S-1/A 1 v120321_s1a.htm
As filed with the Securities and Exchange Commission on July 21, 2008.
SEC File No. 333-150619


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
______________________
Pre-effective Amendment No. 3 to  
 
FORM S-1
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________________
 
PURPLE BEVERAGE COMPANY, INC.
(Exact name of registrant as specified in its charter)

Nevada
2080
01-0670370
(State or jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)

450 East Las Olas Blvd., Suite 830
Fort Lauderdale, Florida 33301
(954) 462-8757
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Theodore Farnsworth
Purple Beverage Company, Inc.
450 East Las Olas Boulevard, Suite 830
Fort Lauderdale, Florida 33301
(954) 462-8757
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Randolf W. Katz, Esq.
Bryan Cave LLP
1900 Main Street, Suite 700
Irvine, California 92614
Tel (949) 223-7000
Fax (949) 223-7100
Harvey J. Kesner, Esq.
Haynes and Boone, LLP
153 East 53rd Street, Suite 4900
New York, New York 10022
Tel (212) 659-7300
Fax (212) 918-8989
 
Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:  x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 

 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer  o
Accelerated filed  o
 
 
Non-accelerated filer  o
(Do not check if a smaller reporting company)
Smaller reporting company  x 
 
CALCULATION OF REGISTRATION FEE
 
TITLE OF EACH
CLASS OF SECURITIES
TO BE REGISTERED
 
AMOUNT TO BE
REGISTERED (1)
 
PROPOSED MAXIMUM
AGGREGATE OFFERING 
PRICE
 
AMOUNT OF
REGISTRATION
FEE
 
Common Stock, $.001 par value
   
8,812,771
 
$
22,550,315
 (2) 
$
886.23
 (4)
Common Stock underlying warrants
   
3,681,650
 
$
9,329,889
 (3)
$
366.67
 (5)
Total
   
12,494,421
 
$
31,880,204
 
$
1,252.90
 (6)

(1)
Pursuant to Rule 416 under the Securities Act, the shares of common stock offered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of anti-dilution provisions, stock splits, stock dividends, recapitalizations or other similar transactions.
 
(2)
With respect to 4,463,235 shares of common stock offered by the selling stockholders named herein, estimated at $2.66 per share, the average of the high and low prices of the common stock as reported on the OTC Bulletin Board regulated quotation service on April 30, 2008, for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act. With respect to 4,349,536 shares of common stock offered by the selling stockholders named herein, estimated at $2.455 per share, the average of the high and low prices of the common stock as reported on the OTC Bulletin Board regulated quotation service on June 6, 2008, for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act.
 
(3)
Estimated at $2.66 per share, the average of the high and low prices of the common stock as reported on the OTC Bulletin Board regulated quotation service on April 30, 2008, for the purpose of calculating the registration fee for the 1,421,650 shares of common stock underlying warrants in accordance with Rule 457(g)(3) under the Securities Act. Estimated at $2.455 per share, the average of the high and low prices of the common stock as reported on the OTC Bulletin Board regulated quotation service on June 6, 2008, for the purpose of calculating the registration fee for the 2,260,000 shares of common stock underlying warrants in accordance with Rule 457(g)(3) under the Securities Act.

(4)
Registration fee previously paid.
 
(5)
Registration fee previously paid.

(6)
Registration fee previously paid.
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 



 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 21, 2008
 
PRELIMINARY PROSPECTUS
 
12,494,421 Shares

Purple Beverage Company, Inc.
 
Common Stock
_________________
 
This prospectus relates to the sale by the selling stockholders identified in this prospectus of up to 12,494,421 shares of our common stock, which includes (i) 8,812,771 shares issued to investors in private placements and through the exercise of warrants and (ii) 3,681,650 shares issuable upon the exercise of warrants with an exercise price of $2.00 per share. All of these shares of our common stock are being offered for resale by the selling stockholders.
 
The prices at which the selling stockholders may sell shares will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any proceeds from the sale of these shares by the selling stockholders. However, we will receive proceeds from the exercise of the warrants if they are exercised for cash by the selling stockholders.
 
We will bear all costs relating to the registration of these shares of our common stock, other than any selling stockholders’ legal or accounting costs or commissions.
 
Our common stock is quoted on the regulated quotation service of the OTC Bulletin Board under the symbol “PPBV.OB”. The last reported sale price of our common stock as reported by the OTC Bulletin Board on July 16, 2008, was $1.66 per share.
 
Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 3 of this prospectus before making a decision to purchase our common stock.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
The date of this prospectus is ______________
 

 
TABLE OF CONTENTS
 
 
Page
Prospectus Summary  
1
Risk Factors  
  3
Special Note Regarding Forward Looking Statements  
 13
Use of Proceeds  
 13
Market for Our Common Stock and Related Stockholder Matters  
 13
Dividend Policy  
 13
Management’s Discussion and Analysis of Financial Condition and Results of Operation  
 14
Business  
 21
Management  
 28
Executive Compensation  
 29
Certain Relationships and Related Transactions  
 31
Security Ownership of Certain Beneficial Owners and Management  
 31
Selling Stockholders  
 33
Description of Securities  
 42
Plan of Distribution  
 48
Legal Matters  
 49
Experts  
49
Where You Can Find Additional Information  
49
Index to Financial Statements  
F-1

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
 
i

PROSPECTUS SUMMARY
 
The following summary highlights information contained elsewhere in this prospectus. It may not contain all the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis or Plan of Operation,” and our historical financial statements and related notes included elsewhere in this prospectus. In this prospectus, unless the context requires otherwise, references to the “Company,” “we,” “our” and “us” for periods prior to the closing of our reverse merger on December 12, 2007, refer to Venture Beverage Company, a private Nevada corporation, and references to the “Company,” “we,” “our” and “us” for periods subsequent to the closing of the reverse merger on December 12, 2007, refer to Purple Beverage Company, Inc., a publicly traded company.
 
Overview
 
We develop, market, and distribute unique beverage brands and products that are positioned as “better for you” beverages and are targeted to the growing category of “new age/functional” beverage consumers. We own the rights to the “ Purple™” brand, a new functional beverage that contains a high level of anti-oxidants that are found in seven different natural fruit juices that combine to make our product. We launched Purple in the summer of 2007.
 
Our proprietary brand is directed to consumers who prefer new age beverage products to traditional carbonated soft drinks such as Coca-Cola®, Pepsi® and 7-Up®. The new age beverage category is attractive to us because it is a growth segment of the beverage market and we believe that consumers will pay higher prices for these products than carbonated soft drinks.
 
Our principal executive office is located at 450 East Las Olas Boulevard, Suite 830, Fort Lauderdale, Florida 33301 and our telephone number is (954) 462-8757. Our website address is http://www.drinkpurple.com. Information on or accessed through our website is not incorporated into this prospectus and is not a part of this prospectus.
 
Our History
 
We were formed in the State of Nevada on April 8, 2002. Pursuant to a stock purchase agreement, on June 30, 2005, we acquired ninety-five percent of the issued and outstanding shares of Landes Daily, Inc. From our inception until our acquisition of Landes Daily, Inc., we were engaged in event planning, especially for weddings and other family events, all types of corporate events, and special access to nightclubs, restaurants and other VIP entertainment or sporting venues and events. After the acquisition of Landes Daily, Inc., our majority-owned subsidiary, we designed, developed, marketed, distributed and sold t-shirts, sweatshirts, thermals, twill shorts and other apparel. On June 6, 2006, we agreed to rescind the stock purchase agreement and ceased all operations in the apparel industry. Thereafter we acted as an independent film production company with the aim of developing, producing, marketing and distributing low budget film and video productions. On December 12, 2007, Purple Acquisition Corp., a newly formed wholly-owned subsidiary of ours, merged with and into Venture Beverage Company, a private corporation. Upon closing of the merger, Venture Beverage Company merged with and into us and we succeeded to the business of Venture Beverage Company as our sole line of business. In connection with the merger, we changed our name to Purple Beverage Company, Inc.
The Offering
 
Common stock offered by the selling stockholders:
 
12,494,421 shares, consisting of 8,812,771 shares issued to investors in private placements and through the exercise of warrants and 3,681,650 shares issuable upon the exercise of outstanding warrants.
 
 
 
Offering price:
 
Market price or privately negotiated prices.
 
Common stock outstanding:
 
60,451,999 shares as of July 16, 2008, and after this offering, assuming that no warrants described herein are exercised.
 
Use of proceeds:
 
We will not receive any proceeds from the sale of the shares of common stock but may receive proceeds from the exercise of the warrants which proceeds will be used for working capital purposes.
 
 
 
OTC Bulletin Board symbol:
 
PPBV.OB
 
1

Risk Factors:
 
You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 3 of this prospectus before deciding whether or not to invest in shares of our common stock.
 
The number of shares of common stock outstanding after this offering excludes:
 
 
·
4,622,850 shares of common stock issuable upon the exercise of currently outstanding warrants with exercise prices ranging from $2.00 to $3.50 per share and having a weighted average exercise price of $2.19 per share;
 
 
·
19,870,112 shares of common stock issuable upon the exercise of currently outstanding options with exercise prices ranging from $0.01 to $3.10 and having a weighted average exercise price of $1.13 per share; and
 
 
·
180,000 shares of common stock available for future issuance under our 2007 Incentive Plan.
 
2

 
RISK FACTORS
 
Investing in our common stock involves a high degree of risk. Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this prospectus. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be adversely affected. In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment.
 
Risks Relating to Our Business
 
Our payment of a monthly 6% performance bonus to Mr. Farnsworth, our chief executive officer, will diminish our profitability.
 
We allocate Mr. Farnsworth’s monthly 6% performance bonus to “other selling, general and administrative” expenses, which currently approximate our net sales on a quarterly basis. Until we meet our internal projections for increasing our net revenues, as to which increases there can be no assurance, our SG&A expenses will not decline as rapidly as a percentage of our net revenues as they otherwise would due to the burden of the 6% monthly performance bonus. Although we believe that our net revenues will increase according to our business plan, as to the realization of which we cannot provide you any assurance, our gross margins will always be reduced to support the 6% monthly bonus, which reduction may have a material impact on our overall profitability, the price of our shares, and the return on your investment.

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
 
We have a relatively limited operating history and no history as a public reporting company. Such limited operating history and the unpredictability of the beverage industry makes it difficult for investors to evaluate our businesses and future operating results. An investor in our securities must consider the risks, uncertainties, and difficulties frequently encountered by companies in new and rapidly evolving markets. The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a relatively limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.
 
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
 
In their report dated December 3, 2007, our registered public accounting firm stated that our financial statements for the year ended September 30, 2007 were prepared assuming that we would continue as a going concern, and that they have substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is subject to our ability to generate a profit, as we have experienced net operating losses since inception. Our continued net operating losses and our auditors’ doubts may hinder our ability to secure financing in the future and our efforts to continue as a going concern may not prove successful.
 
We may need additional financing to execute our business plan.
 
The revenues from the sale of our beverage products and the projected revenues from these products are not adequate to support our expansion and product development programs. We will need substantial additional funds to:
 
 
·
effectuate our business plan; expand our product line;
 
 
·
obtain related regulatory approvals if we should decide to bottle our beverages ourselves, market and produce our product internationally, or expand our bottling with additional co-packers who may not have all necessary regulatory approvals;
 
 
·
file, prosecute, defend and enforce our intellectual property rights; and
 
 
·
produce and market our products.
 
We will seek additional funds through public or private equity or debt financing, strategic transactions and other sources.
 
There are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we will need to reduce, defer or cancel development programs, planned initiatives, or overhead expenditures to the extent necessary. The failure to fund our capital requirements could have a material adverse effect on our business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing could result in additional dilution to our stockholders and the incurrence of indebtedness would result in increased debt service obligations that could result in operating and financing covenants that would restrict our operations.
 
3

 
The lack of any significant market in future periods will adversely affect our ability to increase our revenues and our margins.
 
A key element to our business model is the expansion of the distribution of our proprietary brand. We face significant competition from other new age beverage companies, the majority of which have greater brand recognition, a longer operating history, and greater financial resources than we do. We cannot assure you that we will ever be successful in developing a meaningful market for our proprietary brand. Our inability to create demand in the marketplace for our proprietary product will prevent us, in future periods, from both increasing our revenues from sales attributable to our proprietary product as well as increasing our margins on our sales.
 
Increased competition could hurt our business.
 
The beverage industry is highly competitive. The principal areas of competition are pricing, packaging, development of new products and flavors, and marketing campaigns. Our products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing, and distribution resources than we do.
 
Important factors affecting our ability to compete successfully include:
 
 
·
the taste and flavor of products; trade and consumer promotions;
 
 
·
rapid and effective development of new, unique cutting-edge products;
 
 
·
attractive and different packaging;
 
 
·
branded product advertising; and
 
 
·
pricing.
 
Our product competes with all liquid refreshments and with products of much larger and substantially better financed competitors, including the products of numerous nationally and internationally known producers such as The Coca-Cola Company, PepsiCo Inc., Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods Inc., Nestle Beverage Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc. We also compete with companies that are smaller or primarily local in operation and with private label brands such as those carried by grocery store chains, convenience store chains and club stores. There can be no assurance that we will not encounter difficulties in maintaining our current revenues or market share or position due to competition in the beverage industry. If our revenues decline, our business, financial condition, and results of operations could be adversely affected.
 
We are dependent on a limited number of distributors who purchase all of our Purple product, the loss of any of which could result in a material adverse effect on our business.

For the six months ended March 31, 2008, three of our distributors, BL Assets, Crosset Company, and Big Geyser, Inc., accounted for approximately 55%, 13%, and 10% of our revenues, respectively. For the period from inception (May 8, 2007) to September 30, 2007, one distributor, BL Assets, accounted for all of our revenues. We did not sell any product to BL Assets during our second quarter. We remain dependent, however, on all of our distributors, and the loss of any of our major distributors would have a material adverse effect on our operating results.
 
Change in consumer preferences may reduce demand for our product.
 
Consumers are seeking greater variety in their beverages. Our future success will depend, in part, upon our continued ability to develop and introduce different and innovative beverages. In order to retain and expand our market share, we must continue to develop and introduce different and innovative beverages and be competitive in the areas of quality and health, although there can be no assurance of our ability to do so. There is no assurance that consumers will continue to purchase our product in the future. Additionally, our product is considered a premium product, and to maintain market share during recessionary periods, we may have to reduce profit margins which would adversely affect our results of operations. Product lifecycles for our beverage brand and/or product and/or packages may be limited to a few years before consumers’ preferences change. The beverage industry is subject to changing consumer preferences, and shifts in consumer preferences may adversely affect us if we misjudge such preferences. We may be unable to achieve volume growth through product and packaging initiatives. We also may be unable to penetrate new markets. If our revenues decline, our business, financial condition, and results of operations will be adversely affected.
 
4

 
There is increasing awareness and concern for the health consequences of obesity. Our product contains sugar naturally occurring from a blend of seven natural fruit juices. Since we do not offer a diet beverage, this could affect our profitability.
 
We rely on bottlers and other contract packers to manufacture our products. If we are unable to maintain good relationships with our bottlers and contract packers and/or their ability to manufacture our products becomes constrained or unavailable to us, our business could suffer.
 
We do not directly manufacture our product, but instead outsource such manufacturing to bottlers and other contract packers. Although our production arrangements are generally of short duration or are terminable upon request, in the event of a disruption or delay, we may be unable to procure alternative packing facilities at commercially reasonable rates and/or within a reasonably short time period. In addition, there are limited packing facilities in the United States with adequate capacity and/or suitable equipment for our product.
 
Increases in cost or shortages of raw materials or increases in costs of co-packing could harm our business.
 
The principal raw materials used by us are glass bottles, as well as fruit pulp and fruit juice concentrates, the costs and availability of which are subject to fluctuations caused by supply and demand forces influenced by, among other factors, cost of energy, availability of fruit juices and concentrates, weather, changing consumer tastes for certain of our ingredients and seasonal availability of the various fruits. Due to the consolidations that have taken place in the glass industry over the past few years, the prices of glass bottles continue to increase. The prices of fruit pulp and certain juice concentrates, including apple, increased in 2006 and certain of these ingredients continued to increase in 2007. These increased costs, together with increased costs primarily of energy, gas and freight, resulted in increases in our product costs, which are ongoing and are expected to continue to exert pressure on our gross margins in 2007. In addition, certain of our co-pack arrangements allow such co-packers to increase their charges based on certain of their own cost increases. We are uncertain whether the prices of any of the above or any other raw materials or ingredients will continue to rise in the future and whether we will be able to pass any of such increases on to our customers.
 
