Attached files
file | filename |
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EX-32.2 - YARRAMAN WINERY, INC. | v186138_ex32-2.htm |
EX-32.1 - YARRAMAN WINERY, INC. | v186138_ex32-1.htm |
EX-31.2 - YARRAMAN WINERY, INC. | v186138_ex31-2.htm |
EX-31.1 - YARRAMAN WINERY, INC. | v186138_ex31-1.htm |
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
þ
|
QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended: December 31,
2009
o
|
TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from:
to
Commission
File No.: : 000-28865
GLOBAL BEVERAGES,
INC.
(Exact
name of registrant as specific in its charter)
Nevada
|
88-0373061
|
|
(State
or Other Jurisdiction of Incorporation
or
Organization)
|
(I.R.S.
Employer Identification
No.)
|
700
YARRAMAN ROAD, WYBONG
UPPER
HUNTER VALLEY
NEW SOUTH WALES, AUSTRALIA
2333
(Address
of Principal Executive
Offices)
(+61) 2
6547-8118
(Registrant's
Telephone Number,
Including
Area Code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
¨ Yes
¨
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer o
|
Accelerated filer o
|
|
Non-accelerated filer o (Do not check if a smaller reporting company)
|
Smaller reporting company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes o No þ
The
aggregate market value of the registrant’s common stock held by non-affiliates
of the registrant on May 26, 2010 was $39,000,014 based on the average closing
bid and ask price of $0.50 for such common stock as of May 26,
2010.
As of May
26, 2010, there were 89,969,180 shares of the registrant’s common stock
outstanding.
GLOBAL
BEVERAGES, INC.
REPORT
ON FORM 10-Q
FOR
THE QUARTERLY PERIOD ENDED DECEMBER 31, 2009
Contents
PART I – FINANCIAL
INFORMATION
|
|
|
Item 1. Financial Statements
|
4
|
|
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operation
|
13
|
|
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
|
16
|
|
Item 4T. Controls and Procedures
|
16
|
|
PART II – OTHER INFORMATION
|
||
Item 1. Legal Proceedings
|
18
|
|
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
|
18
|
|
Item 3. Defaults Upon Senior
Securities
|
18
|
|
Item 5. Other Information
|
18
|
|
Item 6. Exhibits
|
18
|
2
FORWARD-LOOKING
STATEMENTS
Some of
the statements in this Quarterly Report on Form 10-Q are forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance, or achievements expressed or implied
by forward-looking statements.
In some
cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative
of these terms or other comparable terminology. You should read
statements that contain these words carefully, because they discuss our
expectations about our future operating results or our future financial
condition or state other “forward-looking” information. There may be
events in the future that we are not able to accurately predict or
control. You should be aware that the occurrence of any of the events
described in this Quarterly Report could substantially harm our business,
results of operations and financial condition, and that upon the occurrence of
any of these events, the trading price of our securities could decline and you
could lose all or part of your investment. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, growth rates, levels of activity, performance
or achievements. We are under no duty to update any of the
forward-looking statements after the date of this Quarterly Report to conform
these statements to actual results.
Although
we believe that the expectations reflected in these forward-looking statements
are based on reasonable assumptions, there are a number of risks and
uncertainties that could cause actual results to differ materially from such
forward-looking statements. These factors include among others:
·
|
The
risks associated with the production and sale of
wines;
|
·
|
Our
ability to raise capital to fund capital
expenditures;
|
·
|
Grape
and other fruit price volatility;
|
·
|
Our
ability to find and retain skilled
personnel;
|
·
|
Regulatory
developments; and
|
·
|
General
economic conditions.
|
On
December 17, 2009, we changed our corporate name from Yarraman Winery, Inc. to
Global Beverages, Inc. All references in this Form 10-K to the “Company,”
“Global Beverages,” “Yarraman,” “we,” “us” or “our” are to Global Beverages,
Inc. and its subsidiary, Yarraman Estate Pty Limited. Except as otherwise noted,
all references to “$” shall mean United States dollars.
