merger, pursuant to which a wholly-owned subsidiary
of ours merged with and into a private company, Venture Beverage Company, with
such private company being the surviving company. In connection with this
reverse merger, we discontinued our former business and succeeded to the
business of Venture Beverage Company as our sole line of business. For financial
reporting purposes, Venture Beverage Company, and not us, is considered the
accounting acquiror. Accordingly, the historical financial statements presented
and the discussion of financial condition and results of operations herein
are
those of Venture Beverage Company and do not include our historical financial
results. All costs associated with the reverse merger, other than financing
related costs in connection with the simultaneous sale of $3,015,000 of units
consisting of common stock and warrants, were expensed as incurred.
Overview
We
develop, market, and distribute unique beverage brands and products that are
positioned as a “better for you” beverages and are targeted to the growing
category of “new age/functional” beverage consumers. We own the rights to the
“
Purple
™”
brand,
a new functional beverage that contains a high level of anti-oxidants that
are
found in seven different natural fruit juices that combine to make our product.
We launched
Purple
in the
summer of 2007.
As
our
business began on May 8, 2007, we have not provided any historical comparative
analysis below.
Critical
Accounting Policies and Estimates
Use
of Estimates.
In
preparing the financial statements, we are required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the
date of the statements of financial condition, revenues, and expenses for the
period then ended. Actual results may differ significantly from those estimates.
Significant estimates made by us include, but are not limited to, stock-based
compensation, valuation of debt discounts, and useful life of property and
equipment.
Accounts
Receivable.
We have
a policy of reserving for uncollectible accounts based on its best estimate
of
the amount of probable credit losses in its existing accounts receivable. We
periodically review our accounts receivable to determine whether an allowance
is
necessary based on an analysis of past due accounts and other factors that
may
indicate that the realization of an account may be in doubt. Account balances
deemed to be uncollectible are charged to the allowance after all means of
collection have been exhausted and the potential for recovery is considered
remote.
Inventories.
Inventories are stated at the lower of cost or market utilizing the first-in,
first-out method and consist of raw materials related to our products. We write
down inventory for estimated obsolescence or unmarketable inventory based upon
assumptions and estimates about future demand and market conditions. If actual
market conditions are less favorable than those projected by us, additional
inventory write-downs may be required.
Property
and Equipment.
Property
and equipment are carried at cost. Depreciation and amortization are provided
using the straight-line method over the estimated economic lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized. When assets are retired or disposed of, the
cost and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are included in income in the year of disposition.
Revenue
Recognition.
We
follow the guidance of the Securities and Exchange Commission’s Staff Accounting
Bulletin No. 104, “Revenue Recognition in Financial Statements.” We record
revenue when persuasive evidence of an arrangement exists, services have been
rendered or product delivery has occurred, the sales price to the customer
is
fixed or determinable, and collectability is reasonably assured. In particular,
revenues from the sale of beverage products is recognized upon delivery of
the
product to the customer. Consideration given by us to a customer, including
a
reseller of our products, such as slotting fees is accounted for as a reduction
of revenue when recognized in our income statement.
Stock
Based Compensation.
We
adopted Statement of Financial Accounting Standards No. 123 (revised 2004),
Share Based Payment (“SFAS No. 123R”). SFAS No. 123R establishes the financial
accounting and reporting standards for stock-based compensation plans. As
required by SFAS No. 123R, we recognized the cost resulting from all stock-based
payment transactions including shares issued under its stock option plans in
the
financial statements.
Non-Employee
Stock-Based Compensation.
The cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task Force
Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services” (“EITF 96-18”).
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“SFAS 157”). SFAS 157 defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosure related to the use of
fair value measures in financial statements. SFAS 157 is to be effective for
our
financial statements issued in 2008; however, earlier application is encouraged.
We are currently evaluating the timing of adoption and the impact that adoption
might have on its financial position or results of operations.
In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB
108 requires companies to evaluate the materiality of identified unadjusted
errors on each financial statement and related financial statement disclosures
using both the rollover approach and the iron curtain approach, as those terms
are defined in SAB 108. The rollover approach quantifies misstatements based
on
the amount of the error in the current year financial statement, whereas the
iron curtain approach quantifies misstatements based on the effects of
correcting the misstatement existing in the balance sheet at the end of the
current year, irrespective of the misstatement’s year(s) of origin. Financial
statements would require adjustment when either approach results in quantifying
a misstatement that is material. Correcting prior year financial statements
for
immaterial errors would not require previously filed reports to be amended.
If a
Company determines that an adjustment to prior year financial statements is
required upon adoption of SAB 108 and does not elect to restate its previous
financial statements, then it must recognize the cumulative effect of applying
SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities
with a corresponding adjustment to the fiscal 2006 opening balance in retained
earnings. SAB 108 is effective for interim periods of the first fiscal year
ending after November 15, 2006. The adoption of SAB 108 did not have an impact
on the our financial statements.
In
December 2006, FASB issued Staff Position No. EITF 00-19-2, “Accounting for
Registration Payment Arrangements” (“FSP”), was issued. EITF 00-19-2 specifies
that the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a
separate agreement or included as a provision of a financial instrument or
other
agreement, should be separately recognized and measured in accordance with
SFAS
No. 5, “Accounting for Contingencies.” We believe that our current accounting is
consistent with EITF 00-19-2.
In
February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities, Including an Amendment of FASB Statement
No.
115” (“SFAS 159”), under which entities will now be permitted to measure many
financial instruments and certain other assets and liabilities at fair value
on
an instrument-by-instrument basis. SFAS 159 is effective as of the beginning
of
an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS 157. We are currently assessing the impact, if any, the
adoption of SFAS 159 will have on its financial statements.
Other
accounting standards that have been issued or proposed by FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the financial statements upon
adoption.
Results
of Operations
Three
Months Ended December 31, 2007
Sales.
Our
sales during the three months ended December 31, 2007, amounted to $258,794
and
was comprised of revenues related to the sale of our beverage product,
Purple
.
For the
three months ended December 31, 2007, we had one customer, who accounted for
all
of our revenues.
Cost
of Sales.
The cost
of sales during the three months ended December 31, 2007, amounted to $254,493.
Our cost of sales includes the manufacturing costs of our proprietary brand
and
warehouse and distribution costs. The cost of sales as a percentage of sales
was
approximately 98% for such time period. We anticipate that our cost of sales
will decrease and related gross profit margins will increase for the remainder
of our current fiscal year due to the refinement of our production process
in
strategically located production facilities and from expected economies of
scale
in the purchasing of raw materials.
Operating
Expenses.
Total
operating expenses for the three months ended December 31, 2007 were $1,619,092
and consisted of the following:
Compensation
expense and related taxes(1)
|
|
$
|
176,019
|
|
Advertising
and marketing(2)
|
|
|
774,330
|
|
Professional
fees(3)
|
|
|
243,310
|
|
Consulting
fees(4)
|
|
|
211,002
|
|
Other
selling, general and administrative(5)
|
|
|
214,431
|
|
Total
|
|
$
|
1,619,092
|
|
(1)
|
compensation
expense and related taxes were attributable to salaries, benefits,
and
related taxes to our officers and employees. We anticipate that
compensation expense will increase during the remainder of our
current
fiscal year, as we continue to build the Purple brand, which will
require
additional market activation personnel and support
staff.
|
(2)
|
advertising
and marketing expenses represent our brand development and promotional
expenses for our proprietary brand. These expenses include promotional
spending at point of sale. In November 2007, we issued 650,712
shares of
common stock for advertising and promotional services valued at
$325,356.
We anticipate that our advertising and marketing expenses, in both
cash
and equity components, will continue to increase for the remainder
of our
current fiscal year, subject to our ability to generate operating
capital.
|
(3)
|
professional
fees represent both accounting and legal fees. We anticipate that
our
professional fees will continue to increase for the remainder of
our
current fiscal year as we continue to raise additional working capital
and
implement the Sarbanes-Oxley 404
Act.
|
(4)
|
consulting
fees were primarily attributable to expenses related to financial
advisory
and public relations services. We anticipate that consulting fees
in both
cash and equity components will increase during the remainder of
our
current fiscal year, as we continue to raise additional operating
capital
and grow our Purple brand.
|
(5)
|
other
selling, general and administrative expenses include rent expense,
travel
expense, office, supplies, telephone and communications expenses,
and
other expenses. We anticipate that these expenses will continue to
increase during the remainder of our current fiscal year as we continue
to
grow our Purple brand.
|
Loss
from Operations.
We
reported a loss from operations of $1,614,791 for the three months ended
December 31, 2007.
Other
Expense.
For the
three months ended December 31, 2007, interest expense amounted to $229,256
and
was attributable to amortization of the debt discount in connection with the
12%
notes payable, which amounted to approximately $155,228. We recognized accrued
interest on the 12% notes payable, which amounted to $24,031. Additionally,
we
issued 100,000 shares of common stock to two debt holders valued at
approximately $50,000 for the extension of maturity date from December 29,
2007
to March 31, 2008.
Net
Loss.
We
reported a net loss of $1,844,047 for the three months ended December 31, 2007,
which translates to basic and diluted net loss per common share of
$0.04.
Year
Ended September 30, 2007
Sales.
Our
sales
during the period from May 8, 2007 (inception) to September 30, 2007 amounted
to
$111,343 and was comprised of revenues related to the sale of our beverage
product “
Purple
.”
Cost
of Sales.
The cost
of sales during the period from May 8, 2007 to September 30, 2007 amounted
to
$96,689. Our cost of sales includes the manufacturing costs of our proprietary
brand and along with warehouse and distribution costs. The cost of sales as
a
percentage of sales was approximately 87% for the period ended September 30,
2007. We anticipate that our cost of sales will decrease and related gross
profit margins will increase in the future.
Operating
Expenses.
Total
operating expenses for the period from May 8, 2007 to September 30, 2007 were
$831,328 and consisted of the following:
Compensation
expense and related taxes(1)
|
|
$
|
8,717
|
|
Advertising
and marketing(2)
|
|
|
184,846
|
|
Professional
fees(3)
|
|
|
65,023
|
|
Consulting
fees(4)
|
|
|
380,676
|
|
Other
selling, general and administrative(5)
|
|
|
192,066
|
|
Total
|
|
$
|
831,328
|
|
(1)
|
Compensation
during the period from May 8, 2007 to September 30, 2007 amounted
to
$8,717 and was attributable to stock based expenses for shares issued
to
our founder and employees. We anticipate that the compensation expense
will increase in the future.
|
(2)
|
Advertising
and marketing expenses during the period from May 8, 2007 to September
30,
2007 amounted to $184,846 and represent our brand development and
promotional expenses for our proprietary brand. These expenses include
promotional spending at point of sale. We anticipate that our advertising
and marketing expenses will continue to increase in the future, subject
to
our ability to generate working
capital.
|
(3)
|
Professional
fees during the period from May 8, 2007 to September 30, 2007 amounted
to
$65,023. This item represents both accounting and legal fees. We
anticipate that our professional fees will continue to increase in
the
future.
|
(4)
|
Consulting
fees during the period from May 8, 2007 to September 30, 2007 amounted
to
$380,676 and was primarily attributable to expenses related to financial
advisory and public relations services. We anticipate that consulting
fees
will increase in the future.
|
(5)
|
Other
selling, general and administrative expenses include rent expense,
travel
expense, office expenses and supplies, telephone and communications,
and
other expenses. For the period from May 8, 2007 to September 30,
2007,
other selling, general and administrative expenses amounted to $192,066.
We anticipate that these expenses will increase in the
future.
|
Loss
From Operations.
We
reported a loss from operations of $816,674 for the period from May 8, 2007
to
September 30, 2007.
Other
Expense.
For the
period from May 8, 2007 to September 30, 2007, interest expense amounted to
$196,364 and was attributable to amortization of the debt discount in connection
with the 12% notes payable, which amounted to approximately $170,692.
Additionally, we recognized accrued interest on the 12% notes payable which
amounted to $25,672 as of September 30, 2007.
Net
Loss.
We
reported a net loss of $1,013,038 for the period from May 8, 2007 to September
30, 2007. This translates to basic and diluted net loss per common share of
$0.09 for the period from May 8, 2007 to September 30, 2007.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future
operations, satisfy its obligations, and otherwise operate on an ongoing basis.
At December 31, 2007, we had a cash balance of $1,175,245 and a working capital
of $1,421,419. We have been funding our operations though the sale of our common
stock; additionally, last fiscal year we borrowed $750,000 for operating capital
purposes. During the three months ended December 31, 2007, we sold 7,290,000
shares of common stock for net proceeds of $3,375,550. Our balance sheet at
December 31, 2007 reflects notes payable amounting to $750,000, which were
to
mature on the earlier of December 29, 2007, or on the date of initial closing
of
subsequent financing of equity or debt securities with gross proceeds exceeding
$2,500,000. These loans bear annual interest at 12% and are unsecured. In
December 2007, we amended the terms and provisions of the convertible notes
payable to two debt holders. Under the terms of the amended convertible note
agreements, the principal and accrued interest thereon will mature on March
31,
2008. Additionally, the third debt holder waived any default that could have
occurred upon the maturity date in December 2007.
Net
cash
flows used in operating activities for the three months ended December 31,
2007
amounted to $2,196,949 and were primarily attributable to our net losses of
$1,844,047, offset by stock-based expenses of $375,324, depreciation of $1,435,
bad debts expense of $27,000, amortization of debt discount of $155,228, and
changes in assets and liabilities of $911,889, which includes $195,127 of
accounts receivable, $434,396 of inventory, $366,778 of other current assets,
$(20,549) of accounts payable, and $(63,863) of accrued expenses. Net cash
flows
used in investing activities for the three months ended December 31, 2007,
amounted to $13,246 and were primarily attributable to the purchase of property
and equipment. Net cash flows provided by financing activities were $3,315,550
for the three months ended December 31, 2007. Further, for the three months
ended December 31, 2007, we received net proceeds from the sale of our common
stock of $3,375,550 and paid $60,000 in connection with a stock repurchase
agreement upon the closing of our reverse merger on December 12,
2007.
We
reported a net increase in cash during the period ended December 31, 2007 of
$1,105,355. At December 31, 2007, we had cash on hand of $1,175,245. We
currently have no material commitments for capital expenditures. Effective
April
2, 2008, we received $1.167 million in proceeds from the exercise of certain
warrants that we had granted in December 2007 and an additional $2.275 million
in proceeds from an additional private offering. Other than such funds, we
presently have no other alternative source of operating capital. We may not
have
sufficient capital to fund the expansion of our operations and to provide
capital necessary for our ongoing operations and obligations. We will need
to
raise significant additional capital to fund our operating expenses, pay our
obligations, and grow our company. We do not presently have any firm commitments
for any additional capital, and our financial condition may make our ability
to
secure this capital difficult. There are no assurances that we will be able
to
continue our business, and we may be forced to cease operations if we do not
raise significant additional working capital, in which event investors could
lose their entire investment in us.
Off
Balance Sheet Arrangements
We
do not
have any off-balance sheet arrangements.
BUSINESS
General
We
were
formed in the State of Nevada on April 8, 2002 as an independent film production
company. On December 12, 2007, Purple Acquisition Corp., a newly formed
wholly-owned subsidiary of ours, merged with and into Venture Beverage Company,
a private corporation. Upon closing of the merger, Venture Beverage Company
merged with and into us and we succeeded to the business of Venture Beverage
Company as our sole line of business. In connection with the merger, we changed
our name to Purple Beverage Company, Inc.
We
develop, market, and distribute unique beverage brands and products that are
positioned as “better for you” beverages and are targeted to the growing
category of “new age/functional” beverage consumers. We own the rights to the
“
Purple
™”
brand,
a new functional beverage that contains a high level of anti-oxidants that
are
found in seven different natural fruit juices that combine to make our product.
We launched
Purple
in the
summer of 2007.
The
new
age or alternative beverage category combines non-carbonated, ready-to-drink
iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages,
ready-to-drink dairy and coffee drinks, energy drinks, sports drinks, and
single-serve still water (flavored, unflavored and enhanced) with “new age”
beverages, including sodas that are considered natural, sparkling juices and
flavored sparkling waters. The alternative beverage category is the fastest
growing segment of the beverage marketplace. Further, according to a 2006 study
in Packaged Facts, sales of “better for you” and functional beverages reached
approximately $40 billion in the United States in 2005 with forecasted sales
in
2007 of $46.3 billion, reaching $53.9 billion by 2011.
Category-sales
increases in 2006 were led by beverages offering health benefits and we believe
that consumers have altered a shift in priorities from pure weight management
to
total health management - a shift that is reflected in slower growth of “lo-cal”
and “light” products and increased growth in functional foods and beverages. Of
growth products in 2006, the most successful products were those with a health
or functional characteristic, such as energy and sport drinks for their
performance-enhancing benefits, or ready-to-drink tea for its antioxidant
claims. The market was estimated at $36 billion in 2006, and management projects
sales of $60 billion by 2009.
We
predict:
|
·
|
Future
category growth will likely be among functional products offering
specific
health benefits - for example, heart, health and antioxidant products;
and
|
|
·
|
With
increased availability and greater consumer demand, functional foods
and
beverages are at the beginning of a major growth wave in the United
States.
|
While
the
soft drink business is a $68 billion industry in the United States, the amount
of soda sold in the United States dropped in 2005 for the first time in recent
history, and even diet soda sales slowed. Thus, beverage companies are entering
the specialty beverage arena as a way to make up for the slowing carbonated
soft
drink sales.
Management
believes that trends to watch in 2008 include several health and wellness
developments such as growth in functional ingredient offerings; a surge in
healthy, kid-focused products; and a heightened focus on healthcare marketing
among retailers. Management also believes that functional products with benefits
such as the following are well-positioned for strong growth in the years 2008
to
2011:
|
·
|
Antioxidants
found in tea, dark chocolate, coffee, wine and “superfruits” (pomegranate
and acai berries);
|
|
·
|
Heart
products including plant sterols, soy, whole grain and omega-3;
|
|
·
|
Digestive
aids such as prebiotic and probiotic foods - primarily dairy, but
increasingly available in non-dairy; and
|
|
·
|
Weight
loss using green tea extracts and chromium.
|
There
were 1,007 new specialty beverages offered in 2005, on top of 1,010 in 2004.
Juices and functional beverage sales increased 51.1% from 2003 to 2005; coffee
and cocoa sales were up 37%; and carbonated, functional, and ready-to-drink
tea
and coffee beverages jumped 65.7%.
Products
Our
proprietary brand is directed to consumers who prefer new age beverage products
to traditional carbonated soft drinks such as Coca-Cola®, Pepsi® and 7-Up®. The
new age beverage category is attractive to us because it is a growth segment
of
the beverage market and we believe that consumers will pay higher prices for
these products than carbonated soft drinks.
Our
first
product is named “
Purple
™,”
a
functional beverage that contains a high level of anti-oxidants from seven
different fruit sources that are combined to make this product. The seven
anti-oxidant-rich fruits combined in our unique formula are the natural juices
of acai, black cherry, pomegranate, black currant, purple plum, cranberry and
blueberry.
Sales,
Marketing and Distribution
Our
sales
and marketing strategy is to focus our efforts on developing brand awareness
and
trial through sampling both in stores and at events. We employ a “PUSH” - “PULL”
promotional and advertising strategy (as more particularly described below)
to
build brand awareness, generate trial/sampling purchases and gain distribution
of
Purple
.
Our
three stage “go-to-market” approach first educates the consumer about the
product through a combination of advertising and public relations initiatives,
then makes the product readily available with direct and three-tier
distribution, and finally implement programs to motivate consumers to buy
Purple.