During the preceding two years, for two of our ingredients the average price decreased by approximately 16%; for three of our ingredients the average price increased by 78%, 100%, and 160%, respectively; for two of our ingredients the average price increased materially in the first year and then decreased marginally in the second year for overall increases of 33% and 63%, respectively; and for one of our ingredients the average price remained relatively constant.
 
We may not accurately estimate the demand for our products, as our ability to do so may be imprecise, particularly since Purple is a new product, and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate the demand for our product or are unable to secure sufficient ingredients or raw materials including, but not limited to, glass bottles, labels, fruit pulp concentrates, fruit juice concentrates or packing arrangements, we might not be able to satisfy the demand on a short-term basis. Moreover, industry-wide shortages of certain fruit-pulp and fruit-juice concentrates have been and could, from time to time in the future, be experienced, which could interfere with and/or delay production of our product and could have a material adverse effect on our business and financial results. We do not use hedging agreements or alternative instruments to manage this risk.
 
The costs of packaging supplies are subject to price increases from time to time and we may be unable to pass all or some of such increased costs on to our customers.
 
The majority of our packaging supplies contracts allow our suppliers to alter the costs they charge us for packaging supplies based on changes in the costs of the underlying commodities that are used to produce those packaging supplies. These changes in the prices we pay for our packaging supplies occur at certain predetermined times that vary by product and supplier. Accordingly, we bear the risk of increases in the costs of these packaging supplies, including the underlying costs of the commodities that comprise these packaging supplies. We do not use derivative instruments to manage this risk. If the costs of these packaging supplies increase, we may be unable to pass these costs along to our customers through corresponding adjustments to the prices we charge, which could have a material adverse effect on our results of operations.
 
We rely upon our on-going relationships with our key concentrate suppliers. If we are unable to source our concentrates on acceptable terms from our key suppliers, we could suffer disruptions to our business.
 
We do not have certain of our concentrates readily available to us, and we may be unable to obtain these concentrates from alternative suppliers on short notice. Industry-wide shortages of certain fruit-pulp and juice concentrates have been and could be, from time to time in the future, experienced, which could interfere with and/or delay production of our product. If we have to replace a concentrate supplier, we could experience temporary disruptions in our ability to deliver our product to our customers, which could have a material adverse effect on our results of operations.
 
5


Our intellectual property rights are critical to our success and the loss of such rights could materially adversely affect our business.
 
We own trademarks that are very important to our business. We currently rely on common law rights to protect our trademark Purple, which is used to identify our products. We are also attempting to obtain a federal trademark registration for our trademark, but we are still in the application phase of the process. There can be no assurance that we will be able to obtain a federal trademark registration for our trademark. Without a federal trademark registration, we do not have: (1) constructive nationwide notice of our claim to the trademark; (2) a legal presumption of our ownership of the trademark; (3) a legal presumption of the validity of our trademark; (4) a legal presumption of our exclusive right to use the trademark on or in connection with our products; (5) a presumption of federal court jurisdiction; (6) a basis for obtaining trademark registrations in foreign countries; (7) the ability to prevent the importation of infringing foreign goods by filing the registration with the US Customs Service; (8) incontestable ownership of the trademark after the US Patent & Trademark Office’s acceptance of an affidavit establishing five years of our continued use of the trademark beyond the registration date; (9) incontestable exclusive rights to use our trademark on or in connection with our products after the US Patent & Trademark Office’s acceptance of an affidavit establishing five years of our continued use of the trademark beyond the registration date; and (10) many other benefits that a federal trademark registration provides.
 
It is possible that our competitors will adopt or have already adopted trademarks or service marks similar to our trademark, thereby potentially impeding our ability to build brand identity and possibly leading to customer confusion. In fact, a few companies, some of which might be direct competitors, have existing federal trademark registrations and/or are attempting to obtain federal trademark registrations for trademarks that include the word “Purple” for their beverage products. Our inability to protect our trademark, if any, will have a material adverse effect on our business, results of operations, and financial condition.
 
We regard our trademark and related intellectual property as critical to our success. The related intellectual property includes the good will associated with the trademark, such as the recipes for our products. We attempt to protect the related intellectual property by restricting the disclosure of and otherwise maintaining the confidentiality of the related intellectual property. We also rely on trade secrets to protect our related intellectual property, which further includes proprietary know-how. Such trade secrets and confidentiality procedures, however, might not afford complete protection, and there can be no assurance that others will not independently develop similar know-how, which is permitted under the law, or that others will not obtain access to our proprietary know-how. There can be no assurance that we will be able to protect our trade secrets and other confidential and proprietary information adequately. Additionally, third parties may assert infringement claims against us or against third parties upon whom we rely, and in the event of an unfavorable ruling on any claim, we may be unable to obtain a license or similar agreement to use the trade secrets, confidential information, proprietary information, or the trademark that we rely upon to conduct our business.
 
Product packages, mechanical designs, artwork, and trade dress are also important to our success. We attempt not to imitate the product packages, mechanical designs, artwork, and trade dress of third parties to avoid being sued for infringement. We will also attempt to protect against imitation of our product packages, mechanical designs, artwork, trade dress, and trademark, as necessary. There can be no assurance, however, that third-parties will not infringe or misappropriate our intellectual property or other proprietary rights or that third parties will not allege that we have done the same to them. If we lose some or all of our intellectual property or other proprietary rights, our business may be materially adversely affected.
 
Significant changes in government regulation may hinder sales.
 
The production, distribution and sale in the United States of our products is subject to the Federal Food, Drug and Cosmetic Act and various other federal, state, and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, labeling, and ingredients of our product. New statutes and regulations may also be instituted in the future. If a regulatory authority finds that a current or future product or production run is not in compliance with any of these regulations, we may be fined, or our product may have to be recalled and/or reformulated and/or repackaged, thus adversely affecting our financial condition and operations.
 
If we are unable to maintain brand image or product quality, or if we encounter product recalls, our business may suffer.
 
Our success depends on our ability to build and maintain brand image for our products. We have no assurance that our advertising, marketing, and promotional programs will have the desired impact on our products’ brand image and on consumer preferences. Product quality issues, real or imagined, or allegations of product contamination, even if fake or unfounded, could tarnish the image of the affected brand and may cause consumers to choose other products. We may be required from time to time to recall products entirely or from specific co-packers, markets, or batches. Product recalls could adversely affect our profitability and our brand image. We do not maintain recall insurance at this time.
 
While we have to-date not experienced any credible product liability litigation, there is no assurance that we will not experience such litigation in the future. In the event we were to experience product liability claims or a product recall, our financial condition and business operations could be materially adversely affected.
 
If we do not maintain sufficient inventory levels or if we are unable to deliver our products to our customers in sufficient quantities, or if our retailer’s inventory levels are too high, our operating results will be adversely affected.
 
If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, our inventory levels will not be appropriate and our results of operations may be negatively impacted. If we fail to meet our delivery schedules, we could damage our relationships with distributors and/or retailers, increase our shipping costs or cause sales opportunities to be delayed or lost. In order to be able to deliver our products on a timely basis, we need to maintain adequate inventory levels of the desired products. If the inventory of our products held by our distributors and/or retailers is too high, they will not place orders for additional products, which would unfavorably impact our future sales and adversely affect our operating results.
 
6

 
If we are not able to retain the services of senior management, there may be an adverse effect on our operations and/or our operating performance until we find suitable replacements.
 
Our business is dependent, to a large extent, upon the services of our senior management. We do not maintain key person life insurance for any members of our senior management at this time. We currently have a three year employment agreement with Theodore Farnsworth, our chief executive officer and president, and an at-will employment agreement with Michael Wallace, our chief financial officer; both officers are full-time employees. Mr. Farnsworth’s employment agreement restricts Mr. Farnsworth during the term of his employment with us, and for a period ending two years after he ceases to be employed by us for any reason, without our prior written consent, from directly or indirectly: (i) entering into the employ of or render any services to any individual or entity engaged in the business of formulating, designing, producing manufacturing, marketing, distributing, selling, consigning, and promoting beverages that contain anti-oxidants; (ii) engage in such a business for his own account within the states of New York, Florida, or California, or any other jurisdiction in which we do business; or (iii) becoming associated with or lending any money to an individual or entity having an ownership interest in any such business in any such territory. Mr. Wallace’s employment agreement states that during his employment with us, Mr. Wallace and his spouse and immediate family members shall not own a material interest in any entity or individual that competes with us and our business. Mr. Wallace and his spouse and immediate family members are also prohibited, without our prior written consent, from engaging in any other employment or business that (i) directly competes with our current or future business; (ii) uses any of our information, equipment, supplies, facilities, or materials, or (iii) otherwise conflicts with or causes a potential disruption of our operations. The loss of services of either of these persons, or any other key members of our senior management, could adversely affect our business until suitable replacements can be found. There may be a limited number of personnel with the requisite skills to serve in these positions, and we may be unable to locate or employ qualified personnel on acceptable terms.
 
Weather could adversely affect our supply chain and demand for our products.
 
With regard to fruit juice and natural flavors, the beverage industry is subject to variability of weather conditions, which may result in higher prices and/or the non-availability of any of such items. Sales of our products may also be influenced to some extent by weather conditions in the markets in which we operate. Weather conditions may influence consumer demand for certain of our beverages, which could have an adverse effect on our results of operations.
 
We rely on distributors to sell our products. Any delays in delivery or poor handling by distributors and third-party transport operators may affect our sales and damage our reputation.
 
We rely on distributors for the distribution of our product pursuant to a series of exclusive territory, multi-year agreements. The distribution service provided by these distributors could be suspended and could cause interruption to the supply of our product to retailers in the case of unforeseen events. Delivery disruptions may occur for various reasons beyond our control, including poor handling by distributors or third-party transport operators, transportation bottlenecks, natural disasters and labor strikes, and could lead to delayed or lost transportation seasons. Poor handing by distributors and third-party transport operators could also result in damage to our products. If our products are not delivered to retailers on time, or are delivered damaged, we could lose business and our reputation could be harmed. Further, under certain circumstances, the termination or non-renewal of any of such agreements could have a material adverse effect upon our sales and gross profits, as well as potentially subjecting us to the payment of material amounts of funds to our then-former distributors.
 
Our results of operations may fluctuate due to seasonality.
 
Our sales are subject to seasonality. For example, we typically experience higher sales in summer time in coastal cities while sales remain constant throughout the entire year in some inland cities. In general, we believe our sales will be higher in the second and third quarter of the year when the weather is hot and dry, and lower in the fourth and first quarter of the year when the weather is cold and wet. Sales peak during the months from June to September. Sales can also fluctuate during the course of a financial year for a number of other reasons, including the timing of advertising and promotional campaigns. As a result of these reasons, our operating results may fluctuate. In addition, the seasonality of our results may be affected by other unforeseen circumstances, such as production interruptions. Due to these fluctuations, comparison of sales and operating results between the same periods within a single year, or between different periods in different financial years, are not necessarily meaningful and should not be relied on as indicators of our performance.
 
Our inability to diversify our operations may subject us to economic fluctuations within our industry.
 
Our limited financial resources reduce the likelihood that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one business area will subject us to economic fluctuations within the beverage industry and therefore increase the risks associated with our operations.
 
We may not be able to achieve the benefits we expect to result from becoming a public company.
 
On December 12, 2007, we became a public company through consummation of a reverse merger. We may not realize the benefits that we presently hope to receive as a result of the merger, which includes:
 
 
·
access to the capital markets of the United States;
 
7

 
 
·
the increased market liquidity;
 
 
·
the ability to use registered securities to make acquisition of assets or businesses;
 
 
·
increased visibility in the financial community;
 
 
·
enhanced access to the capital markets;
 
 
·
improved transparency of operations; and
 
 
·
perceived credibility and enhanced corporate image of being a publicly traded company.
 
There can be no assurance that any of the anticipated benefits of our reverse merger will be realized in respect to our business operations. In addition, the attention and effort devoted to achieving the benefits of the reverse merger and attending to the obligations of being a public company, such as reporting requirements and securities regulations, could significantly divert management’s attention from other important issues, which could materially and adversely affect our operating results or stock price in the future.
 
Past activities of our and our affiliates may lead to future liability for us.
 
Prior to our reverse merger on December 12, 2007, we operated for approximately three years in the event planning industry, after which we operated for a little under one year in the apparel industry. From June 30, 2006 onwards, we were an independent film production company seeking to develop, produce, market, and distribute low budget film and video productions. In addition, prior to December 12, 2007, we were controlled by persons unrelated to current management. As a result, we may have incurred liabilities related to our prior business or the actions of prior management that we are currently unaware of. The presence of any currently unknown liabilities or contingencies related to our past operations or management activities could result in a material adverse effect on us and our operations. In addition, as we did not obtain any indemnifications from prior management for such potential liabilities, our recourse to recover any such losses from prior management may be limited to actions for breach of contract or fraud .
 
Risks Relating to Our Organization
 
Theodore Farnsworth, our chief executive officer and president, owns a substantial portion of our outstanding common stock, which enables him to influence many significant corporate actions and in certain circumstances may prevent a change in control that would otherwise be beneficial to our stockholders.
 
Theodore Farnsworth beneficially owns approximately 25.77% of our outstanding shares of common stock, or approximately 31.94% of our common stock should Mr. Farnsworth exercise all of his stock options. As such, Mr. Farnsworth has a substantial impact on matters requiring the vote of the stockholders, including the election of our directors and most of our corporate actions. This control could delay, defer, or prevent others from initiating a potential merger, takeover or other change in our control, even if these actions would benefit our stockholders and us. This control could adversely affect the voting and other rights of our other stockholders and could depress the market price of our common stock.

Theodore Farnsworth is our sole director. As such, we do not have any independent directors and have not implemented various corporate governance measures, in the absence of which, stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.
 
As Theodore Farnsworth, our chief executive officer, serves as our sole director, we do not currently have any independent directors to evaluate our decisions nor have we adopted corporate governance measures. Although not required by rules or regulations applicable to us, corporate governance measures such as the presence of independent directors, or the establishment of an audit and other independent committees of our board of directors, would be beneficial to our stockholders. We do not presently maintain any of these protections for our stockholders. It is possible that if our board of directors included independent directors and if we were to adopt corporate governance measures, stockholders would benefit from greater assurance that decisions were being made with impartiality by directors and that policies had been implemented to define conduct of our management and board members. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by Theodore Farnsworth, who may have a direct interest in the outcome. Prospective investors should bear in mind our current failure to adopt these or other corporate governance measures provides additional risk in connection with an investment in our company.
 
Our indebtedness and future indebtedness could adversely affect our financial health, limit our cash flow available to invest in the ongoing needs of our business, limit our operating flexibility and adversely affect the rights of holders of our common stock.
 
8

 
At June 5, 2008, we had no term or revolving debt . We may incur additional debt from time to time to finance working capital, capital expenditures and other general corporate purposes. Our common stock ranks junior in right of payment to all of our existing and future liabilities . Our indebtedness could have important consequences to the holders of our common stock. Our business may not generate sufficient cash to repay outstanding debt. In the event of a bankruptcy, liquidation or winding-up, we may not have sufficient remaining assets to repay the amounts due on our obligations, resulting in no funds remaining for the holders of our common stock.
 
Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.
 
There may be risks associated with us becoming public through a reverse merger. Specifically, securities analysts of major brokerage firms may not provide coverage of us because there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on our behalf.
 
  We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.
 
We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires us to conduct an annual management assessment of the effectiveness of our internal controls over financial reporting and to obtain a report by our independent auditors addressing these assessments. The requirements of these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and will place significant demands on our management, administrative, operational, internal audit and accounting systems and resources. In connection with these requirements, we anticipate that we will need to:
 
9

 
 
·
upgrade our systems;
 
 
·
implement additional financial and management controls, reporting systems and procedures;
 
 
·
implement an internal audit function; and
 
 
·
hire additional accounting, internal audit and finance staff.
 
