As filed with the Securities and Exchange Commission on , 2000.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under
THE SECURITIES ACT OF 1933
East Coast Beverage Corp.
(Exact name of registrant as specified in charter)
Colorado 2086 84-1039267
(State or other (Primary Standard Classi- (IRS Employer
jurisdiction of fication Code Number) I.D. Number)
incorporation)
1750 University Drive
Suite 117
Coral Springs, Florida 33071
(954) 796-8060
(Address and telephone number
of principal executive offices)
1750 University Drive
Suite 117
Coral Springs, Florida 33071
(Address of principal place of business or
intended principal place of business)
John Calebrese
1750 University Drive
Suite 117
Coral Springs, Florida 33071
(954) 796-8060
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
Page 1 of Pages
Exhibit Index Begins on Page
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered (1) Unit (2) Price Fee
- ---------- -------------- --------- ----------- ----------------
Common stock 2,447,841 $2.75 $6,731,562 $1,788
(1) Shares are offered by certain selling shareholders
(2) Offering price computed in accordance with Rule 457 (c).
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 l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
EAST COAST BEVERAGE CORP.
Common Stock
This prospectus relates to the sale of 2,447,841 shares of the common
stock of East Coast Beverage Corp. ("ECBC") by certain owners of shares of
ECBC's common stock. The shares were issued by ECBC for cash, services rendered
and in settlement of amounts owed by ECBC to various third parties.
The owners of the common stock to be sold by means of this prospectus
are referred to as the "selling shareholders".
ECBC will not receive any proceeds from the resale of the shares by the
selling shareholders. The selling shareholders may resell the shares they
acquire by means of this prospectus from time to time in the public market. The
selling shareholders have advised ECBC that they will offer the shares through
broker/dealers at market prices with customary commissions being paid by the
selling shareholders. The costs of registering the shares offered by the selling
shareholders are being paid by ECBC. The selling shareholders will pay all other
costs of the sale of the shares offered by them. See "Dilution and Comparative
Share Data" and "Selling Shareholders".
These securities are speculative and involve a high degree of risk and
should be purchased only by persons who can afford to lose their entire
investment. For a description of certain important factors that should be
considered by prospective investors, see "Risk Factors" beginning on page of
this prospectus.
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.
There is presently no market for ECBC's common stock.
The date of this prospectus is _______, 2000
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY .................................................
RISK FACTORS .......................................................
COMPARATIVE SHARE DATA .............................................
MARKET FOR ECBC'S COMMON STOCK......................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS .........
BUSINESS ...........................................................
MANAGEMENT .........................................................
PRINCIPAL SHAREHOLDERS .............................................
SELLING SHAREHOLDERS ...............................................
DESCRIPTION OF SECURITIES ..........................................
EXPERTS ............................................................
LITIGATION .........................................................
INDEMNIFICATION ....................................................
ADDITIONAL INFORMATION .............................................
FINANCIAL STATEMENTS ...............................................
PROSPECTUS SUMMARY
Prior to September 1999 ECBC did business under the name USA Service
Systems, Inc. ("USA"). Between November 1998 and July 1999 USA provided retail
stores and manufacturers with product assembly, product demonstrations, point -
of - sale product displays, and inventory counts and audits. As of July 1999 USA
had entered into letters of intent for the acquisition of four companies engaged
in the same business as that conducted by USA. However, USA was unable to obtain
approximately $4,000,000 in additional equity capital which was needed to
finance these acquisitions. In July 1999 USA essentially discontinued its
business and made plans to distribute its remaining assets (having a minimal
value) to George Pursglove, a former officer and director of USA.
Effective August 31, 1999 ECBC acquired all of the issued and outstanding
shares of East Coast Beverage Corp., a Florida Corporation, in exchange for
5,040,000 shares of common stock. Following this transaction the former
shareholders of East Coast Beverage owned approximately 93% of USA's common
stock. In connection with this transaction the management of USA resigned and
was replaced by the management of East Coast Beverage.
ECBC's business involves the development, production and distribution of
Coffee House USA(TM), a proprietary line of all natural, ready to drink ("RTD")
bottled coffee drinks.
ECBC sells its products through distributors and wholesalers to
supermarkets, mass-marketers, convenience stores, drug store chains and oil
company convenience stores. As of January 15, 2000 ECBC's products were being
sold in 44 states.
ECBC's offices are located at 1750 University Drive, Suite 117, Coral
Springs, Florida 33071. ECBC's telephone number is (954) 796-8060 and its
facsimile number is (954) 796-0802.
All historical share data in this prospectus has been adjusted to
reflect a 8.194595-for-one reverse split of ECBC's common stock, which was
approved by ECBC's shareholders on February 22, 2000.
As of January 31, 2000, ECBC had 7,666,359 shares of common stock
outstanding. The number of outstanding shares does not give effect to shares
which may be issued upon the exercise and/or conversion of options, warrants or
other convertible securities previously issued by ECBC. See "Dilution and
Comparative Share Data", "selling shareholders" and "Description of Securities".
At the present time there is no public market for ECBC's common stock.
RISK FACTORS
There are substantial risks associated with an investment in ECBC's
common stock including, among others, ECBC's need for additional capital,
intense competition and the absence of any public market for ECBC's common
stock.
SUMMARY FINANCIAL INFORMATION
The following sets forth certain financial data with respect to ECBC
and is qualified in its entirety by reference to the more detailed financial
statements and notes included elsewhere in this Prospectus.
Statement of Operations Data:
Period from Inception (March 25, 1998 Nine Months Ended
to December 31, 1998 September 30, 1999
--------------------------------------------------------
Revenues $478,066 $5,179,189
Cost of Sales (344,493) (3,681,520)
Selling, General and
Administrative Expenses (874,025) (1,427,926)
Stock Based Compensation -- (421,166)
Other Income (expense) 2,135 625
-------- --------
Net (Loss) $(738,317) $(350,798)
========== ==========
Balance Sheet Data:
December 31, September 30, September 30,
1998 1999 1999
--------------- ------------- --------------
(Pro Forma)
Current Assets $1,560,709 $3,387,339 $5,287,339
Total Assets 1,751,922 4,418,248 6,318,248
Current Liabilities 2,489,739 2,200,289 700,289
Total Liabilities 2,489,739 3,767,715 1,300,289
Working Capital (Deficit) (929,030) 1,187,050 4,587,050
Shareholders' Equity
(Deficit) (737,817) 650,533 5,017,959
Subsequent to September 30, 1999 ECBC sold 768,247 shares of its common
stock to private investors at a price of $2.75 per share. ECBC paid commissions
of $212,000 in connection with the sale of these shares.
In January 2000 ECBC issued 694,973 shares of its common stock to John
Calebrese, an officer, director and principal shareholder of ECBC, in settlement
of $1,817,426 owed to Mr. Calebrese by ECBC.
Also in January 2000 ECBC issued 316,192 shares of its common stock to
other creditors in settlement of $650,000 owed to these creditors by ECBC.
The pro forma balance sheet as of September 30, 1999 reflects these
transactions as if they had occurred on September 30, 1999.
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk and should be purchased only by persons who can afford to lose their
entire investment. Therefore, prospective investors should read this entire
prospectus and carefully consider, among others, the following risk factors in
addition to the other information set forth in this prospectus prior to making
an investment.
History of Losses. ECBC has incurred losses since it was formed in
1998. From the date of its formation through September 30, 1999, ECBC incurred
net losses of approximately $(1,089,000). ECBC first began shipping product in
December 1998. There can be no assurance that ECBC will be profitable.
ECBC may need additional capital. This offering is being made on behalf
of certain selling shareholders. ECBC will not receive any proceeds from the
sale of the shares offered by the selling shareholders. ECBC may need to obtain
additional capital in order expand its business. There can be no assurance that
ECBC will be able to obtain any additional financing. The failure of ECBC to
obtain additional capital on terms acceptable to it, or at all, may
significantly restrict ECBC's proposed operations.
ECBC's future operations will be subject to all of the risks inherent
in the establishment of a new business enterprise, including limited capital and
possible delays in the expansion of ECBC's business. The likelihood that ECBC
will succeed must be considered in light of the problems, expenses, and delays
frequently encountered in connection with the development of new businesses.
ECBC's operations may place significant strains on future management, staff,
working capital, and financial control systems. The failure to maintain
financial control systems, to recruit qualified staff or to respond effectively
to difficulties encountered during expansion could have a material adverse
effect on ECBC's business, financial condition and results of operations. There
can be no assurance that ECBC's systems and controls or staff will be adequate.
ECBC will compete with numerous other businesses which are involved in
the sale of ready-to-drink beverages. Most of ECBC's competitors have greater
name recognition and greater financial, management and marketing resources than
those of ECBC.
There is no public market for the securities of ECBC, and there is no
assurance that such a market will ever develop. Notwithstanding the lack of a
public market ECBC plans to register approximately 1,200,000 additional shares
of common stock which were sold between September 1999 and February 15, 2000 to
a group of private investors at a price of $2.75 per share. ECBC plans to file a
separate registration statement with the Securities and Exchange Commission so
as to permit the public sale of these shares. Should a market ever develop for
ECBC's common stock, the public sale of these shares may depress the market
price of ECBC's common stock.
ECBC plans to register additional shares of its common stock. Between
September 1999 and February 15, 2000 ECBC sold 1,189,958 shares of its common
stock to a group of private investors at a price of $2.75 per share. ECBC plans
to file a separate registration statement with the Securities and Exchange
Commission so as to permit the public sale of these shares.
COMPARATIVE SHARE DATA
As of January 31, 2000 ECBC had 7,666,359 outstanding shares of common
stock which had a net tangible book value (on a pro forma basis) of
approximately $0.60 per share.
Number of Shares
Shares outstanding as of January 31, 2000 (1) 7,666,359
Shares offered by selling shareholders 2,447,841
Percentage of ECBC's common stock represented
by shares offered by this prospectus 32%
Net tangible book value per share (on a pro forma
basis) as of January 31, 2000. $0.60
The purchasers of the securities offered by this prospectus will suffer an
immediate dilution if the price paid for the securities offered is greater than
the net tangible book value of ECBC's common stock.