“PUSH,”
or “getting the product on the shelf,” provides the programs necessary to gain
distribution and secure product placement on retailer’s limited shelves and/or
nightclub’s back bar-space. It consists of customer marketing funds designed to
support the customer’s best promotional and consumption building vehicles, as
well as employee incentive and training programs, while providing materials
that
clearly communicate
Purple
’s
key
brand benefit: “The Most Powerful Antioxidant Beverage on the Planet!” These
materials consist of a variety of “communication messages,” including those
listed above as well as shelf and cooler signs, neck hangers, window banners,
floor displays with header cards, table tents, menus, back bar pieces and logo
apparel. We intend to budget approximately 10% of our gross sales as a
contribution to these customer marketing funds, as well as provide participation
with our distributors by matching funds (i.e., we provide $1.00 per case and
the
distributor provides $1.00 per case; together, we contribute $2.00 towards
the
customers’ best promotional vehicles).
“PULL,”
or getting the product “off-the-shelf” and into the hands of happy consumers,
answers the biggest question posed by buyers: “What are you doing to drive
consumers into my store to purchase your product?” Pull programs are designed to
entice and educate consumers, while motivating them to sell or purchase our
product. Various Pull programs include advertising directed towards the consumer
(print, radio, TV, internet, direct mail, etc.), instant redeemable or mail-in
coupons, mail-in money back rebates, retailer loyalty programs, co-branding
with
complementary products, and wet sampling events. We will employ all of the
above, budgeting an additional 10% to support these programs that reach our
targeted audience.
The
following are a sample of the creative approaches and tactics we will use to
build our brands:
|
·
|
Media
advertisements (newspaper and magazine) that will be placed with
the
advice of media buying professionals;
|
|
·
|
Improved
electronic presence (enhanced website and e-mail communication);
|
|
·
|
In-store
sales promotions;
|
|
·
|
Targeted
sponsorship of brand-building events;
|
|
·
|
Corporate
events catering, and follow-on marketing, to individuals in
attendance;
|
|
·
|
Use
of celebrity endorsers and related
promotions;
|
|
·
|
Trade
show marketing; and
|
|
·
|
On
premise marketing with the Purple Girls.
|
Seasonality
Sales
of
ready-to-drink beverages are somewhat seasonal, with the second and third
calendar quarters accounting for the highest sales volumes. The volume of sales
in the beverage business may be affected by weather conditions. Sales of our
beverage products may become increasingly subject to seasonal fluctuations.
Quarterly fluctuations may also be affected by other factors, including the
introduction of new products, the opening of new markets where temperature
fluctuations are more pronounced, the addition of new bottlers and distributors,
changes in the mix of sales of our finished products and changes in and/or
increased advertising, marketing and promotional expenses.
Research
and Development
The
new
age beverage category growth is largely sustained by the constant addition
of
new products, brands and brand extensions. An integral part of our strategy
is
to develop and introduce innovative products and packages. The development
time
from inception of the concept through product development and testing to the
manufacture and sale of the finished product is several months. Not all new
ideas survive consumer research. Our research, development, manufacture, and
distribution of
Purple
and
other beverage products will be limited by our capital resources.
Manufacturing
Process
The
principal raw materials used by us are glass bottles, as well as fruit pulp
and
fruit juice concentrates, the costs and availability of which are subject to
fluctuations. Due to the consolidations that have taken place in the glass
industry over the past few years, the prices of glass bottles continue to
increase. The prices of fruit pulp concentrates and certain juice concentrates,
including apple, increased in 2006 and certain of these ingredients continued
to
increase in 2007. These increased costs, together with other increased costs,
primarily energy, gas and freight, resulted in increases in certain product
costs that are ongoing and are expected to continue to exert pressure on our
gross margins in the foreseeable future.
We
rely
on third-party manufacturers to produce our products, using our proprietary
formula and flavor ingredients. Chemists continually observe the
product-manufacture and production-run and test the finished beverage product
and the package integrity. We obtain the raw materials for the manufacture
of
our products from several sources and arrange for the direct delivery of these
raw materials to the third-party manufacturer, except for acai, which we obtain
from a single source. We normally pre-pay for the manufacture and packaging
materials. We own the finished inventory that is shipped to warehouses upon
completion.
There
are
several primary suppliers of all necessary raw materials within the United
States. In addition, there are numerous manufacturers in the United States
that
can manufacture our products for us. We do not anticipate having contracts
with
any entities or persons committing such suppliers to provide the materials
required for the production of our products.
The
following are our principal suppliers:
Major Suppliers
|
|
Product Supplied
|
Stiebs
Pomegranate Products
|
|
Acai
& Pomegranate Juice
|
|
|
|
National
Fruit & Essences, LLC
|
|
Juices:
Black Cherry, Black Currant, Purple
|
|
|
|
King
Juice Company, Inc.
|
|
Blending
& Bottling
|
|
|
|
MFCI
|
|
Re-Packing
|
|
|
|
Zuckerman
Honickman
|
|
Glass
bottle - 10 oz
|
|
|
|
Silgan
White Cap Americas
|
|
Bottle
Cap
|
|
|
|
CL&D
Graphics, Inc.
|
|
Labels
|
|
|
|
Green
Bay Packaging, Inc.
|
|
Cartons
and corrugated inserts
|
Competition
The
beverage industry is highly competitive. The principal areas of competition
are
pricing, packaging, development of new products and flavors, and marketing
campaigns. Our product competes with a wide range of drinks produced by a
relatively large number of manufacturers, most of which have substantially
greater financial, marketing, and distribution resources than we
do.
Important
factors affecting our ability to compete successfully include:
|
·
|
the
taste and flavor of our products;
|
|
·
|
trade
and consumer promotions;
|
|
·
|
rapid
and effective development of new, unique, cutting-edge products;
|
|
·
|
attractive
and different packaging;
|
|
·
|
branded
product advertising; and
|
We
also
compete for distributors who will concentrate on marketing our products over
those of our competitors, provide stable and reliable distribution, and secure
adequate shelf-space in retail outlets. Competitive pressures in the
alternative, energy, and functional beverage categories could cause our products
to be unable to gain market share and we could experience price erosion, which
could have a material adverse affect on our business and results.
We
compete not only for consumer acceptance, but also for maximum marketing efforts
by multi-brand licensed bottlers, brokers and distributors, many of which have
a
principal affiliation with competing companies and brands. Our product competes
with all liquid refreshments and with products of much larger and substantially
better-financed competitors, including the products of numerous nationally
and
internationally known producers such as The Coca-Cola Company, PepsiCo, Inc.,
Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods, Inc., Nestle Beverage
Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc. We also compete
with
companies that are smaller or primarily local in operation. Our products also
compete with private label brands such as those carried by grocery store chains,
convenience store chains and club stores.
To
date,
our significant competition includes the following companies:
|
·
|
Bossa
Nova Beverage Group;
|
|
·
|
POM
Wonderful, LLC; and
|
Intellectual
Property
We
rely
on common law rights to our trademark “
Purple
.”
The
common law rights protect the use of this mark used to identify our product.
It
is possible that our competitors will adopt product or service names similar
to
ours, thereby impeding our ability to build brand identity and possibly leading
to customer confusion. Our inability to protect our trade name will have a
material adverse effect on our business, results of operations, and financial
condition. We also rely on trade secrets and proprietary know-how to protect
our
concepts. However, such methods may not afford complete protection, and there
can be no assurance that others will not independently develop similar know-how
or obtain access to our know-how and concepts. There can be no assurance that
we
will be able to adequately protect our trade secrets. Third parties may assert
infringement claims against us or against third parties upon whom we rely and,
in the event of an unfavorable ruling on any claim, we may be unable to obtain
a
license or similar agreement to use trade secrets that we rely upon to conduct
our business.
Regulation
The
Food
and Drug Administration issues rules and regulations for the beverage industry,
including, but not limited to, the labeling and formulary ingredients of
beverage products. We are also subject to various state and local statutes
and
regulations applicable to the production, transportation, sale, safety,
advertising, and labeling of our product. Compliance with these provisions
has
not had, and we do not expect such compliance to have, any material adverse
effect upon our capital expenditures, net income, or competitive position.
Regulatory guidelines, however, are constantly changing, and there can be no
assurance that our product and our third-party manufacturers will be able to
comply with ongoing government regulations.
Employees
As
of May
1, 2008, we had 47 employees, all of whom are full-time. None of our
employees is covered by a collective bargaining agreement, nor are they
represented by a labor union. We have not experienced any work stoppages, and
we
consider relations with our employees to be good.
Description
of Property
We
lease
approximately 3,070 square feet of office space in Fort Lauderdale, Florida
for
$5,533.68 per month, which rate increases by 3% each year commencing on March
1,
2009. The current lease term expires on April 30, 2012. This facility serves
as
our corporate headquarters. We believe that this facility is adequate for our
immediate and near-term needs. Additional space may be required as we expand
our
activities. We do not currently foresee any significant difficulties in
obtaining any required additional facilities. In the opinion of the management,
this property is adequately covered by insurance.
We
do not
invest in real estate or real estate interests.
Legal
Proceedings
From
time
to time we may be involved in claims arising in the ordinary course of business.
To our knowledge, no legal proceedings, government actions, administrative
actions, investigations or claims are currently pending against us or involve
us
that, in the opinion of our management, could reasonably be expected to have
a
material adverse effect on our business and financial condition.
MANAGEMENT
The
following table sets forth information regarding the sole member of our board
of
directors and our executive officers. Our director holds office for one-year
terms until the election and qualification of his successor. Officers are
elected annually by the board of directors and serve at the discretion of the
board.
Name
|
|
Age
|
|
Position
|
Theodore
Farnsworth
|
|
45
|
|
Chief
Executive Officer, President, Secretary and Director
|
|
|
|
|
|
Michael
Wallace
|
|
39
|
|
Chief
Financial Officer and Executive Vice President
|
|
|
|
|
|
Theodore
Farnsworth, Chief Executive Officer, President, Secretary and
Director.
Mr.
Farnsworth has served as our chief executive officer, president, secretary
and
as a director since December 2007. Mr. Farnsworth was the chief executive
officer, president, secretary and as a director of Venture Beverage Company
from
May 2007 to December 2007. From September 2001 to October 2007, Mr. Farnsworth
served as chairman of Xstream Beverage Network, Inc. and from November 2004
to
November 2007, Mr. Farnsworth served as Xstream Beverage Network, Inc.’s chief
executive officer. Prior to that, from April 1998 to March 2001, Mr. Farnsworth
served as chairman and founder of Farmbid.com, an agricultural Internet portal
site. From May 1997 to March 1998, Mr. Farnsworth was president of Fontal
Restaurant Group, Inc., parent of Burrito Grill restaurants.
Michael
Wallace, Chief Financial Officer and Executive Vice
President.
Mr.
Wallace has served as our chief financial officer and executive vice president
since March 2008. Before joining us and since 2004, Mr. Wallace was the chief
financial officer and senior vice president of Radiology Corporation of America,
a Boca Raton, Florida company that provides medical diagnostic services
nationwide. From 2003 to 2004, Mr. Wallace was an assistant chief accountant
in
the Securities and Exchange Commission’s Division of Enforcement and a member of
the Securities and Exchange Commission’s Financial Fraud Task Force in
Washington, D.C. From 2000 to 2003, Mr. Wallace was the chief financial officer
and senior vice president of Inktel Direct and CELLIT Technologies, privately
held companies located in Miami, Florida engaged in the direct marketing
industry, and the business of software development for the contact center
market, respectively. From 1997 to 2000, Mr. Wallace was the chief financial
officer and senior vice president of Kellstrom Industries, a Nasdaq-listed
company operating in the aerospace services sector. From 1990 to 1997, Mr.
Wallace was a manager at KPMG LLP in the firm’s assurance practice.
There
are
no family relationships among our director or executive officers.
Board
Committees
Audit
Committee.
We
intend to establish an audit committee of the board of directors, which will
consist of independent directors, of which at least one director will qualify
as
a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation
S-K.
The audit committee’s duties would be to recommend to our board of directors the
engagement of independent auditors to audit our financial statements and to
review our accounting and auditing principles. The audit committee would review
the scope, timing and fees for the annual audit and the results of audit
examinations performed by the internal auditors and independent public
accountants, including their recommendations to improve the system of accounting
and internal controls. The audit committee would at all times be composed
exclusively of directors who are, in the opinion of our board of directors,
free
from any relationship which would interfere with the exercise of independent
judgment as a committee member and who possess an understanding of financial
statements and generally accepted accounting principles.
Compensation
Committee.
We
intend to establish a compensation committee of the board of directors. The
compensation committee would review and approve our salary and benefits
policies, including compensation of executive officers. The compensation
committee would also administer our stock option plans and recommend and approve
grants of stock options under such plans.
Compensation
Committee Interlocks and Insider Participation
During
the fiscal year ended September 30, 2007, all executive officer compensation
was
determined by Theodore Farnsworth, our chief executive officer, president and
director.
Code
of Ethics
We
intend
to adopt a code of ethics that applies to our officers, directors and employees,
including our chief executive officer and chief financial officer, but have
not
done so to date due to our relatively small size.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table summarizes the annual and long-term compensation paid to
Theodore Farnsworth, our chief executive officer, who we refer to in this
prospectus as the “named executive officer.” During the year ended September 30,
2007, no executive officer received annual remuneration in excess of
$100,000.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards(1)
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Theodore
Farnsworth
|
|
|
2007
|
|
|
11,712
|
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,712
|
|
Chief
Executive Officer,
President
and Secretary
(principal
executive officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Annual
salary of $250,000, which commenced on December 12, 2007.
Employment
Agreements
On
December 12, 2007, we entered into a three-year employment agreement with
Theodore Farnsworth, which agreement shall be automatically renewed for
additional one-year periods until either we or Mr. Farnsworth, as the case
may
be, gives the other written notice of its intent not to renew the agreement
at
least 90 days prior to the end of the then current term. Pursuant to this
agreement, Mr. Farnsworth shall serve at our chief executive officer and shall
receive a salary of $225,000 per year and a monthly performance bonus equal
to
6% of the net invoice price for all sales, at wholesale or retail, of
Purple
during
the corresponding month. Such bonus shall be paid on the 15th day of the month
following the respective measuring month, which amount shall be increased by
at
least 10% following the one year anniversary of the agreement. In addition,
Mr.
Farnsworth is entitled to participate in employee medical, health, pension,
welfare and insurance benefit plans maintained by us for the general benefit
of
our executive employees, as well as all other benefits and perquisites made
generally available to our executive employees, up to three weeks of vacation
per year and a monthly car allowance of $800. If Mr. Farnsworth’s employment is
terminated by us without cause or because of Mr. Farnsworth’s death
or disability or by Mr. Farnsworth for good reason (including as a result
of a change in control), or if we deliver a timely non-renewal notice, then
we
shall pay to Mr. Farnsworth:
|
·
|
subject
to Mr. Farnsworth executing a general release of all claims in our
favor
in a form approved by our board, a severance payment equal to three
times
the sum of (x) Mr. Farnsworth base salary in the calendar year in
which
the termination occurs plus (y) the bonus earned for the year prior
to the
year in which the termination occurs;
|
|
·
|
a
bonus for the year in which termination occurred based on payments
received by us through the last day of actual employment; and
|
|
·
|
for
a period of three years following the termination date, Mr. Farnsworth’s
costs of COBRA continuation coverage of health insurance, or if COBRA
coverage is unavailable, the actual cost incurred by Mr. Farnsworth
in
obtaining comparable coverage.
|
Notwithstanding
anything else to the contrary, the aggregate of the payments above are limited
to the extent that Mr. Farnsworth would incur an excise tax under Section
4999(a) of the Internal Revenue Code of 1986, as amended, if the payments to
be
made above were deemed to be an “excess parachute payment.” Our obligation to
make the above described payments are not subject to mitigation or a duty to
mitigate.
If
Mr.
Farnsworth’s employment is terminated by us for cause, or by Mr. Farnsworth
without good reason:
|
·
|
Mr.
Farnsworth will receive payment of his base salary through and including
the date of termination, payment of any earned but unpaid bonus for
the
prior fiscal year, payment for all accrued but unused vacation time
existing as of the date of termination, and reimbursement of business
expenses incurred prior to the date of termination;
and
|
|
·
|
Mr.
Farnsworth may continue to participate in our employee benefit plans
to
the extent permitted by and in accordance with the terms thereof
or as
otherwise required by law.
|
On
March
19, 2008, we entered into a three-year employment agreement with Michael
Wallace, pursuant to which Mr. Wallace shall serve at our chief financial
officer and shall receive a salary of $250,000 during the first fiscal year
of
employment, $275,000 for the second fiscal year of employment and $300,000
for
the third fiscal year of employment. Mr. Wallace also received a signing bonus
of $25,000 upon execution of this agreement and is entitled to receive a
prorated bonus of at least $75,000 for the current fiscal year, $100,000 for
the
subsequent fiscal year and at the discretion of our board of directors
thereafter. In addition, Mr. Wallace is entitled to participate in all employee
medical, health, dental, pension, welfare and insurance benefit plans maintained
by us for the general benefit of our executive employees, as well as all other
benefits and perquisites made generally available to our executive employees,
as
well as group medical and dental insurance for Mr. Wallace’s family, a monthly
auto allowance of $1,000 and up to four weeks of vacation per year. If Mr.
Wallace’s employment is terminated by us because of Mr. Wallace’s death,
disability or without cause, then:
|
·
|
we
shall pay to Mr. Wallace a severance payment equal to payment of
that
amount equal to six months of Mr. Wallace’s then-current base salary,
payment of that amount equal to six months of Mr. Wallace’s annual bonus,
and reimbursement of business expenses incurred prior to the date
of
termination; and
|
|
·
|
all
of Mr. Wallace’s unvested options shall
vest.
|
However,
if Mr. Wallace’s employment is terminated by us for cause, or by Mr. Wallace for
any reason, then:
|
·
|
we
shall pay to Mr. Wallace his base salary through and including the
date of
termination, any earned but unpaid bonus for the prior fiscal year,
|
|
·
|
we
shall reimburse Mr. Wallace for all business expenses incurred prior
to
the date of termination;
|
|
·
|
all
options granted under the agreement will cease vesting on the date
of
termination of employment, and to the extent vested and not previously
exercised or expired, may be exercised in accordance with the terms
and
conditions of his option grant; and
|
|
·
|
Mr.
Wallace shall continue to participate in our employee benefit plans
to the
extent permitted by and in accordance with the terms thereof or as
otherwise required by law.
|
In
connection with Mr. Wallace’s employment agreement, Mr. Wallace was granted a
ten-year option to purchase 1,663,826 shares of common stock at an exercise
price of $1.50 per share. One-third of the option vested upon grant; one-third
vests on the first anniversary of the employment agreement; and one-third vests
on the second anniversary of the employment agreement, assuming that Mr. Wallace
is employed by us as of such dates. The agreement also contains certain
non-competition and confidentiality provisions, as well as intellectual property
assignment provisions.
Outstanding
Equity Awards at Fiscal Year-End
There
were no outstanding equity awards held by our named executive officer as of
September 30, 2007.