If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a negative impact on our ability to manage our business and on our stock price.
 
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
 
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have research coverage by securities and industry analysts. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
 
Risks Relating to Our Common Stock
 
Our stock price may be volatile, so investors could lose their investment.
 
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
 
 
·
new products introduced by us or our competitors;
 
 
·
additions or departures of key personnel;
 
 
·
sales of the common stock, particularly following effectiveness of the resale registration statement of which this prospectus forms a part;
 
 
·
our ability to execute our business plan;
 
 
·
operating results that fall below expectations;
 
 
·
industry developments;
 
 
·
economic and other external factors; and
 
 
·
period-to-period fluctuations in our financial results.
 
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
 
10

 
There may be a limited market for our securities and we may fail to qualify for a listing on a national securities exchange such as the NASDAQ Stock Market or the American Stock Exchange.
 
Although we plan on applying for listing of our common stock on a national stock exchange such as the NASDAQ Stock Market or the American Stock Exchange once we meet the qualifications, there can be no assurance that our initial listing application will be granted, when the required listing criteria will be met or when, or if, our application will be granted. Thereafter, there can be no assurance that trading of our common stock on such a market will be sustained or desirable. In the event that our common stock fails to qualify for initial or continued inclusion, our common stock could thereafter only be quoted on the OTC Bulletin Board or in what are commonly referred to as the “pink sheets.” Under such circumstances, a stockholder may find it more difficult to dispose of, or to obtain accurate quotations, for our common stock, and our common stock would become substantially less attractive to certain purchasers, such as financial institutions, hedge funds, and large investors.
 
Furthermore, for companies whose securities are quoted on the OTC Bulletin Board, it is more difficult to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies, and to obtain needed capital.
 
Our common stock may be affected by limited trading volume and price fluctuations, each of which could adversely impact the value of our common stock.
 
There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will be maintained. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time.
 
Our common stock is subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
 
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.
 
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
 
If our stockholders sell substantial amounts of common stock in the public market, including shares issued upon the effectiveness of the registration statement of which this prospectus forms a part, upon the expiration of any statutory holding period under Rule 144 of the Securities Act of 1933, as amended or upon any contractual holding or trading limitation periods, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to secure additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
 
11

 
The elimination of monetary liability against our directors under Nevada law and the existence of indemnification rights to our directors may result in substantial expenditures by us and may discourage lawsuits against our directors.
 
Our bylaws provides that, to the fullest extent that the Nevada Revised Statutes permits, none of our directors shall be personally liable to either us or our stockholders for any breach in his or her fiduciary duties as a director. This provision creates an indemnification obligation by us that could ultimately cause us to incur substantial expenditures to cover the cost of settlement or damage awards against our directors. This provision and resultant costs may also discourage us from bringing a lawsuit against directors for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors even though such actions, if successful, might otherwise benefit us and our stockholders.
 
We do not anticipate paying any cash dividends.
 
We have never paid cash dividends on our common stock and do not anticipate doing so for the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board of directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
 
Options granted to our celebrity endorsers and members of our management will have a dilutive effect on our common stock if such options are exercised; and if the underlying shares are ultimately sold in the public market, the market price of our common stock could decline 
 
On January 18, 2008, we granted 1,275,000 options to purchase common stock to an accredited individual pursuant to an endorsement agreement and granted 225,000 options to purchase common stock to an accredited entity in connection with such endorsement agreement. The options are exercisable at $1.00 per share for a term of six months. In connection with an agreement related to such aforementioned endorsement agreement, on January 18, 2008, we granted 500,000 options to purchase common stock to three accredited investors. The options are exercisable at $1.00 per share for a term of six months. In connection with an endorsement agreement, on March 25, 2008, we granted to an accredited individual pursuant to such endorsement agreement a three-year non-qualified stock option to purchase up to 1,414,286 shares of our common stock at an exercise price of $0.01. This option vested and became exercisable immediately.
 
In connection with the commencement of employment, on February 18, 2008, we granted to an employee a 10-year non-qualified stock option to purchase up to 500,000 shares of our common stock at an exercise price of $2.44 per share. This option vests and becomes exercisable as to (i) 166,667 shares on February 18, 2009, (ii) an additional 166,667 shares on February 18, 2010, and (iii) the remaining 166,666 shares on February 18, 2011, assuming that such employee is employed by us as of such dates. In connection with his employment agreement, on March 19, 2008, we granted to Mr. Wallace, our chief financial officer, a 10-year non-qualified stock option to purchase up to 1,663,826 shares of our common stock at an exercise price of $1.50 per share. This option vested and became exercisable as to 554,609 shares on the date of grant. The remainder of this option vests and becomes exercisable as to (i) 554,609 shares on March 19, 2009, and (ii) the remaining 554,608 shares on March 19, 2010, assuming that Mr. Wallace is employed by us as of such dates. In connection with an employment agreement, on March 21, 2008, we granted to an employee a 10-year non-qualified stock option to purchase up to 1,000,000 shares of our common stock at an exercise price of $0.80 per share. This option vests and becomes exercisable as to (i) 333,333 shares on March 21, 2009, (ii) an additional 333,333 shares on March 21, 2010, and (iii) the remaining 333,334 shares on March 21, 2011, assuming that such employee is employed by us as of such dates. In connection with another employment agreement, on March 21, 2008, we granted to an employee a 10-year non-qualified stock option to purchase up to 600,000 shares of our common stock at an exercise price of $0.80 per share. This option vests and becomes exercisable as to (i) 200,000 shares on March 21, 2009, (ii) an additional 200,000 shares on March 21, 2010, and (iii) the remaining 200,000 shares on March 21, 2011, assuming that such employee is employed by us as of such dates.
 
If any of the foregoing optionees decide to exercise any of their vested options, they will receive shares of our common stock and such issuances will have a dilutive effect on the number of shares of our outstanding common stock. In addition, if such optionees, when they are able to do so under Rule 144 of the Securities Act, elect to sell a substantial amount of our common stock in the public market, or there is a perception in the public market of such sales, this could decrease the market price of our common stock significantly. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulations. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will probably not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. You should review carefully the section entitled “Risk Factors” beginning on page 3 of this prospectus for a discussion of the risks that relate to our business and investing in shares of our common stock.
USE OF PROCEEDS
 
We will not receive any proceeds from the sale of common stock by the selling stockholders. However, of the 12,494,421 shares of common stock being offered for resale under this prospectus by the selling stockholders, 3,681,650 shares are issuable upon the exercise of warrants (the “Registered Warrants”), 1,421,650 of which contain a cashless exercise feature. The Registered Warrants containing a cashless feature are held by 29 investors. If all of the Registered Warrants are exercised for cash, we will receive gross proceeds of $7,363,300; if all of the Registered Warrants are exercised, but the cashless exercise option is used for those Registered Warrants with such option, we will receive gross proceeds of $4,520,000. If only the cashless exercise Registered Warrants are exercised using this cashless exercise feature, we will not receive any cash proceeds and the number of shares issuable thereunder will be reduced based on the market price of our common stock at the time of exercise; if the Registered Warrants that have a cashless exercise option are nevertheless exercised for cash, we will receive gross proceeds of $2,843,300. If any of the Registered Warrants are exercised for cash, all proceeds will be used for general corporate and working capital purposes.
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
Our common stock has been quoted on the OTC Bulletin Board since April 25, 2007. From April 25, 2007 through January 6, 2008, our trading symbol was REDZ.OB and since January 7, 2008 our trading symbol has been PPBV.OB. Prior to December 13, 2007, there was no active market for our common stock. The following table sets forth the high and low bid prices for our common stock for the periods indicated, as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Fiscal Year Ending September 30, 2008
 
High
 
Low
 
Third Quarter
 
$
3.25
 
$
1.60
 
Second Quarter
 
$
8.00
 
$
1.25
 
First Quarter (from December 13, 2007)
 
$
1.70
 
$
1.30
 
 
The last reported sales price of our common stock on the OTC Bulletin Board on July 16, 2008, was $1.66 per share. As of July 16, 2008, there were approximately 142 holders of record of our common stock. The number of stockholders of record does not include beneficial owners of our common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
DIVIDEND POLICY
 
In the past, we have not declared or paid cash dividends on our common stock, and we do not intend to pay any cash dividends on our common stock. Rather, we intend to retain future earnings, if any, to fund the operation and expansion of our business and for general corporate purposes.
 
13

 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
 
Recent Events
 
Prior to December 12, 2007, we were a public shell company, as defined by the Securities and Exchange Commission, without material assets or activities that engaged in event planning between the years 2002 and 2005, the apparel industry from 2005 to 2006, and thereafter aimed to develop, produce, market and distribute low budget film and video productions. On December 12, 2007, we completed a reverse merger, pursuant to which a wholly-owned subsidiary of ours merged with and into a private company, Venture Beverage Company, with such private company being the surviving company. In connection with this reverse merger, we discontinued our former business and succeeded to the business of Venture Beverage Company as our sole line of business. For financial reporting purposes, Venture Beverage Company, and not us, is considered the accounting acquiror. Accordingly, the historical financial statements presented and the discussion of financial condition and results of operations herein are those of Venture Beverage Company and do not include our historical financial results. All costs associated with the reverse merger, other than financing related costs in connection with the simultaneous sale of $3,015,000 of units consisting of common stock and warrants and the costs related to the repurchase of securities from two former stockholders, were expensed as incurred.
 
Overview
 
We develop, market, and distribute unique beverage brands and products that are positioned as a “better for you” beverages and are targeted to the growing category of “new age/functional” beverage consumers. We own the rights to the Purple brand, a new functional beverage that contains a high level of anti-oxidants that are found in seven different natural fruit juices that combine to make our product. We launched Purple in the summer of 2007.
 
As our business began on May 8, 2007, we have not provided any historical comparative analysis below.
 
Critical Accounting Policies and Estimates
 
Use of Estimates. In preparing the financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, revenues, and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by us include, but are not limited to, stock-based compensation, valuation of debt discounts, and useful life of property and equipment.
 
Accounts Receivable. We have a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
 
Inventories. Inventories are stated at the lower of cost or market utilizing the first-in, first-out method and consist of raw materials related to our products. We write down inventory for estimated obsolescence or unmarketable inventory based upon assumptions and estimates about future demand and market conditions. If actual market conditions are less favorable than those projected by us, additional inventory write-downs may be required.
 
Property and Equipment. Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.
 
Revenue Recognition. We record revenue when persuasive evidence of an arrangement exists, services have been rendered or product has been shipped, the sales price to the customer is fixed or determinable, and our ability to collect the receivable is reasonably assured. We do not ship product without receipt of an official order from the customer. The customer does not have the right to return the product except for matters related to manufacturing defects on our part. We regularly review our policies for sales allowances and, if deemed appropriate, we adjust those policies based on available, historical trends; net sales are inclusive of these estimated allowances. We primarily sell our product to distributors and recognize revenue upon shipment to them, as opposed to recognizing revenue upon their resale of the product to the ultimate customers. In limited cases where we retain ownership of the product after shipment to the distributor, we defer recognition of the revenue until such time as the product is sold to the ultimate customer and all other revenue recognition criteria have been satisfied.
 
14

 
Stock Based Compensation. We adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment (“SFAS No. 123R”). SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans. As required by SFAS No. 123R, we recognized the cost resulting from all stock-based payment transactions including shares issued under its stock option plans in the financial statements.
 
Non-Employee Stock-Based Compensation. The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”).
 
Recent Accounting Pronouncements
 
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” This interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefits of an uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding de-recognition, classification, and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. We believe the adoption of this interpretation did not have an impact on our financial position, results of operations, or cash flows.
 
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). This Statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure related to the use of fair value measures in financial statements. The Statement is to be effective for our financial statements issued in 2008; however, earlier application is encouraged. We believe the adoption of this interpretation did not have an impact on our financial position, results of operations, or cash flows.
 
In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosures using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. We believe the adoption of SAB 108 did not have an impact on our financial statements.
 
In December 2006, FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements,” was issued. This Staff Position specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies.” We believe that our current accounting is consistent with this Staff Position.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115,” under which entities will now be permitted to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. We believe the adoption of this interpretation did not have an impact on our financial position, results of operations, or cash flows.
 
In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48. This Staff Position provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under this Staff Position, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. We do not expect that this interpretation will have a material impact on our financial position, results of operations, or cash flows.
 
15

 
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which replaces SFAS No. 141, “Business Combinations,” which, among other things, establishes principles and requirements for how an acquirer entity recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including intangibles), and any noncontrolling interests in the acquired entity. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating what impact, if any, the adoption of SFAS No. 141(R) will have on our financial statements.
 
In December 2007, the FASB issued SFAS No. 160, “ Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating what impact the adoption of SFAS No. 160 will have on our financial statements.
 
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Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
 
Results of Operations
 
Three and Six Months Ended March 31, 2008

Net Sales. Our sales during the three and six months ended March 31, 2008 amounted to $215,460 and $474,254, respectively, and were comprised of revenues related to the sale of our beverage product, Purple. For the three months ended March 31, 2008, three of our customers, Crosset Company, Big Geyser, Inc., and B&E Juice, accounted for approximately 28%, 22%, and 10% of our revenues, respectively. For the six months ended March 31, 2008, one of our customers, BL Assets, accounted for approximately 55% of our revenues. All of the revenues from BL Assets during the six-month period ended March 31, 2008, were recognized during the three months ended December 31, 2007. During the three-month period ended March 31, 2008, we discontinued the specific product sold to BL Assets and introduced an updated formulation into the market. Prior to such discontinuance and introduction, BL Assets had commenced marketing of the product; but, in connection with such discontinuance and introduction, BL Assets returned all of such discontinued product to us for credit in the amount of $268,681 and we charged the related costs to marketing expense as of March 31, 2008. Although we recognized sales during the three and six months ended March 31, 2008, there can be no assurances that we will continue to recognize similar revenues in the future.
 
Cost of Sales. The cost of sales during the three and six months ended March 31, 2008 amounted to $202,671 and 457,164, respectively. Our cost of sales includes the manufacturing costs of our proprietary brand and warehouse and distribution costs. The cost of sales as a percentage of sales was approximately 94% and 96% for the three and six months ended March 31, 2008, respectively. We anticipate that our cost of sales will decrease and related gross profit margins will increase for the remainder of our current fiscal year due to the refinement of our production process in strategically located production facilities and from expected economies of scale in the purchasing of raw materials.
 
Operating Expenses. Total operating expenses for the three and six months ended March 31, 2008, were $12,136,768 and $13,755,860, respectively, and consisted of the following:
 
 
Three months ended
March 31, 2008
 
Six months ended
March 31, 2008
 
Compensation expense and related taxes
  $ 3,685,480  
$
3,861,499
 
Advertising and marketing
    7,744,910    
8,519,240
 
Professional fees
    152,330    
395,640
 
Consulting fees
    322,106    
533,108
 
Other selling, general and administrative
    231,942    
446,373
 
Total
  $ 12,136,768  
$
13,755,860
 
 
 
·
compensation expense and related taxes were attributable to salaries, benefits, and related taxes to our officers and employees. For the six months ended March 31, 2008, we recorded non-cash expenses of $3,430,727 related to stock-based compensation expense, which includes approximately $3,134,000 attributable to options granted to our chief executive officer and chief financial officer. Stock-based compensation - options represented approximately 25% of our total operating expenses for the six months ended March 31, 2008 and approximately 28% for the three months ended March 31, 2008. Under SFAS No. 123(R), which was effective January 1, 2006, companies are now required to measure the compensation costs of share-based compensation arrangements based on the grant date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. We anticipate that compensation expense will increase during the remainder of our current fiscal year as we continue to build the Purple brand, which will require additional market activation personnel and support staff.
 
 
·
advertising and marketing expenses represent our brand development and promotional expenses for our proprietary brand. These expenses include promotional spending at point of sale. For the six months ended March 31, 2008, we issued 1,085,712 shares of common stock for advertising and promotional services valued at approximately $1,211,000. Additionally, we recorded non-cash expenses of $5,438,571 related to stock-based expense, primarily attributable to options granted in connection with endorsement agreements entered into during the six months ended March 31, 2008. We also recorded non-cash marketing expenses due to the discontinuation of the inventory items sold to one of our customers and the introduction of a new product formula into the market during the quarter ended March 31, 2008; we credited the customer’s account for the balance due in the amount of $268,681 and charged the related costs to marketing expense as of March 31, 2008. We anticipate that our advertising and marketing expenses, in both cash and equity components, will continue to increase for the remainder of our current fiscal year, subject to our ability to generate operating capital.
 