"Net tangible book value" (on a pro forma basis) gives effect to the sale
of common stock and the conversion of loans subsequent to September 30, 1999 and
is the amount that results from subtracting the total liabilities and intangible
assets of ECBC from its total assets.
As of January 31, 2000 ECBC had 7,666,359 shares of common stock issued
and outstanding. The following table reflects the shares of common stock which
may be issued by ECBC as the result of the exercise of options to be issued by
ECBC.
Number of Note
Shares Reference
Shares Outstanding 7,666,359
Shares issuable upon exercise of options 500,000 A
held by officer and director
Shares issuable upon exercise of options 152,500 B
held by others
A. Options are held by John Calebrese, an officer, director and principal
shareholder of ECBC. Options may be exercised at a price of $2.75 per share at
any time prior to December 31, 2004. All options are currently exercisable.
B. Options are exercisable at prices between $2.00 and $3.50 per share and
expire between 10/30/2000 and 1/03/2002. See "Management - Other Options"
for further information concerning these options.
MARKET FOR ECBC'S COMMON STOCK
As of January 31, 2000 there were approximately 400 owners of ECBC's
common stock. At the present time, there is no public market for ECBC's common
stock.
Holders of common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available and, in the
event of liquidation, to share pro rata in any distribution of ECBC's assets
after payment of liabilities. The Board of Directors is not obligated to declare
a dividend. ECBC has not paid any dividends on it's common stock and ECBC does
not have any current plans to pay any common stock dividends.
The provisions in ECBC's Articles of Incorporation relating to ECBC's
preferred stock would allow ECBC's directors to issue preferred stock with
rights to multiple votes per share and dividends rights which would have
priority over any dividends paid with respect to ECBC's common stock. The
issuance of preferred stock with such rights may make more difficult the removal
of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following selected financial data should be read in conjunction
with the more detailed financial statements, related notes and other financial
information included in this prospectus.
Statement of Operations Data:
Period from Inception (March 25, Nine Months Ended
1998 to December 31, 1998 September 30, 1999
--------------------------------------------------------
Revenues $478,066 $5,179,189
Cost of Sales (344,493) (3,681,520)
Selling, General and
Administrative Expenses (874,025) (1,427,926)
Stock Based Compensation -- (421,166)
Other Income (expense) 2,135 625
------------ --------------
Net (Loss) $(738,317) $(350,798)
========== ==========
Balance Sheet Data:
December 31, 1998 September 30, 1999 September 30, 1999
----------------- ------------------ ------------------
(Pro Forma)
Current Assets $1,560,709 $3,387,339 $5,287,339
Total Assets 1,751,922 4,418,248 6,318,248
Current Liabilities 2,489,739 2,200,289 700,289
Total Liabilities 2,489,739 3,767,715 1,300,289
Working Capital (Deficit) (929,030) 1,187,050 4,587,050
Shareholders' Equity
(Deficit) (737,817) 650,533 5,017,959
Subsequent to September 30, 1999 ECBC sold 768,247 shares of its common
stock to private investors at a price of $2.75 per share. ECBC paid commissions
of $212,000 in connection with the sale of these shares.
In January 2000 ECBC issued 694,973 shares of its common stock to John
Calebrese, an officer, director and principal shareholder of ECBC, in settlement
of $1,817,426 owed to Mr. Calebrese by ECBC.
Also in January 2000 ECBC issued 316,192 shares of its common stock to
other creditors in settlement of $650,000 owed to these creditors by ECBC.
The pro forma balance sheet as of September 30, 1999 reflects these
transactions as if they had occurred on September 30, 1999.
Period From Inception (March 25, 1998) to December 31, 1998
ECBC first began shipping product in December 1998. During this period,
ECBC's gross profit ratio was 28%, compared to a gross profit ratio of 29% for
the nine months ended September 30, 1999.
The primary components of selling, general and administrative expenses
during this period were:
Salaries and Contract Labor $432,997
Travel and Marketing $42,991
Organization Expenses $146,683
Nine Months Ending September 30, 1999
ECBC did not begin shipping product until December 1998. As a result,
comparisons cannot be made between operations for the nine months ending
September 30, 1999 and the nine months ending September 30, 1998.
During the nine months ended September 30, 1999 ECBC had income from
operations of $69,743. However, expenses of $421,166 (which did not require the
use of cash) associated with stock-based compensation and common stock issued on
consideration for the modification of loan terms resulted in a net loss for the
period of $350,798. ECBC believes that the expenses associated with the issuance
of the common stock for services and for the modification of loan terms will not
occur in future periods, or at least will not impact ECBC's operating results to
the same extent as during the period ending September 30, 1999.
Liquidity and Sources of Capital
ECBC's operations used $1,194,272 in cash during the period ended December
31, 1998. ECBC funded its operating losses during this period with loans from
John Calebrese, ECBC's Chief Executive Officer.
During the nine-months ended September 30, 1999 ECBC's operations used
approximately $1,836,168 in cash and ECBC spent approximately $1,006,000 on the
purchase of property and equipment. Cash required during the nine month period
was generated through sales of ECBC's common stock and borrowings from ECBC's
Chief Executive Officer and third parties.
ECBC believes that additional capital will be needed to expand ECBC's
operations and to finance ECBC's growth. ECBC expects to obtain additional
capital through the private sale of ECBC's common stock or from borrowings from
private lenders and/or financial institutions. There can be no assurance that
ECBC will be successful in obtaining any additional capital which may be needed.
ECBC may suffer future losses, in which case ECBC will need to obtain
additional sources of capital in order to continue operations. There can be no
assurance, however, that ECBC will be successful in obtaining additional
funding.
BUSINESS
ECBC is a Colorado corporation which prior to September 1999 did business
under the name USA Service Systems, Inc. ("USA"). Between November 1998 and July
1999 USA provided retail stores and manufacturers with product assembly, product
demonstrations, point - of sale product displays, and inventory counts and
audits.
As of July 1999 USA had entered into letters of intent for the acquisition
of four companies engaged in the same business as that conducted by USA.
However, USA was unable to obtain approximately $4,000,000 in additional equity
capital which was needed to finance these acquisitions. In July 1999 USA
essentially discontinued its business and made plans to distribute its remaining
assets (having a minimal value) to certain officers and directors of USA.
Effective August 31, 1999 USA acquired all of the issued and outstanding
shares of East Coast Beverage Corp. in exchange for 5,040,000 shares of USA's
common stock. In connection with this transaction the management of USA resigned
and was replaced by the management of ECBC. ECBC's business now involves the
development, production and distribution of Coffee House USA(TM), a proprietary
line of all natural, ready to drink ("RTD") bottled coffee drinks.
Coffee is the number one drink in the world, with Americans alone
consuming over $5.8 billion in 1997. According to the National Coffee
Association in 1998 over 108 million Americans drank an espresso, cappuccino,
latte or iced coffee, a 35% increase over the previous year. Three years ago,
frozen coffee drinks came into the market and the consumption of frozen coffee
has doubled every year. However, the drawback with frozen coffees is they must
be consumed immediately and could not be sold to the mass market. From this
evolved the RTD (ready to drink) Iced Coffee category, which in a few years has
become the fastest growing segment in the New Age category with an increase of
153% in 1997 and 83% in 1998. The New Age category refers to premium-priced
beverages that were created to respond to emerging consumer trends and interest.
Sales by category of New Age Beverages are summarized below:
Year Ending 1998
NEW AGE BEVERAGES (in millions)
RTD SS Fruit beverages (Tropicana, Very Fine) $2,125 27.5%
RTD PET bottled waters (Perrier Group, Geyser) 1,500 19.4%
Sports Beverages (Gatorade, Powerade, All Sport 1,510 19.5%
RTD Teas (Snapple, Arizona, Mystic, Lipton) 1,340 17.4%
Sparkling flavored waters (Talking Rain) 450 5.8%
Premium Soda 360 4.6%
RTD Coffee (Starbucks, regional brands) 200 2.6%
----- -----
SUBTOTAL NEW AGE $7,485
Nutrient Enhanced Drinks 100 1.3%
Fresh Packed Juices 55 .7%
Smoothies 45 .6%
Vegetable/Fruit Juice Blends 20 .3%
All Other 25 .3%
---- -----
TOTAL $7,730
Product
ECBC's product is more than just a cold coffee, tasting like a milkshake,
and is marketed as such. It can be substituted at any occasion where a milkshake
might be used with a hamburger at lunch, as a stand-alone snack, etc. ECBC's
iced coffee is naturally flavored and enhanced with whole milk and rich coffee
bean extract. ECBC's products are all natural, low in fat, visually exciting and
have a broad spectrum of flavors.
ECBC's product can be differentiated with those of competitors by its
taste, advanced technological Fuji wrap and ECBC's proprietary glass container.
Each of the flavors used by ECBC has gone through extensive consumer tasting and
approval. ECBC's iced coffee comes in the following flavors:
Cinnamon, Mocha, Vanilla Mousse, Regular, Hazelnut, Toasted Almond,
German Chocolate, and Banana's Foster
ECBC's proprietary formulas for its products are trade secrets and ECBC
requires its manufacturers, employees, brokers and consultants to sign
confidentiality agreements. ECBC's glass container is also proprietary and
design protected.
Production
ECBC does not own or operate any manufacturing facilities, but rather
outsources manufacturing and bottling to third party copackers. Outsourcing
provides ECBC production flexibility and capacity and allow management to focus
its energy and resources on marketing and sales while avoiding the costs and
risks associated with production .
ECBC's products are manufactured using ECBC's proprietary formulas.
Copackers may not produce products for any other customer using these formulas.
Copackers supply ECBC's products at a fixed co-packing price per unit (case).
ECBC purchases flavor, nutrient, and packaging raw materials for delivery to the
copacker.
ECBC's copackers have the capacity to produce 70,000 cases a day and are
able to fulfill ECBC's planned production needs for at least the next three
years. If ECBC's growth exceeds the production capacity of its copackers, or
they were unable or unwilling to continue production, ECBC believes it could
locate other copackers to meet its production needs without any serious
disruption to ECBC's operations.
The copackers produce and package ECBC's products in accordance with
Standard Operating Procedures for Good Manufacturing Practice specified by the
FDA.