2007
Incentive Plan
On
December 12, 2007, our board of directors adopted the Venture Beverage Company
2007 Incentive Plan. The purpose of the 2007 Incentive Plan is to provide an
incentive to attract and retain directors, officers, consultants, advisors
and
employees whose services are considered valuable, to encourage a sense of
proprietorship and to stimulate an active interest of such persons in our
development and financial success. Under the 2007 Incentive Plan, we are
authorized to issue incentive stock options intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended, non-qualified stock
options, stock appreciation rights, performance shares, restricted stock, cash
based awards and other share based awards. The 2007 Incentive Plan is
administered by our board of directors. Since consummation of our reverse merger
on December 12, 2007, we have granted options to purchase common stock under
the
2007 Incentive Plan to the following executive officers:
Name
|
|
Shares
Subject to
Options
|
|
Exercise
Price
|
|
Grant Date
|
|
Vesting Schedule
|
|
Expiration
|
|
Theodore
Farnsworth
|
|
|
5,405,000
|
|
$
|
0.55
|
|
December 12, 2007
|
|
Immediately
|
|
5 years from date of
grant
|
|
Director
Compensation
We
do not
currently compensate our director for acting as such, although we may do so
in
the future, including with cash or equity. We reimburse our director for
reasonable expenses incurred in connection with his services as a director.
As
of September 30, 2007, our director did not receive any compensation from
us.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We
review
all relationships and transactions in which the company and our directors and
executive officers or their immediate family members are participants to
determine whether such persons have a direct or indirect material interest.
Transactions that we have determined to be directly or indirectly material
to us
or a related person are disclosed below. We believe each transaction is on
terms
no less favorable to us than the terms generally available to an unaffiliated
third-party under the same or similar circumstances.
Upon
the
closing of our reverse merger on December 12, 2007, Christopher Johnson, a
former director and former officer, and Lissa Johnson sold their holdings in
us
to us for $60,000 in cash and all of our historical operating assets prior
to
the closing of the reverse merger on December 12, 2007.
Director
Independence
We
do not
currently have any independent directors.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of our common stock as of May 1, 2008 by:
|
·
|
each
person known by us to beneficially own more than 5.0% of our common
stock;
|
|
·
|
our
named executive officer; and
|
|
·
|
our
sole director and executive officers as a group.
|
The
percentages of common stock beneficially owned are reported on the basis of
regulations of the Securities and Exchange Commission governing the
determination of beneficial ownership of securities. Under the rules of the
Securities and Exchange Commission, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power, which includes the
power to vote or to direct the voting of the security, or investment power,
which includes the power to dispose of or to direct the disposition of the
security. Except as indicated in the footnotes to this table, each beneficial
owner named in the table below has sole voting and sole investment power with
respect to all shares beneficially owned and each person’s address is c/o Purple
Beverage Company, Inc. 450 East Las Olas Boulevard, Suite 830, Fort Lauderdale,
Florida 33301. As of May 1, 2008, we had 58,940,649 shares
outstanding.
Name and Address of Beneficial Owner
|
|
Number of Shares Beneficially Owned(1)
|
|
Percentage Beneficially
Owned(1)
|
|
Theodore
Farnsworth
|
|
|
20,750,493
|
(2)
|
|
32.25
|
%
|
|
|
|
|
|
|
|
|
Michael
Wallace
|
|
|
554,609
|
(3)
|
|
*
|
|
|
|
|
|
|
|
|
|
Barry
Honig
595
South Federal Highway, Suite 600
Boca
Raton, Florida 33432
|
|
|
4,514,285
|
(4)
|
|
7.60
|
%
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (2 persons)
|
|
|
21,305,102
|
|
|
32.83
|
%
|
*
Less
than 1%.
(1)
|
Shares
of common stock beneficially owned and the respective percentages
of
beneficial ownership of common stock assumes the exercise of all
options,
warrants and other securities convertible into common stock beneficially
owned by such person or entity currently exercisable or exercisable
within
60 days of May 1, 2008. Shares issuable pursuant to the exercise
of stock
options and warrants exercisable within 60 days are deemed outstanding
and
held by the holder of such options or warrants for computing the
percentage of outstanding common stock beneficially owned by such
person,
but are not deemed outstanding for computing the percentage of outstanding
common stock beneficially owned by any other
person.
|
(2)
|
Includes
5,405,000 shares of common stock issuable upon the exercise of
options.
Mr. Farnsworth’s shares, options, and shares underlying options are
subject to a two-year “lock-up,” which expires on December 12, 2009.
During such lock-up period, without our prior written consent, which
may
be withheld, delayed, or denied for any reason or for no reason,
Mr.
Farnsworth is precluded from selling, transferring, or otherwise
disposing
of any of such shares. Notwithstanding the term of such lock-up,
upon our
prior written consent, which may be withheld, delayed, or denied
for any
reason or for no reason, during each calendar month of the last year
of
the lock-up period, Mr. Farnsworth may sell, pledge, hypothecate,
or
otherwise derive economic value from an amount of shares underlying
his
options equivalent to not more than 5% of such shares subject to
the
restrictions. In the event Mr. Farnsworth does not sell 5% of such
shares
in any of such months (assuming permission has been so granted),
such
unsold shares may be sold in any future month without reducing such
future
month’s 5% allowance (assuming permission has been so
granted).
|
(3)
|
Includes
554,609 shares of common stock issuable upon the exercise of options.
Mr.
Wallace’s options are subject to a two-year “lock-up,” which expires on
the second anniversary of grant, or March 19, 2010. Notwithstanding
the
term of such lock-up, Mr. Wallace, during each month of the second
year of
the lock-up, may sell, pledge, hypothecate, or otherwise derive economic
value from an amount of such shares equivalent to not more than 5%
of the
number of shares owned by him. In the event he does not sell 5% of
his
shares in any of such months, such unsold shares may be sold in any
future
month without reducing such future month’s 5%
allowance.
|
(4)
|
Includes
(i) 450,000 shares of common stock issuable upon the exercise of
warrants
held by Barry Honig, the president of GRQ Consultants, Inc,, and
(ii)
2,164,285 shares of common stock held by GRQ Consultants, Inc, with
respect to which Barry Honig is the president. 1,450,000 of Mr. Honig’s
shares are subject to a two-year “lock-up,” which expires on December 12,
2009. During such lock-up period, without our prior written consent,
which
may be withheld, delayed, or denied for any reason or for no reason,
Mr.
Honig is precluded from selling, transferring, or otherwise disposing
of
any of such shares. Further, another 450,000 shares and 450,000 shares
underlying his warrants are subject to a lock-up period for six months,
which expires June 12, 2008; after the expiration of the six-month
period,
Mr. Honig may, upon our prior written consent, which may be withheld,
delayed, or denied for any reason or for no reason, during each calendar
month for the following six-months, sell, pledge, hypothecate, or
otherwise derive economic value from an amount of such shares equivalent
to not more than 5% of such shares subject to the restrictions. In
the
event Mr. Honig does not sell 5% of such shares in any of such months
(assuming permission has been so granted), such unsold shares may
be sold
in any future month without reducing such future month’s 5% allowance
(assuming permission has been so granted). With regard to the shares
held
of record by GRQ Consultants, Inc., 1,450,000 shares are subject
to a
lock-up period for one year, which expires December 12, 2008; after
the
expiration of the one-year period, GRQ Consultants, Inc. may, upon
our
prior written consent, which may be withheld, delayed, or denied
for any
reason or for no reason, during each calendar month for the following
six-months, sell, pledge, hypothecate, or otherwise derive economic
value
from an amount of such shares equivalent to not more than 5% of such
shares subject to the restrictions. In the event GRQ Consultants,
Inc.
does not sell 5% of such shares in any of such months (assuming permission
has been so granted), such unsold shares may be sold in any future
month
without reducing such future month’s 5% allowance (assuming permission has
been so granted).
|
SELLING
STOCKHOLDERS
Up
to
5,884,885 shares of common stock are being offered by this prospectus, all
of
which are being registered for sale for the accounts of the selling security
holders and include the following:
|
·
|
4,463,235
shares of common stock issued in private placements and following
the
exercise of warrants; and
|
|
·
|
1,421,650
shares of common stock initially issuable upon the exercise of warrants
issued in private placements.
|
The
shares of common stock referred to above are being registered to permit public
sales of the shares, and the selling stockholders may offer the shares for
resale from time to time pursuant to this prospectus. The selling stockholders
may also sell, transfer or otherwise dispose of all or a portion of their shares
in transactions exempt from the registration requirements of the Securities
Act
of 1933, as amended, or pursuant to another effective registration statement
covering those shares. We may from time to time include additional selling
stockholders in supplements or amendments to this prospectus.
The
table
below sets forth certain information regarding the selling stockholders and
the
shares of our common stock offered by them in this prospectus. The selling
stockholders have not had a material relationship with us within the past three
years other than as described in the footnotes to the table below or as a result
of their acquisition of our shares or other securities. To our knowledge,
subject to community property laws where applicable, each person named in the
table has sole voting and investment power with respect to the shares of common
stock set forth opposite such person’s name.
We
have
entered into certain registration rights agreements with certain of the selling
stockholders. The registration rights agreements and the warrants exercisable
for certain of the shares registered hereby are described in “Description of
Securities – Warrants” and “Description of Securities – Registration
Rights.”
The
following table sets forth certain information known to us with respect to
the
beneficial ownership of our common stock by the selling stockholders as of
May
1, 2008, based on 58,940,649 shares of our common stock then outstanding. The
share numbers in the column labeled “Number of Shares Offered” represent all of
the shares that the selling stockholders may offer in this prospectus. The
table
assumes that each selling stockholder exercises all of his, her or its warrants.
We are unable to determine the exact number of shares that will actually be
sold. We do not know how long the selling stockholders will hold the shares
before selling them. Other than our agreement with the selling stockholders
to
maintain the effectiveness of the registration statement of which this
prospectus forms a part until all shares covered hereby have been sold, or
may
be sold without volume restrictions pursuant to Rule 144 under the Securities
Act of 1933, as amended, we currently have no agreements, arrangements or
understandings with the selling stockholders regarding the sale of any of their
shares.
|
|
Ownership Before Offering
|
|
After Offering(1)
|
|
Selling Stockholder
|
|
Number of
shares of
common stock
beneficially owned
|
|
Number of
shares
offered
|
|
Number of
shares of
common stock
beneficially
owned
|
|
Percentage of
common
stock
beneficially
owned
|
|
Tobanna
Enterprises Corp.(2)
|
|
1,968,000
|
(3)
|
482,400
|
(4)
|
1,485,600
|
(5)
|
2.50
|
%
|
|
|
|
|
|
|
|
|
|
|
Sara
Leifer
|
|
346,000
|
(6)
|
94,800
|
(7)
|
251,200
|
(8)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Mangrove
Bay, Inc.(9)
|
|
316,000
|
|
94,800
|
|
221,500
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Crestview
Capital Master, LLC(10)
|
|
30,000
|
|
9,000
|
|
21,000
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Chelsea
Development International Limited(11)
|
|
285,714
|
|
285,714
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Nachum
Stein
|
|
623,000
|
(12)
|
210,000
|
|
413,000
|
(13)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Robert
& Chaya Millet
|
|
90,000
|
(14)
|
32,000
|
|
58,000
|
(15)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Silber
|
|
408,000
|
(16)
|
122,400
|
(17)
|
285,600
|
(18)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Steven
& Batsheva Friedman
|
|
81,000
|
(19)
|
28,800
|
|
52,200
|
(20)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Michael
L. Feinman
|
|
200,000
|
(21)
|
60,000
|
(22)
|
140,000
|
(23)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Brio
Capital L.P.(24)
|
|
490,000
|
(25)
|
141,000
|
(26)
|
349,000
|
(27)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
David
Adelman
|
|
250,000
|
(28)
|
130,000
|
|
120,000
|
(29)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Susan
E. Saxton
|
|
100,000
|
(30)
|
30,000
|
(31)
|
70,000
|
(32)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Alan
Horowitz
|
|
500,000
|
(33)
|
260,000
|
|
240,000
|
(34)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Andrea
Groussman
|
|
200,000
|
(35)
|
60,000
|
(36)
|
140,000
|
(37)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Irwin
L. Zalcberg
|
|
330,000
|
(38)
|
105,000
|
|
225,000
|
(39)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Harold
E. Gelber & Patricia M. Gelber
|
|
100,000
|
(40)
|
30,000
|
(41)
|
70,000
|
(42)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Chase
Mortgage, Inc. (43)
|
|
1,200,000
|
(44)
|
360,000
|
(45)
|
840,000
|
(46)
|
1.42
|
%
|
|
|
|
|
|
|
|
|
|
|
Alfred
Gladstone
|
|
100,000
|
(47)
|
30,000
|
(48)
|
70,000
|
(49)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Phyllis
Ulreich
|
|
100,000
|
(50)
|
30,000
|
(51)
|
70,000
|
(52)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
FB
Capital Partners(53)
|
|
375,000
|
(54)
|
120,000
|
|
255,000
|
(55)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
David
Alperin
|
|
75,000
|
|
40,000
|
|
35,000
|
|
*
|
|
|
|
Ownership Before Offering
|
|
After Offering(1)
|
|
Selling Stockholder
|
|
Number of
shares of
common stock
beneficially owned
|
|
Number of
shares
offered
|
|
Number of
shares of
common stock
beneficially
owned
|
|
Percentage of
common
stock
beneficially
owned
|
|
Chocolate
Chip Investments LP(56)
|
|
200,000
|
(57)
|
60,000
|
(58)
|
140,000
|
(59)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Chase
Financing, Inc.(60)
|
|
600,000
|
(61)
|
180,000
|
(62)
|
420,000
|
(63)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Beverly
Pinnas
|
|
100,000
|
(64)
|
30,000
|
(65)
|
70,000
|
(66)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Harvey
Kesner
|
|
305,000
|
(67)
|
90,000
|
(68)
|
215,000
|
(69)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Melechdavid
Inc.(70)
|
|
475,000
|
(71)
|
60,000
|
(72)
|
415,000
|
(73)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Susan
S. Auerbach
|
|
400,000
|
(74)
|
120,000
|
(75)
|
280,000
|
(76)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Shelly
Koffler
|
|
600,000
|
(77)
|
180,000
|
(78)
|
420,000
|
(79)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Lustigman
|
|
200,000
|
(80)
|
60,000
|
(81)
|
140,000
|
(82)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Robert
& Barbara Samans
|
|
200,000
|
(83)
|
60,000
|
(84)
|
140,000
|
(85)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
Brauser
|
|
775,000
|
(86)
|
260,000
|
|
515,000
|
(87)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Palladium
Capital Advisors, LLC(88)
|
|
163,000
|
(89)
|
48,900
|
(90)
|
114,100
|
(91)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Hartstein (92)
|
|
400,000
|
(93)
|
120,000
|
(94)
|
280,000
|
(95)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Lee
|
|
800,000
|
(96)
|
240,000
|
(97)
|
560,000
|
(98)
|
*
|
|
|
|
|
|
|
|
|
|
|
|
GRQ
Consultants, Inc.(99)
|
|
4,514,285
|
(100)
|
984,285
|
(101)
|
3,530,000
|
(102)
|
5.97
|
%
|
|
|
|
|
|
|
|
|
|
|
Barry
Honig (103)
|
|
4,514,285
|
(104)
|
984,285
|
(105)
|
3,530,000
|
(106)
|
5.97
|
%
|
|
|
|
|
|
|
|
|
|
|
Robert
S. Colman Trust (107)
|
|
142,857
|
|
142,857
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Alpha
Capital Anstalt(108)
|
|
178,571
|
|
178,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
& Betsy Brauser
|
|
107,143
|
|
107,143
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
W. & Patricia Abrams Family Trust
(109)
|
|
71,500
|
|
71,500
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
C.
James Jensen
|
|
100,000
|
|
100,000
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Phillip
& Tracy Swan
|
|
35,715
|
|
35,715
|
|
—
|
|
—
|
|
(1)
|
Represents
the amount of shares that will be held by the selling stockholders
after
completion of this offering based on the assumptions that (a) all
shares
registered for sale by the registration statement of which this prospectus
is part will be sold and (b) that no other shares of our common stock
are
acquired or sold by the selling stockholders prior to completion
of this
offering. However, the selling stockholders may sell all, some or
none of
the shares offered pursuant to this prospectus and may sell other
shares
of our common stock that they may own pursuant to another registration
statement under the Securities Act of 1933, as amended, or sell some
or
all of their shares pursuant to an exemption from the registration
provisions of the Securities Act of 1933, as amended, including under
Rule
144. To our knowledge there are currently no agreements, arrangements
or
understanding with respect to the sale of any of the shares that
may be
held by the selling stockholders after completion of this offering
or
otherwise.
|
(2)
|
David
Rosenbaum is a control person of Tobanna Enterprises Corp and, in
such
capacity, may be deemed to have voting and dispositive power over
the
securities held for the account of this selling
stockholder.
|
(3)
|
Includes
804,000 shares of common stock issuable upon the exercise of
warrants.
|
(4)
|
Includes
241,200 shares of common stock issuable upon the exercise of
warrants.
|
(5)
|
Includes
562,800 shares of common stock issuable upon the exercise of
warrants.
|
(6)
|
Includes
286,000 shares of common stock issuable upon the exercise of
warrants.
|
(7)
|
Includes
34,800 shares of common stock issuable upon the exercise of
warrants.
|
(8)
|
Includes
251,200 shares of common stock issuable upon the exercise of
warrants.
|
(9)
|
Arthur
Jones is the director and a control person of Mangrove Bay,
Inc., and, in such capacity, may be deemed to have voting and dispositive
power over the securities held for the account of this selling
stockholder.
|
(10)
|
Crestview
Capital Partners, LLC is the sole managing member of Crestview Capital
Master, LLC and may be deemed to have sole voting and investment
power
with respect to the securities beneficially owned by Crestview Capital
Master, LLC. Crestview Capital Partners, LLC disclaims beneficial
ownership of these securities. The managing members of Crestview
Capital
Partners, LLC are Stewart Fink, Robert Hoyt and Daniel Warsh, each
of whom
may be deemed to have voting and dispositive power over securities
beneficially owned by Crestview Capital Master,
LLC,
|
(11)
|
Alice
Lo is a director and an "authorized person" of Chelsea Development
International Limited and, in such capacity, may be deemed to have
voting
and dispositive power over the securities held for the account of
this
selling stockholder.
|
(12)
|
Includes
217,000 shares of common stock issuable upon the exercise of
warrants.
|
(13)
|
Includes
217,000 shares of common stock issuable upon the exercise of
warrants
.
|
(14)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(15)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(16)
|
Includes
204,000 shares of common stock issuable upon the exercise of
warrants.
|
(17)
|
Includes
61,200 shares of common stock issuable upon the exercise of
warrants.
|
(18)
|
Includes
142,800 shares of common stock issuable upon the exercise of
warrants.
|
(19)
|
Includes
27,000 shares of common stock issuable upon the exercise of
warrants.
|
(20)
|
Includes
27,000 shares of common stock issuable upon the exercise of
warrants.
|
(21)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(22)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants
.
|
(23)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(24)
|
Shaye
Hirsch is the managing member of Brio Capital Management, LLC, the
general
partner of Brio Capital L.P., and, in such capacity, may be deemed
to have
voting and dispositive power over the securities held for the account
of
this selling stockholder.
|
(25)
|
Includes
230,000 shares of common stock issuable upon the exercise of
warrants.
|
(26)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(27)
|
Includes
195,000 shares of common stock issuable upon the exercise of
warrants.
|
(28)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(29)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(30)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(31)
|
Includes
15,000 shares of common stock issuable upon the exercise of
warrants.
|
(32)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(33)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(34)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(35)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(36)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(37)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(38)
|
Includes
120,000 shares of common stock issuable upon the exercise of
warrants.