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·
professional fees represent both accounting and legal fees. We anticipate that our professional fees will continue to increase for the remainder of our current fiscal year as we continue to raise additional working capital and seek to implement Section 404 of the Sarbanes-Oxley Act.
 
 
·
consulting fees were primarily attributable to expenses related to financial advisory and public relations services. For the six months ended March 31, 2008, we recorded non-cash expenses of $52,304 related to stock-based expense, attributable to options granted to consultants for business advisory services. We anticipate that consulting fees in both cash and equity components will increase during the remainder of our current fiscal year as we continue to raise additional operating capital and grow our Purple brand.
 
 
·
other selling, general and administrative expenses include rent expense, travel expense, office, supplies, telephone and communications expenses, and other expenses. We anticipate that these expenses will continue to increase during the remainder of our current fiscal year as we continue to grow our Purple brand.
 
Loss from Operations. We reported a loss from operations of $12,123,979 and $13,738,770 for the three and six months ended March 31, 2008, respectively.
 
Other Expenses. For the three and six months ended March 31, 2008, interest expense amounted to $183,281 and $412,537, respectively. Of such amount, approximately $155,228 was attributable to amortization of the debt discount in connection with the issuance of the 12% notes payable, all of which was included in interest expense for the six-month period ended March 31, 2008, and none of which was included in interest expense for the three-month period then ended. We recognized interest expense on the 12% and 5% notes payable, which amounted to a total of approximately $29,000 and $51,000 during the respective three and six months ended March 31, 2008. Additionally, we issued 100,000 shares of common stock to two debt holders, which shares were valued at approximately $50,000 in connection with the extension of maturity date from December 2007 to March 31, 2008. Such amount was included in interest expense solely for the six months ended March 31, 2008. In February 2008, we issued an additional 100,000 shares of common stock in connection with the convertible notes payable and valued these common shares at the fair market value on the date of issuance, which was $1.56 per share or $156,000. Such amount was included in interest expense for the three and six months ended March 31, 2008.
 
Net Loss. We reported a net loss of $12,304,356 and $14,148,403 for the three and six months ended March 31, 2008, respectively, which translates to basic and diluted net loss per common share of $0.22 during the three months ended March 31, 2008, and basic and diluted net loss per common share of $0.27 during the six months ended March 31, 2008.

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     Year Ended September 30, 2007
 
Sales. Our sales during the period from May 8, 2007 (inception) to September 30, 2007 amounted to $111,343 and was comprised solely of revenues related to the sale of our beverage product Purple to BL Assets.
 
Cost of Sales. The cost of sales during the period from May 8, 2007 to September 30, 2007 amounted to $96,689. Our cost of sales includes the manufacturing costs of our proprietary brand and along with warehouse and distribution costs. The cost of sales as a percentage of sales was approximately 87% for the period ended September 30, 2007. We anticipate that our cost of sales will decrease and related gross profit margins will increase in the future.
 
Operating Expenses. Total operating expenses for the period from May 8, 2007 to September 30, 2007 were $831,328 and consisted of the following:
Compensation expense and related taxes(1)
 
$
8,717
 
Advertising and marketing(2)
   
184,846
 
Professional fees(3)
   
65,023
 
Consulting fees(4)
   
380,676
 
Other selling, general and administrative(5)
   
192,066
 
Total
 
$
831,328
 
 

 
(1)
Compensation during the period from May 8, 2007 to September 30, 2007 amounted to $8,717 and was attributable to stock based expenses for shares issued to our founder and employees. We anticipate that the compensation expense will increase in the future.
 
(2)
Advertising and marketing expenses during the period from May 8, 2007 to September 30, 2007 amounted to $184,846 and represent our brand development and promotional expenses for our proprietary brand. These expenses include promotional spending at point of sale. We anticipate that our advertising and marketing expenses will continue to increase in the future, subject to our ability to generate working capital.
 
(3)
Professional fees during the period from May 8, 2007 to September 30, 2007 amounted to $65,023. This item represents both accounting and legal fees. We anticipate that our professional fees will continue to increase in the future.
 
(4)
Consulting fees during the period from May 8, 2007 to September 30, 2007 amounted to $380,676 and was primarily attributable to expenses related to financial advisory and public relations services. We anticipate that consulting fees will increase in the future.
 
(5)
Other selling, general and administrative expenses include rent expense, travel expense, office expenses and supplies, telephone and communications, and other expenses. For the period from May 8, 2007 to September 30, 2007, other selling, general and administrative expenses amounted to $192,066. We anticipate that these expenses will increase in the future.
 
Loss From Operations. We reported a loss from operations of $816,674 for the period from May 8, 2007 to September 30, 2007.  
 
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Other Expense. For the period from May 8, 2007 to September 30, 2007, interest expense amounted to $196,364 and was attributable to amortization of the debt discount in connection with the 12% notes payable, which amounted to approximately $170,692. Additionally, we recognized accrued interest on the 12% notes payable which amounted to $25,672 as of September 30, 2007.
 
Net Loss. We reported a net loss of $1,013,038 for the period from May 8, 2007 to September 30, 2007. This translates to basic and diluted net loss per common share of $0.03 for the period from May 8, 2007 to September 30, 2007.
Liquidity and Capital Resources
 
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At March 31, 2008, we had a cash balance of $1,414,541 and working capital of $2,498,377. We have been funding our operations though the sale of our common stock and short-term bridge notes. Additionally, during the prior fiscal year, we borrowed $750,000 for operating capital purposes. During the six months ended March 31, 2008, we sold 8,925,780 shares of common stock for net proceeds of $3,375,550 and subscriptions receivable of $2,264,601. In April 2008, we collected the subscriptions receivable. Additionally, we received net proceeds of $1,167,500 from the exercise of warrants and issued a note payable of $1,000,000 during the six months ended March 31, 2008. We repaid this note payable in April 2008. Our balance sheet at March 31, 2008 reflects convertible notes payable amounting to $750,000, which were to have matured on the earlier of December 29, 2007, or on the date of initial closing of subsequent financing of equity or debt securities with gross proceeds exceeding $2,500,000. These loans bear annual interest at 12% and are unsecured. In December 2007, we amended the terms and provisions of the convertible notes payable to two of three debt holders. Under the terms of their amended convertible note agreements, the principal and accrued interest thereon matured on March 31, 2008. Additionally, the third debt holder waived any default that could have occurred upon the maturity date in December 2007 through March 31, 2008. On May 12, 2008, all three debt holders signed conversion notice and acknowledgement agreements, whereby the principal amount of the notes payable and substantially all accrued interest thereon were converted into shares of our common stock at a conversion ratio of $1.25 of debt for each share of common stock issued. We issued a total of 664,504 shares to the three debt holders on May 15, 2008. The $739.74 interest accruing from May 12 through May 15 was paid in cash to the debt holders on May 15, 2008.
 
Net cash flows used in operating activities for the six months ended March 31, 2008, amounted to $4,108,618 and were primarily attributable to our net losses of $14,148,403, offset by stock-based expenses of $10,338,376, depreciation of $4,131, non-cash marketing expense of $268,681, amortization of debt discount of $155,228, and changes in assets and liabilities of $726,631, which includes $339,158 of accounts receivable, $254,647 of inventory, $458,794 of other current assets, $231,451 of accounts payable, and $94,517 of accrued expenses. Net cash flows used in investing activities for the six months ended March 31, 2008, amounted to $29,781 and were primarily attributable to the purchase of property and equipment. Net cash flows provided by financing activities were $5,483,050 for the six months ended March 31, 2008. Further, for the six months ended March 31, 2008, we received net proceeds from the sale of our common stock and exercise of warrants of $3,375,550 and $1,167,500, respectively. Additionally, we received proceeds from the issuance of a note payable of $1,000,000 and paid $60,000 in connection with a stock repurchase agreement upon the closing of our reverse merger on December 12, 2007.
 
We pay Mr. Farnsworth a salary of $225,000 per year and a monthly performance bonus equal to 6% of the net invoice price for all sales, at wholesale or retail, of Purple during the corresponding month in accordance with our revenue recognition policies. Mr. Farnsworth’s bonus is based upon the sales of our product, whether at wholesale or retail, if such sales are recognized as revenue by us. Thus, in the case of our sale to one of our distributors that, in turn, re-sells the product to a retail store, which sell the product to a consumer, Mr. Farnsworth’s bonus is calculated on that sale. We allocate Mr. Farnsworth’s monthly 6% performance bonus to “other selling, general and administrative” expenses, which currently approximate our net sales on a quarterly basis. If we meet our internal projections for increasing our net revenues, as to which increases there can be no assurance, our SG&A expenses will decrease as a percentage thereof. However, those expenses will not decline as rapidly as they otherwise would due to the burden of the 6% monthly performance bonus. We believe that, if our net revenues increase according to our business plan, our gross margins will support the 6% monthly bonus, although not necessarily without a material adverse impact on our overall profitability.

We also reported a net increase in cash during the period ended March 31, 2008 of $1,344,651. At March 31, 2008, we had cash on hand of $1,414,541. However, as of July 15, 2008, we had cash on hand of approximately $13,611. We currently have no material commitments for capital expenditures. Other than such funds, we presently have no other alternative source of operating capital. We may not have sufficient capital to fund the expansion of our operations and to provide capital necessary for our ongoing operations and obligations. We will need to raise significant additional capital to fund our operating expenses, pay our obligations, and grow our company. We do not presently have any firm commitments for any additional capital, and our financial condition may make our ability to secure this capital difficult. There are no assurances that we will be able to continue our business, and we may be forced to cease operations if we do not raise significant additional working capital, in which event investors could lose their entire investment in us.
 
Off Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.

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BUSINESS
 
General
 
We were formed in the State of Nevada on April 8, 2002 as an event planning company and operated as such until June 30, 2005, when we acquired ninety-five percent of the issued and outstanding shares of Landes Daily, Inc. and began operating in the apparel industry. On June 6, 2006, we ceased all operations in the apparel industry and began operations as an independent film production company that aimed to develop, produce, market and distribute low budget film and video productions. On December 12, 2007, Purple Acquisition Corp., a newly formed wholly-owned subsidiary of ours, merged with and into Venture Beverage Company, a private corporation. Upon closing of the merger, Venture Beverage Company merged with and into us and we succeeded to the business of Venture Beverage Company as our sole line of business. In connection with the merger, we changed our name to Purple Beverage Company, Inc.
 
We develop, market, and distribute unique beverage brands and products that are positioned as “better for you” beverages and are targeted to the growing category of “new age/functional” beverage consumers. We own the common law rights to the Purple brand, a new functional beverage that contains a high level of anti-oxidants that are found in seven different natural fruit juices that combine to make our product. We launched Purple in the summer of 2007.
 
The new age or alternative beverage category combines non-carbonated, ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports drinks, and single-serve still water (flavored, unflavored and enhanced) with “new age” beverages, including sodas that are considered natural, sparkling juices and flavored sparkling waters. The alternative beverage category is the fastest growing segment of the beverage marketplace. Further, according to a 2006 study in Packaged Facts, sales of “better for you” and functional beverages reached approximately $40 billion in the United States in 2005 with forecasted sales in 2007 of $46.3 billion, reaching $53.9 billion by 2011.
 
Category-sales increases in 2006 were led by beverages offering health benefits and we believe that consumers have altered a shift in priorities from pure weight management to total health management - a shift that is reflected in slower growth of “lo-cal” and “light” products and increased growth in functional beverages. Of growth products in 2006, the most successful products were those with a health or functional characteristic, such as energy and sport drinks for their performance-enhancing benefits, or ready-to-drink tea for its antioxidant claims. The market was estimated at $36 billion in 2006, and management projects sales of $60 billion by 2009. Based on our direct and indirect knowledge of the beverage and functional beverage industry, we predict:
 
 
·
Future category growth will likely be among functional products offering specific health benefits - for example, heart, health and antioxidant products; and
 
 
·
With increased availability and greater consumer demand, functional beverages are at the beginning of a major growth wave in the United States.
 
Functional beverages are beverages that include ingredients designed to provide specific benefits to the consumer. The sector typically includes juices, smoothies, teas, soy-based drinks, energy drinks, enhanced waters and sports drinks. “Better for you” beverages are a sub-sector of the functional beverage industry which includes drinks designed to provide specific health benefits to consumers.
 
While the soft drink business is a $68 billion industry in the United States, the amount of soda sold in the United States dropped in 2005 for the first time in recent history, and even diet soda sales slowed. Thus, beverage companies are entering the specialty beverage arena as a way to make up for the slowing carbonated soft drink sales.  
 
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There were 1,007 new specialty beverages offered in 2005, on top of 1,010 in 2004. Juices and functional beverage sales increased 51.1% from 2003 to 2005; coffee and cocoa sales were up 37%; and carbonated, functional, and ready-to-drink tea and coffee beverages jumped 65.7%.
 
Products
 
Our proprietary brand is directed to consumers who prefer new age beverage products to traditional carbonated soft drinks such as Coca-Cola®, Pepsi® and 7-Up®. The new age beverage category is attractive to us because it is a growth segment of the beverage market and we believe that consumers will pay higher prices for these products than carbonated soft drinks.
 
Our sole product is named Purple a functional beverage that contains a high level of anti-oxidants from seven different fruit sources that are combined to make this product. The seven anti-oxidant-rich fruits combined in our unique formula are the natural juices of a ç ai, black cherry, pomegranate, black currant, purple plum, cranberry and blueberry. While we do not currently have any additional products in development at this time, we are constantly evaluating new product offerings.
 
Sales, Marketing and Distribution
 
Our sales and marketing strategy is to focus our efforts on developing brand awareness and trial through sampling both in stores and at events. We employ a “PUSH” - “PULL” promotional and advertising strategy (as more particularly described below) to build brand awareness, generate trial/sampling purchases and gain distribution of Purple . Our three stage “go-to-market” approach first educates the consumer about the product through a combination of advertising and public relations initiatives, then makes the product readily available with direct and three-tier distribution, and finally implement programs to motivate consumers to buy Purple .
 
“PUSH,” or “getting the product on the shelf,” provides the programs necessary to gain distribution and secure product placement on retailer’s limited shelves and/or nightclub’s back bar-space. It consists of customer marketing funds designed to support the customers’ best promotional and consumption-building vehicles, as well as employee incentive and training programs, while providing materials that clearly communicate Purple’s key brand benefit: “The Most Powerful Antioxidant Beverage on the Planet!” The foregoing statement is a tagline or advertising slogan used by us that is not a specific or measurable claim or factual statement regarding our product. These materials consist of a variety of “communication messages,” including those listed above, as well as shelf and cooler signs, neck hangers, window banners, floor displays with header cards, table tents, menus, back bar pieces and logo apparel. We intend to budget approximately 10% of our gross revenues as a contribution to these customer marketing funds, as well as provide participation with our distributors by matching funds (i.e., we provide $1.00 per case and the distributor provides $1.00 per case; together, we contribute $2.00 towards the customers’ best promotional vehicles).
 
“PULL,” or getting the product “off-the-shelf” and into the hands of happy consumers, answers the biggest question posed by buyers: “What are you doing to drive consumers into my store to purchase your product?” Pull programs are designed to entice and educate consumers, while motivating them to sell or purchase our product. Various Pull programs include advertising directed towards the consumer (print, radio, TV, internet, direct mail, etc.), instant redeemable or mail-in coupons, mail-in money back rebates, retailer loyalty programs, co-branding with complementary products, and wet sampling events. We will employ all of the above, budgeting an additional 10% to support these programs that reach our targeted audience.
 
The following are a sample of the creative approaches and tactics we use to build our Purple brand:

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·
Media advertisements (newspaper and magazine) that will be placed with the advice of media buying professionals;
 
 
·
Improved electronic presence (enhanced website and e-mail communication);
 
 
·
In-store sales promotions;
 
 
·
Targeted sponsorship of brand-building events;
 
 
·
Use of celebrity endorsers and related promotions;
 
 
·
Trade show marketing; and
 
 
·
On premise marketing with the Purple Girls.
 