3
PART
I
FINANCIAL
INFORMATION
Item 1 – Financial
Statements
4
GLOBAL
BEVERAGES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
December
31,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 197,242 | $ | - | ||||
Accounts
receivable, net
|
1,735,723 | 760,313 | ||||||
Due
from related parties
|
661,156 | - | ||||||
Inventory
|
7,598,712 | 3,362,528 | ||||||
Other
receivables
|
1,265,877 | - | ||||||
Other
assets
|
803,334 | 190,961 | ||||||
Total
Current Assets
|
12,262,043 | 4,313,802 | ||||||
Property,
plant and equipment, net
|
3,861,410 | 3,528,013 | ||||||
Intangible
assets
|
43,913,139 | 19,459,248 | ||||||
$ | 60,036,592 | $ | 27,301,063 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 4,260,467 | $ | 1,929,055 | ||||
Loan
payable
|
58,536 | 13,095 | ||||||
Line
of credit
|
648,934 | - | ||||||
Deferred
revenue
|
45,663 | - | ||||||
Cash
deficit
|
- | 38,816 | ||||||
Capital
lease, current portion
|
15,735 | 42,539 | ||||||
Due
to related party
|
8,058,902 | 3,396,616 | ||||||
Total
Current Liabilities
|
13,088,238 | 5,420,122 | ||||||
Long
Term Liabilities:
|
||||||||
Convertible
notes payable
|
607,500 | - | ||||||
Long-term
debt
|
5,271,363 | 4,627,379 | ||||||
Total
Long Term Liabilities
|
5,878,863 | 4,627,379 | ||||||
Total
Liabilities
|
18,967,101 | 10,047,501 | ||||||
Stockholder's
Equity
|
||||||||
Preferred
stock, Series A, $.001 par value, 381,600 shares authorized 381,600 shares
issued and outstanding
|
386 | - | ||||||
Preferred
stock, Series B, $.001 par value, 55,000 shares authorized 55,000 shares
issued and outstanding
|
55 | 55 | ||||||
Common
stock, $.001 par value, 90,000,000 shares authorized 88,497,213 and
39,390,476 shares issued and outstanding respectively
|
88,497 | 39,390 | ||||||
Additional
paid in capital
|
57,429,324 | 30,851,807 | ||||||
Subscription
receivable
|
(55,000 | ) | (66,000 | ) | ||||
Shares
to be issued
|
10,455 | - | ||||||
Other
comprehensive income
|
(1,025,487 | ) | (456,752 | ) | ||||
Accumulated
deficit
|
(15,378,739 | ) | (13,114,938 | ) | ||||
Total
Stockholder's Equity
|
41,069,491 | 17,253,562 | ||||||
$ | 60,036,592 | $ | 27,301,063 |
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
GLOBAL
BEVERAGES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the three months ended
|
For
the six months ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Sales,
net
|
$ | 1,994,762 | $ | 478,367 | $ | 5,164,082 | $ | 1,087,513 | ||||||||
Cost
of sales
|
1,653,650 | 652,996 | 4,297,728 | 1,095,680 | ||||||||||||
Gross
profit (loss)
|
341,112 | (174,629 | ) | 866,354 | (8,167 | ) | ||||||||||
- | ||||||||||||||||
Selling,
general and administrative expenses
|
835,565 | 367,376 | 1,287,704 | 719,823 | ||||||||||||
Total
operating expenses
|
835,565 | 367,376 | 1,287,704 | 719,823 | ||||||||||||
- | ||||||||||||||||
Income
(Loss) from operations
|
(494,453 | ) | (542,005 | ) | (421,350 | ) | (727,990 | ) | ||||||||
Other
(Income) Expense
|
||||||||||||||||
Interest
income
|
(33 | ) | (326 | ) | (33 | ) | (3,121 | ) | ||||||||
Interest
expense
|
407,053 | 113,196 | 612,263 | 277,685 | ||||||||||||
Acquisition
costs
|
77,130 | - | 141,116 | - | ||||||||||||
Other
(income) expenses net
|
(8,041 | ) | (3,397 | ) | (10,939 | ) | (8,522 | ) | ||||||||
Amortization
of intangible
|
562,608 | - | 1,125,216 | - | ||||||||||||
Bad
debt
|
(15,104 | ) | - | 23,467 | - | |||||||||||
Gain
on sale of fixed asset
|
- | (607 | ) | - | (1,928 | ) | ||||||||||
Transaction