|
(39)
|
Includes
120,000 shares of common stock issuable upon the exercise of
warrants.
|
(40)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(41)
|
Includes
15,000 shares of common stock issuable upon the exercise of
warrants.
|
(42)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(43)
|
Mark
Herskovitz is vice president and a control person of Chase Mortgage,
Inc.,
and, in such capacity, may be deemed to have voting and dispositive
power
over the securities held for the account of this selling
stockholder.
|
(44)
|
Includes
600,000 shares of common stock issuable upon the exercise of
warrants.
|
(45)
|
Includes
180,000 shares of common stock issuable upon the exercise of
warrants.
|
(46)
|
Includes
420,000 shares of common stock issuable upon the exercise of
warrants.
|
(47)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(48)
|
Includes
15,000 shares of common stock issuable upon the exercise of
warrants.
|
(49)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(50)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(51)
|
Includes
15,000 shares of common stock issuable upon the exercise of
warrants.
|
(52)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(53)
|
Michael
Forman is the President and a control person of FB Capital Partners
and,
in such capacity, may be deemed to have voting and dispositive power
over
the securities held for the account of this selling
stockholder.
|
(54)
|
Includes
150,000 shares of common stock issuable upon the exercise of
warrants.
|
(55)
|
Includes
150,000 shares of common stock issuable upon the exercise of
warrants.
|
(56)
|
Stratum
Wealth Management LLC has the discretionary right to make investment
decisions with respect to the shares held by Chocolate Chip Investments
LP. Charles B. Ganz is a principal of Stratum Wealth Management LLC
and,
in such capacity, may be deemed to have voting and dispositive power
over
the securities held for the account of this selling
stockholder.
|
(57)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(58)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(59)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(60)
|
Robert
Herskovitz is the president and a control person of Chase Financing,
Inc.,
and, in such capacity, may be deemed to have voting and dispositive
power
over the securities held for the account of this selling
stockholder.
|
(61)
|
Includes
300,000 shares of common stock issuable upon the exercise of
warrants.
|
(62)
|
Includes
90,000 shares of common stock issuable upon the exercise of
warrants.
|
(63)
|
Includes
210,000 shares of common stock issuable upon the exercise of
warrants.
|
(64)
|
Includes
50,000 shares of common stock issuable upon the exercise of
warrants.
|
(65)
|
Includes
15,000 shares of common stock issuable upon the exercise of
warrants.
|
(66)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(67)
|
Includes
145,000 shares of common stock issuable upon the exercise of
warrants.
|
(68)
|
Includes
35,000 shares of common stock issuable upon the exercise of
warrants.
|
(69)
|
Includes
110,000 shares of common stock issuable upon the exercise of
warrants.
|
(70)
|
Mark
Groussman is the president and a control person of Melechdavid Inc.,
and,
in such capacity, may be deemed to have voting and dispositive power
over
the securities held for the account of this selling
stockholder.
|
(71)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(72)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(73)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(74)
|
Includes
200,000 shares of common stock issuable upon the exercise of
warrants.
|
(75)
|
Includes
60,000 shares of common stock issuable upon the exercise of
warrants.
|
(76)
|
Includes
140,000 shares of common stock issuable upon the exercise of
warrants.
|
(77)
|
Includes
300,000 shares of common stock issuable upon the exercise of
warrants.
|
(78)
|
Includes
90,000 shares of common stock issuable upon the exercise of
warrants.
|
(79)
|
Includes
210,000 shares of common stock issuable upon the exercise of
warrants.
|
(80)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(81)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(82)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(83)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(84)
|
Includes
30,000 shares of common stock issuable upon the exercise of
warrants.
|
(85)
|
Includes
70,000 shares of common stock issuable upon the exercise of
warrants.
|
(86)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(87)
|
Includes
100,000 shares of common stock issuable upon the exercise of
warrants.
|
(88)
|
Joel
Padowitz is the chief executive officer of Palladium Capital Advisors,
LLC
and, in such capacity, may be deemed to have voting and dispositive
power
over the securities held for the account of this selling stockholder.
Palladium Capital Advisors, LLC is a registered broker-dealer and
served
as one of the placement agents in connection with our private offerings
in
December 2007, March 2008 and April
2008.
|
(89)
|
Includes
81,500 shares of common stock issuable upon the exercise of warrants.
These shares of common stock and warrants were bought in the ordinary
course of business, and at the time of the purchase of the shares
of
common stock to be resold, there were no agreements or understanding,
directly or indirectly with any person to distribute the shares of
common
stock.
|
(90)
|
Includes
24,450 shares of common stock issuable upon the exercise of
warrants.
|
(91)
|
Includes
57,050 shares of common stock issuable upon the exercise of
warrants.
|
(92)
|
Michael
Hartstein is an affiliate of Palladium Capital Advisors, LLC, a registered
broker-dealer.
|
(93)
|
Includes
200,000 shares of common stock issuable upon the exercise of
warrants.
|
(94)
|
Includes
60,000 shares of common stock issuable upon the exercise of
warrants.
|
(95)
|
Includes
140,000 shares of common stock issuable upon the exercise of
warrants.
|
(96)
|
Includes
400,000 shares of common stock issuable upon the exercise of
warrants.
|
(97)
|
Includes
120,000 shares of common stock issuable upon the exercise of
warrants.
|
(98)
|
Includes
280,000 shares of common stock issuable upon the exercise of
warrants.
|
(99)
|
Barry
Honig is the president and a control person of GRQ Consultants, Inc.,
and,
in such capacity, may be deemed to have voting and dispositive power
over
the securities held for the account of this selling
stockholder.
|
(100)
|
Includes
(i) 450,000 shares of common stock issuable upon the exercise of
warrants
held by Barry Honig and (ii) 1,900,000 shares of common stock held
by
Barry Honig.
|
(101)
|
Includes
(i) 135,000 shares of common stock issuable upon the exercise of
warrants
held by Barry Honig and (ii) 135,000 shares of common stock held
by Barry
Honig.
|
(102)
|
Includes
315,000 shares of common stock issuable upon the exercise of warrants
held
by Barry Honig and (ii) 1,765,000 shares of common stock held by
Barry
Honig.
|
(103)
|
Barry
Honig is the president and a control person of GRQ Consultants, Inc.,
and,
in such capacity, may be deemed to have voting and dispositive power
over
the securities held for the account of GRQ Consultants,
Inc.
|
(104)
|
Includes
(i) 450,000 shares of common stock issuable upon the exercise of
warrants
and (ii) 2,164,285 shares of common stock held by GRQ Consultants,
Inc.
|
(105)
|
Includes
(i) 135,000 shares of common stock issuable upon the exercise of
warrants
and (ii) 714,285 shares of common stock held by GRQ Consultants,
Inc.
|
(106)
|
Includes
(i) 315,000 shares of common stock issuable upon the exercise of
warrants
and (ii) 1,450,000 shares of common stock held by GRQ Consultants,
Inc.
|
(107)
|
Robert
S. Colman is the trustee and a control person of Robert S. Colman
Trust
UDT., and, in such capacity, may be deemed to have voting and dispositive
power over the securities held for the account of this selling
stockholder.
|
(108)
|
Konard
Ackerman may be deemed the control person of the shares owned by
such
entity. Alpha Capital Anstalt is a private investment fund that is
owned
by all its investors and managed by Mr.
Ackerman.
|
(109)
|
Joseph
W. Abrams is the trustee and a control person of Joseph W. & Patricia
Abrams Family Trust., and, in such capacity, may be deemed to have
voting
and dispositive power over the securities held for the account of
this
selling stockholder.
|
We
have
been notified by each of the selling stockholders that such selling stockholder,
other than Palladium Capital Advisors, LLC and Michael Hartstein, is not a
broker-dealer or an affiliate of a broker-dealer. Each of the selling
stockholders has informed us that such selling stockholder did not have at
the
time it purchased the common stock and warrants any agreements, understandings
or arrangements with any other persons, directly or indirectly, to dispose
of
his, her or its securities.
DESCRIPTION
OF SECURITIES
We
are
authorized to issue 412,500,000 shares of common stock. On May 1, 2008, there
were 58,940,649 shares of common stock issued and outstanding.
Common
Stock
The
holders of common stock are entitled to one vote per share. Our articles of
incorporation do not provide for cumulative voting. The holders of our common
stock are entitled to receive ratably such dividends, if any, as may be declared
by the board of directors out of legally available funds. Upon liquidation,
dissolution or winding-up, the holders of our common stock are entitled to
share
ratably in all assets that are legally available for distribution. The holders
of our common stock have no preemptive, subscription, redemption or conversion
rights. The rights, preferences and privileges of holders of our common stock
are subject to, and may be adversely affected by, the rights of the holders
of
any series of preferred stock, which may be designated solely by action of
the
board of directors and issued in the future.
Warrants
May
2007 Warrants
From
May
2007 to July 2007, we issued investors five year warrants to purchase up to
an
aggregate of 300,000 shares of common stock at an exercise price of $2.00 per
share. The exercise price of the warrants and the number of shares issuable
upon
exercise of the warrants are subject to adjustments for stock splits,
combinations or similar events. These warrants also contain a callable feature
requiring their exercise upon 30 days prior written notice. If a warrant holder
fails to exercise a warrant within 30 days of receiving a call notice, the
warrants held by such warrant holder may be purchased by us for a purchase
price
equal to $.01 per warrant share.
December
2007 Investor Warrants
In
connection with our December 12, 2007 private placement, we issued warrants
to
purchase up to an aggregate of 6,030,000 shares
of
common
stock to the investors. The warrants provide for the purchase of shares of
common stock for five years at an exercise price of $2.00 per share
.
The
exercise price of the warrants and the number of shares issuable upon exercise
of the warrants are subject to adjustments for stock splits, combinations or
similar events. We are prohibited from effecting the exercise of the warrants
to
the extent that as a result of such exercise the holder of the exercised
warrants beneficially owns more than 4.99% (or, if such limitation is waived
by
the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate
of the issued and outstanding shares of our common stock calculated immediately
after giving effect to the issuance of shares of our common stock upon the
exercise of the warrants. If at any time there is no effective registration
statement registering, or no current prospectus available for, the resale of
the
shares of common stock underlying the warrants, then the holders of such
warrants have the right to exercise the warrants by means of a cashless
exercise.
If
within
seven business days from date on which the exercise of the warrants shall be
effected (the “Warrant Share Delivery Date”) we fail to deliver to a holder of
the warrants certificates representing the shares into which such warrants
are
convertible, and if after such Warrant Share Delivery Date the holder of the
warrants is required by its brokerage firm to purchase, or the holder’s
brokerage firm otherwise purchases, shares of our common stock to deliver in
satisfaction of a sale by such holder of the shares of our common stock which
the holder was entitled to receive upon the exercise, then we are obligated
to
pay in cash to the holder the amount by which (x) the holder’s total purchase
price for our common stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of common stock that such holder was entitled to
receive from the exercise multiplied by (2) the then effective exercise price
of
the warrant, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full.
These
warrants also contain a callable feature requiring their automatic exercise
if
the market price of our common stock is equal to or in excess of 175% of the
then effective exercise price for a period of 20 consecutive trading days,
the
average volume of the common stock during such period has been at least 150,000
shares per day and, the shares issuable upon exercise of the warrant are freely
tradable without limitation pursuant to Rule 144 of the Securities Act of 1933,
as amended, and there is an effective registration statement covering the resale
of the shares underlying the warrants. If a warrant holder fails to exercise
a
warrant within 14 days of receiving notice of our satisfaction of these
automatic exercise conditions, the warrants held by such warrant holder shall
expire.
December
2007 Placement Agent Warrants
In
connection with our private placement completed on December 12, 2007, we issued
warrants to purchase up to an aggregate of 731,900 shares of common stock to
Palladium Capital Advisors, LLC, our placement agent, and an affiliate of
Palladium Capital Advisors, LLC. Such warrants have the same terms as the
warrants issued to the investors in the private placement completed on December
12, 2007.
April
2008 Warrants
On
April
2, 2008, in connection with the exercise of the December 2007 investor warrants
to acquire 934,000 shares of common stock, we issued the holders of such
exercising holders warrants to purchase up to an aggregate of 467,000 shares
of
common stock. Such warrants have the same terms as the warrants issued to the
investors in the private placement completed on December 12, 2007, except that
the initial exercise price of such April 2, 2008 warrants is $3.50 per
share.
Registration
Rights
December
2007 Private Placement
On
April
2, 2008, we entered into a registration rights agreement with those persons
who
agreed to exercise our December 2007 investor warrants pursuant to which we
agreed to provide certain registration rights with respect to the common stock
issued.
Specifically,
we agreed to file a registration statement (of which this prospectus forms
a
part) with the Securities and Exchange Commission on or before May 2, 2008
covering the resale of the common stock issued pursuant to the warrant exercises
and to cause such registration statement to be declared effective by the
Securities and Exchange Commission on or before June 30, 2008. If (i) the
registration statement is not filed on or before May 2, 2008 or (ii) the
registration statement is not declared effective by the Securities and Exchange
Commission on or before June 30, 2008, then we are subject to liquidated damage
payments to the holders of the exercised warrants in an amount equal to 1.5%
of
aggregate exercise price of the exercised warrants pro rata for every 30 days
of
delinquency.
However,
if the registration statement is declared effective by the Securities and
Exchange Commission on or before June 30, 2008, all liquidated damages that
we
may be obligated to pay for our failure to file a registration statement on
or
prior to May 2, 2008 are deemed to be automatically waived.
Pursuant
to an amendment to our December 2007 subscription agreement and a separate
waiver agreement, we have also agreed to register an additional 1,893,450 shares
of common stock issued in our December 12, 2007 private placement and 1,893,450
shares of common stock underlying warrants issued our December 12, 2007 private
placement. The holders of these shares, however, are not entitled to any
liquidated damages should we fail to file a registration statement with the
Securities and Exchange Commission on or before May 2, 2008 or cause a
registration statement to be declared effective by the Securities and Exchange
Commission on or before June 30, 2008.
April
2008 Private Placement
On
April
2, 2008, in connection with a private placement, we entered into a registration
rights agreement with the investors, pursuant to which we agreed to provide
certain registration rights with respect to the common stock issued.
Specifically, we agreed to file a registration statement (of which this
prospectus forms a part) with the Securities and Exchange Commission on or
before May 2, 2008 covering the resale of the common stock issued and to cause
such registration statement to be declared effective by the Securities and
Exchange Commission on or before June 30, 2008. If (i) the registration
statement is not filed on or before May 2, 2008 or (ii) the registration
statement is not declared effective by the Securities and Exchange Commission
on
or before June 30, 2008, then we are subject to liquidated damage payments
to
the holders of the exercising warrant holders in an amount equal to 1.5% of
aggregate amount paid for the shares pro rata for every 30 days of delinquency.
However, if the registration statement is declared effective by the Securities
and Exchange Commission on or before June 30, 2008, all liquidated damages
that
we may be obligated to pay for our failure to file a registration statement
on
or prior to May 2, 2008 are deemed to be automatically waived.
Lock-up
Agreements
On
December 12, 2007, the holders of 26,395,452 shares of our common stock,
including Theodore Farnsworth, our chief executive officer and president,
entered
into lock-up agreements pursuant to which they agreed not to sell, transfer
or
otherwise dispose of any shares of common stock or any options, warrants or
other rights to purchase shares of common stock until December 12,
2009.
On
December 12, 2007, the holders of 7,812,477 shares of our common stock entered
into lock-up agreements pursuant to which they agreed not to sell, transfer
or
otherwise dispose of any shares of common stock or any options, warrants or
other rights to purchase shares of common stock until December 12, 2009. We
have
agreed not to waive our rights under the lock-up agreements during the first
year of their term. However, these holders, during each month of the second
year
of the lock-up term may, subject to our prior written consent, sell, pledge,
hypothecate, or otherwise derive economic value from an amount of such shares
equivalent to not more than five percent of the number of shares owned by each
such holder. In the event any such holder does not sell five percent of such
holder’s shares in any of such months (assuming permission has been so granted),
such unsold shares may be sold in any future month without reducing such future
month’s five percent allowance (assuming permission has been so granted). From
and after the beginning of the 24
th
month,
none of such holders is subject to any contractual limitations on the
disposition of such shares.
On
December 12, 2007, six holders of 2,822,494 shares of our common stock entered
into lock-up agreements pursuant to which they agreed not to sell, transfer
or
otherwise dispose of any shares of common stock or any options, warrants or
other rights to purchase shares of common stock until June 12, 2008. During
each
of the six months following the expiration of such lock-up period, each of
the
holders of such shares may sell, pledge, hypothecate, or otherwise derive
economic value from an amount of such shares equivalent to not more than five
percent of the number of shares owned by each such holder. In the event any
such
holder does not sell five percent of such holder’s shares in any of such months
(assuming permission has been so granted), such unsold shares may be sold in
any
future month without reducing such future month’s five percent allowance
(assuming permission has been so granted). From and after the beginning of
the
13th month, none of such holders is subject to any contractual limitations
on
the disposition of such shares.
Rule
144 Damages
Pursuant
to the subscription agreement from our December 12, 2007 private placement,
if
those investors are not allowed to resell certain shares of common stock or
shares of common stock underlying warrants issued in such private placement,
without limitation, pursuant to Rule 144 of the Securities Act of 1933, as
amended, for any reason except for an investor’s status as an affiliate or
“control person”, then we shall pay such investors liquidated damages equal to
1.5% of the purchase price for all such securities that are not subject to
any
lock-up provisions for each 30 day period of delinquency. The resale rights
of
such investors are limited to 5% per month (for the second six months after
closing) of the shares held by them, as increased by any shares purchased by
them through the exercise of their private placement warrants.
Anti-Takeover
Effect of Nevada Law and Certain By-Law Provisions
Our
bylaws contain provisions that could have the effect of discouraging potential
acquisition proposals or tender offers or delaying or preventing a change of
control of our company. These provisions are as follows:
|
·
|
they
provide that special meetings of stockholders may be called only
by our
chairman, our president or by a resolution adopted by a majority
of our
board of directors; and
|
|
·
|
they
do not include a provision for cumulative voting in the election
of
directors. Under cumulative voting, a minority stockholder holding
a
sufficient number of shares may be able to ensure the election of
one or
more directors. The absence of cumulative voting may have the effect
of
limiting the ability of minority stockholders to effect changes in
our
board of directors.
|
In
the
future we may also become subject to Nevada’s control share law. A corporation
is subject to Nevada’s control share law if it has more than 200 stockholders,
at least 100 of whom are stockholders of record and residents of Nevada, and
if
the corporation does business in Nevada or through an affiliated
corporation.
The
law
focuses on the acquisition of a “controlling interest” which means the ownership
of outstanding voting shares is sufficient, but for the control share law,
to
enable the acquiring person to exercise the following proportions of the voting
power of the corporation in the election of directors: (1) one-fifth or more
but
less than one-third, (2) one-third or more but less than a majority or (3)
a
majority or more. The ability to exercise voting power may be direct or
indirect, as well as individual or in association with others.
The
effect of the control share law is that the acquiring person, and those acting
in association with that person, obtain only voting rights in the control shares
as are conferred by a resolution of the stockholders of the corporation,
approved at a special or annual meeting of stockholders. The control share
law
contemplates that voting rights will be considered only once by the other
stockholders. Thus, there is no authority to take away voting rights from the
control shares of an acquiring person once those rights have been approved.