Each of these approaches is capital intensive, and additional capital will be needed to continue these efforts.

Celebrity Endorsement Agreements
 
As part of our marketing and advertising campaign to promote Purple , we have entered into celebrity endorsement agreements with Chaka Kahn, Torii Hunter and Mariano Rivera. Such celebrities will be the focus of Purple advertising campaigns and will conduct public appearances. In addition, our celebrity endorsers will support the Purple brand at events and programs that we intend to sponsor. A description of the material terms of our celebrity endorsement agreements are summarized below.
 
Chaka Kahn Endorsement Agreement 
 
In November, 200 7, we entered into a three year endorsement agreement with Grammy®-Award winning entertainer Chaka Kahn. In connection with her agreement, we granted  to Chaka Kahn Enterprises 550,712 shares of our common stock.
 
Torii Hunter Endorsement Agreement 
 
In January 2008, we entered into a three year endorsement agreement with Torii Hunter of the Los Angeles Angels of Anaheim. In connection with his agreement, we paid Mr. Hunter $150,000 with $50,000 payable on signing and $50,000 payable on the first and second anniversaries of the agreement. In addition, Mr. Hunter and his representative and certain others were paid an aggregate of $10,000, were issued and aggregate of 275,000 shares of our common stock, and were granted an aggregate of 2,000,000 stock options. The options are exercisable at $1.00 per share and expire on July 18, 2008.

Mariano Rivera Endorsement Agreement 
 
In May 2008, we entered into a three year endorsement agreement with Mariano Rivera of the New York Yankees. In connection with his agreement, we agreed to pay Mr. Rivera $150,000 with $50,000 payable on signing and $50,000 payable on the first and second anniversaries of the agreement. In addition, Mr. Rivera and certain others were paid an aggregate of $25,000, issued an aggregate of 160,000 shares of our common stock, and granted an aggregate of three-year non-qualified stock options to purchase up to 1,414,286 shares of our common stock at an exercise price of $0.01 per share.
 
Seasonality
 
Sales of ready-to-drink beverages are somewhat seasonal, with the second and third calendar quarters accounting for the highest sales volumes. The volume of sales in the beverage business may be affected by weather conditions. Sales of our beverage products may become increasingly subject to seasonal fluctuations. Quarterly fluctuations may also be affected by other factors, including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers and distributors, changes in the mix of sales of our finished products and changes in and/or increased advertising, marketing and promotional expenses.
 
Research and Development
 
The new age beverage category growth is largely sustained by the constant addition of new products, brands and brand extensions. An integral part of our strategy is to develop and introduce innovative products and packages. The development time from inception of the concept through product development and testing to the manufacture and sale of the finished product is several months. Not all new ideas survive consumer research. Our research, development, manufacture, and distribution of Purple and other beverage products have thus far been limited by our capital resources.
 
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We are not currently engaged in any research and development activities. However, we recently began exploring the possibility of engaging a third party to commence research on our behalf in connection with expanding our line of products and further determining the implications of mixing Purple with components such as teas and alcoholic beverages.
 
Manufacturing Process
 
The principal raw materials used by us are glass bottles, as well as fruit pulp and fruit juice concentrates, the costs and availability of which are subject to fluctuations. Due to the consolidations that have taken place in the glass industry over the past few years, the prices of glass bottles continue to increase. The prices of fruit pulp concentrates and certain juice concentrates, including apple, increased in 2006 and certain of these ingredients continued to increase in 2007. These increased costs, together with other increased costs, primarily energy, gas and freight, resulted in increases in certain product costs that are ongoing and are expected to continue to exert pressure on our gross margins in the foreseeable future.
 
We rely on third-party manufacturers to produce our products, using our proprietary formula and flavor ingredients. Chemists continually observe the product-manufacture and production-run and test the finished beverage product and the package integrity. We obtain the raw materials for the manufacture of our products from several sources and arrange for the direct delivery of these raw materials to the third-party manufacturer, except for acai, which we obtain from a single source. We normally pre-pay for the manufacture and packaging materials. We own the finished inventory that is shipped to warehouses upon completion.
 
We use several suppliers of all necessary raw materials within the United States. In addition, there are numerous manufacturers in the United States that can manufacture our products for us. We do not have any agreements with our material suppliers or manufacturers, and we do not anticipate having contracts with any entities or persons committing such suppliers to provide the materials required for the production of our products or committing such manufacturers to provide manufacturing services to us or committing us to purchase any materials or manufacturing services from any specific entities.

24

 

The following are our principal suppliers:
Principal Suppliers
 
Product Supplied
Stiebs Pomegranate Products
 
Açai & Pomegranate Juice
 
 
 
National Fruit & Essences, LLC  
 
Juices: Black Cherry, Black Currant, Purple
 
 
 
King Juice Company, Inc.  
 
Blending & Bottling
 
 
 
MFCI
 
Re-Packing
 
 
 
Zuckerman Honickman  
 
Glass bottle - 10 oz
 
 
 
Silgan White Cap Americas
 
Bottle Cap
 
 
 
CL&D Graphics, Inc.
 
Labels
 
 
 
Green Bay Packaging, Inc.    
 
Cartons and corrugated inserts

Distributors

For the six months ended March 31, 2008, three of our distributors, BL Assets, Crosset Company, and Big Geyser, Inc., accounted for approximately 55%, 13%, and 10% of our revenues, respectively. For the period from inception (May 8, 2007) to September 30, 2007 and during the first quarter of our current fiscal year, one distributor, BL Assets, accounted for all of our revenues. BL Assets is no longer one of our distributors. We did not sell any product to BL Assets during our second quarter and do not expect to sell product to them in the future. To substitute for the distribution services BL Assets provided to us, we entered into distribution agreements with Big Geyser, Inc. and B & E Juice Co. for the same geographic areas. We remain dependent, however, on all of our distributors, and the loss of any of our major distributors would have a material adverse effect on our operating results.

We have agreements with most of our distributors, and we believe the agreements with Crosset Company, Big Geyser, Inc., B & E Juice Co, and General Nutrition Distribution, LP are material to our business. Those agreements are attached as exhibits to the registration statement of which this prospectus forms a part; however, certain terms have been redacted, as we believe the public disclosures thereof  would put us at a competitive disadvantage. The duration of our material distributor agreements (not including renewals), and the territories covered by such agreements, are as follows:

DISTRIBUTOR
DURATION OF AGREEMENT
(not including renewals)
TERRITORY
Crosset Company
Through January 25, 2013
State of Kentucky and 150-mile radius from City of Independence; includes all Kroger Food stores presently being served by Distributor
Big Geyser, Inc.
Through February 26, 2013
Manhattan (New York County)
Brooklyn (Kings County)
Queens
Staten Island (Richmond County)
Bronx
Nassau
Suffolk
Westchester
B & E Juice Co.
Through March 26, 2013
Fairfield County, Connecticut
General Nutrition Distribution, LP
December 6, 2008
United States
 
 
The beverage industry is highly competitive. The principal areas of competition are pricing, packaging, development of new products and flavors, and marketing campaigns. Our product competes with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing, and distribution resources than we do.
 
Important factors affecting our ability to compete successfully include:
 
 
·
the taste and flavor of our products;
 
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·
trade and consumer promotions;
 
 
·
rapid and effective development of new, unique, cutting-edge products;
 
 
·
attractive and different packaging;
 
 
·
branded product advertising; and
 
 
·
pricing.
 
We also compete for distributors who will concentrate on marketing our products over those of our competitors, provide stable and reliable distribution, and secure adequate shelf-space in retail outlets. Competitive pressures in the alternative, energy, and functional beverage categories could cause our products to be unable to gain market share and we could experience price erosion, which could have a material adverse affect on our business and results.
 
We compete not only for consumer acceptance, but also for maximum marketing efforts by multi-brand licensed bottlers, brokers and distributors, many of which have a principal affiliation with competing companies and brands. Our product competes with all liquid refreshments and with products of much larger and substantially better-financed competitors, including the products of numerous nationally and internationally known producers such as The Coca-Cola Company, PepsiCo, Inc., Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods, Inc., Nestle Beverage Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc. We also compete with companies that are smaller or primarily local in operation. Our products also compete with private label brands such as those carried by grocery store chains, convenience store chains and club stores.

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To date, our significant competition includes the following companies:
 
 
·
Bossa Nova Beverage Group;
 
 
·
Fuze Beverage, LLC;
 
 
·
POM Wonderful, LLC; and
 
 
·
Sambazon, Inc.

Our product is most closely comparable with the natural beverage products created by those companies listed above. In particular, Bossa Nova Beverage Group produces a line of “Açai Juices,” which contains açai berries and anti-oxidants. Fuze Beverage, LLC produces a product line named “ Vitalize,” which are non-carbonated beverages that contain anti-oxidants and electrolytes. POM Wonderful, LLC produces a line of “POM Wonderful Pomegranate Juices,” which contains naturally occurring polyphenol antioxidants, and Sambazon, Inc.’s “ Organic Açai Juice” contains açai berries and blue agave syrup.
 
Intellectual Property
 
We rely on common law rights to our trademark Purple . The common law rights protect the use of this mark used to identify our product. It is possible that our competitors will adopt product or service names similar to ours, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Our inability to protect our trade name will have a material adverse effect on our business, results of operations, and financial condition. We also rely on trade secrets and proprietary know-how to protect our concepts. However, such methods may not afford complete protection, and there can be no assurance that others will not independently develop similar know-how or obtain access to our know-how and concepts. There can be no assurance that we will be able to adequately protect our trade secrets. Third parties may assert infringement claims against us or against third parties upon whom we rely and, in the event of an unfavorable ruling on any claim, we may be unable to obtain a license or similar agreement to use trade secrets that we rely upon to conduct our business.
 
Regulation
 
The Food and Drug Administration issues rules and regulations for the beverage industry, including, but not limited to, the labeling and formulary ingredients of beverage products. We are also subject to various state and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, and labeling of our product. Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse effect upon our capital expenditures, net income, or competitive position. Regulatory guidelines, however, are constantly changing, and there can be no assurance that our product and our third-party manufacturers will be able to comply with ongoing government regulations.
Employees
 
As of May 1, 2008, we had 47 employees, all of whom are full-time. None of our employees is covered by a collective bargaining agreement, nor are they represented by a labor union. We have not experienced any work stoppages, and we consider relations with our employees to be good.
Description of Property
 
We lease approximately 3,070 square feet of office space in Fort Lauderdale, Florida for $5,533.68 per month, which rate increases by 3% each year commencing on March 1, 2009. The current lease term expires on April 30, 2012. This facility serves as our corporate headquarters. We believe that this facility is adequate for our immediate and near-term needs. Additional space may be required as we expand our activities. We do not currently foresee any significant difficulties in obtaining any required additional facilities. In the opinion of the management, this property is adequately covered by insurance.
 
We do not invest in real estate or real estate interests.

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Legal Proceedings
 
From time to time we may be involved in claims arising in the ordinary course of business. To our knowledge, no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.
MANAGEMENT
 
The following table sets forth information regarding our sole director and our executive officers. Our sole director holds office for a one-year term until the election and qualification of his successor. Subject to any written employment agreements, our officers are elected annually by the board of directors and serve at the discretion of the board. Each of Messrs. Farnsworth and Wallace has a three-year employment agreement with us.
Name
 
Age
 
Position
Theodore Farnsworth
 
46
 
Chief Executive Officer, President, Secretary and Director
 
 
 
 
 
Michael Wallace
 
39
 
Chief Financial Officer and Executive Vice President
 
 
 
 
 
Theodore Farnsworth, Chief Executive Officer, President, Secretary and Director. Mr. Farnsworth has served as our chief executive officer, president, secretary and as a director since December 2007. Mr. Farnsworth was the chief executive officer, president, secretary and as a director of Venture Beverage Company from May 2007 to December 2007. From September 2001 to October 2007, Mr. Farnsworth served as chairman of Xstream Beverage Network, Inc. and from November 2004 to November 2007, Mr. Farnsworth served as Xstream Beverage Network, Inc.’s chief executive officer. Prior to that, from April 1998 to March 2001, Mr. Farnsworth served as chairman and founder of Farmbid.com, an agricultural Internet portal site. From May 1997 to March 1998, Mr. Farnsworth was president of Fontal Restaurant Group, Inc., parent of Burrito Grill restaurants.
 
Michael Wallace, Chief Financial Officer and Executive Vice President. Mr. Wallace has served as our chief financial officer and executive vice president since March 2008. Before joining us and since 2004, Mr. Wallace was the chief financial officer and senior vice president of Radiology Corporation of America, a Boca Raton, Florida company that provides medical diagnostic services nationwide. From 2003 to 2004, Mr. Wallace was an assistant chief accountant in the Securities and Exchange Commission’s Division of Enforcement and a member of the Securities and Exchange Commission’s Financial Fraud Task Force in Washington, D.C. From 2000 to 2003, Mr. Wallace was the chief financial officer and senior vice president of Inktel Direct and CELLIT Technologies, privately held companies located in Miami, Florida engaged in the direct marketing industry, and the business of software development for the contact center market, respectively. From 1997 to 2000, Mr. Wallace was the chief financial officer and senior vice president of Kellstrom Industries, a Nasdaq-listed company operating in the aerospace services sector. From 1990 to 1997, Mr. Wallace was a manager at KPMG LLP in the firm’s assurance practice.
 
There are no family relationships among our director or executive officers.
 
Board Committees
 
Audit Committee. We intend to establish an audit committee of the board of directors, which will consist of independent directors, of which at least one director will qualify as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee’s duties would be to recommend to our board of directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The audit committee would review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee would at all times be composed exclusively of directors who are, in the opinion of our board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
 
Compensation Committee. We intend to establish a compensation committee of the board of directors. The compensation committee would review and approve our salary and benefits policies, including compensation of executive officers. The compensation committee would also administer our stock option plans and recommend and approve grants of stock options under such plans.

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Compensation Committee Interlocks and Insider Participation
 
During the fiscal year ended September 30, 2007, all executive officer compensation was determined by Theodore Farnsworth, our chief executive officer, president and director.
 
Code of Ethics
 
We intend to adopt a code of ethics that applies to our officers, directors and employees, including our chief executive officer and chief financial officer, but have not done so to date due to our relatively small size.
EXECUTIVE COMPENSATION
Summary Compensation Table
 
The following table summarizes the annual and long-term compensation paid to Theodore Farnsworth, our chief executive officer, who we refer to in this prospectus as the “named executive officer.” During the year ended September 30, 2007, no executive officer received annual remuneration in excess of $100,000.
 
Name and Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Option
Awards(1)
($)
 
All Other
Compensation
($)
 
Total
($)
 
Theodore Farnsworth
   
2007
   
11,712(1
)
 
   
   
   
11,712
 
Chief Executive Officer,
President and Secretary
(principal executive officer)
                         
 
(1)       Annual salary of $225,000, which commenced on December 12, 2007.

Employment Agreements
 
On December 12, 2007, we entered into a three-year employment agreement with Theodore Farnsworth, which agreement shall be automatically renewed for additional one-year periods until either we or Mr. Farnsworth, as the case may be, gives the other written notice of its intent not to renew the agreement at least 90 days prior to the end of the then current term. Pursuant to this agreement, Mr. Farnsworth shall serve at our chief executive officer and shall receive a salary of $225,000 per year and a monthly performance bonus equal to 6% of the net invoice price for all sales, at wholesale or retail, of Purple during the corresponding month in accordance with our revenue recognition policies. Mr. Farnsworth’s bonus is based upon sales of our product, whether at wholesale or retail, if such sales are recognized as revenue by us. Thus, in the case of our sale to one of our distributors that, in turn, re-sells the product to a retail store, which sell the product to a consumer, Mr. Farnsworth’s bonus is calculated on the original sale to our distributor. In the case of a sale directly to a consumer, Mr. Farnsworth’s bonus is calculated on that sale. Such bonus shall be paid on the 15th day of the month following the respective measuring month. In addition, Mr. Farnsworth is entitled to participate in employee medical, health, pension, welfare and insurance benefit plans maintained by us for the general benefit of our executive employees, as well as all other benefits and perquisites made generally available to our executive employees, up to three weeks of vacation per year and a monthly car allowance of $800. If Mr. Farnsworth’s employment is terminated by us without cause or because of Mr. Farnsworth’s death or disability or by Mr. Farnsworth for good reason (including as a result of a change in control), or if we deliver a timely non-renewal notice, then we shall pay to Mr. Farnsworth:
 
 
·
subject to Mr. Farnsworth executing a general release of all claims in our favor in a form approved by our board, a severance payment equal to three times the sum of (x) Mr. Farnsworth base salary in the calendar year in which the termination occurs plus (y) the bonus earned for the year prior to the year in which the termination occurs;
 
 
·
a bonus for the year in which termination occurred based on payments received by us through the last day of actual employment; and

29


 
·
for a period of three years following the termination date, Mr. Farnsworth’s costs of COBRA continuation coverage of health insurance, or if COBRA coverage is unavailable, the actual cost incurred by Mr. Farnsworth in obtaining comparable coverage.
 