gain (loss) on foreign currency
|
64 | 22,625 | (48,639 | ) | 22,675 | |||||||||||
Total
Other (Income) Expense
|
1,023,677 | 131,491 | 1,842,450 | 286,789 | ||||||||||||
Loss
before income taxes
|
(1,518,131 | ) | (673,496 | ) | (2,263,800 | ) | (1,014,779 | ) | ||||||||
Provision
for income taxes
|
- | - | - | - | ||||||||||||
Net
loss
|
(1,518,131 | ) | (673,496 | ) | (2,263,800 | ) | (1,014,779 | ) | ||||||||
Other
comprehensive income (loss)
|
||||||||||||||||
Foreign
currency translation
|
(195,074 | ) | (33,279 | ) | (738,259 | ) | (935 | ) | ||||||||
Comprehensive
income (loss)
|
$ | (1,713,205 | ) | $ | (706,775 | ) | $ | (3,002,059 | ) | $ | (1,015,714 | ) | ||||
Net
loss per share:
|
||||||||||||||||
Basic
& diluted
|
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||
Weighted
average number of shares outstanding:
|
||||||||||||||||
Basic
& diluted
|
88,497,213 | 38,000,000 | 88,497,213 | 38,000,000 |
Weighted
average of dilutive securities has not been calculated since the effect of
dilutive securities is anti-dilutive
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
GLOBAL
BEVERAGES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE
SIX MONTH PERIODS ENDED DECEMBER 31, 2009 AND 2008
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Loss
|
$ | (2,263,800 | ) | $ | (1,014,779 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Bad
debt
|
23,467 | - | ||||||
Depreciation
and amortization
|
1,206,768 | 134,499 | ||||||
Salary
forgiven for stock payment
|
11,000 | 11,000 | ||||||
(Increase)
/ decrease in assets:
|
||||||||
Accounts
receivables
|
(390,044 | ) | (168,359 | ) | ||||
Inventory
|
(3,219,509 | ) | 402,654 | |||||
Other
receivables
|
(670,583 | ) | (35,121 | ) | ||||
Deposits
and prepaid expenses
|
31,003 | - | ||||||
Other
assets
|
(112,584 | ) | (41,091 | ) | ||||
Increase
in liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
1,950,734 | 31,069 | ||||||
Income
tax payable
|
71,305 | - | ||||||
Deferred
revenue
|
31,199 | - | ||||||
Total
Adjustments
|
(1,067,244 | ) | 334,651 | |||||
Net
cash used in operations
|
(3,331,044 | ) | (680,128 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition
of subsidiaries, net of cash acquired
|
147,380 | - | ||||||
Acquisition
of property and equipment
|
(21,697 | ) | (20,231 | ) | ||||
Acquisition
of intangible
|
- | (270 | ) | |||||
Net
cash provided by (used in) investing activities
|
125,683 | (20,501 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from long-term debt
|
175,704 | 115,406 | ||||||
Proceeds
from loan payable
|
607,500 | - | ||||||
Procceds
(payment) from line of credit
|
107,533 | - | ||||||
Cash
deficit financing
|
- | (1,769 | ) | |||||
Capital
lease payments
|
(30,671 | ) | (55,496 | ) | ||||
Receivable
from related party
|
451,619 | - | ||||||
Payable
to related party
|
2,293,915 | - | ||||||
Loans
payable - related party
|
85,141 | 308,777 | ||||||
Net
cash provided by (used in) financing activities
|
3,690,742 | 366,918 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(249,324 | ) | 333,711 | |||||
Net
increase in cash and cash equivalents
|
236,057 | - | ||||||
Cash
and cash equivalents, beginning balance
|
(38,816 | ) | - | |||||
Cash
and cash equivalents, ending balance
|
$ | 197,241 | $ | - | ||||
SUPPLEMENTAL
DISCLOSURES:
|
||||||||
Cash
paid for:
|
||||||||
Income
tax payments
|
$ | - | $ | - | ||||
Interest
payments
|
$ | 311,560 | $ | 218,426 |
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
7
Global
Beverages, Inc.