Since shipping its first product ECBC has been able to improve its
purchasing and production process thereby reducing product costs by over $1.00
per case. Additionally, improved cash flow has enabled ECBC, beginning in June
1999, to eliminate its factoring agreements resulting in significant savings .
ECBC does not have any credit line with any bank. Should ECBC's growth
exceed what is anticipated, a line of credit may be required to cover working
capital needs.
Distribution and Marketing
ECBC uses a network of distributors to market its iced coffee beverage.
Certain distributing companies used by ECBC have long term relationships with
major grocery chains and as a result, are capable of rapidly gaining access into
chain shelves at reduced rates.
Other distributors are dominant in the convenience/deli/single serve
business that is essential in building a brand from the ground up. The
distributors in each territory have been selected based on their impact in the
territory, financial strength, commitment to building the brand and expertise in
specific distribution venues. In many cases, ECBC will employ two distributors
to launch the product in a specific region, allowing each to focus on their
respective area of distribution expertise.
ECBC has recently engaged Super Value (Emerald and Portland Bottling) to
bring its products to Asia, South America and Europe.
During the nine months ended September 30,1999 mass and super markets
accounted for approximately 70% of total revenues, sales to convenience stores
represented 28% of revenues and foreign sales represented the remainder. It is
expected that foreign sales will account for 35% of total sales once ECBC's
international network is established.
ECBC sells its products through distributors and wholesalers to
supermarkets, convenience stores, drug store chains and oil company convenience
stores. As of December 31, 1999 ECBC was shipping an average of 3,000 cases per
day to customers in 44 states.
ECBC believes that there may be an opportunity to distribute its products
to a number of national food and beverage chains under private labeling
agreements.
ECBC plans to use a combination of print billboards and radio advertising,
with emphasis on regional and special interest publications, such as those
targeted towards mainstream consumers, to increase consumer awareness and demand
for its products. The advertising selected will coincide with the established
channels and points of distribution.
Free samples will be distributed to consumers, store managers, store
employees and caterers to generate product awareness.
Paper point of sale items will be made available to enhance product
visibility and exposure. Other promotional items, such as drink coolers will be
made available on a co-op basis to enhance product visibility and exposure.
ECBC also plans to participate as an exhibitor at all major retail trade
and distributor shows.
Competition
ECBC's products compete with the following brands.
National Brands
Starbucks "Frappuccino" - Distributed exclusively by Pepsi-Cola. Three
flavors available in glass bottles. Sold in supermarkets in four packs only.
Shelf life is 3 months.
Regional Brands
"Ghirardelli Iced Coffees" - Limited nationwide - Only two flavors
available in cans.
"Havana Iced Cappuccino" - Scattered distribution in New England and
Mid-Atlantic- 3 flavors available in cans.
"Main Street Cafe' Iced Lattes" - Manufactured by GehI's Guernsey Farms -
5 flavors available in cans -scattered distribution.
"The Coffee" - by Pokka Beverages, Inc. California - Scattered
distribution - 3 flavors available in cans.
"America's Best" - Available in Northeast only - 5 flavors available
in both glass and cans.
"Jamaica Gold" - Distributed in Northwest -3 flavors available in cans
New Entries
Procter and Gamble is testing a new product called "Jakada" in
California. The results so far are extremely positive; rollout
information is not available.
Coca-Cola is attempting to trademark the name "Javalait", identified as a
frozen coffee drink. No other information is known at this time.
Research and Development
A number of new products are undergoing laboratory tests and nearing
completion. These products include a dietary line and new flavors, as well as a
coffee based nutraceutical line. ECBC is also considering the development of a
Decaf product. Research and development costs are low because new products are
usually developed by the copacker or other third parties with associated costs
charged to production.
Employees and Offices
As of January 31, 2000, ECBC employed 17 persons on a full-time basis.
Seven employees serve in management or administrative capacities, and the
remainder are hourly workers in ECBC's operations. None of ECBC's employees are
covered by a collective bargaining agreement. ECBC has never experienced an
organized work stoppage, strike or labor dispute. Management considers ECBC's
relations with its employees to be good.
ECBC leases a 1,200 square foot production and office facility in Coral
Springs, Florida at an annual rent of $13,000. The lease on this facility
expires in May 2000.
MANAGEMENT
The following sets forth certain information concerning the management of
ECBC:
Name Age Position with Company
John Calebrese 47 Chief Executive Officer and a Director
Alex Garabedian 46 President
Edward Shanahan 47 Vice President - Eastern Division
John Daumeyer 59 Vice President - Central Division
William Perry Maxwell 59 Vice President - Western Division
Robert Gardener 52 Chief Financial Officer
Drew Carver 53 Vice President -Business Development
James J. Harford 61 Director
Edith G. Osman 50 Director
John Calebrese has been an officer and director of ECBC since March 1998.
From 1993 to 1995 Mr. Calebrese was a broker for Arizona Beverage Company
(Arizona Iced Tea) in the Florida market. From 1980 to 1992 Mr. Calebrese was an
officer of A & C Italian Bakery, a large Italian wholesale bakery which was sold
to Ferrara's of New York in 1990. From 1981 to 1984 Mr. Calebrese opened a
number of deli/restaurants which were purchased by Subway in 1984. During this
period of time Mr. Calebrese also developed the concept for ECBC's
ready-to-drink iced coffee beverages. From 1990 to 1993 Mr. Calebrese developed
and marketed an iced coffee beverage which was acquired in 1993 by Lewis and
Clark Snake River.
Alex Garabedian has been the President of ECBC since October 1998. From
1968 to 1997 Mr. Garabedian was President and Chief Executive Officer of Fine
Distributing, a subsidiary of Hagameyer, a large multi-national food
distributor.
Edward Shanahan has been an officer and director of ECBC since October
1998. From 1993 to 1994 Mr. Shanahan served as Vice President of Sales and
Marketing for Westmark, Inc./Clearly Canadian where he was responsible for
product distribution in seven states. While at Westmark, Mr. Shanahan was
responsible for sales, pricing, packaging, distribution, brand management, media
advertising and key account development. From 1976 to 1993 Mr. Shanahan worked
for Coca-Cola Enterprises, Inc. in various capacities.
John Daumeyer has been an officer of ECBC since October 1998. From 1995 to
1997 Mr. Dauymeyer was Vice-President of Geyser Bottled Water Company. From 1993
to 1995 Mr. Dauymeyer was Vice President of Sales, Western Division for Arizona
Iced Tea. In the late 1960's Mr. Dauymeyer was a co-founder of Wendy's Old
Fashioned Hamburger Restaurants and served as President and General Manager of
Wendy's.
William Perry Maxwell has been an officer of ECBC since 1998. From 1991 to
1993 Mr. Maxwell was Vice President of Sales for the William Hoelskin company, a
food broker. From 1993 to 1998 Mr. Maxwell was Vice President for the Arizona
Beverage Company where he was responsible for developing Arizona's distributor
network.
Drew Carver has been an officer of ECBC since October 1998. From 1990 to
1993 Mr. Carver was National Sales Manager for Arizona Iced Tea. From 1993 to
1998 Mr. Carver was employed by the Geyser Bottled Water Company as Vice
President of Sales.
Robert Gardener has been an officer of ECBC since January 2000. From 1984
to 1999 Mr. Gardner operated his own Certified Public Accounting practice which
concentrated on food distributors servicing major chain stores, restaurants and
airlines. From 1976 to 1984 Mr. Gardner worked as a controller for Kenyon and
Eckhardt, a large advertising firm, and as a Vice President for SFWPRI, and
international magazine distribution company.
James J. Harford has been a director of ECBC since December 1999. Since
1998 Mr. Harford has been a consultant to corporations in the beverage industry.
Mr. Harford's consulting services include the evaluation of acquisitions and new
products. Since 1978 Mr. Harford served as an officer with various corporations
in the beverage industry, including Canada Dry Mid-South as President and Chief
Operating Officer (1978-1980), Mid-Atlantic Coca Cola Bottling Co., Inc. as
President and Chief Operating Officer (1980-1984), Joyce Seven Up Bottling
Companies as Chairman of the Board and Chief Executive Officer (1985-1987), and
the Seven Up Company as President and Chief Operating Officer (1987-1988). From
1967 through 1978 Mr. Harford has also held executive positions with Royal Crown
Cola Company and Canada Dry Corporation..
Edith G. Osman has been a director of ECBC since January 2000. Ms. Osman
has been a practicing attorney since 1984. Ms. Osman is presently a shareholder
of the law firm of Carlton Fields in Miami, Florida. Ms. Osman is also the
current president of the Florida Bar Association (president-elect 1998-1999) and
was a member of the Florida Bar Association's Board of Governors between 1998
and 1998.
All of ECBC's officers devote substantially all of their time on ECBC's
business. Mr. Harford and Ms. Osman, as directors, devote only a minimal amount
of time to ECBC.
Change in Management
In September 1999, and in connection with the acquisition of East Coast
Beverage Corp., George Pursglove, Chet Howard, Douglas Maclellan and William
Solfisburg resigned as officers and directors and were replaced with the present
management of ECBC.
Executive Compensation
The following table sets forth in summary form the compensation
received by (i) the Chief Executive Officer of ECBC and (ii) by each other
executive officer of ECBC who received in excess of $100,000 during the fiscal
year ended December 31, 1999.
Other Re-
Annual stricted
Compen- Stock Options
Name and Fiscal Salary Bonus sation Awards Granted
Principal Position Year (1) (2) (3) (4) (5)
John Calebrese, 1999 $250,000 -- -- -- 500,000
Chief Executive 1998 $125,000 -- -- --
Officer
Alex Garabedian, 1999 $125,000 -- -- -- --
President 1998 $62,500 -- -- $3,250 --
Edward Shanahan 1999 $125,000 $13,000 $6,000 -- --
Vice President 1998 $ 25,000 -- -- $1,950 --
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represent car allowances.
(4) During the year ending December 31, 1999, the value of the shares of ECBC's
common stock issued as compensation for services.
The table below shows the number of shares of ECBC's common stock owned by
the officers listed above, and the value of such shares as of December 31, 1999.