If
the stockholders do not grant voting rights to the control shares acquired
by an
acquiring person, those shares do not become permanent non-voting shares. The
acquiring person is free to sell its shares to others. If the buyers of those
shares themselves do not acquire a controlling interest, their shares do not
become governed by the control share law.
If
control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority or more of the voting power, any
stockholder of record, other than an acquiring person, who has not voted in
favor of approval of voting rights is entitled to demand fair value for the
stockholder’s shares.
Nevada’s
control share law may have the effect of discouraging corporate
takeovers.
In
addition to the control share law, Nevada has a business combination law, which
prohibits some business combinations between Nevada corporations and “interested
stockholders” for three years after the “interested stockholder” first becomes
an “interested stockholder” unless the corporation’s board of directors approves
the combination in advance. For purposes of Nevada law, an “interested
stockholder” is any person who is (1) the beneficial owner, directly or
indirectly, of ten percent or more of the voting power of the outstanding voting
shares of the corporation, or (2) an affiliate or associate of the corporation
and at any time within the three previous years was the beneficial owner,
directly or indirectly, of ten percent or more of the voting power of the then
outstanding shares of the corporation. The definition of the term “business
combination” is sufficiently broad to cover virtually any kind of transaction
that would allow a potential acquirer to use the corporation’s assets to finance
the acquisition or otherwise to benefit its own interests rather than the
interests of the corporation and its other stockholders.
The
effect of Nevada’s business combination law is to potentially discourage parties
interested in taking control of our company from doing so if it cannot obtain
the approval of our board of directors.
Indemnification
of Directors and Officers
Sections
78.7502 and 78.751 of the Nevada Revised Statutes provide us with the power
to
indemnify any of our directors and officers. The director or officer must have
conducted himself/herself in good faith and reasonably believe that his/her
conduct was in, or not opposed to, our best interests. In a criminal action,
the
director or officer must not have had reasonable cause to believe his/her
conduct was unlawful.
Under
Section 78.751 of the Nevada Revised Statutes, advances for expenses may be
made
by agreement if the director or officer affirms in writing that he/she believes
he/she has met the standards and will personally repay the expenses if it is
determined the officer or director did not meet the standards.
Our
bylaws include an indemnification provision under which we have the power to
indemnify, to the fullest extent permitted under Nevada law, our current and
former directors and officers, or any person who serves or served at our request
for our benefit as a director or officer of another corporation or our
representative in a partnership, joint venture, trust or other enterprise,
against all expenses, liability and loss reasonably incurred by reason of being
or having been a director, officer or representative of ours or any of our
subsidiaries. We may make advances for expenses upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he/she is not
entitled to be indemnified by us.
We
are
also permitted to apply for insurance on behalf of any director, officer,
employee or other agent for liability arising out of his actions.
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended, may be permitted to our directors, officers and persons controlling
us,
we have been advised that it is the Securities and Exchange Commission’s opinion
that such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable.
PLAN
OF DISTRIBUTION
Each
selling stockholder of the common stock and any of their pledgees, assignees
and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on the OTC Bulletin Board or any other stock exchange, market
or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. A selling stockholder may
use
any one or more of the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the
Securities
Act of 1933, as amended
,
if
available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
FINRA Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.
In
connection with the sale of the common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act of 1933, as amended, in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933, as amended. Each
selling stockholder has informed us that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the common stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act of 1933, as amended.
Because
selling stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act of 1933, as amended, they will be subject to the prospectus
delivery requirements of the Securities Act of 1933, as amended, including
Rule
172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as
amended may be sold under Rule 144 rather than under this prospectus. There
is
no underwriter or coordinating broker acting in connection with the proposed
sale of the resale shares by the selling stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the selling stockholders without registration and
without the requirement to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144 or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934,
as
amended, any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior
to
the commencement of the distribution. In addition, the selling stockholders
will
be subject to applicable provisions of the Securities Exchange Act of 1934,
as
amended, and the rules and regulations thereunder, including Regulation M,
which
may limit the timing of purchases and sales of shares of the common stock by
the
selling stockholders or any other person. We will make copies of this prospectus
available to the selling stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time
of
the sale (including by compliance with Rule 172 under the Securities Act of
1933, as amended).
LEGAL
MATTERS
Haynes
and Boone, LLP, New York, New York, will pass upon the validity of the shares
of
our common stock offered by us pursuant to this prospectus. Certain members
of
Haynes and Boone, LLP beneficially own shares of our common stock.
EXPERTS
The
financial statements as of September 30, 2007, and for the period from May
8,
2007 (Inception) to September 30, 2007 included in this prospectus have been
audited by Sherb & Co. LLP, an independent registered public accounting
firm, as stated in their report appearing herein and elsewhere in the
registration statement, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have
filed with the Securities and Exchange Commission a registration statement
on
Form S-1, together with any amendments and related exhibits, under the
Securities Act of 1933, as amended, with respect to our shares of common stock
offered by this prospectus. The registration statement contains additional
information about us and our shares of common stock that we are offering in
this
prospectus.
We
file
annual, quarterly and current reports and other information with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Our Securities and Exchange Commission filings are available to the public
over
the Internet at the Securities and Exchange Commission’s website at
http://www.sec.gov. You may also read and copy any document we file at the
Securities and Exchange Commission’s public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms and their copy charges. In addition, through our website,
http://www.drinkpurple.com, you can access electronic copies of documents we
file with the Securities and Exchange Commission, including our Annual Report
on
Form 10-KSB, our Quarterly Reports on Form 10-QSB, and Current Reports on Form
8-K and any amendments to those reports. Information on our website is not
incorporated by reference in this prospectus. Access to those electronic filings
is available as soon as practicable after filing with the Securities and
Exchange Commission. You may also request a copy of those filings, excluding
exhibits, from us at no cost. Any such request should be addressed to us at:
Michael Wallace, Purple Beverage Company, Inc., 450 East Las Olas Blvd., Suite
830, Fort Lauderdale, Florida 33301.
This
prospectus is part of a registration statement filed by us with the Securities
and Exchange Commission. Because the Securities and Exchange Commission’s rules
and regulations allow us to omit certain portions of the registration statement
from this prospectus, this prospectus does not contain all the information
set
forth in the registration statement. You may review the registration statement
and the exhibits filed with, or incorporated therein by reference in, the
registration statement for further information regarding us and the shares
of
our common stock offered by this prospectus. Statements contained in this
prospectus as to the contents of any contract or any other documents filed,
or
incorporated therein by reference, as an exhibit to the registration statement,
we refer you to the exhibits for a more complete description of the matter
involved. The registration statement and its exhibits may be inspected at the
Securities and Exchange Commission
’
s Public
Reference
Room at the location described above.
PURPLE
BEVERAGE COMPANY, INC.
INDEX
TO
FINANCIAL STATEMENTS
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheet as of September 30, 2007
|
F-3
|
Statement
of Operations for
the
period from May 8, 2007 (Inception) to September 30, 2007
|
F-4
|
Statement
of Changes in Stockholders’ Deficiency
for
the period from May 8, 2007 (Inception) to September 30,
2007
|
F-5
|
Statement
of Cash Flows the period from May 8, 2007 (Inception) to September
30,
2007
|
F-6
|
Notes
to Financial Statements
|
F-7
|
|
|
Balance
Sheet as of December 31, 2007 (unaudited)
|
F-19
|
Statement
of Operations (unaudited) for the three months ended December 31,
2007
|
F-20
|
Statement
of Cash Flows (unaudited) for the three months ended December 31,
2007
|
F-21
|
Notes
to Unaudited Financial Statements
|
F-22
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders:
Venture
Beverage Company, Inc.
Fort
Lauderdale, Florida
We
have
audited the accompanying balance sheet of Venture Beverage Company, Inc.
as of
September 30, 2007, and the related statements of operations, changes in
shareholders’ deficiency and cash flows for the period from May 8, 2007
(Inception) to September 30, 2007. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required
to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control
over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purposes of expressing
an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amount and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Venture Beverage Company, Inc.
as
of September 30, 2007, and the results of its operations and its cash flows
for
the period from May 8, 2007 (Inception) to September 30, 2007, in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has experienced net losses since inception. The
Company’s financial position and operating results raise substantial doubt about
the Company’s ability to continue as a going concern. Management’s plans in
regards to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
|
Sherb
& Co., LLP
|
|
Certified
Public Accountants
|
Boca
Raton, Florida
December
3, 2007
VENTURE
BEVERAGE COMPANY, INC.
BALANCE
SHEET
SEPTEMBER
30, 2007
ASSETS
|
|
CURRENT
ASSETS:
|
|
|
|
|
Cash
|
|
$
|
69,890
|
|
Accounts
receivable, net of allowance
|
|
|
|
|
for
doubtful accounts of $0
|
|
|
78,866
|
|
Inventories
|
|
|
145,941
|
|
Prepaid
expense and other current assets
|
|
|
19,822
|
|
|
|
|
|
|
Total
current assets
|
|
|
314,519
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
10,232
|
|
|
|
|
|
|
Total
assets
|
|
$
|
324,751
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Convertible
notes payable, net
|
|
$
|
594,772
|
|
Accounts
payable
|
|
|
30,880
|
|
Accrued
expenses
|
|
|
25,672
|
|
|
|
|
|
|
Total
liabilities
|
|
|
651,324
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIENCY:
|
|
|
|
|
Common
stock, $.001 par value, 100,000,000 shares
authorized;
|
|
|
|
|
10,915,880
shares issued and outstanding
|
|
|
10,916
|
|
Additional
paid-in capital
|
|
|
675,549
|
|
Accumulated
deficit
|
|
|
(1,013,038
|
)
|
|
|
|
|
|
Total
stockholders' deficiency
|
|
|
(326,573
|
)
|
|
|
|
|
|
Total
liabilities and stockholders' deficiency
|
|
$
|
324,751
|
|
See
notes to financial statements.
VENTURE
BEVERAGE COMPANY, INC.
STATEMENT
OF OPERATIONS
For
the Period from May 8, 2007 (Inception) to September 30,
2007
Net
sales
|
|
$
|
111,343
|
|
|
|
|
|
|
Cost
of sales
|
|
|
96,689
|
|
|
|
|
|
|
Gross
profit
|
|
|
14,654
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Compensation
expense
|
|
|
8,717
|
|
Advertising
and marketing
|
|
|
184,846
|
|
Professional
fees
|
|
|
65,023
|
|
Consulting
fees
|
|
|
380,676
|
|
Other
selling, general and administrative
|
|
|
192,066
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
831,328
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(816,674
|
)
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
Interest
expense
|
|
|
(196,364
|
)
|
|
|
|
|
|
Total
other expense
|
|
|
(196,364
|
)
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,013,038
|
)
|
See
notes to financial statements.
VENTURE
BEVERAGE COMPANY, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS' DEFICIENCY
For
the Period from May 8, 2007 (Inception) to September 30,
2007
|
|
Common
Stock, $.001 Par Value
|
|
Additional
|
|
|
|
Total
|
|
|
|
Number
of
|
|
|
|
Paid-in
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
May 8, 2007 (Inception)
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued to founder
|
|
|
8,187,946
|
|
|
8,188
|
|
|
-
|
|
|
-
|
|
|
8,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
2,356,611
|
|
|
2,357
|
|
|
-
|
|
|
-
|
|
|
2,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
205,882
|
|
|
206
|
|
|
349,794
|
|
|
-
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued in connection with notes payable
|
|
|
165,441
|
|
|
165
|
|
|
281,085
|
|
|
-
|
|
|
281,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants granted in connection with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
notes
payable
|
|
|
-
|
|
|
-
|
|
|
44,670
|
|
|
-
|
|
|
44,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,013,038
|
)
|
|
(1,013,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2007
|
|
|
10,915,880
|
|
$
|
10,916
|
|
$
|
675,549
|
|
$
|
(1,013,038
|
)
|
$
|
(326,573
|
)
|
See
notes to financial statements.
VENTURE
BEVERAGE COMPANY, INC.
STATEMENT
OF CASH FLOWS
For
the Period from May 8, 2007 (Inception) to September 30,
2007
Cash
flows from operating activities:
|
|
|
|
|
Net
loss
|
|
$
|
(1,013,038
|
)
|
Adjustments
to reconcile net loss to net cash used in
operations:
|
|
|
|
|
Depreciation
|
|
|
1,105
|
|
Stock
based compensation and consulting
|
|
|
10,545
|
|
Amortization
of debt discount
|
|
|
170,692
|
|
Changes
in assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
|
|
(78,866
|
)
|
Inventories
|
|
|
(145,941
|
)
|
Prepaid
expense and other current assets
|
|
|
(19,822
|
)
|
Accounts
payable
|
|
|
30,880
|
|
Accrued
expenses
|
|
|
25,672
|
|
|
|
|
|
|
Total
adjustments
|
|
|
(5,735
|
)
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,018,773
|
)
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(11,337
|
)
|
|
|
|
|
|
Net
cash flows used in investing activities
|
|
|
(11,337
|
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Proceeds
from notes payable
|
|
|
750,000
|
|
Proceeds
from sale of common stock
|
|
|
350,000
|
|
|
|
|
|
|
Net
cash flows provided by financing activities
|
|
|
1,100,000
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
69,890
|
|
|
|
|
|
|
Cash
- beginning of period
|
|
|
-
|
|
|
|
|
|
|
Cash
- end of period
|
|
$
|
69,890
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash
paid for :
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Fair
value of common stock and warrants issued in connection
|
|
|
|
|
with
the issuance of notes payable
|
|
$
|
325,920
|
|
See
notes to financial statements.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES
|
Organization
Venture
Beverage Company, (the “Company”), was incorporated in the State of Nevada on
May 8, 2007.
The
Company develops, markets, and distributes a unique beverage product.
The
following summarize the more significant accounting and reporting policies
and
practices of the Company:
Use
of
Estimates
In
preparing the financial statements, management is required to make estimates
and
assumptions that affect the reported amounts of assets and liabilities as
of the
date of the statements of financial condition, and revenues and expenses
for the
period then ended. Actual results may differ significantly from those estimates.
Significant estimates made by management include, but are not limited to,
include the stock-based compensation, valuation of debt discounts, and the
useful life of property and equipment.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
The
Company places its cash with high credit quality financial institution. Account
at this institution is insured by the Federal Deposit Insurance Corporation
("FDIC") up to $100,000. For the period ended September 30, 2007, the Company
has not reached bank balances exceeding the FDIC insurance limit. To reduce
its
risk associated with the failure of such financial institution, the Company
evaluates at least annually the rating of the financial institution in which
it
holds deposits.
Accounts
Receivable
The
Company has a policy of reserving for uncollectible accounts based on its
best
estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past
due
accounts and other factors that may indicate that the realization of an account
may be in doubt. Account balances deemed to be uncollectible are charged
to the
allowance after all means of collection have been exhausted and the potential
for recovery is considered remote.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
|
Inventories
Inventories
are stated at the lower of cost or market utilizing the first-in, first-out
method and consist of raw materials related to the Company’s products. The
Company writes down inventory for estimated obsolescence or unmarketable
inventory based upon assumptions and estimates about future demand and market
conditions. If actual market conditions are less favorable than those projected
by the Company, additional inventory write-downs may be required.
Property
and Equipment
Property
and equipment are carried at cost. Depreciation and amortization are provided
using the straight-line method over the estimated economic lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized. When assets are retired or disposed of,
the
cost and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are included in income in the year of disposition.
I
mpairment
of Long-Lived Assets
In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," The Company
periodically reviews its long-lived assets for impairment whenever events
or
changes in circumstances indicate that the carrying amount of the assets
may not
be fully recoverable. The Company recognizes an impairment loss when the
sum of
expected undiscounted future cash flows is less than the carrying amount
of the
asset. The amount of impairment is measured as the difference between the
asset’s estimated fair value and its book value. The Company did not consider it
necessary to record any impairment charges during the period ended September
30,
2007.
Income
Taxes
Under
the
asset and liability method of FASB Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets
and liabilities, and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Deferred
tax assets are reduced by a valuation allowance, when in the Company's opinion
it is likely that some portion or the entire deferred tax asset will not
be
realized.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
|
Revenue
Recognition
The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104, “Revenue Recognition in Financial
Statements”. In general, the Company records revenue when persuasive
evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable,
and collectability is reasonably assured.
The
following policies reflect specific criteria for the revenues stream of the
Company:
The
Company generates revenue from the sale of its beverage products. Revenues
from
the sale of these items are recognized upon delivery of the product to the
customer.
Consideration
given by the Company to a customer (including a reseller of the Company’s
products) such as slotting fees is accounted for as a reduction of revenue
when
recognized in the Company’s income statement.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheet for cash, inventories, accounts
payable and accrued expenses, and notes payable approximate their fair market
value based on the short-term maturity of these instruments.
Stock
Based Compensation
The
Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004),
Share
Based Payment
(“SFAS
No. 123R”). SFAS No. 123R establishes the financial accounting and
reporting standards for stock-based compensation plans. As required by SFAS
No. 123R, the Company recognized the cost resulting from all stock-based
payment transactions including shares issued under its stock option plans
in the
financial statements. For the period from May 8, 2007 (Inception) to September
30, 2007, the Company did not grant any stock options.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
|
Non-
Employee
Stock-Based Compensation
The
cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task
Force
Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
or
Services” (“EITF 96-18”).
Advertising
Advertising
is expensed as incurred. Advertising expenses for the period from May 8,
2007
(Inception) to September 30, 2007 totaled $119,829.
Shipping
costs
Shipping
costs are included in other selling, general and administrative expenses
and
totaled $27,779 for the period from May 8, 2007 (Inception) to September
30,
2007.
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents and notes payable.
The Company's investment policy is to invest in low risk, highly liquid
investments. The Company does not believe it is exposed to any significant
credit risk in its cash investment.
The
Company performs on-going credit evaluations of its customer, and, generally,
does not require collateral. The Company maintains reserves for potential
credit
losses and such losses have been within management’s expectations.
Concentration
of suppliers
At
September 30, 2007, approximately 100% of the Company’s raw materials were
purchased primarily from two vendors. Management believes that similar raw
materials would be available from other sources for all raw materials with
the
exception of one.
Concentration
of sales and accounts receivable
At
September 30, 2007, one customer accounted for approximately 100% of the
Company’s sales and accounts receivables.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
|
Recent
Accounting Pronouncements
In
July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation
of
FASB Statement No. 109." This interpretation provides guidance for recognizing
and measuring uncertain tax positions, as defined in SFAS No. 109, "Accounting
for Income Taxes." FIN No. 48 prescribes a threshold condition that a tax
position must meet for any of the benefit of an uncertain tax position to
be
recognized in the financial statements. Guidance is also provided regarding
de-recognition, classification, and disclosure of uncertain tax positions.
FIN
No. 48 is effective for fiscal years beginning after December 15, 2006. The
Company does not expect that this interpretation will have a material impact
on
its financial position, results of operations, or cash flows.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, “Fair Value Measurements” (“FAS 157”). This Statement defines fair value as
used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
The Statement is to be effective for the Company’s financial statements issued
in 2008; however, earlier application is encouraged. The Company is currently
evaluating the timing of adoption and the impact that adoption might have
on its
financial position or results of operations.
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering
the Effects of Prior Year Misstatements when quantifying Misstatements in
Current Year Financial Statements
(“SAB 108”).
SAB 108 requires companies to evaluate the materiality of identified
unadjusted errors on each financial statement and related financial statement
disclosure using both the rollover approach and the iron curtain approach,
as
those terms are defined in SAB 108. The rollover approach quantifies
misstatements based on the amount of the error in the current year financial
statement, whereas the iron curtain approach quantifies misstatements based
on
the effects of correcting the misstatement existing in the balance sheet
at the
end of the current year, irrespective of the misstatement’s year(s) of origin.