Notes
to Condensed Consolidated Financial Statements
December
31, 2009
NOTE 1 -
NATURE OF OPERATIONS
AND BASIS OF PRESENTATION
Our
Condensed Consolidated Balance Sheet as of December 31, 2009, the Condensed
Consolidated Statements of Income and Comprehensive Income for the three and six
months ended December 31, 2009 and 2008, and the Condensed Consolidated
Statements of Cash Flows for the six months ended December 31, 2009 and 2008
have not been audited. These statements have been prepared on a basis that is
substantially consistent with the accounting principles applied in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2009. In our opinion,
these financial statements include all normal and recurring adjustments
necessary for a fair presentation. The results for the three months are not
necessarily indicative of the results expected for the full year.
Our
significant interim accounting policies include the addition of overhead costs
to our work in process inventory and the recognition of income taxes using an
estimated annual effective tax rate. In addition the income and expenses from
acquisitions are included from the date of acquisition forward.
The
following information is unaudited. All per share amounts assume dilution unless
otherwise noted, and are based on unrounded amounts. Certain reclassifications
were made to prior year amounts to conform to the 2009 presentation. This report
should be read in conjunction with our Annual Report on Form 10-K for the fiscal
year ended June 30, 2009.
The
following is a list of our subsidiaries:
Yarraman
Estate, Pty., Ltd., Australia
Global
Beverages Hong Kong, Ltd., Hong Kong
Asia
Distributions Systems Limited, Cayman Islands, and it’s
subsidiaries:
|
·
|
Vitality
Development holdings Limited – British Virgin
Islands
|
|
·
|
Vitality
Tianjin Beverage Co Ltd – People’s Republic of
China
|
|
·
|
Highland
Mist Holdings Ltd – British Virgin
Islands
|
|
·
|
Tropical
Splendor International Ltd – British Virgin
Islands
|
|
·
|
Chendu
Gao Li Yuan – People’s Republic of
China
|
|
·
|
TBC
Shanghai Ltd – People’s Republic of
China
|
|
·
|
Global
Beverages Asia Limited - Hong Kong
|
|
·
|
Global
Beverages China Co Ltd – People’s Republic of
China
|
|
·
|
Shanghai
Runke Trading Co Ltd – People’s Republic of
China
|
|
·
|
Panda
Express China Limited – British Virgin
Islands
|
|
·
|
Panda
Xpress International Co Pte Ltd -
Singapore
|
8
During
the fiscal first quarter of 2010, the Company adopted The FASB Accounting Standards
Codification (ASC or Codification) and the Hierarchy of Generally Accepted
Accounting Principles (GAAP) which establishes the Codification as the
sole source for authoritative U.S. GAAP and will supersede all accounting
standards in U.S. GAAP, aside from those issued by the SEC. The adoption of the
Codification did not have an impact on the Company’s results of operations, cash
flows or financial position. Since the adoption of the Accounting Standards
Codification (ASC) the Company’s notes to the consolidated financial statements
will no longer make reference to Statement of Financial Accounting Standards
(SFAS) or other U.S. GAAP pronouncements.
The
Company also adopted, in accordance with U.S. GAAP, the standards on business
combinations and noncontrolling interests in Consolidated Financial Statements.
These statements aim to improve, simplify, and converge internationally, the
accounting for business combinations and the reporting of noncontrolling
interests in consolidated financial statements. These statements have a
significant impact on the manner in which the Company accounts for acquisitions
beginning in the fiscal year 2010. Significant changes include the
capitalization of in process research and development, expensing of acquisition
related restructuring actions and transaction related costs and the recognition
of contingent purchase price consideration at fair value at the acquisition
date. In addition, changes in accounting for deferred tax asset valuation
allowances and acquired income tax uncertainties after the measurement period
will be recognized in earnings rather than as an adjustment to the cost of
acquisition. This accounting treatment for taxes is applicable to acquisitions
that occurred prior and subsequent to the adoption of the standard. Operating
profit attributable to noncontrolling interests are reported in Other
(Income)Expense, net and the related tax impact to the Provision for Income
Taxes. Additionally, equity attributable to noncontrolling interests is recorded
in Other Non-Current Liabilities. The adoption of these standards did not have a
material impact on the Company’s results of operations, cash flows or financial
position.