Since there is presently no market for ECBC's common stock, the shares owned by
such persons at December 31, 1999 were valued at $2.75 per share, which is equal
to the price at which ECBC was selling shares of its common stock to private
investors during December 1999.
Name Shares Value
John Calebrese 1,832,972 $5,040,673
Alex Garabedian 325,000 893,750
Edward Shanahan 195,000 536,250
(5) The shares of common stock to be received upon the exercise of all stock
options granted during the. year ending December 31, 1999.
Employment Contracts
ECBC has employment agreements with the following officers:
Expiration of
Employment
Name Agreement Compensation
John Calebrese 1-27-02 Annual salary of $200,000, monthly car allowance
of $600, monthly medical insurance reimbursement of
$1,200, and options to purchase 500,000 shares of
ECBC's common stock at a price of $2.75 per share
at any time prior to December 31, 2004. Mr.
Calebrese will be entitled to a bonus equal to 35%
of his annual salary in the event ECBC has sales
(net of returns and allowances) of at least
$30,000,000 during 2000, $65,000,000 during 2001,
and $125,000,000 during 2002.
Alex Garabedian 1-27-02 Annual salary of $155,000, monthly car allowance
of $1,150, monthly medical insurance reimbursement
of $1,200 and 325,000 shares of ECBC's common stock.
Mr. Garabedin will be entitled to a bonus equal
to 35% of his annual salary in the event ECBC has
sales (net of returns and allowances) of at least
$30,000,000 during 2000, $65,000,000 during 2001,
and $125,000,000 during 2002.
Edward Shanahan 10-26-00 Annual salary of $125,000,
a monthly car allowance of $500, a one time
signing bonus of $10,000, and 195,000 shares
of ECBC's common stock.
John Daumeyer 10-19-00 Annual salary of $95,000,
a monthly car allowance of $500, a one time
signing bonus of $7,500, and 130,000 shares
of ECBC's common stock.
William Perry 10-31-00 Annual salary of $85,000, a monthly car allowance
Maxwell of $500, a one time signing bonus of $7,500,
and 130,000 shares of ECBC's common stock.
Drew Carver 10-10-00 Annual salary of $95,000, a
monthly car allowance of $500, a one time
signing bonus of $10,000, and 130,000 shares
of ECBC's common stock.
Long Term Incentive Plans - Awards in Last Fiscal Year
None
Employee Pension, Profit Sharing or Other Retirement Plans
Except as provided in ECBC's employment agreements with its executive
officers, ECBC does not have a defined benefit, pension plan, profit sharing or
other retirement plan, although ECBC may adopt one or more of such plans in the
future.
Compensation of Directors
Standard Arrangements. At present ECBC does not pay its directors for
attending meetings of the Board of Directors, although ECBC expects to adopt a
director compensation policy in the future. ECBC has no standard arrangement
pursuant to which directors of ECBC are compensated for any services provided as
a director or for committee participation or special assignments.
Except as disclosed elsewhere in this prospectus no director of ECBC
received any form of compensation from ECBC during the year ended December 31,
1999.
Options Granted During Fiscal Year Ending December 31, 1999
The following tables set forth information concerning the options granted,
during the fiscal year ended December 31, 1999, to the persons named below, and
the fiscal year-end value of all unexercised options (regardless of when
granted) held by these persons. The options listed below were granted pursuant
to ECBC's Non-Qualified Stock Option Plan.
% of Total
Options
Granted to Exercise
Options Employees in Price Per Expiration
Name Granted (#) Fiscal Year Share Date
John Calebrese 500,000 100% $2.75 12-31-04
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, December 31,1999
Acquired Value 1999 Exercisable/ Exercisable/
Name on Exercise(1) Realized(2) Unexercisable(3) Unexercisable(4)
- ----- ------------- ---------- ---------------- ----------------
John Calebrese -- -- 500,000/-- --/--
(1) The number of shares received upon exercise of options during the fiscal
year ended December 31, 1999.
(2) With respect to options exercised during ECBC's fiscal year ended December
31, 1999, the dollar value of the difference between the option exercise
price and the market value of the option shares purchased on the date of the
exercise of the options.
(3) The total number of unexercised options held as of December 31, 1999,
separated between those options that were exercisable and those options that
were not exercisable. All options held at are presently exercisable.
(4) For all unexercised options held as of December 31, 1999, the excess of the
market value of the stock underlying those options (as of December 31, 1999)
and the exercise price of the option. All options held at December 31, 1999
are presently exercisable.
Stock Option and Bonus Plans
ECBC has an Incentive Stock Option Plan, a Non-Qualified Stock Option Plan
and a Stock Bonus Plan. A summary description of each Plan follows. In some
cases these three Plans are collectively referred to as the "Plans".
Incentive Stock Option Plan.
The Incentive Stock Option Plan authorizes the issuance of options to
purchase up to 500,000 shares of ECBC's common stock. The Incentive Stock Option
Plan will remain in effect until January 10, 2010 unless terminated earlier by
action of the Board. Only officers, directors and key employees of ECBC may be
granted options pursuant to the Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
(a) The expiration of thirty (30) days after the date on which an option
holder's employment by ECBC is terminated.
(b) The expiration of one year after the date on which an option holder's
employment by ECBC is terminated, if such termination is due to the Employee's
disability or death.
2. In the event of an option holder's death while in the employ of ECBC,
his legatees or distributees may exercise (prior to the option's expiration) the
option as to any of the shares not previously exercised.
3. The total fair market value of the shares of common stock(determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the of ECBC
may not be exercisable by its terms after five years from the date of grant.
5. The purchase price per share of common stock purchasable under an
option is determined by the Committee but cannot be less than the fair market
value of ECBC's common stock on the date of the grant of the option (or 110% of
the fair market value in the case of a person owning ECBC's stock which
represents more than 10% of the total combined voting power of all classes of
stock).
Non-Qualified Stock Option Plan.
The Non-Qualified Stock Option Plan authorizes the issuance of options to
purchase up to 1,500,000 shares of ECBC's common stock. The Non-Qualified Stock
Option Plan became effective on January 10, 2000. ECBC's employees, directors,
officers, consultants and advisors are eligible to be granted options pursuant
to the Plan, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction. The option
exercise price is determined by the Committee but cannot be less than the market
price of ECBC's common stock on the date the option is granted.
Options granted pursuant to the Plan not previously exercised terminate
upon the first to occur of the following dates:
(a) The expiration of one year after the date on which an option holder's
employment by ECBC is terminated (whether termination is by ECBC, disability or
death); or
(b) The expiration of the option which occurs five (5) years from the date
the option was granted.
In the event of an option holder's death while in the employ of ECBC, his
legatees or distributees may exercise the option as to any of the shares not
previously exercised prior to the option's expiration.
Stock Bonus Plan.
Up to 250,000 shares of common stock may be granted under the Stock Bonus
Plan. Such shares may consist, in whole or in part, of authorized but unissued
shares, or treasury shares. Under the Stock Bonus Plan, ECBC's employees,
directors, officers, consultants and advisors are eligible to receive a grant of
ECBC's shares; provided, however, that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Other Information Regarding the Plans.
The Plans are administered by ECBC's Board of Directors. The Board of
Directors has the authority to interpret the provisions of the Plans and
supervise the administration of the Plans. In addition, the Board of Directors
is empowered to select those persons to whom shares or options are to be
granted, to determine the number of shares subject to each grant of a stock
bonus or an option and to determine when, and upon what conditions, shares or
options granted under the Plans will vest or otherwise be subject to forfeiture
and cancellation.
In the discretion of the Board of Directors, any option granted pursuant
to the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also accelerate the date upon which any option (or any part of any options) is
first exercisable. Any shares issued pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of Directors at the time of the grant is not met. For this purpose,
vesting means the period during which the employee must remain an employee of
ECBC or the period of time a non-employee must provide services to ECBC. At the
time an employee ceases working for ECBC (or at the time a non-employee ceases
to perform services for ECBC), any shares or options not fully vested will be
forfeited and cancelled. In the discretion of the Board of Directors payment for
the shares of underlying options may be paid through the delivery of shares of
ECBC's common stock having an aggregate fair market value equal to the option
price, provided such shares have been owned by the option holder for at least
one year prior to such exercise. A combination of cash and shares of common
stock may also be permitted at the discretion of the Board of Directors.
Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.
The Board of Directors of ECBC may at any time, and from time to time,
amend, terminate, or suspend one or more of the Plans in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
common stock which may be issued pursuant to the Plans except in the case of a
reclassification of ECBC's capital stock or a consolidation or merger of ECBC;
reduce the minimum option price per share; extend the period for granting
options; or materially increase in any other way the benefits accruing to
employees who are eligible to participate in the Plans.
The Plans are not qualified under Section 401(a) of the Internal Revenue
Code, nor are they subject to any provisions of the Employee Retirement Income
Security Act of 1974.
Summary.
The following sets forth certain information as of January 15, 2000,
concerning the stock options and stock bonuses granted by ECBC. Each option
represents the right to purchase one share of ECBC's common stock.
Total Shares Remaining
Shares Reserved for Shares Options/
Reserved Outstanding Issued As Shares
Name of Plan Under Plan Options Stock Bonus Under
Plan
Incentive Stock Option Plan 500,000 -- N/A 500,000
Non-Qualified Stock Option
Plan 1,500,000 500,000 N/A 1,000,000
Stock Bonus Plan 250,000 N/A -- 250,000
Other Options
ECBC has granted options to purchase shares of ECBC's common stock to the
persons below. These options were not granted pursuant to ECBC's Incentive or
Non-Qualified stock option plans.
Shares Issuable Option
Upon Exercise Exercise Expiration
Name of Options Price of Option
Arnold Rosen 100,000 $2.00 10/30/2000
Arnold Rosen 12,500 $3.50 1/03/2002
Other third parties 40,000 $3.50 1/03/2002
Mr. Rosen received these options for extending loans of $200,000 to ECBC
and for converting a $250,000 loan into shares of ECBC's common stock. See
"Transactions with Affiliates and Recent Sales of Securities" below. Mr. Rosen
and persons affiliated with Mr. Rosen presently own approximately 11% of ECBC's
common stock. See "Principal Shareholders".