Notwithstanding anything else to the contrary, the aggregate of the payments above are limited to the extent that Mr. Farnsworth would incur an excise tax under Section 4999(a) of the Internal Revenue Code of 1986, as amended, if the payments to be made above were deemed to be an “excess parachute payment.” Our obligation to make the above described payments are not subject to mitigation or a duty to mitigate.
 
If Mr. Farnsworth’s employment is terminated by us for cause, or by Mr. Farnsworth without good reason:
 
 
·
Mr. Farnsworth will receive payment of his base salary through and including the date of termination, payment of any earned but unpaid bonus for the prior fiscal year, payment for all accrued but unused vacation time existing as of the date of termination, and reimbursement of business expenses incurred prior to the date of termination; and
 
 
·
Mr. Farnsworth may continue to participate in our employee benefit plans to the extent permitted by and in accordance with the terms thereof or as otherwise required by law.
 
On March 19, 2008, we entered into a three-year employment agreement with Michael Wallace, pursuant to which Mr. Wallace shall serve at our chief financial officer and shall receive a salary of $250,000 during the first fiscal year of employment, $275,000 for the second fiscal year of employment and $300,000 for the third fiscal year of employment. Mr. Wallace also received a signing bonus of $25,000 upon execution of this agreement and is entitled to receive a prorated bonus of at least $75,000 for the current fiscal year, $100,000 for the subsequent fiscal year and at the discretion of our board of directors thereafter. In addition, Mr. Wallace is entitled to participate in all employee medical, health, dental, pension, welfare and insurance benefit plans maintained by us for the general benefit of our executive employees, as well as all other benefits and perquisites made generally available to our executive employees, as well as group medical and dental insurance for Mr. Wallace’s family, a monthly auto allowance of $1,000 and up to four weeks of vacation per year. If Mr. Wallace’s employment is terminated by us because of Mr. Wallace’s death, disability or without cause, then:
 
 
·
we shall pay to Mr. Wallace a severance payment equal to payment of that amount equal to six months of Mr. Wallace’s then-current base salary, payment of that amount equal to six months of Mr. Wallace’s annual bonus, and reimbursement of business expenses incurred prior to the date of termination; and
 
 
·
all of Mr. Wallace’s unvested options shall vest.
 
However, if Mr. Wallace’s employment is terminated by us for cause, or by Mr. Wallace for any reason, then:
 
 
·
we shall pay to Mr. Wallace his base salary through and including the date of termination, any earned but unpaid bonus for the prior fiscal year,
 
 
·
we shall reimburse Mr. Wallace for all business expenses incurred prior to the date of termination;
 
 
·
all options granted under the agreement will cease vesting on the date of termination of employment, and to the extent vested and not previously exercised or expired, may be exercised in accordance with the terms and conditions of his option grant; and
 
 
·
Mr. Wallace shall continue to participate in our employee benefit plans to the extent permitted by and in accordance with the terms thereof or as otherwise required by law.

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In connection with Mr. Wallace’s employment agreement, Mr. Wallace was granted a ten-year option to purchase 1,663,826 shares of common stock at an exercise price of $1.50 per share. One-third of the option vested upon grant; one-third vests on the first anniversary of the employment agreement; and one-third vests on the second anniversary of the employment agreement, assuming that Mr. Wallace is employed by us as of such dates. The agreement also contains certain non-competition and confidentiality provisions, as well as intellectual property assignment provisions.

Currently, decisions pertaining to incentive based compensation of our executive officers (including, without limitation, changes in the amount of bonuses payable to our chief executive officer and chief financial officer) are made unilaterally by Mr. Farnsworth. However, we intend in the near future to expand our board membership to include independent directors, and such decisions will be then made by our compensation committee comprised of independent directors. In determining incentive based compensation, it is contemplated that we will look at the incentive based compensation awarded to members of senior management of comparable companies of our size in our industry or similar industries.
 
Outstanding Equity Awards at Fiscal Year-End
 
There were no outstanding equity awards held by our named executive officer as of September 30, 2007.
 
2007 Incentive Plan
 
On December 12, 2007, our sole director adopted the Venture Beverage Company 2007 Incentive Plan. The purpose of the 2007 Incentive Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in our development and financial success. Under the 2007 Incentive Plan, we are authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights, performance shares, restricted stock, cash based awards and other share based awards. The 2007 Incentive Plan is administered by our sole director. Options were granted under the 2007 Incentive Plan to certain of our employees employed at the time of our reverse merger to incentivize their continued employment with us. The number of options granted by our sole director to himself was determined after consultation with the placement agent for our December private placement and with the concurrence of each of the investors in such offering. The conclusion was based upon the number of options initially available under the 2007 Incentive Plan, the number of options under such plan to be granted to our other personnel, and the number of shares of our common stock owned by Mr. Farnsworth and the percentage of our capital stock that such shares would represent upon the closing of our December private placement. Our sole director determined the terms of such awards based on the services the employees provided or were expected to provide to us. Since consummation of our reverse merger on December 12, 2007, we have granted options to purchase common stock under the 2007 Incentive Plan to the following executive officer:
Name
 
Shares
Subject to
Options
 
Exercise
Price
 
Grant Date
 
Vesting Schedule
 
Expiration
 
Theodore Farnsworth
   
5,405,000
 
$
0.55
   
December 12, 2007
 
 
Immediately
 
 
5 years from date of grant
 
Director Compensation
 
We do not currently compensate our director for acting as such, although we may do so in the future, including with cash or equity. We reimburse our director for reasonable expenses incurred in connection with his services as a director. As of September 30, 2007, our director did not receive any compensation from us.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 
 
We review all relationships and transactions in which the company and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Transactions that we have determined to be directly or indirectly material to us or a related person are disclosed below. We believe each transaction is on terms no less favorable to us than the terms generally available to an unaffiliated third-party under the same or similar circumstances.
 
Upon the closing of our reverse merger on December 12, 2007, Christopher Johnson, a former director and former officer, and Lissa Johnson sold their holdings in us to us for $60,000 in cash and all of our historical operating assets prior to the closing of the reverse merger on December 12, 2007.
 
From inception through January 22, 2008, we were a subtenant of a company owned by our sole director and chief executive officer. The rent that we paid was the same as such affiliated entity was charged by its sublessor. From and after January 22, 2008, we have been a direct subtenant of such sublessor. Management believes that the rent that we have paid both prior and subsequent to January 22, 2008, is competitive with local market conditions.
 
Director Independence
 
We do not currently have any independent directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 
 
The following table sets forth information with respect to the beneficial ownership of our common stock as of July 16, 2008 by:

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·
each person known by us to beneficially own more than 5.0% of our common stock;
 
 
·
our sole director;
 
 
·
our named executive officer; and
 
 
·
our sole director and executive officers as a group.
 
The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o Purple Beverage Company, Inc. 450 East Las Olas Boulevard, Suite 830, Fort Lauderdale, Florida 33301. As of July 16, 2008, we had 60,451,449 shares outstanding.
Name and Address of Beneficial Owner
 
Number of Shares Beneficially Owned(1)
 
Percentage Beneficially
Owned(1)
 
Theodore Farnsworth
   
20,750,493
 (2)
 
31.51
%
 
         
Michael Wallace
   
554,609
 (3)
 
*
 
 
         
Barry Honig
595 South Federal Highway, Suite 600
Boca Raton, Florida 33432
   
4,599,999
 (4)
 
7.49
%
 
         
All directors and executive officers as a group (2 persons)
   
21,305,102
   
32.08
%
 
* Less than 1%.

(1)
Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of July 16, 2008. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.

(2)
Includes 5,405,000 shares of common stock issuable upon the exercise of options. Mr. Farnsworth’s shares, options, and shares underlying options are subject to a two-year “lock-up,” which expires on December 12, 2009. During such lock-up period, without our prior written consent, which may be withheld, delayed, or denied for any reason or for no reason, Mr. Farnsworth is precluded from selling, transferring, or otherwise disposing of any of such shares. Notwithstanding the term of such lock-up, upon our prior written consent, which may be withheld, delayed, or denied for any reason or for no reason, during each calendar month of the last year of the lock-up period, Mr. Farnsworth may sell, pledge, hypothecate, or otherwise derive economic value from an amount of shares underlying his options equivalent to not more than 5% of such shares subject to the restrictions. In the event Mr. Farnsworth does not sell 5% of such shares in any of such months (assuming permission has been so granted), such unsold shares may be sold in any future month without reducing such future month’s 5% allowance (assuming permission has been so granted).

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(3)
Includes 554,609 shares of common stock issuable upon the exercise of options. Mr. Wallace’s options are subject to a two-year “lock-up,” which expires on the second anniversary of grant, or March 19, 2010. Notwithstanding the term of such lock-up, Mr. Wallace, during each month of the second year of the lock-up, may sell, pledge, hypothecate, or otherwise derive economic value from an amount of such shares equivalent to not more than 5% of the number of shares owned by him. In the event he does not sell 5% of his shares in any of such months, such unsold shares may be sold in any future month without reducing such future month’s 5% allowance.

(4)
Includes (i) 450,000 shares of common stock issuable upon the exercise of warrants held by Barry Honig, the president of GRQ Consultants, Inc,, and (ii) 2,209,999 shares of common stock held by GRQ Consultants, Inc, with respect to which Barry Honig is the president. 1,450,000 of Mr. Honig’s shares are subject to a two-year “lock-up,” which expires on December 12, 2009. During such lock-up period, without our prior written consent, which may be withheld, delayed, or denied for any reason or for no reason, Mr. Honig is precluded from selling, transferring, or otherwise disposing of any of such shares. Further, another 450,000 shares and 450,000 shares underlying his warrants are subject to a lock-up period for six months, which expires June 12, 2008; after the expiration of the six-month period, Mr. Honig may, upon our prior written consent, which may be withheld, delayed, or denied for any reason or for no reason, during each calendar month for the following six-months, sell, pledge, hypothecate, or otherwise derive economic value from an amount of such shares equivalent to not more than 5% of such shares subject to the restrictions. In the event Mr. Honig does not sell 5% of such shares in any of such months (assuming permission has been so granted), such unsold shares may be sold in any future month without reducing such future month’s 5% allowance (assuming permission has been so granted). With regard to the shares held of record by GRQ Consultants, Inc., 1,450,000 shares are subject to a lock-up period for one year, which expires December 12, 2008; after the expiration of the one-year period, GRQ Consultants, Inc. may, upon our prior written consent, which may be withheld, delayed, or denied for any reason or for no reason, during each calendar month for the following six-months, sell, pledge, hypothecate, or otherwise derive economic value from an amount of such shares equivalent to not more than 5% of such shares subject to the restrictions. In the event GRQ Consultants, Inc. does not sell 5% of such shares in any of such months (assuming permission has been so granted), such unsold shares may be sold in any future month without reducing such future month’s 5% allowance (assuming permission has been so granted).
 
SELLING STOCKHOLDERS
 
Up to 12,494,421 shares of common stock are being offered by this prospectus, all of which are being registered for sale for the accounts of the selling security holders and include the following:
 
 
·
8,812,771 shares of common stock issued in private placements and following the exercise of warrants; and
 
 
·
3,681,650 shares of common stock initially issuable upon the exercise of warrants issued in private placements.
 
The shares of common stock referred to above are being registered to permit public sales of the shares, and the selling stockholders may offer the shares for resale from time to time pursuant to this prospectus. The selling stockholders may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, or pursuant to another effective registration statement covering those shares. We may from time to time include additional selling stockholders in supplements or amendments to this prospectus.
 
The table below sets forth certain information regarding the selling stockholders and the shares of our common stock offered by them in this prospectus. The selling stockholders have not had a material relationship with us within the past three years other than as described in the footnotes to the table below or as a result of their acquisition of our shares or other securities. To our knowledge, subject to community property laws where applicable, each person named in the table has sole voting and investment power with respect to the shares of common stock set forth opposite such person’s name.

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We have entered into certain registration rights agreements with certain of the selling stockholders. The registration rights agreements and the warrants exercisable for certain of the shares registered hereby are described in “Description of Securities - Warrants” and “Description of Securities - Registration Rights.”
 
The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock by the selling stockholders as of July 16, 2008, based on 60,451,449 shares of our common stock then outstanding. The share numbers in the column labeled “Number of Shares Offered” represent all of the shares that the selling stockholders may offer in this prospectus. The table assumes that each selling stockholder exercises all of his, her or its warrants. We are unable to determine the exact number of shares that will actually be sold. We do not know how long the selling stockholders will hold the shares before selling them. Other than our agreement with the selling stockholders to maintain the effectiveness of the registration statement of which this prospectus forms a part until all shares covered hereby have been sold, or may be sold without volume restrictions pursuant to Rule 144 under the Securities Act of 1933, as amended, we currently have no agreements, arrangements or understandings with the selling stockholders regarding the sale of any of their shares.
 
 
Ownership Before Offering
 
After Offering(1)
 
Selling Stockholder
 
Number of
shares of
common stock
beneficially owned
 
Number of
shares
offered*
                     
Number of
shares of
common stock
beneficially
owned
 
Percentage of
common
stock
beneficially
owned
 
Tobanna Enterprises Corp.(2)
   
2,328,000
 (3)
 
1,202,400
 (4)(a)
 
1,125,600
 (5)
 
1.84
%
 
   
 
           
Sara Leifer
   
346,000
 (6)
 
94,800
 (7)(a)
 
251,200
 (8)
 
*
 
 
   
 
           
Mangrove Bay, Inc.(9)
   
316,000
 
 
94,800
(a)  
221,500
   
*
 
 
   
 
           
Crestview Capital Master, LLC(10)
   
30,000
 
 
9,000
(a)   
21,000
   
*
 
 
   
 
           
Chelsea Development International Limited(11)
   
320,000
 
 
285,714
   
34,286
   
*
 
 
   
 
           
Nachum Stein
   
623,000
 (12)
 
210,000
(a)   
413,000
 (13)
 
*
 
 
   
 
           
Robert & Chaya Millet
   
90,000
 (14)
 
32,000
(a)   
58,000
 (15)
 
*
 
 
   
 
           
Brian Silber
   
408,000
 (16)
 
122,400
(17)(a)
 
285,600
 (18)
 
*
 
 
   
 
           
Steven & Batsheva Friedman
   
81,000
 (19)
 
28,800
(a)   
52,200
 (20)
 
*
 
 
   
 
           
Michael L. Feinman
   
200,000
 (21)
 
60,000
 (22)(a)
 
140,000
 (23)
 
*
 
 
   
 
           
Brio Capital L.P.(24)
   
490,000
 (25)
 
141,000
 (26)(a)
 
349,000
 (27)
 
*
 
 
   
 
           
David Adelman
   
250,000
 (28)
 
130,000
(a)  
120,000
 (29)
 
*
 
 
   
 
           
Susan E. Saxton
   
100,000
 (30)
 
30,000
 (31)(a)
 
70,000
 (32)
 
*
 
 
   
 
           
Alan Horowitz
   
500,000
 (33)
 
260,000
(a)   
240,000
 (34)
 
*
 
 
   
 
           
Andrea Groussman
   
200,000
 (35)
 
60,000
 (36)(a)
 
140,000
 (37)
 
*
 
 
   
 
           
Irwin L. Zalcberg
   
330,000
 (38)
 
105,000
(a)   
225,000
 (39)
 
*
 
 
   
 
           
Harold E. Gelber & Patricia M. Gelber
   
100,000
 (40)
 