Financial statements would require adjustment when either approach results
in
quantifying a misstatement that is material. Correcting prior year financial
statements for immaterial errors would not require previously filed reports
to
be amended. If a Company determines that an adjustment to prior year financial
statements is required upon adoption of SAB 108 and does not elect to
restate its previous financial statements, then it must recognize the cumulative
effect of applying SAB 108 in fiscal 2006 beginning balances of the
affected assets and liabilities with a corresponding adjustment to the fiscal
2006 opening balance in retained earnings. SAB 108 is effective for interim
periods of the first fiscal year ending after November 15, 2006. The
adoption of SAB 108 did not have an impact on the Company’s financial
statements.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
1 -
|
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
|
Recent
Accounting Pronouncements (continued)
In
December 2006, FASB Staff Position No. EITF 00-19-2,
“Accounting
for Registration Payment Arrangements,”
was
issued. The FSP specifies that the contingent obligation to make future payments
or otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured
in
accordance with SFAS No. 5,
“Accounting
for Contingencies.”
The
Company believes that its current accounting is consistent with the FSP.
In
February 2007, the FASB issued SFAS No. 159,
“The
Fair Value Option for Financial Assets and Financial Liabilities, Including
an
Amendment of FASB Statement No. 115”
,
under
which entities will now be permitted to measure many financial instruments
and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis. This Statement is effective as of the beginning
of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on
or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS 157. The Company is currently assessing the impact, if
any, the adoption of SFAS 159 will have on its financial statements.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date
are
not expected to have a material impact on the financial statements upon
adoption.
NOTE
2 -
|
GOING
CONCERN CONSIDERATIONS
|
The
accompanying financial statements are prepared assuming the Company will
continue as a going concern. At September 30, 2007, the Company had an
accumulated deficit of $1,013,037, and a working capital deficiency of $336,805.
Additionally, for the period from May 8, 2007 (Inception) to September 30,
2007,
the Company incurred net losses of $1,013,037, and had negative cash flows
from
operations in the amount of $1,018,773. The ability of the Company to continue
as a going concern is dependent upon increasing sales and obtaining additional
capital and financing. During the period ended September 30, 2007, the Company
borrowed $750,000 for working capital purposes and sold common shares for
net
proceeds of $350,000. Management intends to attempt to raise additional funds
by
way of a public or private offering. While the Company believes in the viability
of its strategy to increase sales volume and in its ability to raise additional
funds, there can be no assurances to that effect. The Company's limited
financial resources have prevented the Company from aggressively advertising
its
products and services to achieve consumer recognition.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
At
September 30, 2007, inventories consisted of raw materials and amounted to
$145,941.
NOTE
4 -
|
PROPERTY
AND
EQUIPMENT
|
At
September 30, 2007, property and equipment consisted of the
following:
|
|
Estimated
life
|
|
|
|
Computer
equipment and office equipment
|
|
|
5
years
|
|
$
|
11,337
|
|
Less:
Accumulated depreciation
|
|
|
|
|
|
(1,105
|
)
|
|
|
|
|
|
$
|
10,232
|
|
For
the
period from May 8, 2007 (Inception) to September 30, 2007, depreciation expense
amounted to $1,105.
NOTE
5 -
|
CONVERTIBLE
NOTES PAYABLE
|
Between
May to July 2007, the Company issued unsecured convertible notes payable
aggregating to $750,000. In connection with the issuance of these notes payable,
the Company issued 165,441 shares of common stock and granted 88,233 warrants
to
investors exercisable at a price of $6.80 per share for a period of five
years.
The notes payable bear 12% interest per annum and mature on the earlier of
December 29, 2007 or on the date of initial closing of subsequent financing
of
equity or debt securities with gross proceeds exceeding $2,500,000. However,
if
the Company does not become a public company by December 29, 2007, the note
holder will receive a 100% return of the principal to be paid by June 30,
2008.
Upon becoming a public company and for a period of six (6) months thereafter,
the Company shall have the right, at its option at any time, or from time
to
time, to convert some or all of these notes payable with a convertible rate
of
$3.40 per share or up to 220,587 shares on a pro rata basis of the Company’s
common stock, par value $0.001 per share. The Company recognized a total
debt
discount of $325,920 in connection with the issuance of these 12% notes
payable.
Amortization
of the debt discount amounted to approximately $170,692 during the period
from
May 8, 2007 (Inception) to September 30, 2007, and is included in interest
expense. Accrued interest on the 12% notes payable amounted to approximately
$25,672 as of September 30, 2007.
At
September 30, 2007, notes payable consists of the following:
Convertible
notes payable
|
|
$
|
750,000
|
|
Less:
unamortized discount on notes payable
|
|
|
(155,228
|
)
|
|
|
|
|
|
Notes
payable, net
|
|
$
|
594,772
|
|
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
6 -
|
RELATED
PARTY TRANSACTIONS
|
The
Company is leasing its office space from a company owned by our chief executive
officer for approximately $43,000 during the period
from
May
8, 2007 (Inception) to September 30, 2007
.
And
does not owe any amount to such related party at September 30,
2007.
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" "SFAS 109". SFAS 109 requires
the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statements and the tax basis
of
assets and liabilities, and for the expected future tax benefit to be derived
from tax losses and tax credit carry forwards. SFAS 109 additionally requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. The Company has a net operating loss
carry
forward for tax purposes totaling approximately $813,000 at September 30,
2007,
expiring through the year 2027. Internal Revenue Code Section 382 places
a
limitation on the amount of taxable income that can be offset by carry forwards
after a certain ownership shifts.
The
table
below summarizes the differences between the Company’s effective tax rate and
the statutory federal rate as follows for the period ended September 30,
2007:
|
|
Period
from
May
8, 2007 (Inception) to
September
30, 2007
|
|
Tax
benefit computed at “expected” statutory rate
|
|
$
|
(354,000
|
)
|
State
income taxes, net of benefit
|
|
|
(41,000
|
)
|
Other
permanent difference
|
|
|
4,000
|
|
Increase
in valuation allowance
|
|
|
391,000
|
|
Net
income tax benefit
|
|
$
|
-
|
|
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
7 -
|
INCOME
TAXES (continued)
|
Deferred
tax assets and liabilities are provided for significant income and expense
items
recognized in different years for tax and financial reporting purposes.
Temporary differences, which give rise to a net deferred tax asset is as
follows:
|
|
September
30, 2007
|
|
Tax
benefit of net operating loss carryforward
|
|
$
|
391,000
|
|
Valuation
Allowance
|
|
|
(391,000
|
)
|
Net
deferred tax asset recorded
|
|
$
|
-
|
|
After
consideration of all the evidence, both positive and negative, management
has
recorded a valuation allowance at September 30, 2007, due to the uncertainty
of
realizing the deferred income tax assets. The valuation allowance was increased
by $391,000.
NOTE
8 -
|
STOCKHOLDERS’
DEFICIENCY
|
Common
Stock
In
May
2007, the Company issued 8,187,946 restricted shares of common stock to the
founder of the Company. The Company valued these common shares at par
value.
In
May
2007, in connection with agreements, the Company issued in the aggregate
of
529,409 restricted shares of common to various employees of the Company for
services to be provided to the Company. The Company valued these common shares
at par value on the date of issuance. In connection with the issuance of
these
shares, for the period ended September 30, 2007, the Company recorded stock
based compensation expense of $529.
In
May
2007, in connection with agreements, the Company issued in the aggregate
of
1,827,202 restricted shares of common to various consultants of the Company
for
business advisory services to be provided to the Company. The term of these
agreements ranges from 3 to 36 months. The Company valued these common shares
at
par value on the date of issuance. In connection with the issuance of these
shares, for the period ended September 30, 2007, the Company recorded stock
based consulting expense of $1,828.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
8 -
|
STOCKHOLDERS’
DEFICIENCY (continued)
|
On
September 7, 2007, the Company completed a private placement to accredited
investors and received proceeds of $350,000 from the sale of units consisting
in
the aggregate of 205,882 shares of its common stock and warrants to purchase
205,882 shares of common stock. The warrants are exercisable at $6.80 per
share
for a term of five years.
Between
May to July 2007, the Company issued unsecured notes payable aggregating
to
$750,000. In connection with the issuance of these notes payable, the Company
issued 165,441 shares of common stock and granted 88,233 warrants to investors
exercisable at a price of $6.80 per share. The shares were valued at the
then
recent contemporaneous offering price of $1.70 per share (see above) resulting
in a value of $281,250 and was recognized as debt discount to be amortized
over
the term of the 12% notes payable.
Common
Stock Warrants
Between
May to July 2007, the Company granted 88,233 warrants to investors exercisable
at a price of $6.80 per share in connection with the issuance of the 12%
notes
payable. The purchase warrants expire in five years from the date of the
warrant. The Company valued these warrants utilizing the Black-Scholes options
pricing model with the following assumptions: stock price of $1.70 per share,
volatility of 68% (estimated using volatilities of similar companies), expected
term of five years, and a risk free interest rate from 4.6% to 4.95% with
a
resulting value of approximately $0.51 or $44,700. The fair values of such
warrants were recorded as debt discount to be amortized over the term of
the 12%
notes payable.
On
September 7, 2007, in connection with a private placement, the Company granted
205,882 purchase warrants to investors. The warrants are exercisable at $6.80
per common share and expire in five years.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
8 -
|
STOCKHOLDERS’
DEFICIENCY (CONTINUED)
|
Common
Stock Warrants (continued)
A
summary
of the status of the Company's outstanding stock warrants as of September
30,
2007 and changes during the period then ended is as follows:
|
|
Period
Ended September 30, 2007
|
|
|
|
Number
of Warrants
|
|
Weighted
Average Exercise Price
|
|
Balance
at inception
|
|
|
-
|
|
$
|
-
|
|
Granted
|
|
|
294,115
|
|
|
6.80
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
Balance
at end of period
|
|
|
294,115
|
|
$
|
6.80
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable at end of period
|
|
|
294,115
|
|
$
|
6.80
|
|
Weighted
average fair value of warrants granted during the period
|
|
|
|
|
$
|
0.51
|
|
The
following table summarizes information about stock warrants outstanding at
September 30, 2007:
Warrants
Outstanding
|
|
Warrants
Exercisable
|
|
Range
of Exercise Price
|
|
Number
Outstanding at September 30, 2007
|
|
Weighted
Average Remaining Contractual Life
|
|
Weighted
Average Exercise Price
|
|
Number
Exercisable
at
September
30, 2007
|
|
Weighted
Average Exercise Price
|
|
$
|
6.80
|
|
|
294,115
|
|
|
4.88
Years
|
|
$
|
6.80
|
|
|
294,115
|
|
$
|
6.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,115
|
|
|
|
|
$
|
6.80
|
|
|
294,115
|
|
$
|
6.80
|
|
NOTE
9 -
|
SUBSEQUENT
EVENTS
|
In
October 2007, the Company completed a private placement to accredited investors
and received proceeds of $630,000 from the sale of units consisting in the
aggregate of 370,587 shares of its common stock and warrants to purchase
370,587
shares of common stock. The Company’s founder contributed 370,587 shares owned
by him to the Company in connection with this private placement. The warrants
are exercisable at $6.80 per share for a term of five years.
VENTURE
BEVERAGE COMPANY
NOTES
TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2007
NOTE
9 -
|
SUBSEQUENT
EVENTS (continued)
|
In
November 2007, the Company agreed to issue 161,974 shares of common stock
for
advertising
and promotional
services
in connection with a three year agreement.
The
Company’s founder contributed 53,991 shares owned by him to the Company in
connection with this agreement.
The
Company valued these common shares at the fair market value on the date of
grant
at $1.70 per share or $275,356
based on
the recent selling price of the Company’s common stock
which
has been recognize as advertising expense.
In
December 2007, the Company amended the terms and provisions in connection
with
convertible notes payable of two debt holders. Under the terms of the amended
convertible note agreement, the principal and accrued interest thereon will
mature on March 31, 2008, and, in connection with such extension of terms,
the
Company issued an aggregate of 29,410 shares to such debt holders.
BALANCE
SHEET
DECEMBER
31, 2007
ASSETS
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
Cash
|
|
$
|
1,175,245
|
|
Accounts
receivable, net of allowance
for doubtful accounts of $27,000
|
|
|
246,993
|
|
Inventories
|
|
|
580,337
|
|
Prepaid
expense and other current assets
|
|
|
389,795
|
|
|
|
|
|
|
Total
current assets
|
|
|
2,392,370
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
22,043
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,414,413
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Convertible
notes payable
|
|
$
|
750,000
|
|
Accounts
payable
|
|
|
131,416
|
|
Accrued
expenses
|
|
|
89,535
|
|
|
|
|
|
|
Total
liabilities
|
|
|
970,951
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
Common
stock, $.001 par value, 100,000,000 shares authorized; 54,985,765
shares
issued and outstanding
|
|
|
54,986
|
|
Additional
paid-in capital
|
|
|
4,245,561
|
|
Accumulated
deficit
|
|
|
(2,857,085
|
)
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
1,443,462
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
2,414,413
|
|
See
notes to unaudited financial statements.
STATEMENT
OF OPERATIONS
For
the three months ended December 31, 2007
Net
sales
|
|
$
|
258,794
|
|
|
|
|
|
|
Cost
of sales
|
|
|
254,493
|
|
|
|
|
|
|
Gross
profit
|
|
|
4,301
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Compensation
expense and related taxes
|
|
|
176,019
|
|
Advertising
and marketing
|
|
|
774,330
|
|
Professional
fees
|
|
|
243,310
|
|
Consulting
fees
|
|
|
211,002
|
|
Other
selling, general and administrative
|
|
|
214,431
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,619,092
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,614,791
|
)
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
Interest
expense
|
|
|
(229,256
|
)
|
|
|
|
|
|
Total
other expense
|
|
|
(229,256
|
)
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,844,047
|
)
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
Weighted
average number of shares outstanding - basic and
diluted
|
|
|
49,131,122
|
|
See
notes to unaudited financial statements.
STATEMENT
OF CASH FLOWS
For
the three months ended December 31, 2007
Cash
flows from operating activities:
|
|
|
|
|
Net
loss
|
|
$
|
(1,844,047
|
)
|
Adjustments
to reconcile net loss to net cash used in
operations:
|
|
|
|
|
Depreciation
|
|
|
1,435
|
|
Bad
debts
|
|
|
27,000
|
|
Common
stock issued for services
|
|
|
325,356
|
|
Common
stock issued for interest in connection with notes
payable
|
|
|
49,968
|
|
Amortization
of debt discount charged to interest expense
|
|
|
155,228
|
|
Changes
in assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
|
|
(195,127
|
)
|
Inventories
|
|
|
(434,396
|
)
|
Prepaid
expense and other current assets
|
|
|
(366,778
|
)
|
Accounts
payable
|
|
|
20,549
|
|
Accrued
expenses
|
|
|
63,863
|
|
|
|
|
|
|
Total
adjustments
|
|
|
(352,902
|
)
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(2,196,949
|
)
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(13,246
|
)
|
|
|
|
|
|
Net
cash flows used in investing activities
|
|
|
(13,246
|
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Payment
in connection with the stock purchase agreement
|
|
|
(60,000
|
)
|
Net
proceeds from sale of common stock
|
|
|
3,375,550
|
|
|
|
|
|
|
Net
cash flows provided by financing activities
|
|
|
3,315,550
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
1,105,355
|
|
|
|
|
|
|
Cash
- beginning of period
|
|
|
69,890
|
|
|
|
|
|
|
Cash
- end of period
|
|
$
|
1,175,245
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash
paid for :
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
See
notes to unaudited financial statements.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES
Organization
Purple
Beverage Company, Inc. (the “Company”), formerly Red Carpet Entertainment, Inc.
(“Red”), was incorporated in April 2002 under the laws of the State of Nevada.
On
November 12, 2007, the Company obtained, through a vote of our majority
stockholder, approval for a 8.25 for 1 stock split of its issued and outstanding
common stock. All amounts stated herein have been retroactively adjusted
to
reflect this split.
On
December 12, 2007, the Company, Venture Beverage Company, Inc., a Nevada
corporation (“Venture”), and a newly-created, wholly-owned subsidiary of ours,
Purple Acquisition Corp., a Nevada corporation (the “Acquisition Subsidiary”),
entered into an agreement and plan of merger (the “Merger Agreement”). The
transactions contemplated by the Merger Agreement (the “Merger”) closed on
December 12, 2007.
Pursuant
to the Merger Agreement, Venture merged with and into the Acquisition
Subsidiary, with Venture surviving. Immediately thereafter, Venture merged
with
and into the Company, with the Company surviving. In connection with the
latter
merger, the Company changed its name to “Purple Beverage Company, Inc.” As a
result of the Merger, the former stockholders of Venture now hold approximately
68% of our outstanding common shares. Further, as a result of the Merger,
Venture was deemed to be the acquirer for accounting purposes. Accordingly,
the
results of operations represent the operations of Venture through December
12,
2007. The results of operations subsequent to that date reflect the operations
of the Company. The Company has retroactively restated the net loss per share
and the stockholders’ equity section of the balance sheet to reflect the reverse
acquisition.
The
Company is engaged in the development, marketing, and distribution of a unique
line of beverage brands and products.
Basis
of presentation
The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, the financial statements do not include all of the information
and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included and such adjustments
are of
a normal recurring nature. These financial statements should be read in
conjunction with the financial statements for the period ended September
30,
2007 and notes thereto contained in the Report on Form 8-K/A of the Company,
as
filed with the Securities and Exchange Commission (the “Commission”). Note that
the results of operations for the three months ended December 31, 2007 are
not
necessarily indicative of the results for the full fiscal year ending September
30, 2008.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
The
following summarize the more significant accounting and reporting policies
and
practices of the Company:
Use
of
Estimates
In
preparing the financial statements, management is required to make estimates
and
assumptions that affect the reported amounts of assets and liabilities as
of the
date of the statements of financial condition, and revenues and expenses
for the
period then ended. Actual results may differ significantly from those estimates.
Significant estimates made by management include, but are not limited to,
stock-based compensation, valuation of debt discounts, and the useful life
of
property and equipment.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
The
Company places its cash with high credit quality financial institution. Account
at this institution is insured by the Federal Deposit Insurance Corporation
(“FDIC”) up to $100,000. For the period ended December 31, 2007, the Company has
reached bank balances exceeding the FDIC insurance limit. To reduce its risk
associated with the failure of such financial institution, the Company evaluates
at least annually the rating of the financial institution in which it holds
deposits.
Accounts
Receivable
The
Company has a policy of reserving for uncollectible accounts based on its
best
estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past
due
accounts and other factors that may indicate that the realization of an account
may be in doubt. Account balances deemed to be uncollectible are charged
to the
allowance after all means of collection have been exhausted and the potential
for recovery is considered remote. At December 31, 2007, management has
determined that an allowance is necessary, which amounted to
$27,000.
Inventories
Inventories
are stated at the lower of cost or market utilizing the first-in, first-out
method and consist of raw materials related to the Company’s products. The
Company writes down inventory for estimated obsolescence or unmarketable
inventory based upon assumptions and estimates about future demand and market
conditions. If actual market conditions are less favorable than those projected
by the Company, additional inventory write-downs may be required.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
Property
and Equipment
Property
and equipment are carried at cost. Depreciation and amortization are provided
using the straight-line method over the estimated economic lives of the assets.
The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized. When assets are retired or disposed of,
the
cost and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are included in income in the year of disposition.
Impairment
of Long-Lived Assets
In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company
periodically reviews its long-lived assets for impairment whenever events
or
changes in circumstances indicate that the carrying amount of the assets
may not
be fully recoverable. The Company recognizes an impairment loss when the
sum of
expected undiscounted future cash flows is less than the carrying amount
of the
asset. The amount of impairment is measured as the difference between the
asset’s estimated fair value and its book value. The Company did not consider it
necessary to record any impairment charges during the three months ended
December 31, 2007.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheet for cash, accounts receivable,
inventories, accounts payable, accrued expenses, and notes payable approximate
their fair market value based on the short-term maturity of these
instruments.
Income
Taxes
Under
the
asset and liability method of FASB Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets
and liabilities, and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Deferred
tax assets are reduced by a valuation allowance, when in the Company’s opinion
it is likely that some portion or the entire deferred tax asset will not
be
realized. After consideration of all the evidence, both positive and
negative, management has recorded a full valuation allowance due to the
uncertainty of realizing the deferred tax assets. Utilization of the Company’s
net operating loss carryforwards are limited based on changes in ownership
as
defined in Internal Revenue Code Section 382. Due to ongoing losses and the
establishment of a valuation allowance to offset deferred tax assets, the
Company did not record a tax provision for the period ended December 31,
2007.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
Stock
Based Compensation
The
Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004),
Share
Based Payment
(“SFAS
No. 123R”). SFAS No. 123R establishes the financial accounting and
reporting standards for stock-based compensation plans. As required by SFAS
No. 123R, the Company recognized the cost resulting from all stock-based
payment transactions including shares issued under its stock option plans
in the
financial statements. For the three months ended December 31, 2007, the Company
did not grant any stock options.
Non-Employee
Stock-Based Compensation
The
cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task
Force
Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
or
Services” (“EITF 96-18”).
Revenue
Recognition
The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104, “Revenue Recognition in Financial
Statements”. In general, the Company records revenue when persuasive
evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable,
and collectability is reasonably assured.
The
following policies reflect specific criteria for the revenues stream of the
Company:
The
Company generates revenue from the sale of its beverage products. Revenues
from
the sale of these items are recognized upon delivery of the product to the
customer.
Consideration
given by the Company to a customer (including a reseller of the Company’s
products) such as slotting fees is accounted for as a reduction of revenue
when
recognized in the Company’s income statement.
Earning
Per Share
Basic
earnings per share are calculated by dividing income available to stockholders
by the weighted-average number of common shares outstanding during each period.
Diluted earnings per share are computed using the weighted average number
of
common and dilutive common share equivalents outstanding during the period.
Dilutive common share equivalents consist of shares issuable upon the exercise
of stock options and warrants. The outstanding warrants and shares equivalent
issuable pursuant to embedded conversion features amounted to 9,321,500 at
December 31, 2007. The outstanding warrants and shares equivalent issuable
pursuant to embedded conversion features at December 31, 2007 are excluded
from
the loss per share computation for that period due to their antidilutive
effect.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
Advertising
Advertising
is expensed as incurred. Advertising expenses for the three months period
ended
December 31, 2007 totaled $206,455.
Shipping
costs
Shipping
costs are included in cost of goods sold and totaled $31,202 for the three
months period ended December 31, 2007.
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents and notes payable.
The Company’s investment policy is to invest in low risk, highly liquid
investments. The Company does not believe it is exposed to any significant
credit risk in its cash investment.
The
Company performs on-going credit evaluations of its customer, and, generally,
does not require collateral. The Company maintains reserves for potential
credit
losses and such losses have been within management’s expectations.
Concentration
of suppliers
At
December 31, 2007, approximately 100% of the Company’s raw materials were
purchased primarily from two vendors. Management believes that similar raw
materials would be available from other sources for all raw materials with
the
exception of one.
Concentration
of sales and accounts receivable
At
December 31, 2007, one customer accounted for approximately 100% of the
Company’s sales and accounts receivables.
Recent
Accounting Pronouncements
In
July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of
FASB Statement No. 109.” This interpretation provides guidance for recognizing
and measuring uncertain tax positions, as defined in SFAS No. 109, “Accounting
for Income Taxes.” FIN No. 48 prescribes a threshold condition that a tax
position must meet for any of the benefit of an uncertain tax position to
be
recognized in the financial statements. Guidance is also provided regarding
de-recognition, classification, and disclosure of uncertain tax positions.
FIN
No. 48 is effective for fiscal years beginning after December 15, 2006. The
adoption of this interpretation did not have an impact on the Company’s
financial position, results of operations, or cash flows.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING
POLICIES (continued)
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, “Fair Value Measurements” (“FAS 157”). This Statement defines fair value as
used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
The Statement is to be effective for the Company’s financial statements issued
in 2008; however, earlier application is encouraged. The Company is currently
evaluating the timing of adoption and the impact that adoption might have
on its
financial position or results of operations.
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering
the Effects of Prior Year Misstatements when quantifying Misstatements in
Current Year Financial Statements
(“SAB 108”).
SAB 108 requires companies to evaluate the materiality of identified
unadjusted errors on each financial statement and related financial statement
disclosure using both the rollover approach and the iron curtain approach,
as
those terms are defined in SAB 108. The rollover approach quantifies
misstatements based on the amount of the error in the current year financial
statement, whereas the iron curtain approach quantifies misstatements based
on
the effects of correcting the misstatement existing in the balance sheet
at the
end of the current year, irrespective of the misstatement’s year(s) of origin.
Financial statements would require adjustment when either approach results
in
quantifying a misstatement that is material. Correcting prior year financial
statements for immaterial errors would not require previously filed reports
to
be amended. If a Company determines that an adjustment to prior year financial
statements is required upon adoption of SAB 108 and does not elect to
restate its previous financial statements, then it must recognize the cumulative
effect of applying SAB 108 in fiscal 2006 beginning balances of the
affected assets and liabilities with a corresponding adjustment to the fiscal
2006 opening balance in retained earnings. SAB 108 is effective for interim
periods of the first fiscal year ending after November 15, 2006. The
adoption of SAB 108 did not have an impact on the Company’s financial
statements.
In
December 2006, FASB Staff Position No. EITF 00-19-2,
“Accounting
for Registration Payment Arrangements,”
was
issued. The FSP specifies that the contingent obligation to make future payments
or otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured
in
accordance with SFAS No. 5,
“Accounting
for Contingencies.”
The
Company believes that its current accounting is consistent with the FSP.
In
February 2007, the FASB issued SFAS No. 159,
“The
Fair Value Option for Financial Assets and Financial Liabilities, Including
an
Amendment of FASB Statement No. 115”
,
under
which entities will now be permitted to measure many financial instruments
and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis. This Statement is effective as of the beginning
of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on
or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS 157. The Company is currently assessing the impact, if
any, the adoption of SFAS 159 will have on its financial statements.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the financial statements upon
adoption.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
2 – GOING CONCERN CONSIDERATIONS
The
accompanying financial statements are prepared assuming the Company will
continue as a going concern. At December 31, 2007, the Company had an
accumulated deficit of $2,857,085, and a working capital of $1,421,419.
Additionally, for the three months ended December 31, 2007, the Company incurred
net losses of $1,844,047, and had negative cash flows from operations in
the
amount of $2,196,949. The ability of the Company to continue as a going concern
is dependent upon increasing sales and obtaining additional capital and
financing. During the fiscal year ended September 30, 2007, the Company borrowed
$750,000 for working capital purposes and sold common shares for net proceeds
of
$350,000. During the three months ended December 31, 2007, the Company sold
common shares for net proceeds of $3,375,550. Management intends to attempt
to
raise additional funds by way of a public or private offering. While the
Company
believes in the viability of its strategy to increase sales volume and in
its
ability to raise additional funds, there can be no assurances to that effect.
The Company’s limited financial resources have prevented the Company from
aggressively advertising its products and services to achieve consumer
recognition.
NOTE
3 – INVENTORIES
At
December 31, 2007, inventories consisted of the following:
Raw
materials
|
|
$
|
543,172
|
|
Finished
goods
|
|
|
37,165
|
|
Total
|
|
$
|
580,337
|
|
NOTE
4 – PROPERTY AND
EQUIPMENT
At
December 31, 2007, property and equipment consisted of the
following:
|
|
Estimated life
|
|
|
|
Computer
equipment and office equipment
|
|
|
3
years
|
|
$
|
24,583
|
|
Less:
Accumulated depreciation
|
|
|
|
|
|
(2,540
|
)
|
|
|
|
|
|
$
|
22,043
|
|
For
the
three months ended December 31, 2007, depreciation expense amounted to
$1,435.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
5 - CONVERTIBLE NOTES PAYABLE
Between
May and July 2007, the Company issued unsecured convertible notes payable
aggregating $750,000. In connection with the issuance of these notes payable,
the Company issued 562,500 shares of common stock and granted 300,000 warrants
to three investors exercisable at a price of $2.00 per share for a period
of
five years. The notes payable bear 12% interest per annum and were to mature
on
the earlier of December 29, 2007, or on the date of initial closing of
subsequent financing of equity or debt securities with gross proceeds exceeding
$2,500,000. From and after the closing of the Merger, for a period of six
(6)
months, the Company has the right, in aggregate, at its option at any time,
or
from time to time, to convert some or all of these notes payable into the
Company’s common stock with a convertible rate of $1.00 per share or up to
750,000 shares on a pro rata basis of the Company’s common stock, par value
$0.001 per share. The Company recognized a total debt discount of $325,920
in
connection with the issuance of these 12% notes payable.
In
December 2007, the Company amended the terms and provisions of convertible
notes
payable to two debt holders (see above). Under the terms of the amended
convertible note agreements, the principal and accrued interest thereon will
mature on March 31, 2008, and only the payees under such notes have the right,
in aggregate, at any time, or from time to time, to convert (prior to the
stated
maturity date) some or all of the notes payable into the Company’s common stock
with a convertible rate of $1.00 per share or up to 500,000 shares on a pro
rata
basis of the Company’s common stock, par value $0.001 per share; and, in
connection with such amendment of terms, the Company issued an aggregate
of
100,000 shares to such debt holders. The Company valued these common shares
at
the fair market value on the date of grant, or $.50 per share or approximately
$50,000
based on
the recent selling price of the Company’s common stock. Such amount
has
been
recognized as interest expense. Additionally, the third debt holder waived
any
default that could have occurred upon the maturity date in December
2007.
Amortization
of the debt discount amounted to approximately $155,228 during the three
months
ended December 31, 2007, and is included in interest expense. Accrued interest
on the 12% notes payable amounted to approximately $49,703 as of December
31,
2007.
NOTE
6 – RELATED PARTY TRANSACTIONS
The
Company is leasing its office space from a company owned by our chief executive
officer for approximately $28,000
during
the three months ended December 31, 2007
and does
not owe any amount to such related party at December 31, 2007.
NOTE
7 – STOCKHOLDERS’ EQUITY
Common
Stock
At
the
effective time of the Merger, the stockholders of Venture exchanged their
securities for 37,581,140 shares of the Company’s restricted common stock,
representing approximately 68% of the common stock of the Company at that
time.
The Company had 10,993,125 outstanding shares of common stock immediately
preceding the merger. Additionally, u
pon
the
closing of the Merger, two former stockholders of Red sold their interest
in Red
in exchange for $60,000 in cash and all the historical operating assets of
Red
pursuant to a stock purchase agreement entered into December 12,
2007.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
7 – STOCKHOLDERS’ EQUITY (continued)
In
October 2007, the Company completed a private placement to accredited investors
and received proceeds of $630,000 from the sale of units consisting in the
aggregate of 1,260,000 shares of its common stock and warrants to purchase
1,260,000 shares of common stock. The Company’s founder contributed 1,260,000
shares owned by him to the Company in connection with this private placement.
The warrants are exercisable at $2.00 per share for a term of five years.
In
November 2007, the Company issued 550,712 shares of common stock for
advertising
and promotional
services
in connection with a three year agreement.
The
Company’s founder contributed 183,565 shares owned by him to the Company in
connection with this agreement.
The
Company valued these common shares at the fair market value on the date of
grant
at $.50 per share or $275,356
based on
the recent selling price of the Company’s common stock
which
has been recognized as advertising expense.
In
December 2007, the Company agreed to issue 100,000 shares of common stock
for
advertising
and promotional
services
in connection with a one year agreement. The Company valued these common
shares
at the fair market value on the date of grant at $.50 per share or
$50,000
based on
the recent selling price of the Company’s common stock
which
has been recognized as advertising expense.
In
December 2007, the Company completed a private placement to accredited investors
and received net proceeds of $2,745,550 from the sale of units consisting
in the
aggregate of 6,030,000 shares of its common stock and warrants to purchase
6,030,000 shares of common stock. The warrants are exercisable at $2.00 per
share for a term of five years. Additionally, during the three months ended
December 31, 2007, in connection with these private placements, the Company
paid
commissions to its placement agents of approximately $225,200 in cash, issued
281,500 shares of common stock and granted 281,500 warrants exercisable at
$2.00
per share for a term of five years which have been allocated against paid
in
capital.
In
December 2007, the Company amended the terms and provisions in connection
with
convertible notes payable of two debt holders. Under the terms of the amended
convertible note agreement, the principal and accrued interest thereon will
mature on March 31, 2008, and, in connection with such extension of terms,
the
Company issued an aggregate of 100,000 shares to such debt holders. The Company
valued these common shares at the fair market value on the date of grant
at $.50
per share or approximately $50,000
based on
the recent selling price of the Company’s common stock
which
has been recognize as interest expense.
Common
Stock Warrants
In
October 2007, in connection with a private placement, the Company granted
1,260,000 purchase warrants to investors. The warrants are exercisable at
$2.00
per common share and expire in five years.
In
December 2007, in connection with a private placement, the Company granted
6,030,000 purchase warrants to investors. The warrants are exercisable at
$2.00
per common share and expire in five years. In connection with these private
placements, the Company paid commissions and granted 281,500 warrants to
its
placement agents. The warrants are exercisable at $2.00 per share for a term
of
five years which have been allocated against paid in capital.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
7 – STOCKHOLDERS’ EQUITY (continued)
A
summary
of the status of the Company’s outstanding stock warrants as of December 31,
2007 and changes during the period then ended is as follows:
|
|
December
31, 2007
|
|
|
|
Number
of
Warrants
|
|
Weighted
Average Exercise Price
|
|
Balance
at inception
|
|
|
1,000,000
|
|
$
|
2.00
|
|
Granted
|
|
|
7,571,500
|
|
|
2.00
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
Balance
at end of period
|
|
|
8,571,500
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable at end of period
|
|
|
8,571,500
|
|
$
|
2.00
|
|
Weighted
average fair value of warrants granted during the period
|
|
|
|
|
$
|
2.00
|
|
The
following table summarizes information about stock warrants outstanding at
December 31, 2007:
|
|
Warrants
Outstanding
|
|
Warrants
Exercisable
|
|
|
|
Range
of
Exercise
Price
|
|
Number
Outstanding at December 31, 2007
|
|
Weighted
Average Remaining Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable at
December
31, 2007
|
|
Weighted
Average
Exercise
Price
|
|
|
|
$
|
2.00
|
|
|
8,571,500
|
|
|
4.91
Years
|
|
$
|
2.00
|
|
|
8,571,500
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,571,500
|
|
|
|
|
$
|
2.00
|
|
|
8,571,500
|
|
$
|
2.00
|
|
NOTE
8 – SUBSEQUENT EVENTS
In
January 2008, the Company issued 150,000 shares of common stock and granted
1,500,000 stock options for
advertising
and promotional
services
in connection with a three year endorsement agreement.
The
options are exercisable at $1.00 per share for a term of six months
.
Additionally, under this agreement, the Company shall pay an aggregate of
$150,000. The Company valued these common shares at the fair market value
on the
date of grant at $1.55 per share or $232,500
which
has
been recognized as advertising expense. The Company valued the stock options
utilizing
the Black-Scholes options pricing model at $
0.58
per
share or $870,000
which
has
been recognized as advertising expense.
PURPLE
BEVERAGE COMPANY, INC.
NOTES
TO
UNAUDITED FINANCIAL STATEMENTS
DECEMBER
31, 2007
NOTE
8 – SUBSEQUENT EVENTS (continued)
In
January 2008, the Company issued 125,000 shares of common stock and granted
500,000 stock options for
advertising
and promotional
services
in connection with a 1 month endorsement agreement.
The
options are exercisable at $1.00 per share for a term of six months
.
Additionally, under this agreement, the Company shall pay $10,000. The Company
valued these common shares at the fair market value on the date of grant
at
$1.55 per share or $193,750
which
has
been recognized as advertising expense. The Company valued the stock options
utilizing
the Black-Scholes options pricing model at $
0.58
per
share or $290,000
which
has
been recognized as advertising expense.
In
January 2008, the Company entered into a 50-month sublease agreement. The
lease
requires the Company to pay monthly base rent of $5,372 plus pro rata share
of
operating expenses. The base rental shall be subject to an increase by 3%
on the
first day of each lease year.
5,884,885
Shares
PURPLE
BEVERAGE COMPANY, INC.
Common
Stock
______________________
PROSPECTUS
______________________
_______________,
2008
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13.
|
Other
Expenses of Issuance and
Distribution.
|
The
following table sets forth the costs and expenses payable by us in connection
with the issuance and distribution of the securities being registered. None
of
the following expenses are payable by the selling stockholders. All of the
amounts shown are estimates, except for the SEC registration fee.
SEC
Registration Fee
|
|
$
|
615.20
|
|
Accounting
Fees and Expenses
|
|
|
10,000.00
|
|
Legal
Fees and Expenses
|
|
|
75,000.00
|
|
Printing
Expenses
|
|
|
5,000.00
|
|
Miscellaneous
Fees and Expenses
|
|
|
9,384.80
|
|
Total
|
|
$
|
100,000.00
|
|
Item
14.
|
Indemnification
of Directors and Officers.
|
The
Nevada Revised Statutes provide that a corporation may indemnify its officers
and directors against expenses actually and reasonably incurred in the event
an
officer or director is made a party or threatened to be made a party to an
action (other than an action brought by or in the right of the corporation
as
discussed below) by reason of his or her official position with the corporation
provided the director or officer (1) is not liable for the breach of any
fiduciary duties as a director or officer involving intentional misconduct,
fraud or a knowing violation of the law or (2) acted in good faith and in a
manner he or she reasonably believed to be in the best interests of the
corporation and, with respect to any criminal actions, had no reasonable cause
to believe his or her conduct was unlawful. A corporation may indemnify its
officers and directors against expenses, including amounts paid in settlement,
actually and reasonably incurred in the event an officer or director is made
a
party or threatened to be made a party to an action by or in the right of the
corporation by reason of his or her official position with the corporation,
provided the director or officer (1) is not liable for the breach of any
fiduciary duties as a director or officer involving intentional misconduct,
fraud or a knowing violation of the laws or (2) acted in good faith and in
a
manner he or she reasonably believed to be in the best interests of the
corporation. The Nevada Revised Statutes further provides that a corporation
generally may not indemnify an officer or director if it is determined by a
court that such officer or director is liable to the corporation or responsible
for any amounts paid to the corporation as a settlement, unless a court also
determines that the officer or director is entitled to indemnification in light
of all of the relevant facts and circumstances. The Nevada Revised Statutes
require a corporation to indemnify an officer or director to the extent he
or
she is successful on the merits or otherwise successfully defends the action.
Our
bylaws provide that we will indemnify our directors and officers to the maximum
extent permitted by Nevada law. We are also permitted to apply for insurance
on
behalf of any director, officer, employee or other agent for liability arising
out of his actions.
Item
15.
|
Recent
Sales of Unregistered
Securities.
|
On
December 12, 2007, in connection with our merger with Venture Beverage Company,
we issued 37,581,135 shares of our common stock to the stockholders of Venture
Beverage Company. The issuance was made pursuant to Rule 506 under Regulation
D
promulgated by the Securities and Exchange Commission. We believe that exemption
was available because (i) no advertising or general solicitation was employed
in
offering the securities, (ii) the offering and sales were made to 52 persons,
40
of whom were accredited investors and 12 of whom were non-accredited investors
(all of whom received applicable disclosure materials) and (iii) transfer was
restricted in accordance with the requirements of the Securities Act of 1933,
as
amended (including by legending of certificates representing the
securities).
On
December 12, 2007, we accepted subscriptions for $3,015,000 or 60.3 units,
with
each unit consisting of 100,000 shares of common stock and a callable five-year
warrant to purchase 100,000 shares of common stock at an initial exercise price
$2.00 per share. Each unit was sold for $50,000 and we accepted subscriptions
for partial units. In total, on December 12, 2007, we issued 6,030,000 shares
of
common stock and warrants to purchase up to 6,030,000 shares of common stock.
The issuances were made pursuant to Rule 506 under Regulation D promulgated
by
the Securities and Exchange Commission. We believe that exemption was available
because (i) no advertising or general solicitation was employed in offering
the
securities, (ii) the offering and sales were made to 31 persons or entities,
each of which was an accredited investor and (iii) transfer was restricted
in
accordance with the requirements of the Securities Act of 1933, as amended
(including by legending of certificates representing the
securities).
As
compensation for Palladium Capital Advisors, LLC’s role as a placement agent in
connection with the above described unit offering, on December 12, 2007, we
issued Palladium Capital Advisors, LLC a callable five-year warrant to purchase
up to 450,400 shares of common stock at an initial exercise price of $2.00.
In
addition, Palladium Capital Advisors, LLC was entitled to a cash fee in
connection with the above described unit offering equal to ten percent of the
gross proceeds from units placed by Palladium Capital Advisors, LLC and
reimbursement for its non-accountable expenses in an amount equal to three
percent of gross proceeds from the units placed by Palladium Capital Advisors,
LLC. On December 12, 2007, we issued Palladium Capital Advisors, LLC and one
of
its affiliates an aggregate of 281,500 shares of common stock and a five year
callable warrant to purchase up to 281,500 shares of common stock at an initial
exercise price of $2.00 in exchange for Palladium Capital Advisors, LLC
surrendering 5% of the above described cash fee. The issuances were made
pursuant to Rule 506 under Regulation D promulgated by the Securities and
Exchange Commission. We believe that exemption was available because (i) no
advertising or general solicitation was employed in offering the securities,
(ii) the offering and sales were made only to Palladium Capital Advisors, LLC,
which was an accredited investor and (iii) transfer was restricted in accordance
with the requirements of the Securities Act of 1933, as amended (including
by
legending of certificates representing the securities).
On
January 18, 2008, we issued 127,500 shares of common stock and granted 1,275,000
options to purchase common stock to an accredited individual pursuant to an
endorsement agreement dated as of January 18, 2008, by and among us and Torii
Hunter and (2) issued 22,500 shares of common stock and granted 225,000 options
to purchase common stock to an accredited entity in connection with such
endorsement agreement. The options are exercisable at $1.00 per share for a
term
of six months. In connection with a consulting agreement, dated as of March
25,
2008, between us and Esquire Sports Marketing, LLC related to such
aforementioned endorsement agreement, on January 18, 2008, we issued an
aggregate of 125,000 shares of common stock to three accredited investors and
granted 500,000 options to purchase common stock to three accredited investors.
The options are exercisable at $1.00 per share and expire on July 10, 2008.
The
issuances were made pursuant to Rule 506 under Regulation D promulgated by
the
Securities and Exchange Commission. We believe that exemption was available
because (i) no advertising or general solicitation was employed in offering
the
securities, (ii) the offering and sales were made solely to accredited investors
and (iii) transfer was restricted in accordance with the requirements of the
Securities Act of 1933, as amended (including by legending of certificates
representing the securities).
In
connection with an endorsement agreement, dated as of March 25, 2008, by and
among us and Mariano Rivera, on March 25, 2008, we granted to an accredited
individual pursuant to such endorsement agreement a three-year non-qualified
stock option to purchase up to 1,414,286 shares of our common stock at an
exercise price of $0.01. This option vested and became exercisable immediately.
In connection with a consulting agreement, dated January 18, 2008, between
us
and Esquire Sports Marketing, LLC related to such aforementioned endorsement
agreement, on March 25, 2008, we issued an aggregate of 160,000 shares of common
stock to three accredited investors. The issuances were made pursuant to Rule
506 under Regulation D promulgated by the Securities and Exchange Commission.
We
believe that exemption was available because (i) no advertising or general
solicitation was employed in offering the securities, (ii) the offering and
sales were made solely to accredited investors and (iii) transfer was restricted
in accordance with the requirements of the Securities Act of 1933, as amended
(including by legending of certificates representing the
securities).
Pursuant
to a consulting agreement dated December 1, 2007 between us and Esquire Sports
Marketing, LLC, on March 3, 2008, we issued 100,000 shares of common stock
to
two accredited entities. The issuances were made pursuant to Rule 506 under
Regulation D promulgated by the Securities and Exchange Commission. We believe
that exemption was available because (i) no advertising or general solicitation
was employed in offering the securities, (ii) the offering and sales were made
solely to accredited investors and (iii) transfer was restricted in accordance
with the requirements of the Securities Act of 1933, as amended (including
by
legending of certificates representing the securities).
On
March
11, 2008, we offered a temporary reduction in the exercise price of 50% of
the
warrants issued as part of our December 2007 private placement. The per-share
exercise price of the warrants was reduced from $2.00 to $1.25 from March 11
to
April 2, 2008. At the request of certain warrant holders, we subsequently
eliminated the 50% limit. In connection with this exercise price reduction,
934,000 shares of common stock were issued following the exercise of warrants,
resulting in $1,167,500 of proceeds. As of the expiration date of the temporary
reduction-in-exercise-price-period, the exercise price of the unexercised
warrants reverted to their original $2.00 per share exercise price. In
connection with the temporary reduction, the exercising warrant holders were
issued callable five-year warrants to purchase an aggregate of 467,000 shares
of
common stock on the basis of one new warrant for each two original warrants
exercised. The terms of the new five-year warrants are substantially similar
to
the terms of the exercised warrants except that the per-share exercise price
of
the new warrants is $3.50. The issuances were made pursuant to Rule 506 under
Regulation D promulgated by the Securities and Exchange Commission. We believe
that exemption was available because (i) no advertising or general solicitation
was employed in offering the securities, (ii) the offering and sales were made
solely to accredited investors and (iii) transfer was restricted in accordance
with the requirements of the Securities Act of 1933, as amended (including
by
legending of certificates representing the securities).
On
April
2, 2008, we issued 1,635,786 shares of common stock to eight accredited
investors in exchange for aggregate gross proceeds of $2,275,000. The issuances
were made pursuant to Rule 506 under Regulation D promulgated by the Securities
and Exchange Commission. We believe that exemption was available because (i)
no
advertising or general solicitation was employed in offering the securities,
(ii) the offering and sales were made solely to accredited investors and (iii)
transfer was restricted in accordance with the requirements of the Securities
Act of 1933, as amended (including by legending of certificates representing
the
securities).
Exhibit
No.
|
|
Description
|
2.1
|
|
Agreement
and Plan of Merger by and among Red Carpet Entertainment, Inc., Venture
Beverage Company, and Purple Acquisition Corp., dated December 12,
2007
(Incorporated by reference to Exhibit 2.1 to the Current Report on
Form
8-K/A filed with the Securities and Exchange Commission on December
17,
2007).
|
|
|
|
3.1*
|
|
Composite
Articles of Incorporation of Purple Beverage Company,
Inc.
|
|
|
|
3.2
|
|
By-laws
of Red Carpet Entertainment, Inc. (Incorporated by reference to Exhibit
3.2 to the Registration Statement on Form SB-2 filed with the Securities
and Exchange Commission December 28, 2006).
|
|
|
|
5.1**
|
|
Opinion
of Haynes and Boone, LLP.
|
|
|
|
10.1
|
|
Employment
Agreement, dated as of December 12, 2007, between Purple Beverage
Company,
Inc. and Theodore Farnsworth (Incorporated by reference to Exhibit
10.1 to
the Current Report on Form 8-K/A of Purple Beverage Company, Inc.
filed
with the Securities and Exchange Commission on December 17,
2007).
|
|
|
|
10.2
|
|
Venture
Beverage Company 2007 Incentive Plan (Incorporated by reference to
Exhibit
10.2 to the Current Report on Form 8-K/A of Purple Beverage Company,
Inc.
filed with the Securities and Exchange Commission on December 17,
2007).
|
|
|
|
10.3
|
|
Form
of Nonqualified Stock Option Award Agreement under the 2007 Incentive
Plan
(Incorporated by reference to Exhibit 10.3 to the Current Report
on Form
8-K/A of Purple Beverage Company, Inc. filed with the Securities
and
Exchange Commission on December 17,
2007).
|
Exhibit
No.
|
|
Description
|
10.4
|
|
Form
of Lock-Up Agreement, dated as of December 12, 2007, by and between
the
Company and each of certain stockholders (Incorporated by reference
to
Exhibit 10.4 to the Current Report on Form 8-K/A of Purple Beverage
Company, Inc. filed with the Securities and Exchange Commission on
December 17, 2007).
|
|
|
|
10.5
|
|
Form
of Subscription Agreement, dated as of May 10, 2007, by and between
Venture Beverage Company and certain stockholders (Incorporated by
reference to Exhibit 10.5 to the Current Report on Form 8-K/A of
Purple
Beverage Company, Inc. filed with the Securities and Exchange Commission
on December 17, 2007).
|
|
|
|
10.6
|
|
Form
of Common Stock Purchase Warrant, dated between May 17 and October
24,
2007, issued by Venture Beverage Company to certain stockholders.
(Incorporated by reference to Exhibit 10.6 to the Current Report
on Form
8-K/A of Purple Beverage Company, Inc. filed with the Securities
and
Exchange Commission on December 17, 2007).
|
|
|
|
10.7
|
|
Form
of Subscription Agreement, dated as of December 12, 2007, by and
between
Purple Beverage Company, Inc. and certain stockholders (Incorporated
by
reference to Exhibit 10.7 to the Current Report on Form 8-K/A of
Purple
Beverage Company, Inc. filed with the Securities and Exchange Commission
on December 17, 2007).
|
|
|
|
10.8
|
|
Form
of Common Stock Purchase Warrant, dated as of December 12, 2007,
issued by
Purple Beverage Company, Inc. to certain stockholders (Incorporated
by
reference to Exhibit 10.8 to the Current Report on Form 8-K/A of
Purple
Beverage Company, Inc. filed with the Securities and Exchange Commission
on December 17, 2007).
|
|
|
|
10.9
|
|
Stock
Repurchase Agreement, made and entered into as of December 12, 2007,
by
and between Red Carpet Entertainment, Inc. and Christopher Johnson
and
Lissa Johnson (Incorporated by reference to Exhibit 10.9 to the Current
Report on Form 8-K/A of Purple Beverage Company, Inc. filed with
the
Securities and Exchange Commission on December 17,
2007).
|
|
|
|
10.10
|
|
Consulting
Agreement, dated December 1, 2007, by and between Purple Beverage
Company,
Inc. and Esquire Sports Marketing, L.L.C. (Incorporated by reference
to
Exhibit 10.10 to the Quarterly Report on Form 10-QSB of Purple Beverage
Company, Inc. filed with the Securities and Exchange Commission on
February 14, 2008).
|
|
|
|
10.11
|
|
Agreement,
dated January 18, 2008, by and between Purple Beverage Company, Inc.
and
Esquire Sports Marketing, L.L.C. (Incorporated by reference to Exhibit
10.11 to the Quarterly Report on Form 10-QSB of Purple Beverage Company,
Inc. filed with the Securities and Exchange Commission on February
14,
2008).
|
|
|
|
10.12
|
|
Endorsement
Agreement, entered into as of January 18, 2008 by and among Purple
Beverage Company, Inc. and Torii Hunter (Incorporated by reference
to
Exhibit 10.12 to the Quarterly Report on Form 10-QSB of Purple Beverage
Company, Inc. filed with the Securities and Exchange Commission on
February 14, 2008).
|
|
|
|
10.13
|
|
Sublease
Agreement, made as of January 22, 2008, by and between Purple Beverage
Company, Inc. and Fisher and Phillips, LLP (Incorporated by reference
to
Exhibit 10.13 to the Quarterly Report on Form 10-QSB of Purple Beverage
Company, Inc. filed with the Securities and Exchange Commission on
February 14, 2008).
|
|
|
|
10.14
|
|
Promissory
Note, dated March 11, 2008, issued by Purple Beverage Company, Inc.
to GRQ
Consultants, Inc. in the principal sum of $1,000,000 (Incorporated
by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Purple
Beverage Company, Inc. filed with the Securities and Exchange Commission
on March 17, 2008).
|
Exhibit
No.
|
|
Description
|
10.15
|
|
Amendment
to Subscription Agreement and to Common Stock Purchase Warrant to
Purchase
Shares of Common Stock of Purple Beverage Company, Inc., dated April
2,
2008, by and between Purple Beverage Company, Inc. and certain persons,
who were parties to the December 12, 2007, Subscription Agreement.
(Incorporated by reference to Exhibit 10.1 to the Current Report
on Form
8-K of Purple Beverage Company, Inc. filed with the Securities and
Exchange Commission on April 4, 2008).
|
|
|
|
10.16
|
|
Common
Stock Purchase Warrant, dated April 2, 2008, issued by Purple Beverage
Company, Inc. in favor of the exercising warrant holders. (Incorporated
by
reference to Exhibit 10.2 to the Current Report on Form 8-K of Purple
Beverage Company, Inc. filed with the Securities and Exchange Commission
on April 4, 2008).
|
|
|
|
10.17
|
|
Addendum
to Subscription Agreement, dated April 2, 2008, by and between Purple
Beverage Company, Inc. and the parties thereto (Incorporated by reference
to Exhibit 10.3 to the Current Report on Form 8-K of Purple Beverage
Company, Inc. filed with the Securities and Exchange Commission on
April
4, 2008).
|
|
|
|
10.18
|
|
Registration
Rights Agreement, dated April 2, 2008, by and between the Company
and the
exercising warrant holders (Incorporated by reference to Exhibit
10.4 to
the Current Report on Form 8-K of Purple Beverage Company, Inc. filed
with
the Securities and Exchange Commission on April 4,
2008).
|
|
|
|
10.19
|
|
Registration
Rights Agreement, dated April 2, by and between the Company and the
parties thereto (Incorporated by reference to Exhibit 10.5 to the
Current
Report on Form 8-K of Purple Beverage Company, Inc. filed with the
Securities and Exchange Commission on April 4, 2008).
|
|
|
|
10.20*
|
|
Agreement,
dated March 25, 2008, by and between Purple Beverage Company, Inc.
and
Esquire Sports Marketing, L.L.C.
|
|
|
|
10.21*
|
|
Endorsement
Agreement, entered into as of March 25, 2008 by and among Purple
Beverage
Company, Inc. and Mariano Rivera
|
|
|
|
10.22*
|
|
Employment
Agreement, dated as of March 19, 2008, by and between Purple Beverage
Company, Inc. and Michael W. Wallace.
|
|
|
|
10.23*
|
|
Option
Award Agreement, effective March 25, 2008, representing a grant of
a
nonqualified stock option by Purple Beverage Company, Inc. to Mariano
Rivera.
|
|
|
|
21.1*
|
|
List
of Subsidiaries.
|
|
|
|
23.1*
|
|
Consent
of Sherb & Co., LLP.
|
|
|
|
23.2**
|
|
Consent
of Haynes and Boone, LLP (included in Exhibit 5.1).
|
|
|
|
24.1
|
|
Power
of Attorney (included on signature
page).
|
*
Filed
herewith.
**
To be
filed by amendment.
The
undersigned registrant hereby undertakes:
1.
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i.
To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
ii.
To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than 20% change
in
the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement.
iii.
To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
2.
That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3.
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
4.
That,
for the purpose of determining liability under the Securities Act of 1933 to
any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance
on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of
the
registration statement or made in any such document immediately prior to such
date of first use.
5.
That,
for
the purpose of determining liability of the registrant under the Securities
Act
of 1933 to any purchaser in the initial distribution of the securities the
undersigned registrant undertakes that in a primary offering of securities
of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if
the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
i.
Any
preliminary prospectus or prospectus of the undersigned registrant relating
to
the offering required to be filed pursuant to Rule 424 (§230.424 of this
chapter);
ii.
Any
free
writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
iii.
The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
iv.
Any
other
communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
6.
Insofar as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Ft. Lauderdale, State
of
Florida, on May 2, 2008.
PURPLE
BEVERAGE COMPANY, INC.
|
|
|
By:
|
/s/
Theodore Farnsworth
|
|
Name:
Theodore Farnsworth
|
|
Title:
Chief Executive Officer
|
POWER
OF ATTORNEY
KNOW
ALL
MEN BY THESE PRESENTS, that the undersigned officers and directors of Purple
Beverage Company, Inc., a Nevada corporation that is filing a registration
statement on Form S-1 with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933, as amended, hereby constitute and
appoint Theodore Farnsworth and Michael Wallace, and each of them, their true
and lawful attorneys-in-fact and agents, with full power of substitution and
re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to the registration statement,
including a prospectus or an amended prospectus therein, and all other documents
in connection therewith to be filed with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all interests and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or either of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In
accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
Chief
Executive Officer, President, Secretary, and Director (Principal
Executive
Officer)
|
|
May
2, 2008
|
/s/
Theodore Farnsworth
|
Theodore
Farnsworth
|
|
|
|
|
|
|
Chief
Financial Officer and Executive Vice President (Principal Financial
and
Accounting Officer)
|
|
May
2, 2008
|
/s/
Michael
Wallace
|
Michael
Wallace
|
|
|
|
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
|
3.1
|
|
Composite
Articles of Incorporation of Purple Beverage Company,
Inc.
|
10.20
|
|
Agreement,
dated March 25, 2008, by and between Purple Beverage Company, Inc.
and
Esquire Sports Marketing, L.L.C.
|
|
|
|
10.21
|
|
Endorsement
Agreement, entered into as of March 25, 2008 by and among Purple
Beverage
Company, Inc. and Mariano Rivera
|
|
|
|
10.22
|
|
Employment
Agreement, dated as of March 19, 2008, by and between Purple Beverage
Company, Inc. and Michael W. Wallace.
|
|
|
|
10.23
|
|
Option
Award Agreement, effective March 25, 2008, representing a grant of
a
nonqualified stock option by Purple Beverage Company, Inc. to Mariano
Rivera.
|
|
|
|
21.1
|
|
List
of Subsidiaries.
|
|
|
|
23.1
|
|
Consent
of Sherb & Co., LLP.
|
|
|
|
24.1
|
|
Power
of Attorney (included on signature
page).
|
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