In the near future ECBC plans to grant other options for the purchase of not
less than 500,000 shares of common stock to certain executive officers, with the
exception of John Calebrese.
Transactions with Affiliates and Recent Sales of Securities
ECBC has issued shares of its to the persons, in the amounts, and for the
consideration set forth in the following table. The amounts have been adjusted
to reflect the shares issued to the former shareholders of East Coast Beverage
Corp. in connection with the August 1999 acquisition of East Coast Beverage
Corp. and the 8.194595 for - one reverse split approved by the shareholders of
ECBC on February 22, 2000:
Number Note
Name Date of Shares Consideration Reference
John Calebrese 3/01/98 2,411,454 Services rendered A
Alex Garabedian 9/10/98 325,000 Services rendered B
Edward Shanahan 10/26/98 195,000 Services rendered B
John Daumeyer 10/19/98 130,000 Services rendered B
William Perry Maxwell 11/02/98 130,000 Services rendered B
Drew Carver 10/10/98 130,000 Services rendered B
FPI, Inc 1/29/99 700,000 Services rendered
Arnold Rosen 8/01/99 66,666 Services rendered C
Arnold Rosen 08/31/99 250,000 Modification of
loan terms C
Arnold Rosen 09/01/99 34,000 Consulting services C
Arnold Rosen 10/20/99 15,000 Extension of maturity
of loan C
John Calebrese 1/10/00 694,973 Payment of loan D
Raygard Enterprises 1/10/00 190,000 Conversion of loan E
Arnold Rosen 1/11/00 126,192 Conversion of loan C
Between September 1999 and February 15, 2000 ECBC sold 1,189,958 shares of its
common stock to a group of private investors at a price of $2.75 per share. ECBC
plans to file a separate registration statement with the Securities and Exchange
Commission so as to permit the public sale of these shares.
A. Subsequent to March 1, 1998 Mr. Calebrese sold 428,812 shares to Genco
Overseas Ventures Limited and 428,812 shares to Aicon Investments, Limited.
Subsequent to March 1, 1998 Mr. Calebrese also assigned shares of ECBC's common
stock to FPI, Inc., Arnold Rosen and other third parties. See "Principal
Shareholders".
B. Shares were issued as part of the compensation provided in the
employment agreement with this person.
C. Between March and May 1999 East Coast Beverage Corp. sold 1,000 shares
of its Series A preferred stock to a group of private investors for $1,000,000.
All Series A preferred shares were subsequently converted into shares of the
common stock of East Coast Beverage Corp. In connection with the acquisition of
East Coast Beverage Corp. the former Series A preferred shareholders received
751,879 shares of ECBC's common stock. Arnold Rosen, a principal shareholder and
a consultant to ECBC, together with his wife and their respective IRA accounts,
purchased 520 of the Series A preferred shares.
Between May and August 1999 ECBC borrowed $1,000,000 from to Mr. Rosen.
The loan from Mr. Rosen enabled ECBC to fund a level of operations associated
with increased orders. The loans are represented by a series of convertible
notes (the "Notes") which bear interest at 12% per annum and are due and payable
in April 2000. The Notes originally provided Mr. Rosen with certain rights (i)
with respect to payment if ECBC was sold, (ii) conversion of the notes into ECBC
stock, and (iii) under certain circumstances, to a percentage of ECBC's net
income.
In exchange for 250,000 shares of ECBC's common stock, ECBC and Mr. Rosen
agreed to the following modifications to the terms of the Notes:
o ECBC would repay Mr. Rosen $400,000, plus accrued interest, prior to
September 30, 1999.
o An additional $300,000 plus accrued interest would be repaid to Mr. Rosen
prior to October 15, 1999.
o The remaining $300,000, plus accrued interest would be payable on or before
April 1, 2000.
o The rights (i) to receive, under certain circumstances, a percentage
interest in ECBC's net income; and (ii) to receive 150% of the unpaid
principal if ECBC was sold, were terminated.
o The right to convert up to $300,000 of the amount owed to Mr. Rosen into
such number of shares of ECBC's common stock as may be determined by
dividing the amount to be converted by $2.00. On January 11, 2000 Mr. Rosen
converted $250,000 owed to him by ECBC, plus $2,383 in accrued interest,
into 126,192 shares of ECBC's common stock.
On October 20, 1999 ECBC paid Mr. Rosen $50,000 toward a $300,000 loan
which was due to be paid by October 15, 1999 and issued Mr. Rosen 15,000 shares
of ECBC's common stock for extending the maturity of the remaining amount of
this loan until January 15, 2000.
In September 1999 ECBC issued Mr. Rosen 34,000 shares of common stock in
consideration for consulting services provided to ECBC.
D. On January 10, 2000 John Calebrese converted $1,818,632 of advances to
ECBC into 694,973 shares of ECBC's common stock. The advances were made between
March 1998 and October 1999, were unsecured and did not bear interest.
E. On January 10, 2000 ECBC issued 190,000 shares of common stock to
Raygard Enterprises of South Florida, Inc. in settlement of $400,000 loaned to
ECBC by Raygard. The amount owed to Raygard was due on July 1, 2000, was
unsecured and did not bear interest.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of January 15, 2000, information with
respect to the only persons owning beneficially 5% or more of the outstanding
common stock and the number and percentage of outstanding shares owned by each
director and officer and by the officers and directors as a group. Unless
otherwise indicated, each owner has sole voting and investment powers over his
shares of common stock.
Shares of
Name and Address Common Stock Percent of Class
John Calebrese 1,832,972 (1) 23.9%
1750 University Drive
Suite 117
Coral Springs, Florida 33071
Shares of
Name and Address Common Stock Percent of Class
Alex Garabedian 325,000 4.2%
1750 University Drive
Suite 117
Coral Springs, FL 33071
Edward Shanahan 195,000 2.5%
78 Harrington Ridge Road
Sherborn, MA 01770
John Daumeyer 130,000 1.7%
8621 Brookridge Dr.
West Chester, OH 45069
William Perry Maxwell 130,000 1.7%
2679 Corey Place
San Ramon, CA 94583
Drew Carver 130,000 1.7%
3852 E. Keresan
Phoenix, AZ 85044
Robert Gardener -- --
1750 University Drive
Suite 117
Coral Springs, FL 33071
James J. Harford -- --
250 Cagle Road
Roswell, GA 30075
Edith G Osman -- --
808 Brickle Key Blvd., #2301
Miami, FL 33131
Arnold Rosen 1,080,940 (2) 14.1%
7138 Ayrshire Lane
Boca Raton, FL 33496
FPI, Inc. 816,941 10.7%
Mizner Park Corporate Center
433 Plaza Real, Suite 275
Boca Raton, FL 33445
Genco Overseas Ventures Limited 428,812 (3) 5.6%
1500 Northwest 65th Ave.
Plantation, FL 33313
Shares of
Name and Address Common Stock Percent of Class
Acion Investments, Limited 428,812 (3) 5.6%
1500 Northwest 65th Ave.
Plantation, FL 33313
All Officers and Directors 2,742,972 35.8%
as a Group (8 persons)
(1) Excludes 500,000 shares issuable upon the exercise of options held by Mr.
Calebrese. The options are exercisable at a price of $2.75 per share at any
time prior to December 31, 2004.
(2) Includes shares held by Mr. Rosen, Mr. Rosen's wife, and their respective
IRA accounts.
(3) Jack Namer is the controlling person of this shareholder and is therefore
the beneficial owner of the shares held of record by this shareholder.
The percentage ownership for each shareholder in the foregoing table has
been computed without including any shares issuable upon the exercise of any
options.
SELLING SHAREHOLDERS
This prospectus relates the sale of shares of ECBC's common stock by
certain owners of such shares. The shares were issued by ECBC in various private
offerings for cash, services rendered, and in settlement of amounts owed by ECBC
to various third parties.
The owners of the common stock to be sold by means of this prospectus are
referred to as the "selling shareholders".
The following table identifies the selling shareholders and the shares which
are being offered for sale by the selling shareholders.
Shares to Be
Shares Sold in this Share Ownership
Name Presently Owned Offering After Offering
John Calebrese 1,832,972 325,000 1,507,972
FPI, Inc. 816,941 816,941 --
Raygard Enterprises of 190,000 190,000 --
South Florida, Inc.
W. R. Smith (IRA) 221,064 187,970 33,094
Sanford I. Litchman, Trust 22,720 15,093 7,627
Sayre Litchman 7,500 7,500 --
Michael J. Litchman 7,500 7,500 --
Shares to Be
Shares Sold in this Share Ownership
Name Presently Owned Offering After Offering
Cindy Litchman 7,500 7,500 --
Arnold L. Rosen 852,553 396,994 455,559
Arnold L. Rosen (IRA) 109,022 109,022 --
Bonnie Rosen (IRA) 120,027 93,984 26,043
Sachiko Miwa 111,551 75,188 36,363
Steven R. Marks 37,593 37,593 --
Edith G. Osman 22,556 22,556 --
Liz Coppola 50,000 50,000 --
Ismael Llera 50,000 50,000 --
Sharon Marks 40,000 40,000 --
Rikki Bruinsma 15,000 15,000 --
-----------
2,447,841
If all shares offered by this prospectus are sold, John Calebrese will own
19.7% of ECBC's common stock and Arnold Rosen will own 5.9% of ECBC's common
stock. Each of the other selling shareholders will own less than 1% of ECBC's
common stock.
Manner of Sale. The shares of common stock owned, or which may be
acquired, by the selling shareholders may be offered and sold by means of this
Prospectus from time to time as market conditions permit in the over-the-counter
market, or otherwise, at prices and terms then prevailing or at prices related
to the then-current market price, or in negotiated transactions. These shares
may be sold by one or more of the following methods, without limitation:
o a block trade in which a broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face transactions between sellers and purchasers without a
broker/dealer.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from selling
shareholders in amounts to be negotiated.
The selling shareholders and any broker/dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of ss.2(11) of the Securities Acts of 1933, and any commissions
received by them and profit on any resale of the Shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
ECBC has agreed to indemnify the selling shareholders and any securities
broker/dealers who may be deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters or otherwise.