30,000
 (41)(a)
 
70,000
 (42)
 
*
 
 
   
 
           
Chase Mortgage, Inc. (43)
   
1,575,000
 (44)
 
472,500
 (45)(a)
 
1,102,500
 (46)
 
1.81
%
 
   
 
           
Alfred Gladstone
   
100,000
 (47)
 
30,000
 (48)(a)  
 
70,000
 (49)
 
*
 
 
   
 
           
Phyllis Ulreich
   
100,000
 (50)
 
30,000
 (51)(a)
 
70,000
 (52)
 
*
 
 
   
 
           
FB Capital Partners(53)
   
375,000
 (54)
 
120,000
(a)   
255,000
 (55)
 
*
 
 
   
 
           
David Alperin
   
75,000
   
40,000
(a)   
35,000
   
*
 
 
34

 
     
Ownership Before Offering
   
After Offering(1)
 
Selling Stockholder
    
Number of
shares of
common stock
beneficially owned
    
Number of
shares
offered
                         
Number of
shares of
common stock
beneficially
owned
    
Percentage of
common
stock
beneficially
owned
 
Chocolate Chip Investments LP(56)
   
200,000
 
 (57)
 
60,000
 
 (58)(a)
 
140,000
 
 (59)
 
*
 
 
                 
Chase Financing, Inc.(60)
   
665,000
 
 (61)
 
199,500
 
 (62)(a)
 
465,000
 
 (63)
 
*
 
 
                 
Beverly Pinnas
   
100,000
 
 (64)
 
30,000
 
 (65)(a)
 
70,000
 
 (66)
 
*
 
 
                 
Harvey Kesner
   
677,499
 
 (67)
 
90,000
 
 (68)(a)
 
587,499
 
 (69)
 
*
 
 
                 
Melechdavid Inc.(70)
   
475,000
 
 (71)
 
60,000
 
 (72)(a)
 
415,000
 
 (73)
 
*
 
 
                 
Susan S. Auerbach
   
400,000
 
 (74)
 
120,000
 
 (75)(a)
 
280,000
 
 (76)
 
*
 
 
                 
Shelly Koffler
   
600,000
 
 (77)
 
180,000
 
 (78)(a)
 
420,000
 
 (79)
 
*
 
 
                 
Michael Lustigman
   
200,000
 
 (80)
 
60,000
 
 (81)(a)
 
140,000
 
 (82)
 
*
 
 
                 
Robert & Barbara Samans
   
200,000
 
 (83)
 
60,000
 
 (84)(a)
 
140,000
 
 (85)
 
*
 
 
                 
Daniel Brauser
   
775,000
 
 (86)
 
260,000
(a)   
515,000
 
 (87)
 
*
 
 
                 
Palladium Capital Advisors, LLC(88)
   
163,000
 
 (89)
 
48,900
 
 (90)(a)
 
114,100
 
 (91)
 
*
 
 
                 
Michael Hartstein (92)
   
400,000
 
 (93)
 
120,000
 
 (94)(a)
 
280,000
 
 (95)
 
*
 
 
                 
Peter Lee
   
800,000
 
 (96)
 
240,000
 
 (97)(a)
 
560,000
 
 (98)
 
*
 
 
                 
GRQ Consultants, Inc.(99)
   
4,559,999
 
 (100)
 
582,285
(a)   
3,707,714
 
 (101)
 
6.10
%
 
                 
Barry Honig (102)
   
4,559,999
 
 (103)
 
270,000
 
 (104)(a)
 
3,707,714
 (105)
 
6.10
%
 
                 
Robert S. Colman Trust (106)
   
160,000
   
142,857
   
17,143
   
*
 
 
                 
Alpha Capital Anstalt(107)
   
200,000
   
178,571
(a)   
21,429
   
*
 
 
                 
Michael & Betsy Brauser
   
120,000
   
107,143
   
12,857
   
*
 
 
                 
Joseph W. & Patricia Abrams Family Trust (108)
   
80,080
   
71,500
   
8,580
   
*
 
 
                 
C. James Jensen
   
112,000
   
100,000
   
12,000
   
*
 
 
                 
Phillip & Tracy Swan
   
40,001
   
35,715
   
4,286
   
*
 
 
                 
Marvin Mermelstein
   
557,226
 
 (109)
 
557,226
 
 (109)
 
   
 
 
                 
Ben Rabinowitz
   
2,223,900
 
 (110)
 
1,923,900
 
 (110)(a)
 
300,000
 
 (111)
 
*
 
 
                 
Jacob Katz
   
658,410
 
 (112)
 
658,410
 
 (112)(a)
 
   
 
 
                 
CMS Capital (113)
   
1,750,000
 
 (114)
 
1,750,000
 
 (114)(a)
 
   
 
 
                 
Gavriel Alexander
   
800,000
 
 (115)
 
800,000
 
 (115)(a)
 
   
 
 
                 
Chany Silverman
   
200,000
 (116)
 
200,000
 
(116)(a)
 
   
 
 
                 
TOTAL
   
26,054,114
 (117)
 
12,494,421
 
 (118)(a)
 
13,559,693
 
 (119)
 
20.84
%
35

 

(a)
Certain of the shares of common stock and shares of common stock issuable upon the exercise of warrants referenced herein are subject to contractual limitations on the number of shares that may be sold in any 30-day period. The holders of such shares have agreed not to sell more than 5% thereof during any such 30-day period for the six-month period that commenced mid-June 2008. In the event such holders sells less than 5% of such shares in any of such 30-day periods, such unsold shares may be sold in any future month without reducing such future period’s 5% allowance.
 
*Less than 1%

(1)
Represents the amount of shares that will be held by the selling stockholders after completion of this offering based on the assumptions that (a) all shares registered for sale by the registration statement of which this prospectus is part will be sold and (b) that no other shares of our common stock are acquired or sold by the selling stockholders prior to completion of this offering. However, the selling stockholders may sell all, some or none of the shares offered pursuant to this prospectus and may sell other shares of our common stock that they may own pursuant to another registration statement under the Securities Act of 1933, as amended, or sell some or all of their shares pursuant to an exemption from the registration provisions of the Securities Act of 1933, as amended, including under Rule 144. To our knowledge there are currently no agreements, arrangements or understanding with respect to the sale of any of the shares that may be held by the selling stockholders after completion of this offering or otherwise.
 
(2)
David Rosenbaum is a control person of Tobanna Enterprises Corp and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.


36


(3)
Includes 1,164,000 shares of common stock issuable upon the exercise of warrants.
 
(4)
Includes 601,200 shares of common stock issuable upon the exercise of warrants.
 
(5)
Includes 562,800 shares of common stock issuable upon the exercise of warrants.
 
(6)
Includes 286,000 shares of common stock issuable upon the exercise of warrants.
 
(7)
Includes 34,800 shares of common stock issuable upon the exercise of warrants.
 
(8)
Includes 251,200 shares of common stock issuable upon the exercise of warrants.
 
(9)
Arthur Jones is the director and a control person of Mangrove Bay, Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(10)
Crestview Capital Partners, LLC is the sole managing member of Crestview Capital Master, LLC and may be deemed to have sole voting and investment power with respect to the securities beneficially owned by Crestview Capital Master, LLC. Crestview Capital Partners, LLC disclaims beneficial ownership of these securities. The managing members of Crestview Capital Partners, LLC are Stewart Fink, Robert Hoyt and Daniel Warsh, each of whom may be deemed to have voting and dispositive power over securities beneficially owned by Crestview Capital Master, LLC,
 
(11)
Alice Lo is a director and an "authorized person" of Chelsea Development International Limited and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(12)
Includes 217,000 shares of common stock issuable upon the exercise of warrants.
 
(13)
Includes 217,000 shares of common stock issuable upon the exercise of warrants .
 
(14)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(15)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(16)
Includes 204,000 shares of common stock issuable upon the exercise of warrants.
 
(17)
Includes 61,200 shares of common stock issuable upon the exercise of warrants.
 
(18)
Includes 142,800 shares of common stock issuable upon the exercise of warrants.
 
(19)
Includes 27,000 shares of common stock issuable upon the exercise of warrants.
 
(20)
Includes 27,000 shares of common stock issuable upon the exercise of warrants.
 
(21)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(22)
Includes 30,000 shares of common stock issuable upon the exercise of warrants .
 
(23)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(24)
Shaye Hirsch is the managing member of Brio Capital Management, LLC, the general partner of Brio Capital L.P., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.

37

 

(25)
Includes 230,000 shares of common stock issuable upon the exercise of warrants.
 
(26)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(27)
Includes 195,000 shares of common stock issuable upon the exercise of warrants.
 
(28)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(29)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(30)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(31)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.
 
(32)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(33)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(34)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(35)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(36)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(37)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(38)
Includes 120,000 shares of common stock issuable upon the exercise of warrants.
 
(39)
Includes 120,000 shares of common stock issuable upon the exercise of warrants.
 
(40)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(41)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.
 
(42)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(43)
Mark Herskovitz is vice president and a control person of Chase Mortgage, Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(44)
Includes 600,000 shares of common stock issuable upon the exercise of warrants.
 
(45)
Includes 180,000 shares of common stock issuable upon the exercise of warrants.
 
(46)
Includes 420,000 shares of common stock issuable upon the exercise of warrants.
 
(47)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(48)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.
 
(49)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(50)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(51)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.

38


(52)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(53)
Michael Forman is the President and a control person of FB Capital Partners and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(54)
Includes 150,000 shares of common stock issuable upon the exercise of warrants.
 
(55)
Includes 150,000 shares of common stock issuable upon the exercise of warrants.
 
(56)
Stratum Wealth Management LLC has the discretionary right to make investment decisions with respect to the shares held by Chocolate Chip Investments LP. Charles B. Ganz is a principal of Stratum Wealth Management LLC and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(57)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(58)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(59)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(60)
Robert Herskovitz is the president and a control person of Chase Financing, Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(61)
Includes 300,000 shares of common stock issuable upon the exercise of warrants.
 
(62)
Includes 90,000 shares of common stock issuable upon the exercise of warrants.
 
(63)
Includes 210,000 shares of common stock issuable upon the exercise of warrants.
 
(64)
Includes 50,000 shares of common stock issuable upon the exercise of warrants.
 
(65)
Includes 15,000 shares of common stock issuable upon the exercise of warrants.
 
(66)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(67)
Includes (i) 145,000 shares of common stock issuable upon the exercise of warrants and (ii) 150,832 shares and options to purchase 166,667 shares exercisable within the next 60 days held by Paradox Capital Partners, LLC, with respect to which Harvey Kesner is the sole member and has voting and dispositive power over the securities held for the account of this selling stockholder. Mr. Kesner is a member of Haynes and Boone, LLP, and counsel to the Company.
 
(68)
Includes 35,000 shares of common stock issuable upon the exercise of warrants.
 
(69)
Includes (i) 110,000 shares of common stock issuable upon the exercise of warrants and (ii) 150,832 shares and options to purchase 166,667 shares exercisable within the next 60 days held by Paradox Capital Partners, LLC, with respect to which Harvey Kesner is the sole member and has voting and dispositive power over the securities held for the account of this selling stockholder. Mr. Kesner is a member of Haynes and Boone, LLP, and counsel to the Company.
 
(70)
Mark Groussman is the president and a control person of Melechdavid Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(71)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(72)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(73)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(74)
Includes 200,000 shares of common stock issuable upon the exercise of warrants.
 
(75)
Includes 60,000 shares of common stock issuable upon the exercise of warrants.

39


(76)
Includes 140,000 shares of common stock issuable upon the exercise of warrants.
 
(77)
Includes 300,000 shares of common stock issuable upon the exercise of warrants.
 
(78)
Includes 90,000 shares of common stock issuable upon the exercise of warrants.
 
(79)
Includes 210,000 shares of common stock issuable upon the exercise of warrants.
 
(80)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(81)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(82)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(83)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(84)
Includes 30,000 shares of common stock issuable upon the exercise of warrants.
 
(85)
Includes 70,000 shares of common stock issuable upon the exercise of warrants.
 
(86)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(87)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(88)
Joel Padowitz is the chief executive officer of Palladium Capital Advisors, LLC and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder. Palladium Capital Advisors, LLC is a registered broker-dealer and served as one of the placement agents in connection with our private offerings in December 2007, March 2008 and April 2008.
 
(89)
Includes 81,500 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants that are being registered hereunder were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock to be registered for resale hereunder, Palladium Capital Advisors, LLC had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Palladium Capital Advisors, LLC purchased units, of which such shares of common stock and warrants were a part, at the same price as that paid by the other December 2007 investors.

(90)
Includes 24,450 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants that are being registered hereunder were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock to be registered for resale herehunder, Palladium Capital Advisors, LLC had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Palladium Capital Advisors, LLC purchased units, of which such shares of common stock and warrants were a part, at the same price as that paid by the other December 2007 investors.
 
(91)
Includes 57,050 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock, Palladium Capital Advisors, LLC had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Palladium Capital Advisors, LLC purchased units, of which such shares of common stock and warrants were a part, at the same price as that paid by the other December 2007 investors.
 
(92)
Michael Hartstein is an affiliate of Palladium Capital Advisors, LLC, a registered broker-dealer.
 
(93)
Includes 200,000 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants that are being registered hereunder were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock to be registered for resale hereunder, Mr. Hartstein had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Mr. Hartstein purchased units, of which such shares of common stock and warrants were apart, at the same price as that paid by the other December 2007 investors.
 
(94)
Includes 60,000 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants that are being registered hereunder were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock to be registered for resale hereunder, Mr. Hartstein had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Mr. Hartstein purchased units, of which such shares of common stock and warrants were part, at the same price as that paid by the other December 2007 investors.
 
40

 
(95)
Includes 140,000 shares of common stock issuable upon the exercise of warrants. The shares of common stock and warrants were purchased in the ordinary course of business, and, at the time of the purchase of the shares of common stock, Mr. Hartstein had no agreements or understandings, directly or indirectly, with any person to distribute the shares of common stock. Mr. Hartstein purchased units, of which such shares of common stock and warrants were a part, at the same price as that paid by the other December 2007 investors.
 
(96)
Includes 400,000 shares of common stock issuable upon the exercise of warrants.
 
(97)
Includes 120,000 shares of common stock issuable upon the exercise of warrants.
 
(98)
Includes 280,000 shares of common stock issuable upon the exercise of warrants.
 
(99)
Barry Honig is the president and a control person of GRQ Consultants, Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.

41


(100)
Includes (i) 450,000 shares of common stock issuable upon the exercise of warrants held by Barry Honig and (ii) 1,900,000 shares of common stock held by Barry Honig.
 
(101)
Includes 315,000 shares of common stock issuable upon the exercise of warrants held by Barry Honig and (ii) 1,765,000 shares of common stock held by Barry Honig.
 
(102)
Barry Honig is the president and a control person of GRQ Consultants, Inc., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of GRQ Consultants, Inc.
 
(103)
Includes (i) 450,000 shares of common stock issuable upon the exercise of warrants and (ii) 2,209,999 shares of common stock held by GRQ Consultants, Inc.
 
(104)
Includes 135,000 shares of common stock issuable upon the exercise of warrants.
 
(105)
Includes (i) 315,000 shares of common stock issuable upon the exercise of warrants and (ii) 1,495,714 shares of common stock held by GRQ Consultants, Inc.
 
(106)
Robert S. Colman is the trustee and a control person of Robert S. Colman Trust UDT, and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(107)
Konard Ackerman may be deemed the control person of the shares owned by such entity. Alpha Capital Anstalt is a private investment fund that is owned by all its investors and managed by Mr. Ackerman.
 
(108)
Joseph W. Abrams is the trustee and a control person of Joseph W. & Patricia Abrams Family Trust., and, in such capacity, may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(109)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(110)
Includes 600,000 shares of common stock issuable upon the exercise of warrants.
 
(111)
Includes 200,000 shares of common stock issuable upon the exercise of warrants.

(112)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(113)
Howard Weiss is the control person of CMS Capital and may be deemed to have voting and dispositive power over the securities held for the account of this selling stockholder.
 
(114)
Includes 800,000 shares of common stock issuable upon the exercise of warrants.
 
(115)
Includes 400,000 shares of common stock issuable upon the exercise of warrants.
 