Note 2 –
INCOME TAXES
The
worldwide effective income tax rates for the three months ended December 31,
2009 and 2008 were 0% and 0%, respectively. The effective rate was primarily due
to net operating losses during this period of time.
Note 3 -
INVENTORIES
December
31,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
Work
in progress
|
$ | 1,508,624 | $ | 354,350 | ||||
Bulk
wine and cider
|
2,308,778 | 2,249,660 | ||||||
Finished
goods
|
3,620,433 | 635,814 | ||||||
Winemaking
and packaging materials
|
160,877 | 122,703 | ||||||
Total
|
$ | 7,598,712 | $ | 3,362,527 |
Note 4 –
INTANGIBLE ASSETS AND GOODWILL
Intangible
assets that have finite useful lives are amortized over their estimated useful
lives. The latest impairment assessment of goodwill and indefinite lived
intangible assets was completed in the fiscal fourth quarter of 2009. Future
impairment tests for goodwill and indefinite lived intangible assets will be
performed annually in the fiscal fourth quarter of each year, or sooner, if
warranted.
9
December
31,
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
Non
amortizable intangibles
|
$ | 10,610,668 | $ | 10,384,848 | ||||
Amortizable
intangibles
|
29,178,484 | 9,074,400 | ||||||
Accumulated
amortization
|
(1,125,216 | ) | - | |||||
Net
amortizable intangibles
|
28,053,268 | 9,074,400 | ||||||
Total
intangibles
|
$ | 38,663,936 | $ | 19,459,248 | ||||
Goodwill
|
$ | 5,249,203 | $ | - |
Note 5 –
BUSINESS SEGMENTS
The
Company had two principal operating segments during the six months ended
December 31, 2009 which were: winery and distribution. These operating segments
were determined based on the nature of the products offered. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision-maker in deciding how to allocate resources and in assessing
performance. The Company's chief executive officer and chief financial officer
have been identified as the chief operating decision makers. The Company’s chief
operating decision makers direct the allocation of resources to operating
segments based on the profitability, cash flows, and other measurement factors
of each respective segment.
The
Company evaluates performance based on several factors, of which the primary
financial measure is business segment income before taxes. The segments’
accounting policies are the same as those described in the summary of
significant accounting policies. The following table shows the operations of the
Company's reportable segments:
10
December
31, 2009
|
||||
Revenues
from unaffiliated customers:
|
||||
Winery
|
$ | 908,965 | ||
Distribution
|
4,213,668 | |||
Consolidated
|
$ | 5,122,633 | ||
Operating
income (loss):
|
||||
Winery
|
$ | (466,505 | ) | |
Distribution
|
127,326 | |||
Corporation
(1)
|
(60,898 | ) | ||
Consolidated
|
$ | (400,077 | ) | |
Net
income (loss) before taxes:
|
||||
Winery
|
$ | (1,046,713 | ) | |
Distribution
|
169,047 | |||
Corporation
(1)
|
(1,338,402 | ) | ||
Consolidated
|
$ | (2,216,068 | ) | |
Net
income (loss) :
|
||||
Winery
|
$ | (1,046,713 | ) | |
Distribution
|
169,047 | |||
Corporation
(1)
|
(1,338,402 | ) | ||
Consolidated
|
$ | (2,216,068 | ) | |
Identifiable
assets:
|
||||
Winery
|
$ | 9,251,631 | ||
Distribution
|
12,426,432 | |||
Corporation
(1)
|
38,147,511 | |||
Consolidated
|
$ | 59,825,574 | ||
Depreciation
and amortization:
|
||||
Winery
|
$ | 91,917 | ||
Distribution
|
1,548 | |||
Corporation
(1)
|
1,109,814 | |||
Consolidated
|
$ | 1,203,279 | ||
Capital
expenditures:
|
||||
Winery
|
$ | - | ||
Distribution
|
(21,697 | ) | ||
Corporation
(1)
|
- | |||
Consolidated
|
$ | (21,697 | ) |
(1)
Unallocated loss from Operating income (loss) and Net income (loss) before taxes
are primarily related to general corporate expenses.
(2)Total
identifiable assets are the owned or allocated assets used by each business.
Corporate assets consist of cash and cash equivalents, unallocated fixed assets
of support divisions and common facilities, and certain other
assets.
(3)
Capital expenditures and depreciation and amortization expense include items
attributable to the unallocated fixed assets of support divisions and common
facilities.
Also,
because all of the Company’s sales are derived from the sales of products
outside of the United States, all long-lived assets are located outside the
United States.
11
Note 6 –
EARNINGS PER SHARE
Earnings
per share are calculated in accordance with ASC 260. Net loss per share for all
periods presented has been stated to reflect the adoption of ASC 260. Basic net
loss per share is computed by dividing loss available to common shareholders by
the weighted average number of common shares outstanding during the period.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period. For the
three months ended December 31, 2009 and 2008 the Company’s common stock
equivalents have not been included for earning per share calculations as they
are anti-dilutive.
Note 7 –
BUSINESS COMBINATIONS
During
the fiscal first quarter of 2010, the Company acquired Asia Distributions
Solutions Limited, a Cayman limited liability company publicly traded in the
United Kingdom, with operations in China with specific focus in the beverage
industry, for a purchase price of $26,637,465. The purchase price for the
acquisition was allocated primarily to intangible assets (distribution system,
client lists, brand names), goodwill and net tangible assets.
12
Results of
Operations
The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue. All amounts in the following
presentation are in U.S. Dollars unless otherwise indicated.
Three Months Ended Months Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Sales,
net
|
$ | 1,994,762 | 100 | % | $ | 478,367 | 100 | % | ||||||||
Cost
of sales
|
$ | 1,653,650 | 83 | % | $ | 652,996 | 137 | % | ||||||||
Gross
profit (loss)
|
$ | 341,112 | 17 | % | $ | (174,629 | ) | -37 | % | |||||||
Selling,
general and administrative expenses
|
$ | 835,565 | 42 | % | $ | 367,376 | 77 | % | ||||||||
Other
(Income) Expense
|
$ | 1,023,677 | 51 | % | $ | 131,491 | 27 | % | ||||||||
Loss
before income taxes
|
$ | (1,518,131 | ) | -76 | % | $ | (673,496 | ) | -141 | % | ||||||
Provision
for income taxes
|
$ | - | 0 | % | $ | - | 0 | % | ||||||||
Net
loss
|
$ | (1,518,131 | ) | -76 | % | $ | (673,496 | ) | -141 | % |
Three
Months Ended December 31, 2009 Compared to Three Months Ended December 31,
2008
Revenue.
Revenue was $1,994,762 in the three months ended December 31, 2009 compared to
$478,367 in the three months ended December 31, 2008. The increase in revenues
of $1,516,395, or approximately 76%, was primarily related to the inclusion of
revenue generated by the business units acquired in the Asia Distribution
Solutions Limited transaction.
Cost of
sales. Cost of sales was $1,653,650 in the three months ended December
31, 2009 compared to $652,996 in the three months ended December 31, 2008, an
increase of $1,000,654 which was primarily attributable to the inclusion of the
business units acquired in the Asia Distribution Solutions Limited transaction.
As a percentage of revenue, cost of revenue was 83% in the three months ended
December 31, 2009 compared to 137% in the three months ended December 31,
2008.
Gross Profit
(Loss). Gross profit was $341,112 in the three months ended December 31,
2009 compared to a gross loss of $174,629 in the three months ended December 31,
2008. As a percentage of revenues, gross profit was 17% in the three months
ended December 31, 2009 and (37)% in the three months ended December 31,
2008.
Sales, General
and Administrative Expenses. Sales, general and administrative expenses
were $835,565 in the three months ended December 31, 2009 compared to $367,376
in the three months ended December 31, 2008. This is an increase of $468,189, or
approximately 127%, from the 2008 period to the 2009 period and is primarily
attributable to the inclusion of the business units acquired in the Asia
Distribution Solutions Limited transaction.
13
As a
percentage of revenues, sales, general and administrative expenses decreased to
approximately 35% in the three months ended December 31, 2009 from 77% in the
three months ended December 31, 2008. The acquisition of Asia Distribution
Solutions Limited added significant revenue with comparatively low additional
sales, general and administration costs.
Other Income
(Expense). Other expense was $1,023,677 in the three months ended
December 31, 2009 compared to $131,491 in the three months ended December 31,
2008. The increase in other expense of $892,186 was primarily due to
amortization of intangible assets acquired and increased interest
expense.
Net Income
(Loss). Our net loss was $1,518,131 in the three months ended December
31, 2009 compared to a net loss of $673,496 in the three months ended December
31, 2008. This increase in loss was primarily attributable to an increase in our
other expenses as described above.
Results of
Operations
The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue. All amounts in the following
presentation are in U.S. Dollars unless otherwise indicated.
Six Months Ended Months Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Sales,
net
|
$ | 5,164,082 | 100 | % | $ | 1,087,513 | 100 | % | ||||||||
Cost
of sales
|
$ | 4,297,728 | 83 | % | $ | 1,095,680 | 101 | % | ||||||||
Gross
profit (loss)
|
$ | 866,354 | 17 | % | $ | (8,167 | ) | -1 | % | |||||||
Selling,
general and administrative expenses
|
$ | 1,287,704 | 25 | % | $ | 719,823 | 66 | % | ||||||||
Other
(Income) Expense
|
$ | 1,842,450 | 36 | % | $ | 286,789 | 26 | % | ||||||||
Loss
before income taxes
|
$ | (2,263,800 | ) | -44 | % | $ | (1,014,779 | ) | -93 | % | ||||||
Provision
for income taxes
|
$ | - | 0 | % | $ | - | 0 | % | ||||||||
Net
loss
|
$ | (2,263,800 | ) | -44 | % | $ | (1,014,779 | ) | -93 | % |
Six
Months Ended December 31, 2009 Compared to Six Months Ended December 31,
2008
Revenue.
Revenue was $5,164,082 in the six months ended December 31, 2009 compared to
$1,087,513 in the six months ended December 31, 2008. The increase in revenues
of $4,076,569, or approximately 79%, was primarily related to the inclusion of
revenue generated by the business units acquired in the Asia Distribution
Solutions Limited transaction.
Cost of
sales. Cost of sales was $4,297,728 in the six months ended December 31,
2009 compared to $1,095,680 in the six months ended December 31, 2008, an
increase of $3,202,048 which was primarily attributable to the inclusion of the
business units acquired in the Asia Distribution Solutions Limited transaction.
As a percentage of revenue, cost of revenue was 83% in the six months ended
December 31, 2009 compared to 101% in the six months ended December 31,
2008.
Gross Profit
(Loss). Gross profit was $866,354 in the six months ended December 31,
2009 compared to a gross loss of $8,167 in the six months ended December 31,
2008. As a percentage of revenues, gross profit was 17% in the six months
ended December 31, 2009 and (1)% in the six months ended December 31, 2008 for
the reasons discussed above.
14
Sales, General
and Administrative Expenses. Sales, general and administrative expenses
were $1,287,704 in the six months ended December 31, 2009 compared to
$719,823 in the six months ended December 31, 2008. This is an increase of
$567,881, or approximately 79%, from the 2008 period to the 2009 period and is
primarily attributable to the inclusion of the business units acquired in the
Asia Distribution Solutions Limited transaction.
As a
percentage of revenues, sales, general and administrative expenses decreased to
approximately 25% in the six months ended December 31, 2009 from 66% in the six
months ended December 31, 2008. The acquisition of Asia Distribution
Solutions added significant revenue with comparatively low additional sales,
general and administration costs.
Other Income
(Expense). Other expense was $1,842,450 in the six months ended December
31, 2009 compared to $286,789 in the six months ended December 31, 2008. The
increase in other expense of $1,555,66 was primarily due to amortization of
intangible assets acquired and increased interest expense.
Net Income
(Loss). Our net loss was $2,263,800 in the six months ended December 31,
2009 compared to a net loss of $1,014,779 in the six months ended December 31,
2008. This increase in loss was primarily attributable to an increase in our
other expenses as described above.
Liquidity
and Capital Resources
As of
December 31, 2009, we had $197,241 of cash and cash equivalents and negative
working capital of $826,195 as compared to $0 cash and cash
equivalents and negative working capital of $1,106,320, respectively,
at December 31, 2008.
During
the six months ended December 31, 2009 and 2008, net cash used in operating
activities was $(3,331,044) and $(680,128), respectively. Net cash provided by
investing activities totaled $125,683 for the six months ended December 31,
2009, compared with net cash used in investing activities of $20,501 for the
same period ended December 31, 2008. Net cash provided by financing activities
totaled $3,690,742 for the six months ended December 31, 2009, compared to
$366,918 for the same period ended December 31, 2008. The net change in our cash
balance was ($38,816) and $0 for the six months ended December 31, 2009 and
2008, respectively.
Our lack
of liquidity could result in an interruption of our business and has led our
auditors to express doubt about our ability to continue as a going concern in
their report on our financial statements for the year ended June 30,
2009. Our ability to fund our operations is dependent at the present
time on collections of our accounts receivable. We have experienced difficulties
in the recent past with collecting on our receivables. The failure of our
customers to timely pay accounts receivable could force us to curtail our
operations.
15
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
Evaluation
of Disclosure Controls and Procedures.
We
maintain "disclosure controls and procedures" as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934. In designing and
evaluating our disclosure controls and procedures, our management recognized
that disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of disclosure controls and procedures are
met. Additionally, in designing disclosure controls and procedures,
our management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures is
also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Our
management, including our Chief Executive Officer and our Chief Financial
Officer, have evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report. Based
on such evaluation, and as discussed in greater detail below, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of the period covered by this report, our disclosure controls and procedures
were not effective:
|
·
|
to
give reasonable assurance that the information required to be disclosed by
us in reports that we file under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms,
and
|
|
·
|
to
ensure that information required to be disclosed in the reports that we
file or submit under the Securities Exchange Act of 1934 is accumulated
and communicated to our management, including our CEO and our Treasurer,
to allow timely decisions regarding required
disclosure.
|
Management's
Report on Internal Control Over Financial Reporting.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934. Our internal control system was designed to
provide reasonable assurance to our management and the Board of Directors
regarding the preparation and fair presentation of published financial
statements. Our internal control over financial reporting includes
those policies and procedures that:
|
·
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets,
|
16
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorization of management and directors,
and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on our financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated
Framework. Based on the assessment using those criteria, our
management concluded that the internal control over financial reporting was not
effective at December 31, 2009.
`While we
have designed a system of internal controls to supplement our existing controls
during our implementation of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX
404"), which has not been fully implemented, we have been unable to complete
testing of these controls and accordingly lack the documented evidence that we
believe is necessary to support an assessment that our internal control over
financial reporting is effective. Without such testing, we cannot
conclude that there are any significant deficiencies or material weaknesses, nor
can we appropriately remediate any such deficiencies that might have been
detected.
Due to
the nature of these material weaknesses in our internal control over financial
reporting, there is more than a remote likelihood that misstatements which could
be material to our annual or interim financial statements could occur that would
not be prevented or detected.
17
This
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Our management's report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management's
report in this report.
Changes
in Internal Control over Financial Reporting.
There
have been no changes in our internal control over financial reporting during our
second fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART
II
OTHER
INFORMATION
Item 1.
Legal Proceedings
None.
Item 1A.
Risk Factors
We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 5.
Other Information
None.
Item 6.
Exhibits
31.1+
|
Chief
Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2+
|
Chief
Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
18
32.1+
|
Chief
Executive Officer's Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2+
|
Chief
Financial Officer's Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
+ Filed
Herewith
19
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
GLOBAL
BEVERAGES, INC.
|
|||
Date:
May 27, 2010
|
By:
|
/s/ Ian Long
|
|
Ian
Long, President
|
|||
Date:
May 27, 2010
|
By:
|
/s/ Lawrence Lichter
|
|
Lawrence
Lichter, Chief Financial Officer
|
20