ECBC has advised the selling shareholders that they and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the Prospectus delivery requirements under the Securities Act of
1933. ECBC has also advised each Selling Shareholder that in the event of a
"distribution" of the shares owned by the Selling Shareholder, such Selling
Shareholder, any "affiliated purchasers", and any broker/dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. Rule 102 makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of the same class
as is the subject of the distribution. A "distribution" is defined in Rule 102
as an offering of securities "that is distinguished from ordinary trading
transactions by the magnitude of the offering and the presence of special
selling efforts and selling methods". ECBC has also advised the selling
shareholders that Rule 101 under the 1934 Act prohibits any "stabilizing bid" or
"stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the common stock in connection with this offering.
DESCRIPTION OF SECURITIES
Common Stock
ECBC is authorized to issue 100,000,000 shares of common stock. Holders
of common stock are each entitled to cast one vote for each share held of record
on all matters presented to shareholders. Cumulative voting is not allowed;
hence, the holders of a majority of the outstanding common stock can elect all
directors.
Holders of common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available therefor
and, in the event of liquidation, to share pro rata in any distribution of
ECBC's assets after payment of liabilities. The board is not obligated to
declare a dividend. It is not anticipated that dividends will be paid in the
foreseeable future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by ECBC. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock. All of the
outstanding shares of common stock are fully paid and nonassessable and all of
the shares of common stock offered as a component of the Units will be, upon
issuance, fully paid and non-assessable.
Preferred Stock
ECBC is authorized to issue up to 20,000,000 shares of preferred stock.
ECBC's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Colorado statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of ECBC.
Transfer Agent
Florida Atlantic Stock Transfer, Inc. is the transfer agent for ECBC's
common stock.
EXPERTS
The balance sheet of ECBC as of December 31, 1998 and the Statement of
Operations, Statement of Changes in Deficiency in Assets and Statement of Cash
Flows for the period from inception (March 25, 1998) to December 31, 1998 have
been included herein in reliance on the report of Kaufman Rossin & Co.,
Professional Association, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
LITIGATION
Genco Overseas Ventures Limited ("Genco") and Aicon Investments,
Limited ("Aicon") have claimed that John Calebrese, ECBC's Chief Executive
Officer, and ECBC's wholly owned subsidiary (which is also named East Coast
Beverage Corp.) misrepresented certain facts to Genco and Aicon in connection
with the purchase by Genco and Aicon of shares of the subsidiary's common stock
from Mr. Calebrese in March 1999. As a result of these claimed
misrepresentations Genco and Aicon have demanded the return of $2,000,000, which
is the price Genco and Aicon paid for the shares. ECBC, ECBC's subsidiary, and
Mr. Calebrese are of the opinion that the claims of Genco and Aicon are without
merit.
Other than the foregoing, there are no legal proceedings to which ECBC
is a party or to which its properties are subject, other than routine litigation
incident to ECBC's business which is covered by insurance or which would not
have a material adverse effect on ECBC.
INDEMNIFICATION
ECBC's Bylaws authorize indemnification of a director, officer,
employee or agent of ECBC against expenses incurred by him in connection with
any action, suit, or proceeding to which he is named a party by reason of his
having acted or served in such capacity, except for liabilities arising from his
own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of ECBC who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling ECBC pursuant to the foregoing provisions, ECBC has been informed
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.
AVAILABLE INFORMATION
ECBC is subject to the informational requirements of the Securities
Exchange Act of l934 and in accordance therewith is required to file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Copies of any such reports, proxy statements and
other information filed by ECBC can be inspected and copied at the public
reference facility maintained by the Securities and Exchange Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. and at the Securities and
Exchange Commission's Regional offices in New York (7 World Trade Center, Suite
1300, New York, New York 10048) and Chicago (Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511). Copies of such
material can be obtained from the Public Reference Section of the Securities and
Exchange Commission at its office in Washington, D.C. 20549 at prescribed rates.
Certain information concerning ECBC is also available at the Internet Web Site
maintained by the Securities and Exchange Commission at www.sec.gov ECBC has
filed with the Securities and Exchange Commission a Registration Statement on
Form SB-2 (together with all amendments and exhibits) under the Securities Act
of 1933, as amended (the "Act"), with respect to the Securities offered by this
prospectus. This prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Securities and Exchange Commission. For
further information, reference is made to the Registration Statement.
- ------------------------------------------------------------------------------
EAST COAST BEVERAGE CORP.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
C O N T E N T S
Page
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Deficiency in Assets 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 12
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
Board of Directors
East Coast Beverage Corp.
Coral Springs, Florida
We have audited the accompanying balance sheet of East Coast Beverage Corp. as
of December 31, 1998, and the related statements of operations, changes in
deficiency in assets, and cash flows for the period from inception (March 25,
1998) to December 31, 1998. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of East Coast Beverage Corp. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (March 25, 1998) to December 31, 1998 in conformity with
generally accepted accounting principles.
Miami, Florida Kaufman Rossin & Co.
October 22, 1999 Professional Association
EAST COAST BEVERAGE CORP.
BALANCE SHEET
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------
CURRENT ASSETS
Cash and equivalents $ 2,485
Accounts receivable (Note 2) 337,138
Note receivable 10,000
Inventories (Note 3) 1,211,086
- -------------------------------------------------------------------------------
Total current assets
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $1,001 (Note 4) 23,618
PREPAID ASSETS (NOTE 5) 141,882
OTHER ASSETS (NOTE 6) 25,713
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 1,751,922
- -------------------------------------------------------------------------------
LIABILITIES AND DEFICIENCY IN ASSETS
- -------------------------------------------------------------------------------
CURRENT LIABILITIES
Bank overdraft $ 55,913
Accounts payable and accrued expenses 1,202,950
Due to stockholder (Note 7) 1,230,876
- -------------------------------------------------------------------------------
Total current liabilities
DEFICIENCY IN ASSETS ( 737,817)
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ 1,751,922
- -------------------------------------------------------------------------------
EAST COAST BEVERAGE CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MARCH 25, 1998) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SALES $ 478,066
COST OF GOODS SOLD 344,493
- --------------------------------------------------------------------------------
GROSS PROFIT 133,573
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 874,025
- --------------------------------------------------------------------------------
LOSS FROM OPERATIONS (740,452)
OTHER INCOME 2,135
- --------------------------------------------------------------------------------
NET LOSS ($ 738,317)
- --------------------------------------------------------------------------------
EAST COAST BEVERAGE CORP.
STATEMENT OF CHANGES IN DEFICIENCY IN ASSETS
FOR THE PERIOD FROM INCEPTION (MARCH 25, 1998) TO DECEMBER 31, 1998
Common Stock,
$1.00 par value;
1,000 shares authorized
---------------------------
Shares Par Value Deficit Total
- -------------------------------------------------------------------------------
Issuance of common stock 500 $ 500 $ - $ 500
Net loss - - ( 738,317) ( 738,317)
- -------------------------------------------------------------------------------
Balances as of December
31, 1998 500 $ 500 ($738,317) ($737,817)
- -------------------------------------------------------------------------------
EAST COAST BEVERAGE CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MARCH 25, 1998) TO DECEMBER 31, 1998
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 738,317)
- -------------------------------------------------------------------------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 1,001
Changes in operating assets and liabilities:
Accounts receivable ( 337,138)
Inventories ( 1,211,086)
Prepaid assets ( 141,882)
Other assets ( 25,713)
Bank overdraft 55,913
Accounts payable and accrued expenses 1,202,950
- -------------------------------------------------------------------------------
Total adjustments ( 455,955)
- --------------------------------------------------------------------------------
Net cash used in operating activities ( 1,194,272)
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to employee ( 10,000)
Purchases of property and equipment ( 24,619)
- --------------------------------------------------------------------------------
Net cash used in investing activities ( 34,619)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 500
Net borrowings from stockholder 1,230,876
- -------------------------------------------------------------------------------
Net cash provided by financing activities
- -------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS AND BALANCE AT DECEMBER
31, 1998 2,485
- ------------------------------------------------------------------------------
Supplemental Disclosures:
- -------------------------------------------------------------------------------
Interest paid to stockholder $ 18,416
- -------------------------------------------------------------------------------
EAST COAST BEVERAGE CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description and Activity
The Company was incorporated in March 25, 1998, under the laws of
the State of Florida for the purpose of developing, producing and
distributing Coffee House USA(TM), a proprietary line of all
natural, ready to drink, bottled coffee drinks.
Cash and Equivalents
During 1998 the Company maintained an account with a brokerage firm.
Cash and equivalents are comprised of cash and highly liquid
securities (consisting primarily of money-market investments) with
an original maturity or redemption option of three months or less.
Balances are insured up to $500,000 (with a limit of $100,000 for
cash) by the Securities Investor Protection Corporation.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
betterments and additions are charged to the asset accounts while
replacements, maintenance and repairs which do not improve or extend
the lives of the respective assets are charged to expense currently.
Depreciation
Depreciation of property and equipment is determined utilizing
straight-line and accelerated methods at various rates based
generally on the estimated useful lives of the assets. The range of
estimated useful lives is as follows:
Office furniture and equipment 5 to 7 years
Machinery and equipment 5 to 7 years
Accounts Receivable
In the opinion of management, substantially all of the accounts
receivable are considered to be realizable at the amounts stated in
the accompanying balance sheet, and no allowance for doubtful
accounts is considered necessary.
Inventories
Inventories are stated at the lower of cost or market, using the
first-in, first-out method in determining cost and replacement cost
in determining market.
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ------------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
No provision for income taxes has been made in the accompanying
financial statements as the Company has elected, with the
stockholder's consent, to be taxed under S Corporation provisions of
the Internal Revenue Code. Under these provisions, the taxable
income of the Company is reflected by the stockholder on his
personal income tax return.
Revenue Recognition
Revenue from product sales is recognized by the Company when title
and risk of loss passes to the distributor, which generally occurs
upon shipment from the manufacturing facility.
Segment Reporting
During 1998, the Company adopted Financial Accounting Standards
Board ("FASB") statement No. 131, "Disclosure about Segments of an
Enterprise and Related Information". The Company has considered its
operations and has determined that it operates in a single operating
segment for purposes of presenting financial information and
evaluating performance. As such, the accompanying financial
statements present information in a format that is consistent with
the financial information used by management for internal use.
Impact of the "Year 2000" Computer Issue
Because computers frequently use only two digits to recognize years,
on January 1, 2000, many computer systems, as well as equipment that
uses embedded computer chips, may be unable to distinguish between
the years 1900 and 2000. If not remediated, this problem could
create system errors and failures resulting in the disruption of
normal business operations. In the event the Company fails to
identify or correct a material Year 2000 problem, there could be
disruptions in normal business operations, which could have a
material adverse effect on the Company's results of operations,
liquidity or financial condition. Further, there may be some third
parties, such as governmental agencies, utilities, telecommunication
companies, vendors, suppliers and customers who may not be able to
continue business with the Company due to their own Year 2000
problems. Also, risks associated with some foreign third parties may
be greater since there is general concern that some entities
operating outside the United States are not addressing Year 2000
issues on a timely basis. There can be no assurance that any efforts
made will fully mitigate the effect of Year 2000 issues.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1998 consisted of the following:
Trade accounts receivable $ 306,202
Accounts receivable from factor 30,936
----------------------------------------------------------------
$
----------------------------------------------------------------
During 1998, the Company entered into a factoring agreement,
providing for assignment of pre-approved trade receivables on a
non-recourse basis of up to $2,000,000 with advances based on 80% of
eligible receivables. Pursuant to this agreement, the Company is
charged fixed factoring fees of 2% of the gross receivables assigned
and a variable discount computed on the actual days elapsed from the
date of the initial payment until and including five days after
payment is received by the factor, based on the base rate plus 2%
per annum, with a minimum of 7% per annum. The agreement is
collateralized by substantially all of the assets of the Company and
personally guaranteed by the stockholder. Total finance changes
amounted to approximately $13,000 during 1998.
NOTE 3. INVENTORIES
Inventories at December 31, 1998 consisted of the following:
Finished goods $1,023,122
Raw materials 187,964
------------------------------------------------------------------
$1,211,086
------------------------------------------------------------------
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consisted of the
following:
Office furniture and equipment $ 6,539
Machinery and equipment 18,080
----------------------------------------------------------------
24,619
Less: accumulated depreciation (1,001)
----------------------------------------------------------------
$23,618
----------------------------------------------------------------
Depreciation expense amounted to $1,001 in 1998.
NOTE 5. PREPAID ASSETS
The Company entered into an agreement with a manufacturer, whereby a
$150,000 mold fee was required in order to set up for the
manufacture of bottles. The manufacturer will credit up to the full
amount of the fee at a rate of $0.40 per gross on all ware
manufactured for and accepted by the Company within a three year
period. During 1998 the Company received a $8,118 credit related to
this agreement.
NOTE 6. OTHER ASSETS
Other assets at December 31, 1998 consisted of the following:
Promotional items $14,487
Trademark 500
Deposits 10,726
----------------------------------------------------------------------
$25,713
----------------------------------------------------------------------
NOTE 7. DUE TO STOCKHOLDER
At December 31, 1998, the Company had an unsecured loan payable to
the sole stockholder in the amount of $1,230,876. The loan bears
interest payable monthly at 10% per annum, and is due on demand.
Interest expense in connection with this note amounted to $26,822
during 1998.
NOTE. 8. RISKS AND UNCERTAINTIES
The Company is substantially dependent on two unrelated parties as
manufacturers of their products. Management believes that the loss
of these manufacturers would not significantly disrupt operations
and that relationships with alternate manufacturers at similar costs
could be established within a few weeks.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Employment Agreements
Prior to commencement of operations, the Company entered into
employment agreements with certain key employees, which provide for,
among other things, minimum annual salaries and issuance of common
stock. In connection with these agreements, the Company agreed to
issue in the aggregate, 140 shares of common stock, representing
approximately 21% of total outstanding common stock of the Company.
As these shares are the equivalent of founder shares and the value
of the shares is nominal, no compensation was recorded by the
Company. On January 1, 1999, these shares were deemed to be issued.
Leases
The Company leases its office facilities under a non-cancellable
operating lease agreement expiring in 2000.
Minimum annual rental commitments under this lease for the years
subsequent to December 31, 1998 are as follows:
1999 $ 14,284
2000 10,989
-----------------------------------------------------------------
$ 25,273
-----------------------------------------------------------------
Total rent expense amounted to $11,199 in 1998.
Commitments
The Company has entered into purchase agreements with two unrelated
entities to provide the Company with manufacturing of the products
to be used in its normal operations.
Under one of the purchase agreements, the Company is committed to
minimum purchases of approximately $940,000, representing 400,000
cases of coffee product per year. Management expects production to
surpass this minimum, however, there can be no assurance this
minimum will be met.
Contingencies
An individual that formerly acted as counsel to the Company has
notified the Company that he believes he is entitled to a five
percent ownership interest in the Company in connection with
services rendered. The Company disagrees with this individual's
representation and intends, if any claim is made for such ownership
interest to vigorously defend its position.
NOTE 10. SUBSEQUENT EVENTS
Stock Split
On March 24, 1999, the Company approved and effectuated a 25,000 for
1 forward stock split of its common stock resulting in an increase
in the number of shares of common stock effectively outstanding from
670 to 16,750,000.
Consulting Agreements
On January 25, 1999, the Company entered into an agreement
(Consulting Agreement) with an entity (Consultant) to act as its
agent and to perform consulting services with financial growth
strategies. Under the terms of the
NOTE 10. SUBSEQUENT EVENTS (Continued)
Consulting Agreement, as amended on January 29, 1999 and April 4,
1999, the Company agreed to compensate the Consultant based upon
various formulas, including the following:
a) $20,000 paid on January 25, 1999;
b) $2,500 per month for 12 months;
c) 30 shares of the Company's common stock;
d) Fees for debt moneys raised due to the efforts of Consultant shall be
set at two percent (2%);
e) Finder's fees computed at a rate to be agreed by both parties;
f) Upon sale of the Company, additional equity in the Company of
five percent (5%), a proportionate amount of the cash, cash and
stock or cash and options received upon sale, plus a proportional
pro-rata share of the net profits.
Also under the Consultant Agreement, it is contemplated that the
Company will seek a private placement in an amount up to $4,000,000
and in connection therewith will pay Consultant $100,000 for each
one million dollars raised, or part thereof, through parties
introduced directly or indirectly by the Consultant.
Compensation in the form of the Company's common stock and cash
compensation paid to the Consultant aggregated 700,000 shares (after
giving effect to the March 24, 1999 forward stock split and a return
of certain shares by the Consultant in anticipation of a
recapitalization) and $322,535, respectively.
On August 1, 1999 in connection with the restructuring of the note
payable discussed below, the Company entered into a second
consulting agreement (Second Consulting Agreement) with an
individual (Individual Consultant) to provide services including
product market studies, customer relations and public relations
assistance for six months from the date of the agreement. Under the
terms of this agreement, the Company agreed to compensate the
Individual Consultant based upon various formulas, as follows:
a) 25,000 shares of the Company's common stock issuable 10 days after the
signing of this agreement.
b) 20,833 shares of common Company stock payable per month for a two month
period, commencing 30 days after the signing of this agreement.
As of October 22, 1999 compensation in the form of the Company's common
stock paid to the Individual Consultant aggregated 66,666 shares.
Private Placement
During March and April 1999, pursuant to a Private Placement Memorandum,
the Company issued 1,000 shares of convertible preferred stock for $1,000 per
share. On August 25, 1999 each share of preferred stock was converted into
751,879 shares of common stock. Costs associated with this offering amounted to
approximately $87,500.
Common Stock
As of October 22, 1999, the Company had not issued certain stock
certificates issuable in connection with employment agreements, consulting
agreements, stock sales and founding stockholder shares due, however, as the
Company is obligated to issue these shares for financial reporting purposes, all
are deemed to be issued and outstanding.
Note Payable
Between May and August 1999, the Company borrowed funds aggregating
$1,000,000 from the Individual Consultant, with interest at 12%. Principal and
accrued interest is due at varying dates from September 1999 through April 2000.
As consideration to restructure this note, and in connection with the Second
Consulting Agreement discussed above, the Company agreed to issue the Individual
Consultant 250,000 shares of the Company's common stock.
Reverse Acquisition
Effective August 31, 1999, the Company entered into an agreement to
exchange common stock with USA Service Systems, Inc. (USA), a non-operating
company. The Agreement provided for the exchange of 41,300,758 restricted shares
of common stock of USA for all of the issued and outstanding shares of the
Company. This merger was treated for accounting purposes as a capital
transaction. As the Company is the accounting acquiror in this "reserve
acquisition," the financial statements of USA are considered to be a
continuation of the Company. Concurrent with this merger, USA changed its name
to East Coast Beverage Corp.
USA SERVICE SYSTEMS, INC.
CONDENSED BALANCE SHEET
Unaudited
September 30,
ASSETS 1999 December 31, 1998
- --------------------------------------------------------------------------------
CURRENT ASSETS
Cash and equivalents $ 89,696 $ 2,485
Accounts receivable 1,523,928 337,138
Loans and exchange 29,800 10,000
Prepaid expenses 232,362 141,882
Subscriptions receivable 195,000 -
Inventories 1,316,553 1,211,086
- -------------------------------------------------------------------------------
Total current assets 3,387,339 1,560,709
Property and equipment, net of accumulated
depreciation of $24,357 and $1,001 1,007,120 23,618
Other assets 23,789 25,713
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 4,418,248 $ 1,751,922
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
- -------------------------------------------------------------------------------
CURRENT LIABILITIES
Bank Overdraft $ - $ 55,913
Accounts payable and accrued expenses 700,289 1,202,950
Loan payable, current portion 1,500,000 -
- -------------------------------------------------------------------------------
Total current liabilities 2,200,289 1,258,863
Due to stockholder 1,567,426 1,230,876
TOTAL LIABILIIES 3,767,715 2,489,739
- -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS) 650,533 (737,817)
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,418,248 $1,751,922
- -------------------------------------------------------------------------------
See accompanying notes
USA SERVICE SYSTEMS, INC.
CONDENSED STATEMENT OF OPERATIONS
Unaudited
Nine months ended September 30,
1999 1998
- -------------------------------------------------------------------------------
SALES $5,179,189 $ -
-
COST OF GOODS SOLD 3,681,520 -
- --------------------------------------------------------------------------------
GROSS PROFIT 1,497,669 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,427,926 334,551
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 69,743 (334,551)
STOCK BASED COMPENSATION AND FINANCING COSTS
(NOTE 7) 421,166 -
OTHER INCOME 625 1,483
- --------------------------------------------------------------------------------
NET INCOME (LOSS) $ (350,798) $ (333,068)
- --------------------------------------------------------------------------------
See accompanying notes
USA SERVICE SYSTEMS, INC.
STATEMENT OF CASH FLOWS
Unaudited
Nine months ended September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 350,798) ($ 333,068)
- ------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 23,356 -
Stock based compensation and financing costs 421,166
Stock issued for services 148,581 -
Changes in operating assets and liabilities:
Accounts receivable ( 1,186,790) -
Inventories ( 105,466) ( 44,534)
Prepaid assets ( 90,480) ( 150,000)
Subscriptions receivable ( 195,000) -
Other assets 1,924 ( 3,102)
Accounts payable and accrued expenses ( 502,662) 88,486
- -----------------------------------------------------------------------------
Total adjustments ( 1,485,371) ( 109,150)
- ------------------------------------------------------------------------------
Net cash used in operating activities ( 1,836,169) ( 442,218)
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to employee ( 19,800) ( 10,000)
Purchases of property and equipment ( 1,006,858) ( 1,575)
- ------------------------------------------------------------------------------
Net cash used in investing activities ( 1,026,658) ( 11,575)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,169,401 500
Net borrowings from stockholder 336,550 499,000
Net borrowings, other 1,500,000 -
Payments ( 55,913) -
- -----------------------------------------------------------------------------
Net cash provided by financing activities 2,950,038 499,500
- -----------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 87,211 45,707
- -----------------------------------------------------------------------------
CASH AND EQUIVALENTS - BEGINNING 2,485 -
CASH AND EQUIVALENTS - ENDING 89,696 $ 45,707
Supplemental Disclosures:
Interest paid to stockholder $ 6,856 -
- -----------------------------------------------------------------------------
See accompanying notes
USA SERVICE SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
1. INTERIM REPORTING
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles and the
requirements of regulation S-X concerning Interim financial statements.
Accordingly, these 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. Operating results for the
nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information, refer to the financial statements and related footnotes for the
year ended December 31, 1998 included elsewhere in this prospectus.
2. Acquisition of East Coast Beverage Corp.
Effective August 31, 1999 the Company acquired all of the issued and
outstanding shares of East Coast Beverage Corp. ("ECBC") in exchange for
41,300,758 shares of the Company's common stock. Immediately prior to this
transaction, certain officers and directors of the Company surrendered 2,734,202
shares of the Company's common stock. Following this transaction the Company had
44,354,058 issued and outstanding shares of common stock. The former
shareholders of ECBC now own approximately 93% of the Company's common stock. In
connection with this transaction the management of the Company resigned and was
replaced by the management of ECBC. The acquisition of ECBC was treated for
accounting purposes as a capital transaction and as a result the historical
financial statements of ECBC are those of the Company.
The business of the Company, which is conducted through ECBC, now involves
the development, production and distribution of Coffee House USA(TM), a
proprietary line of all natural, ready to drink ("RTD") bottled coffee drinks.
3. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, East Coast Beverage Corp. All
significant inter company accounts and transactions have been eliminated.
4. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
5. Revenue Recognition
Revenue from product sales is recognized by the Company when title and
risk of loss passes to the distributor, which generally occurs upon shipment
from the manufacturing facility.
6. LOAN FROM STOCKHOLDER
At September 30, 1999, the Company had an unsecured loan payable to an
officer, director and principal shareholder in the amount of $1,567,426. The
loan bears interest payable monthly at 10% per annum, and is due on demand.
7. STOCK BASED COMPENSATION AND FINANCING COSTS
In August 1999 ECBC issued 546,300 shares of its common stock (as adjusted
for the share-for-share exchange between the Company and ECBC) to a principal
shareholder and consultant for services provided to ECBC. The value of these
shares ($88,666) has been expensed as Stock Based Compensation during the
quarter ended September 30, 1999.
Between May and August 1999 ECBC borrowed $1,000,000 from the consultant.
In exchange for 2,048,648 shares of common stock (as adjusted for the
share-for-share exchange between the Company and ECBC), ECBC and the consultant
agreed to significant modifications to the terms of the Notes. The value of
these shares ($332,500) has been expensed as Financing Costs during the quarter
ended September 30, 1999.
8. Stock Split
On March 24, 1999, the Company's shareholders approved a 25,000 for 1
forward split of the Company's common stock.
9. Private SALES OF SECURITIES
During March and April 1999, ECBC sold 1,000 shares of convertible
preferred stock to certain private investors for $1,000 per share. On August 25,
1999 the shares of preferred stock were converted into 6,161,334 shares of the
Company's common stock (as adjusted for the share-for-share exchange between the
Company and ECBC).
During the three months ending September 30, 1999 the Company sold
3,485,541 shares of its common stock to private investors at a price of $0.34
per share. Subsequent to September 30, 1999 the Company sold an additional
2,993,871 shares of its common stock to private investors at the same price.
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors.
The Colorado Business Corporation Act and the Company's Bylaws provide that
the Company may indemnify any and all of its officers, directors, employees or
agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined to not have acted in good faith and in the best
interest of the Company.
Item 25. Other Expenses of Issuance and Distribution.
SEC Filing Fee $ 1,788
NASD Filing Fee --
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 500
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 5,000
Miscellaneous Expenses 5,712
--------
TOTAL $40,000
All expenses other than the S.E.C. and NASD filing fees are estimated.
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company
which have been sold during the past three years and which securities were not
registered under the Securities Act of 1933, as amended. All historical share
data has been adjusted to reflect a 8.194595-for-one reverse split of the
Company's common stock, which was approved by the Company's shareholders on
February 22, 2000.
A. In November 1998 the Company issued 706,258 shares of common stock to the
former shareholders of USA Service Systems, Inc. (28 in number) in exchange for
all of the issued and outstanding shares of USA Service Systems, Inc. A total of
333,659 shares were subsequently returned to the Company for cancellation.
B. In August 1999 the Company issued 5,040,000 shares of its common stock to
the former shareholders (fourteen in number) of East Coast Beverage Corp., a
Florida corporation in exchange for all of the issued and outstanding shares of
East Coast Beverage Corp.
C. Between September 1999 and February 10, 2000 the Company sold 1,189,958
shares of its common stock to 48 persons (38 of which are accredited investors)
at a price of $2.75 per share.
D. The Company has also sold shares of common stock to the following persons:
Number
Name Date of Shares Consideration
Arnold Rosen 09/01/99 34,000 Consulting Services
Arnold Rosen 10/20/99 15,000 Extension of Maturity
of loan
John Calebrese 01/10/00 694,973 Payment of loan
Rayguard Enterprises 01/10/00 190,000 Conversion of loan
Arnold Rosen 01/11/00 126,192 Conversion of loan
The sales of the Company's common stock referred to in Sections A and D were
exempt from Registration pursuant to Section 4 (2) of the Securities Act of
1933. The shares of common stock were acquired for investment purposes only and
without a view to distribution. All of the persons who acquired these shares
were fully informed and advised about matters concerning the Company, including
its business, financial affairs and other matters. The purchasers of the
Company's common stock acquired the securities for their own accounts. The
certificates evidencing the shares of common stock will bear legends stating
that the shares represented by the certificates may not be offered, sold or
transferred other than pursuant to an effective registration statement under the
Securities Act of 1933, or pursuant to an applicable exemption from
registration. The shares of common stock referred to in Sections A and D are
"restricted" securities as defined in Rule 144 of the Securities and Exchange
Commission.
The sales of the Company's common stock referred to in Sections B and C were
exempt from registration pursuant to Rule 506 of the Securities and Exchange
Commission. The shares of the common stock were acquired for investment purposes
only and without a view to distribution. The persons who acquired these shares
were fully informed and advised about matters concerning the Company, including
its business, financial affairs and other matters. The purchasers of the
Company's common stock acquired the securities for their own accounts. The
certificates evidencing the common these shares will bear legends stating that
they may not be offered, sold or transferred other that pursuant to an effective
registration statement under the Securities Act of 1933, or pursuant to an
applicable exemption from registration. The shares of common stock referred to
in Sections B and C are "restricted" securities as defined in Rule 144 of the
Securities and Exchange Commission.
Item 27. Exhibits
Exhibits Page Number
1 Underwriting Agreement N/A
2. Share Exchange Agreement between USA
Service Systems, Inc. and East Coast Beverage Corp.
3.1 Articles of Incorporation,
as restated and amended
3.2 Bylaws
4.1 Incentive Stock Option Plan
4.2 Non-Qualified Stock Option Plan
4.3 Stock Bonus Plan
5 Opinion of Counsel
10 Employment Agreements
23.1 Consent of Attorneys
23.2 Consent of Accountants
24. Power of Attorney Included as part of the
Signature Page
27. Financial Data Schedules
Item 28. Undertakings.
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 l0(a)(3) of the Securities
Act of l933;
(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;
(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,
including (but not limited to) any addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, 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) To provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to directors, officers and controlling
persons of the Registrant, 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 of 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.
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Coral Springs, Florida,
on the 23rd day of February, 2000.
EAST COAST BEVERAGE CORP.
By: /s/ John Calebrese
John Calebrese, Chief Executive Officer
By:/s/ Robert Gardener
Robert Gardener, Principal Financial
Officer and Chief Accounting Officer
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ John Calebrese
John Calebrese Director February 23, 2000
/s/ James J. Harford
James J. Harford Director February 23, 2000
Edith G. Osman Director
ECBC SB-2 Jan 2000
EAST COAST BEVERAGE CORP.
REGISTRATION STATEMENT
ON
FORM SB-2
EXHIBITS