(116)
Includes 100,000 shares of common stock issuable upon the exercise of warrants.
 
(117)
Includes 8,304,500 shares of common stock issuable upon the exercise of warrants.
 
(118)
Includes 3,681,650 shares of common stock issuable upon the exercise of warrants.
 
(119)
Includes 4,622,850 shares of common stock issuable upon the exercise of warrants.
 
We have been notified by each of the selling stockholders that such selling stockholder, other than Palladium Capital Advisors, LLC and Michael Hartstein, is not a broker-dealer or an affiliate of a broker-dealer. Each of the selling stockholders has informed us that such selling stockholder did not have at the time it purchased the common stock and warrants any agreements, understandings or arrangements with any other persons, directly or indirectly, to dispose of his, her or its securities.
DESCRIPTION OF SECURITIES
 
We are authorized to issue 412,500,000 shares of common stock. On July 16, 2008, there were 60,451,449 shares of common stock issued and outstanding.
 
42

 
Common Stock
 
The holders of common stock are entitled to one vote per share. Our articles of incorporation do not provide for cumulative voting. The holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.

43


Warrants
 
May 2007 Warrants
 
From May 2007 to July 2007, we issued investors five year warrants to purchase up to an aggregate of 300,000 shares of common stock at an exercise price of $2.00 per share. The exercise price of the warrants and the number of shares issuable upon exercise of the warrants are subject to adjustments for stock splits, combinations or similar events. These warrants also contain a callable feature requiring their exercise upon 30 days prior written notice. If a warrant holder fails to exercise a warrant within 30 days of receiving a call notice, the warrants held by such warrant holder may be purchased by us for a purchase price equal to $.01 per warrant share. These warrants are exercisable only for cash.
 
December 2007 Investor Warrants
 
In connection with our December 12, 2007 private placement, we issued warrants to purchase up to an aggregate of 6,030,000 shares of common stock to the investors. The warrants provide for the purchase of shares of common stock for five years at an exercise price of $2.00 per share . The exercise price of the warrants and the number of shares issuable upon exercise of the warrants are subject to adjustments for stock splits, combinations or similar events. We are prohibited from effecting the exercise of the warrants to the extent that as a result of such exercise the holder of the exercised warrants beneficially owns more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of our common stock upon the exercise of the warrants. If at any time there is no effective registration statement registering, or no current prospectus available for, the resale of the shares of common stock underlying the warrants, then the holders of such warrants have the right to exercise the warrants by means of a cashless exercise.
 
If within seven business days from date on which the exercise of the warrants shall be effected (the “Warrant Share Delivery Date”) we fail to deliver to a holder of the warrants certificates representing the shares into which such warrants are convertible, and if after such Warrant Share Delivery Date the holder of the warrants is required by its brokerage firm to purchase, or the holder’s brokerage firm otherwise purchases, shares of our common stock to deliver in satisfaction of a sale by such holder of the shares of our common stock which the holder was entitled to receive upon the exercise, then we are obligated to pay in cash to the holder the amount by which (x) the holder’s total purchase price for our common stock so purchased exceeds (y) the product of (1) the aggregate number of shares of common stock that such holder was entitled to receive from the exercise multiplied by (2) the then effective exercise price of the warrant, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full.
 
These warrants also contain a callable feature requiring their automatic exercise if the market price of our common stock is equal to or in excess of 175% of the then effective exercise price for a period of 20 consecutive trading days, the average volume of the common stock during such period has been at least 150,000 shares per day and, the shares issuable upon exercise of the warrant are freely tradable without limitation pursuant to Rule 144 of the Securities Act of 1933, as amended, and there is an effective registration statement covering the resale of the shares underlying the warrants. If a warrant holder fails to exercise a warrant within 14 days of receiving notice of our satisfaction of these automatic exercise conditions, the warrants held by such warrant holder shall expire.
 
December 2007 Placement Agent Warrants
 
In connection with our private placement completed on December 12, 2007, we issued warrants to purchase up to an aggregate of 731,900 shares of common stock to Palladium Capital Advisors, LLC, our placement agent, and an affiliate of Palladium Capital Advisors, LLC. Such warrants have the same terms as the warrants issued to the investors in the private placement completed on December 12, 2007, including the right to exercise the warrants by means of a cashless exercise if there is no effective registration statement registering, or no current prospectus available for, the resale of the shares of common stock underlying the warrants at the time. 
 
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April 2008 Warrants

On April 2, 2008, in connection with the exercise of the December 2007 investor warrants to acquire 934,000 shares of common stock, we issued the holders of such exercising holders warrants to purchase up to an aggregate of 467,000 shares of common stock. Such warrants have the same terms as the warrants issued to the investors in the private placement completed on December 12, 2007, except that the initial exercise price of such April 2, 2008 warrants is $3.50 per share. In addition, as with the December 2007 investor warrants, if at any time there is no effective registration statement registering, or no current prospectus available for, the resale of the shares of common stock underlying the warrants, then the holders of these warrants have the right to exercise the warrants by means of a cashless exercise.
 
Please see the disclosure provided in the below section “Lock-up Agreements” for certain restrictions on the sale, transfer, exercise or other disposition of the herein referenced warrants.

Registration Rights
 
December 2007 Private Placement
 
On April 2, 2008, we entered into a registration rights agreement with those persons who agreed to exercise our December 2007 investor warrants pursuant to which we agreed to provide certain registration rights with respect to the common stock issued. Specifically, we agreed to file a registration statement (of which this prospectus forms a part) with the Securities and Exchange Commission on or before May 2, 2008 covering the resale of the common stock issued pursuant to the warrant exercises and to cause such registration statement to be declared effective by the Securities and Exchange Commission on or before June 30, 2008. If (i) the registration statement is not filed on or before May 2, 2008 or (ii) the registration statement is not declared effective by the Securities and Exchange Commission on or before June 30, 2008, then we are subject to liquidated damage payments to the holders of the exercised warrants in an amount equal to 1.5% of aggregate exercise price of the exercised warrants pro rata for every 30 days of delinquency. However, if the registration statement is declared effective by the Securities and Exchange Commission on or before June 30, 2008, all liquidated damages that we may be obligated to pay for our failure to file a registration statement on or prior to May 2, 2008 are deemed to be automatically waived.
 
Pursuant to an amendment to our December 2007 subscription agreement and a separate waiver agreement, we have also agreed to register an additional 1,893,450 shares of common stock issued in our December 12, 2007 private placement and 1,893,450 shares of common stock underlying warrants issued our December 12, 2007 private placement. The holders of these shares, however, are not entitled to any liquidated damages should we fail to file a registration statement with the Securities and Exchange Commission on or before May 2, 2008 or cause a registration statement to be declared effective by the Securities and Exchange Commission on or before June 30, 2008.
 
April 2008 Private Placement
 
On April 2, 2008, in connection with a private placement, we entered into a registration rights agreement with the investors, pursuant to which we agreed to provide certain registration rights with respect to the common stock issued. Specifically, we agreed to file a registration statement (of which this prospectus forms a part) with the Securities and Exchange Commission on or before May 2, 2008 covering the resale of the common stock issued and to cause such registration statement to be declared effective by the Securities and Exchange Commission on or before June 30, 2008. If (i) the registration statement is not filed on or before May 2, 2008 or (ii) the registration statement is not declared effective by the Securities and Exchange Commission on or before June 30, 2008, then we are subject to liquidated damage payments to the holders of the exercising warrant holders in an amount equal to 1.5% of aggregate amount paid for the shares pro rata for every 30 days of delinquency. However, if the registration statement is declared effective by the Securities and Exchange Commission on or before June 30, 2008, all liquidated damages that we may be obligated to pay for our failure to file a registration statement on or prior to May 2, 2008 are deemed to be automatically waived.
 
Lock-up Agreements
 
On December 12, 2007, the holders of 26,395,452 shares of our common stock, including Theodore Farnsworth, our chief executive officer and president, entered into lock-up agreements pursuant to which they agreed not to sell, transfer or otherwise dispose of any shares of common stock or any options, warrants or other rights to purchase shares of common stock until December 12, 2009. Any stockholder, including any officer, desiring to sell any of these shares during the lock-up period must send a letter to us requesting a waiver of the restrictions against transfer provided in the lock-up agreements. Upon receipt of such a letter, our chief executive officer, Theodore Farnsworth, and our chief financial officer, Michael Wallace, will determine whether to approve or deny the request. Neither individual claims the authority to make such decisions on an individual basis. If a request for relates to Mr. Farnsworth’s securities, Mr. Wallace has the sole authority to approve such a request, without any influence from Mr. Farnsworth; if a request for waiver relates to Mr. Wallace’s securities, Mr. Farnsworth has the sole authority to approve such a request, without any influence from Mr. Wallace. All decisions regarding waivers of lock-up restrictions are to be made by management and not by our sole director, as such.

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On December 12, 2007, the holders of 7,812,477 shares of our common stock entered into lock-up agreements pursuant to which they agreed not to sell, transfer or otherwise dispose of any shares of common stock or any options, warrants or other rights to purchase shares of common stock until December 12, 2009. We have agreed not to waive our rights under the lock-up agreements during the first year of their term. However, these holders, during each month of the second year of the lock-up term may, subject to our prior written consent, sell, pledge, hypothecate, or otherwise derive economic value from an amount of such shares equivalent to not more than five percent of the number of shares owned by each such holder. In the event any such holder does not sell five percent of such holder’s shares in any of such months (assuming permission has been so granted), such unsold shares may be sold in any future month without reducing such future month’s five percent allowance (assuming permission has been so granted). From and after the beginning of the 24 th month, none of such holders is subject to any contractual limitations on the disposition of such shares.
 
On December 12, 2007, six holders of 2,822,494 shares of our common stock entered into lock-up agreements pursuant to which they agreed not to sell, transfer or otherwise dispose of any shares of common stock or any options, warrants or other rights to purchase shares of common stock until June 12, 2008. During each of the six months following the expiration of such lock-up period, each of the holders of such shares may sell, pledge, hypothecate, or otherwise derive economic value from an amount of such shares equivalent to not more than five percent of the number of shares owned by each such holder. In the event any such holder does not sell five percent of such holder’s shares in any of such months (assuming permission has been so granted), such unsold shares may be sold in any future month without reducing such future month’s five percent allowance (assuming permission has been so granted). From and after the beginning of the 13th month, none of such holders is subject to any contractual limitations on the disposition of such shares.
 
Rule 144 Damages
 
Pursuant to the subscription agreement from our December 12, 2007 private placement, if those investors are not allowed to resell certain shares of common stock or shares of common stock underlying warrants issued in such private placement, without limitation, pursuant to Rule 144 of the Securities Act of 1933, as amended, for any reason except for an investor’s status as an affiliate or “control person”, then we shall pay such investors liquidated damages equal to 1.5% of the purchase price for all such securities that are not subject to any lock-up provisions for each 30 day period of delinquency. The resale rights of such investors are limited to 5% per month (for the second six months after closing) of the shares held by them, as increased by any shares purchased by them through the exercise of their private placement warrants.
 
Anti-Takeover Effect of Nevada Law and Certain By-Law Provisions
 
Our bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change of control of our company. These provisions are as follows:
 
 
·
they provide that special meetings of stockholders may be called only by our chairman, our president or by a resolution adopted by a majority of our board of directors; and
 
 
·
they do not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority stockholders to effect changes in our board of directors.
 
In the future we may also become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and if the corporation does business in Nevada or through an affiliated corporation.
 
The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares is sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third, (2) one-third or more but less than a majority or (3) a majority or more. The ability to exercise voting power may be direct or indirect, as well as individual or in association with others.

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The effect of the control share law is that the acquiring person, and those acting in association with that person, obtain only voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.
 
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for the stockholder’s shares.
 
Nevada’s control share law may have the effect of discouraging corporate takeovers.
 
In addition to the control share law, Nevada has a business combination law, which prohibits some business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
 
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of our company from doing so if it cannot obtain the approval of our board of directors.
 
Indemnification of Directors and Officers
 
Sections 78.7502 and 78.751 of the Nevada Revised Statutes provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director or officer must not have had reasonable cause to believe his/her conduct was unlawful.
 
Under Section 78.751 of the Nevada Revised Statutes, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined the officer or director did not meet the standards.
 
Our bylaws include an indemnification provision under which we have the power to indemnify, to the fullest extent permitted under Nevada law, our current and former directors and officers, or any person who serves or served at our request for our benefit as a director or officer of another corporation or our representative in a partnership, joint venture, trust or other enterprise, against all expenses, liability and loss reasonably incurred by reason of being or having been a director, officer or representative of ours or any of our subsidiaries. We may make advances for expenses upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he/she is not entitled to be indemnified by us.
 
We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions.
 
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

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PLAN OF DISTRIBUTION
 
Each selling stockholder of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTC Bulletin Board or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:
 
 
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 
 
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
 
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
 
·
an exchange distribution in accordance with the rules of the applicable exchange;
 
 
·
privately negotiated transactions;
 
 
·
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
 
 
·
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
 
 
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
 
·
a combination of any such methods of sale; or
 
 
·
any other method permitted pursuant to applicable law.
 
The selling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended , if available, rather than under this prospectus.
 
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
 
In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
 
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The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. Each selling stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).
 
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as amended.
 
Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, they will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the selling stockholders.
 
We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144 or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
 
Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933, as amended).
LEGAL MATTERS
 
Bryan Cave LLP, Irvine, California, will pass upon the validity of the shares of our common stock offered by us pursuant to this prospectus.
EXPERTS
 
The financial statements as of September 30, 2007, and for the period from May 8, 2007 (Inception) to September 30, 2007 included in this prospectus have been audited by Sherb & Co. LLP, an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities Act of 1933, as amended, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information about us and our shares of common stock that we are offering in this prospectus.

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We file annual, quarterly and current reports and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Our Securities and Exchange Commission filings are available to the public over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov. You may also read and copy any document we file at the Securities and Exchange Commission’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. In addition, through our website, http://www.drinkpurple.com, you can access electronic copies of documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-KSB, our Quarterly Reports on Form 10-QSB, and Current Reports on Form 8-K and any amendments to those reports. Information on our website is not incorporated by reference in this prospectus. Access to those electronic filings is available as soon as practicable after filing with the Securities and Exchange Commission. You may also request a copy of those filings, excluding exhibits, from us at no cost. Any such request should be addressed to us at: Michael Wallace, Purple Beverage Company, Inc., 450 East Las Olas Blvd., Suite 830, Fort Lauderdale, Florida 33301.
 
This prospectus is part of a registration statement filed by us with the Securities and Exchange Commission. Because the Securities and Exchange Commission’s rules and regulations allow us to omit certain portions of the registration statement from this prospectus, this prospectus does not contain all the information set forth in the registration statement. You may review the registration statement and the exhibits filed with, or incorporated therein by reference in, the registration statement for further information regarding us and the shares of our common stock offered by this prospectus. Statements contained in this prospectus as to the contents of any contract or any other documents filed, or incorporated therein by reference, as an exhibit to the registration statement, we refer you to the exhibits for a more complete description of the matter involved. The registration statement and its exhibits may be inspected at the Securities and Exchange Commission ’ s Public Reference Room at the location described above.

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PURPLE BEVERAGE COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
 
 
 
Report of Independent Registered Public Accounting Firm
F-2
Balance Sheet as of September 30, 2007
F-3
Statement of Operations for the period from May 8, 2007 (Inception) to September 30, 2007
F-4
Statement of Changes in Stockholders’ Deficiency
for the period from May 8, 2007 (Inception) to September 30, 2007
F-5
Statement of Cash Flows the period from May 8, 2007 (Inception) to September 30, 2007
 
Notes to Financial Statements
F-7
 
 
Balance Sheet as of March 31, 2008 (unaudited)
F-19
Statement of Operations (unaudited) for the three months ended March 31, 2008
F-20
Statement of Cash Flows (unaudited) for the three months ended March 31, 2008
F-21
Notes to Unaudited Financial Statements
F-22

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders:
Purple Beverage Company, Inc.
Fort Lauderdale, Florida

We have audited the accompanying balance sheet of Purple Beverage Company, Inc. as of September 30, 2007, and the related statements of operations, changes in stockholders’ deficiency and cash flows for the period from May 8, 2007 (Inception) to September 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose