SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street, N.W.

Washington, D. C. 20549

 

 

AMENDMENT NO. 1

TO

 

FORM 10-SB

 

General Form for Registration of Securities

 

Pursuant to Section 12(b) or (g) of

The Securities Exchange Act of 1934

 

SWEET SUCCESS ENTERPRISES, INC.

(Exact name of registrant as specific in its charter)

 

Nevada		54-2088620
(State of Incorporation)		(I.R.S. Employer I.D. No.)

 

1250 NE Loop 410, Suite 630

San Antonio, Texas 78209

 (Address of principal executive offices, including zip code)

 

210.824.2496

(Registrant’s telephone number, including area code)

 

Copies to:

Gary A. Agron, Esq.

5445 DTC Parkway, Suite 520

Greenwood Village, CO 80111

(303) 770-7257

Securities to be registered pursuant to Section 12(b) of the Act:

 

None

(Title of Class)

 

Securities to be registered pursuant to Section 12(g) of the Act:

 

Common Stock, $.0001 par value per share

(Title of Class)

 

 

PART I

 

ITEM I:  DESCRIPTION OF BUSINESS

 

History

 

Sweet Success Enterprises, Inc. (the “Company”), formerly New Bridge Reorganization Corp., was organized as a Nevada corporation in September 2001 in connection with the reorganization of its parent, New Bridge Products, Inc. which was originally incorporated in August 1995 as a manufacturer of mini-vans for the physically challenged and which filed a petition in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in December, 2001. The Company’s plan of reorganization was approved by the U.S. Bankruptcy Court for the District of Arizona in September 2002, and the Company was discharged from bankruptcy in October 2002.

 

In November 2002, the Company acquired all 4,000,000 shares of the issued and outstanding common stock of Beverage Acquisition Corporation (“BAC”) for 2,750,000 shares of the Company’s common stock. In December 2002, the Company changed its name to Sweet Success Enterprises, Inc. All references to the Company’s business throughout this Registration Statement reflect the operations of BAC.

 

The Company’s shares of common stock currently trade on the Pink Sheets of the National Quotation Bureau under the symbol “SWTS.” On September 23, 2005, the closing price of the common stock was $1.51 per share.

 

In their report dated September 6, 2005, the Company’s auditors indicated there was substantial doubt about the Company’s ability to continue as a going concern. Accordingly, unless the Company raises additional working capital or revenue grows to support the Company’s business plan, it may be unable to continue in business. At June 30, 2005, the Company had an accumulated deficit of $2,875,336.

 

Acquisition of the Sweet Success Brand

 

In 1993, as a part of its existing product line, Nestlé USA developed a line of diet meal replacement products under the “Sweet Success” brand name (“Sweet Success”).  The Sweet Success product line consisted of ready-to-drink beverages, snack bars, and powder mixes and was marketed as a weight loss and healthcare management product.

 

In August 2000, Nestlé sold Sweet Success to Nutri/System, Inc., a company that had intended to market Sweet Success as one of its Web based on-line meal replacement products.  However, in December 2000, due to funding problems associated with the decline of investor interest in Internet companies, Nutri/System was unable to launch Sweet Success.  Accordingly, in the second quarter of 2001, Nutri/System discontinued sales of Sweet Success products.

 

In December 2002, BAC purchased the Sweet Success brand from Nutri/System for a purchase price of $200,000. The Company also granted a royalty to Nutri/System equal to 1% of net sales generated in the 19^th through 36^th month following the product’s introduction and issued to Nutri/System common stock purchase warrants to purchase up to 200,000 shares of the Company’s common stock at $5.00 per share exercisable until December 2005.  The acquisition, which closed in December 2002, included all rights to the “Sweet Success” brand name, formulas for all meal replacement products, trademarks, service marks, copyrights, research and records.

 

 

Products

 

In July 2005, the Company reformulated and reintroduced the Sweet Success product line initially through a small number of food retailers in Las Vegas, Nevada and select cities in Texas. The reformulated product offered in these retail stores is the Company’s new Sweet Success “Complete Fuel” premium priced ready-to-drink beverage. The Company believes that the Complete Fuel formula is responsive to contemporary consumers’ interest in nutritional and healthful products that can serve simply as a good tasting drink or can serve as a meal replacement or as a food supplement. Complete Fuel has been introduced initially in two flavors, Creamy Vanilla Supreme and Bavarian Chocolate Supreme. These formulations offer consumers healthful ingredients, such as Aktivated Barley (TM), guarana, Omega-3 fatty acids and ground flax. In the Company’s opinion, these new ingredients provide consumers with a superior healthy-lifestyle beverage that can be conveniently consumed at any time. The Complete Fuel formulas are good tasting and all natural. To date, production has been limited to 7,200 cases of Complete Fuel, produced at a cost of $104,000.

 

The two Complete Fuel formulas are milk-based and fortified with vitamins to enhance the nutritional content.  They contain approximately 200 calories and three grams of fat per 11ounce serving and are designed to provide sufficient nutrition to substitute for as many as two meals per day, based upon one serving per meal. The fiber and texture in the products are designed to satiate, but contain no appetite suppressants. Guarana provides a sustained energy boost. The products are marketed in a limited geographic area in 11 ounce Tetra-Pack containers, packaged in cases of 24 units (6 four-packs). The products are “shelf stable” for up to twelve months using a process in which the product and its contents are sterilized by heating to over 250°F.

 

Assuming consumer acceptance of Complete Fuel, the Company plans to introduce additional flavors for the Complete Fuel line beginning in the first quarter of 2006 with the Company’s Mocha flavor.  Innovation is a critical component of the Company’s overall business plan because new products create excitement with consumers and retailers, and provide leverage for the Company’s developing sales and distribution network.  Therefore, the Company seeks to build a pipeline of new products to create market momentum.  Future new products will be extensions of the Complete Fuel line of nutritional beverages to include Mocha, or will represent new categories of functional beverages which offer healthful ingredients to address specific body needs such as (i) antioxidants represented initially by antioxidant formulation the Company expects to brand as “The Purifier,” which will include a number of berry juices, (ii) highly concentrated vitamin formulations represented initially by a formulation the Company expects to brand as “Power Blend,” or (iii) products that contain heart healthy or brain healthy ingredients represented initially by a formulation the Company expects to brand as “Brain Power.” The criteria the Company has chosen for new products takes into consideration the product’s growth potential, margin potential, competitive differentiation and its synergy with existing Sweet Success products. The Power Blend is expected to be in production in the first quarter of 2006, with The Purifier and Brain Power expected in the second quarter of 2006.

 

The Company expended $15,000 and $37,562 on research and development during the year ended December 31, 2004 and the six months ended June 30, 2005, respectively. The Company did not incur any costs for research and development during the year ended December 31, 2003.

 

The Ready-To-Drink Nutritional Beverage Market

 

In reintroducing the Sweet Success line to the market, the Company seeks to build upon the brand’s previous name recognition as well as the growing demand for good tasting, convenient and nutritious beverages. Consumers have become increasingly health conscious over the past decade, as reflected in the popularity of activities aimed at maintaining and improving health; including exercising and dieting. The continued decline in negative health habits such as smoking and alcohol consumption also reflects this trend.  Moreover, the Company believes that consumers have become more aware of the nutritional content of the foods they eat and seek beverages that offer healthful ingredients.

 

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Competition

 

Although the Company competes with a variety of competitors in the health beverage as well as the meal replacement industry, it currently competes primarily with other nationally distributed producers of healthy nutritional beverage products as well as regional and local producers.  National competitors include Odwalla, which markets chilled juices and smoothies, as well as Atkins, EAS Myoplex, Pure Pro, Balance, Kashi, Jones Soda and Hanson’s, all of which offer premium nutritional beverages.

 

To the extent that Complete Fuel is used as a meal replacement product, it competes against Slim Fast Foods and other meal replacement producers, which offer less expensive products.  There are many other competitors in the liquid meal replacement market including divisions of other large companies, as well as smaller competitors. Competitors also include private label brands and firms that offer a variety of liquid beverages, meal replacements, nutritional beverage bars and shakes, appetite suppressants and nutritional supplements. These beverages include Ensure, Atkins, Naked Juice, Sustacal, Snapple-A-Day and Edge along with private labels offered by most of the major retail food stores. In a broader sense, the Company also competes with retail chains, such as Jenny Craig and Weight Watchers, both of which offer liquid meal replacement nutritional beverages, along with medically supervised programs, on-line diet oriented Web sites and other self administered products and programs.  Current and new competitors may be able to quickly introduce products at relatively low cost.  These competitors may operate in a variety of distribution channels, including on-line commerce, retail stores, catalog operations or direct selling.

 

The principal competitive factors in the nutritional beverage and meal replacement categories:

 

•        Taste

•        Nutritional value

•        Appetite satisfaction

•        Brand recognition

•        Availability and convenience of obtaining the products

•        Price

 

The Company offers its Sweet Success Complete Fuel at prices similar to other premium nutritional or meal replacement beverages, such as Atkins, EAS Myoplex, Odwalla, Jones Soda and Hanson’s. The Company believes its products offer taste, nutritional value and appetite satisfaction at least equal to those of its competitors. Nevertheless, most of the Company’s competitors have substantially greater name recognition and financial, marketing and personnel resources than the Company. Additionally, the products of these competitors are more readily available for purchase on-line, in retail stores and through direct sales. Currently, the Company’s sales have been limited to Las Vegas, Nevada and select cities in Texas. These sales commenced in July 2005.

 

As indicated above, the Company has begun a limited production of its nutritional beverages consisting of a total of 7,200 cases to date, and will be unable to expand its production and marketing until it raises sufficient debt or equity financing. The Company initially outsourced the production and storage of Complete Fuel products through a production agreement with Kiko Foods, Inc. which was terminated in October 2005 as a result of damage to Kiko’s facilities from Hurricane Katrina. In October 2005 Kiko was replaced by California Natural Products (“CNP”) pursuant to a purchase order letter agreement under which CNP will provide the Complete Fuel line based upon a price of $4.35 per case, predicated upon a production run of 300,000 cases annually and minimum individual production runs of 10,000 cases. Smaller runs are subject to additional charges. CNP will also store product for $.15 per case per month. Following production and storage, products are shipped by the Company’s producer, or by third-party fulfillment companies, directly to food brokers and retailers.

 

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Marketing

 

The Company seeks to market its Sweet Success Complete Fuel brand as an advanced and healthy nutritional beverage product. Complete Fuel is offered as a premium, tasty, healthful shake that can be a meal replacement or can be consumed just for its taste and health benefits. Emphasis is currently being placed primarily on selling cold single servings in stores and secondarily on multi-packs. In support of this strategy, the Company will seek to utilize several merchandising techniques to gain contract retailers, including providing cold equipment in high volume stores and obtaining space in retailers’ cold beverage sections. Subject to funding, the Company plans to significantly invest in programs for in-store shoppers to sample Complete Fuel. The Company will also aggressively invest in retail display programs, promotions and consumer incentives to build excitement and volume for the brand.

 

In July 2005 the Company launched Complete Fuel in the Las Vegas, Nevada and Houston, Texas markets. Retailers that specialize in specialty/gourmet/health products will be targeted for future distribution. In Texas, the Company will seek shelf space in stores such as Central Market, Whole Foods, Wild Oats, Rice Epicurean, Market Street, Costco, HEB gourmet and selected independent stores. To date, the Company has had discussions with these stores, has shipped samples to them and is awaiting responses from them. While providing access to target consumers, these retailers are also important because success in these chains will positively influence potential retailers throughout the rest of the U.S. The Company has initially stocked shelf space in Walgreen stores in Las Vegas, Nevada, Tetco convenience stores in Houston, Dallas, Austin and San Antonio, Texas and four Antone’s Delis, two Murphy’s Delis and two hospitals in Houston, Texas. Total aggregate sales to these stores for the three months ended September 30, 2005 were approximately $12,000 in Nevada and $4,000 in Texas.

 

Subject to obtaining funding, the Company expects to use a variety of programs to drive consumer awareness of Complete Fuel. Consumer programs will be developed that will deliver the Complete Fuel message to target consumers. These will include television, radio and print media advertising along with participation and sampling at key community events, activities and shows. Community events will be focused in areas where the Company has key retail availability and will encourage consumers to purchase Complete Fuel at participating retailers.

 

The Company’s marketing plan is directed toward building customer loyalty, encouraging repeat purchases, increasing average order size and producing recurring revenue.  In order to maximize this marketing effort, the Company must:

 

•        Generate interest and awareness of Complete Fuel to encourage customers to purchase the product at retail stores;

•        Continuously improve its online and offline sales efforts and service;

•        Build customer trust in healthy, nutritious beverages by providing product information to facilitate informed purchases;

•        Continuously add new distributors;

•        Ensure quick and efficient distribution; and

•        Build strategic relationships.

 

In July 2005 the Company entered into a product promotion agreement with Mark Burnett, a television producer, under which Burnett agreed to make a commercially reasonable good faith effort to cause Sweet Success brand products to be placed on the set or used in television productions produced by Burnett. Burnett was issued warrants to purchase up to 2,000,000 shares of the Company’s common stock at prices ranging from $.70 to $1.25 per share in connection with the agreement together with a 5% royalty on products sold which were promoted on a Burnett television production.  Of these options, 850,000 are exercisable immediately, and the balance are exercisable based upon certain milestones and conditions.

 

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Government Regulation

 

The processing, formulation, packaging, labeling and advertising of the Company’s products are subject to regulation by several federal agencies, but primarily by including the Food and Drug Administration (the “FDA”) and the Federal Trade Commission (the “FTC”).  The Company must comply with the standards, labeling (including nutritional information) and packaging requirements imposed by the FDA and FTC for the marketing and sale of medical foods, food supplements, vitamins and nutritional products.  Many FDA and FTC remedies and processes, including imposing civil penalties and commencing criminal prosecution, are available under federal statutes and regulations if product claims violate law.  The FDA could, in certain circumstances, require the reformulation of certain products to meet new standards, require the recall or discontinuance of certain products not capable of reformulation, or require additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling, and scientific substantiation. Compliance with FDA and, FTC requirements and other regulations is costly and time consuming. Moreover, violations of regulations or requirements could result in the Company’s products being removed from the market.

 

Intellectual Property

 

In December 2002, the Company acquired from Nutri/System all of its rights to the “Sweet Success” brand name and its then formulations for all nutritional beverage products together with trademarks, service marks, copyrights, research and records. The formulations will not and have not been patented. Subsequently, the Company developed (but has not patented) other formulations under its Complete Fuel brand with the assistance of Jon Barron, one of its directors.

 

The Company relies on a combination of common law trademark rights, U.S. federal registration rights and trade secret laws to protect its brand name and its product formulations. Nevertheless, the Company’s formulations are not patented and may be duplicated by competitors. The Company protects its product formulations by confidentiality agreements with its employees and contract manufacturers. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company’s trade secrets or those of its contract manufacturers will not otherwise become known or discovered independently by competitors. If the Company were to lose ownership of its product formulations, it could have a material adverse affect on its competitive position.

 

Employees

 

As of the date hereof, the Company has three full-time employees, William J. Gallagher, its Chief Executive Officer, his son, W. H. Benjamin Gallagher and Micheraie Cruz Canales. The Company’s performance and development are substantially dependent on the continued services of its executive officers and on the Company’s ability to retain and motivate other key employees. The Company does not have “key person” life insurance policies on the lives of any of its executive officers or other employees. The Company’s future success also depends on its continuing ability to attract and retain qualified personnel and management in the future.

 

Reports to Security Holders

 

 As a result of its filing of this Form 10-SB, the Company expects to become subject to the reporting obligations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include filing an annual report under cover of Form 10-KSB, with audited financial statements, unaudited quarterly reports on Form 10-QSB and the requisite proxy statements with regard to annual shareholder meetings. The public may read and copy any materials the Company files with the Securities and Exchange

 

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Commission (the “Commission”) at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0030. The Commission maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. Information about the Company is also available on its Web site at www.sweetsuccess.com. Information included on the Web site is not part of this Form 10-SB.

 

Risk Factors

 

This Registration Statement contains forward-looking statements that involve risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “plans,” “may,” “will,” “should,” or “anticipation” or the negative thereof or other variations thereon or comparable terminology. Actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors, including those set forth below and elsewhere in this Registration Statement. The following risk factors should be considered carefully in addition to the other information in this Registration Statement, before purchasing any of the Company’s securities.

 

If the Company continues to experience limited operations and revenue and historical losses, it may be required to limit or terminate its operations.

 

The Company has had limited operations since inception and has incurred losses of $564,268 and $1,864,680 for the years ended December 31, 2004 and 2003 and $446,388 for the six months ended June 30, 2005 on no revenue. Continued limited operations and revenue and ongoing losses may cause the Company to limit or terminate its operations.

 

The Company received a going concern qualification from its auditors and has an accumulated deficit of $2,875,336, thereby limiting its ability to continue its operations.

 

In their report dated September 6, 2005, the Company’s auditors indicated there was substantial doubt about the Company’s ability to continue as a going concern. Accordingly, unless the Company raises additional working capital or revenue grow to support the Company’s business plan, it may be unable to continue in business. At June 30, 2005, the Company had an accumulated deficit of $2,875,336.

 

The Company will require additional capital, which, if unavailable, may not allow it to remain in business.

 

The Company estimates it will need approximately $1,800,000 to fund its operations in 2006, to market Complete Fuel and to develop other nutritional or functional beverages. The Company cannot guarantee that it will have access to these required funds in the future, or that such funds will be available on acceptable terms and conditions. If the Company is unable to raise additional funds, it will be unable to market its products and may be unable to remain in business.

 

In order to obtain funds for working capital, the Company may be required to dilute its existing investors.

 

The Company requires approximately $1,800,000 to fund its operations in 2006. In order to obtain these funds, of which there can be no assurance, it may seek to sell additional equity securities, thereby diluting ownership of its current investors.

 

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The Company has produced only a small quantity of Complete Fuel and is dependent upon this single product line and on the development of new products, in the absence of which the Company’s sales will be extremely limited.

 

The Company has only produced 7,200 cases of Complete Fuel, its ready-to-drink nutritional beverage and only offers the single product line in two flavors. If this product is not well received by consumers, the Company’s sales will be extremely limited. Future sales will be dependent upon the Company’s ability to introduce new and innovative products. The success of new products depends on a number of factors, including the Company’s ability to develop products that appeal to consumers and that are competitively priced. There can be no assurance that the Company’s efforts to develop new products will be successful, that consumers will accept new products, or that the Company’s competitors will not introduce products that achieve greater market acceptance than the Company’s products.

 

The Company is dependent on independent distributors, which could affect its ability to efficiently and profitably distribute and market its products and expand its business into other geographic markets and could reduce its revenue.

 

The Company’s ability to establish a market for its products in any geographic distribution area is dependent on its ability to raise funds and to establish and maintain successful relationships with reliable independent distributors strategically positioned to serve those areas. The Company’s few distributors sell and distribute competing products, including non-alcoholic and alcoholic beverages, and the Company’s products represent a small portion of their business. To the extent that its distributors are distracted from selling its products or do not employ sufficient efforts in managing and selling its products, including re-stocking the retail shelves with the Company’s products, its sales and profitability will be adversely affected. The Company’s ability to maintain its distribution network and attract additional distributors will depend on a number of factors, many of which are outside its control. Some of these factors include:

 

•        The level of demand for its products in a particular distribution area;

•        Its ability to price its products at levels competitive with those offered by competing products; and

•        Its ability to deliver products in the quantity and at the time ordered by distributors.

 

The Company may not be able to meet all or any of these factors in any of its prospective geographic areas of distribution. The Company’s inability to achieve any of these factors in any geographic distribution area will have a material adverse effect on its relationships with its distributors in that particular geographic area, thus limiting its ability to expand its market and reduce its revenue.

 

The Company does not have long-term agreements with its distributors, and incurs significant time and expense in attracting and maintaining key distributors.

 

The Company’s marketing and sales strategy depends in large part on the availability and performance of its independent distributors. The Company’s few distribution relationships are oral (based solely on purchase orders) and are terminable by either party at will. The Company currently does not have, nor does it anticipate in the future that it will be able to establish, long-term contractual commitments with distributors. In addition, there are no minimum levels of performance under these distribution arrangements, and any of those arrangements may be terminated at will. The Company may not be able to maintain current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that it may have to incur additional expenditures to attract and maintain key distributors in one or more geographic distribution areas in order to profitably exploit its geographic markets.

 

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The Company faces intense competition, which could lower its product prices and reduce its profitability.

 

Although the Company competes with a variety of competitors in the health food and meal replacement industry, it will initially compete primarily with other producers of ready-to-drink nutritional beverages.  The category is relatively fragmented, consisting of private label brands and other competitors, including Atkins, EAS Myoplex, Pure Pro, Balance, Kashi, Jones Soda and Hanson’s, which offer a variety of nutritional and healthful beverages. These products also include Ensure, Sustacal, Snapple-A-Day and Edge along with private labels offered by most of the major retail food stores. In a broader sense, the Company also competes with traditional meal replacement products such as Slim Fast, as well as retail chains such as Jenny Craig and Weight Watchers (both of which offer their own liquid nutritional beverages), along with medically supervised programs, on-line diet oriented Web sites and other self administered products and programs.  Current and new competitors may be able to quickly introduce products at relatively low cost.  These competitors may operate in a variety of distribution channels, including on-line commerce, retail stores, catalog operations or direct selling. Such competition could cause the Company to reduce its product prices, which in turn could reduce its revenue and therefore its profitability.

 

The Company is subject to product liability claims, which could require it to expend funds to defend or pay claims against it.

 

The Company faces an inherent risk of exposure to product liability claims if the use of its proposed products results in illness or injury. If the Company does not have adequate insurance or contractual indemnification from its manufacturers, product liability claims could require it to expend funds to defend such claims or to pay claims against it. Manufacturers and distributors of meal replacement products and nutritional supplements are often named as defendants in product liability lawsuits. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of any insurance coverage that the Company may acquire would add additional costs to its business and divert the attention of its senior management from the operation of its business.

 

The Company’s products may contain innovative ingredients or combinations of ingredients, and there may be little long-term experience with human consumption of these ingredients or combinations in concentrated form. In addition, interactions of these products with other similar products, prescription medicines and over-the-counter drugs have not been fully explored. Although the Company may perform research and tests in connection with the formulation and production of the products that it proposes to sell, there are no conclusive clinical studies regarding its proposed products.

 

The Company is subject to risks associated with adverse publicity, which could reduce consumer acceptance of its products and therefore reduce its revenue and its product prices.

 

The Company is highly dependent upon consumer perception of the safety, quality and possible dietary benefits of its products. As a result, substantial negative publicity concerning meal replacement products or other nutritional foods similar to the Company’s products could lead to a loss of consumer confidence in the Company’s products, removal of the Company’s products from retail shelves and reduced revenue and product prices for the Company’s products.

 

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The Company may be unable to protect its intellectual property, thereby reducing its revenue and its ability to compete.

 

The Company relies on a combination of common law trademark rights, U.S. federal registration rights and trade secret laws to protect its product formulations. Nevertheless, these formulations are not patented and may be duplicated by competitors. The Company protects its product formulations by confidentiality agreements with its employees and contract manufacturers. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company’s trade secrets or those of its contract manufacturers will not otherwise become known or discovered independently by competitors. If the Company were to lose ownership of its product formulations, its revenue and ability to compete would be substantially reduced.

 

Raw materials used in the Company’s products may be subject to delays, limited availability and uncertain costs, thereby reducing the Company’s product production and revenue.

 

As with most food products, the availability and cost of raw materials, especially for the Company’s tetra prisma packaging and guarana extract, used in the Company’s products can be affected by a number of factors beyond its control, such as general economic conditions affecting growing decisions, weather conditions such as frosts, drought, and floods, and plant diseases, pests, and other acts of nature. Because the Company does not control the production of raw materials, it is subject to delays caused by interruption in production of materials based on conditions not within its control. Such conditions include job actions or strikes by employees of suppliers, weather, crop conditions, transportation interruptions, natural disasters or other catastrophic events. There can be no assurance that the Company’s contract manufacturers will be able to obtain alternative sources of raw materials at favorable prices, or at all, if they experience supply shortages. The lack of availability of raw materials could reduce the Company’s product production and therefore its revenue.

 

The Company depends on its key personnel and the loss of such personnel could limit its operations and reduce its revenue and profitability.

 

The success of the Company is significantly dependent on the personal efforts, performance, abilities and continued service of its three employees. The loss of service of any of these individuals could limit its operations, reduce its revenue and its profitability. In addition, the future success of the Company depends upon its ability to attract and retain highly qualified personnel.  Competition for such personnel is intense and there can be no assurance that the Company will be able to attract and retain such qualified personnel.

 

The Company’s products are subject to government regulation. Violations of such regulations could prohibit the Company from selling its products.

 

The processing, formulation, packaging, labeling and advertising of the Company’s products are subject to regulation by several federal agencies, but primarily by the Food and Drug Administration (the “FDA”) and the Federal Trade Commission (the “FTC”) who strictly regulate companies that these agencies believe may be making health claims.  The Company must comply with the standards, labeling (including nutritional information) and packaging requirements imposed by the FDA and FTC for the marketing and sale of medical foods, food supplements, vitamins and nutritional products.  Many FDA and FTC remedies and processes, including imposing civil penalties and commencing criminal prosecution, are available under federal statutes and regulations if product claims violate law.  The FDA could, in certain circumstances, require the reformulation of certain products to meet new standards, require the recall or discontinuance of sales of certain products not capable of reformulation, or require

 

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additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling, and scientific substantiation.

 

If the Company violates regulations associated with its advertising, it could limit its future advertising efforts and therefore its potential revenue.

 

Advertising of the Company’s products is subject to regulation by the FTC under the Federal Trade Commission Act, which prohibits unfair or deceptive trade practices, including dissemination of false or misleading advertising. In addition, the National Advertising Division of the Council of Better Business Bureaus, Inc. (“NAD”) administers a self-regulatory program by the advertising industry to insure truth and accuracy in national advertising. NAD monitors national advertising and entertains inquiries and challenges from competing companies and consumers. Any violations of FTC or NAD regulations, or future changes to the Company’s advertising resulting from compliance with an adverse NAD determination or FTC action or fines or penalties assessed in connection therewith, could limit the Company’s advertising and therefore its potential revenue.

 

Consumers may not accept the Company’s products, thereby reducing the Company’s revenue.

 

The Company’s revenue depends on attracting and maintaining purchasers of healthy beverages and meal replacement products through cost-efficient marketing and research. These markets are extremely competitive, with a multitude of products available to consumers, including nutrition and meal replacement drinks, prescription and over-the-counter drugs and herbal supplements. The Company may not be able to attract consumers away from more traditional health food and meal replacement products. Factors that could prevent or delay consumer acceptance of the Company’s product, and consequently affect its ability to generate revenue, include:

 

•        Pricing that does not meet consumer expectations when compared to the pricing of other nutritional beverage products;

•        Lack of consumer awareness of the Company’s products;

•        Customer concerns about the healthfulness of the Sweet Success product; and

•        Release of scientific information that highlights a nutritional beverage or meal replacement product superior to the Company’s product.

 

The Company is dependent upon third-party manufacturers, the loss of whom may limit the Company’s ability to deliver its products.

 

The Company does not own or operate any manufacturing facilities and therefore is dependent on third parties for the manufacture of its products. If the Company’s current contract manufacturer was unable or unwilling to produce and ship the Company’s products in a timely manner or to produce sufficient product quantities to support the Company’s growth, the Company would have to identify and qualify a new contract manufacturer. There can be no assurance that the Company would be able to identify and qualify new contract manufacturers in a timely manner or that such manufacturers would allocate sufficient capacity to the Company in order to meet its requirements, which could adversely affect the Company’s ability to make timely deliveries of its products. In addition, there can be no assurance that the capacity of the Company’s contract manufacturer will be sufficient to fulfill the Company’s orders.

 

The nutritional food and meal replacement industries are subject to changes in consumer trends, which could reduce interest in the Company’s products and therefore reduce product prices and revenue.

 

The nutritional food and meal replacement industries are subject to changing consumer trends, demands and preferences. Trends within these industries change often, and the failure of the Company to

 

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anticipate, identify or react to changes in these trends could lead, among other things, to reduced interest and product price reductions, which in turn would reduce the Company’s revenue. These changes might include consumer demand for new products or formulations that include different health promoting ingredients or appetite suppressants. The Company’s success depends, in part, on its ability to anticipate the tastes and dietary habits of consumers and to offer products that appeal to their preferences on a timely and affordable basis.

 

Control by the Company’s principal shareholders and the Company’s preferred stock authorization may prevent a change in control.

 

The Company’s officers and directors own approximately 29.6% of the Company’s issued and outstanding shares of common stock and, accordingly, are likely to be able to elect all of the Company’s directors and control the affairs of the Company.  The Company’s Articles of Incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by the Board of Directors.  Accordingly, the Board of Directors may, without shareholder approval, issue preferred stock with dividend, liquidation, conversion, voting, redemption or other rights which could adversely affect the voting power or other rights of the holders of the common stock.  The issuance of any shares of preferred stock having rights superior to those of the common stock may result in a decrease of the value or market price of the common stock and could further be used by the Company’s Board of Directors as a device to prevent a change in control of the Company.  The Company has no other anti-takeover provisions in its Articles of Incorporation.  Holders of preferred stock may also have a right to receive dividends, certain preferences in liquidation and conversion rights.

 

ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this registration statement. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this registration statement.

 

Overview

 

We contract for the production of, market and distribute Sweet Success Complete Fuel All-Natural Healthy beverages, which contain a proprietary blend of Aktivated Barley™, Ground Flax and Omega-3 Fatty Acids. Sweet Success beverages are dairy-based and fortified with vitamins and minerals. We currently sell our ready-to-drink nutritious beverages in Texas Metro’s and in Las Vegas, Nevada.

 

We currently generate negligible sales and no income or cash flows.  We are currently developing and marketing shelf stable nutritious beverage products. Our products are produced by third party manufacturers of all natural beverage products. We plan to sell these products to retailers as well as distributors.

 

A primary component of our costs will be marketing expenditures to support our brand including advertising costs, sponsorship fees and special promotional events. We plan to focus on re-developing brand awareness and repeat purchases through advertising and sampling, both in stores and at events.

 

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Retailers may receive rebates, promotional pricing incentives and slotting fees, which we may pay to gain preferable shelf location for our products. We will also use in-store promotions and in-store placement of point-of-sale materials and endorsements from selected public figures. Consumers receive coupons, discounts and promotional incentives. These marketing expenditures will help to enhance distribution and availability of our products as well as increase consumer awareness and preference for our brands. We believe that these marketing and promotional activities will be critical to the growth of our business.

 

The Sweet Success brand was established in 1992 by Nestlé USA. Our product line currently consists of two varieties of all-natural, Bavarian Chocolate Supreme and Creamy Vanilla Supreme nutritious beverages. We also have several new flavors in development. Our future plans include an extended line of Sweet Success Complete Fuel branded shelf-stable healthy beverages. Test marketing will be conducted to further understand how Sweet Success might fit into the dynamics of the healthy beverage market.

 

The Sweet Success line extensions will contain different consumer benefits, vitamins, minerals and proprietary blends than the current products. We expect to introduce our Mocha flavor in the first quarter of 2006 and our three new products, The Purifier, Power Blend and Brain Power in the first and second quarters of 2006. Costs associated with these introductions are expected to aggregate $100,000 and will be financed by funds raised through debt or equity offerings. In addition, the extended line of the Sweet Success Complete Fuel will be marketed on a national basis through the Sweet Success website, distributors and retail accounts commencing in the second quarter of 2006 at an estimated cost of $150,000 also to be financed by debt or equity offerings. If we are unable to raise debt or equity funds, we will be unable to introduce and produce new products or market the products on a national basis.  Although we have demonstrated the concepts and manufactured the product lines on a trial basis to prepare for commercialization, we have only recently begun marketing products. Development and testing of new products and flavors may have a material impact on our results of operations.

 

If the results of the extended product lines test are successful, we may incur slotting fees, which are payments made to the retailers to acquire shelf space for our products, and additional working capital may be needed to add the flavors to our existing product line. We plan to begin marketing the healthy beverages through retailers, distributors, and our website. Initial production for these products will require approximately $1,000,000 of additional working capital outlay for ingredients, packaging and production. Additionally, we expect to provide funding for advertising and promotion. Such funds will not be available for us unless we are successful in raising debt or equity financings, of which there can be no assurance.

 

Our products are primarily sold in 4 packs of 11-ounce Tetra Prismas. In our initial product launch in July 2005, we distributed the product through Walgreens in the Las Vegas area. We are currently expanding into Texas metropolitan areas. Subject to funding our product launch will be supported by radio advertising, product sampling, store circular advertising and other promotional activities commencing in the first quarter of 2006 at a cost of $300,000, which we also expect, but cannot assure, to finance through debt or equity offerings. We believe that one of the keys to success in the nutritional beverage industry is continued advertising and promotion to drive consumer awareness, trial, and repeat purchases of our products.

 

Our business plan contemplates increasing consumer sales in the areas where our product is sold and obtaining retailers nationally. We expect to accomplish this by increasing trial and repeat purchases through advertising, sampling and promotion. We also expect to expand our customer base to include convenience stores, club stores, nutrition centers and health food outlets and other retail establishments to carry our 4 pack 11-ounce products.

 

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Results of Operations

 

Results of operations for the six months ended June 30, 2005 compared to the six months ended June 30, 2004

 

Gross Sales. There were no gross sales for the six months ended June 30, 2005 or 2004.

 

Gross Profit(loss). There was no gross profit(loss) for the six months ended June 30, 2005.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $445,419 for the six months ended June 30, 2005, an increase of $427,034, or 2322%, from general and administrative expenses of $18,385 for the six months ended June 30, 2004. Selling, general and administrative expenses increased due to increase in expenses such as non-cash compensation recorded of $314,305 attributed to the issuance of stock options, an increase of $41,275 in professional fees for legal, accounting and public relations and an increase in payroll expenses of $28,028 due to the increase in employees.

 

Loss from Operations. Loss from operations was $445,419 for the six months ended June 30, 2005 compared to $18,385 for the six months ended June 30, 2004. The $427,034 increase in loss from operations was attributable to the increased operating expenses described above.

 

Interest Expense. Interest expense was $969 for the six months ended June 30, 2005, a decrease of $1,015, or 51%, from interest expense of $1,984 for the six months ended June 30, 2004. The decrease in interest expense is primarily attributable to the March 2005 payoff of the $50,000 note to Nutri/System.

 

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Net Loss. Net loss was $446,388 for the six months ended June 30, 2005 compared to $20,369 for the six months ended June 30, 2004. The $426,019 increase in net loss was primarily attributable to the gross loss and higher operating expenses discussed above.

 

Results of operations for the year ended December 31, 2003 compared to the year ended December 31, 2004

 

Gross Sales. There were no gross sales for the year ended December 31, 2004 or 2003.

 

Gross Profit. There was no gross profit (loss) for the year ended December 31, 2004, or 2003.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $560,141 for the year ended December 31, 2004, a decrease of $1,300,537, or 70%, from selling, general and administrative expenses of $1,860,678 for the year ended December 31, 2003. The decrease in selling, general and administrative expenses was primarily attributable to the re-measurement of Series A, B and C Warrants in 2003. No such re-measurement occurred in 2004.

 

Loss from Operations. Loss from operations was $560,141 for the year ended December 31, 2004 compared to $1,860,678 for the year ended December 31, 2003. The $1,300,537 decrease in loss from operations was primarily attributable to the decreased operating expenses described above.

 

Interest Expense. Interest expense was $4,127 for the year ended December 31, 2004, an increase of $125, or 3%, from interest expense of $4,002 for the year ended December 31, 2003.  Interest expense is primarily attributable to interest expense related to the note to Nutri/System in connection with purchase of the Sweet Success brand.

 

Net Loss. Net loss was $564,268 for the year ended December 31, 2004 compared to $1,864,680 for the year ended December 31, 2003. The $1,300,412 decrease in net loss from operations was primarily attributable to the decreased expenses discussed above.

 

Liquidity and Capital Resources

 

We are a start-up, development stage company and have generated or realized negligible revenue from our business operations.  Our operations to date have generated significant operating losses that have been funded through the issuance of common stock. We will require additional sources of outside capital to continue our operations and currently have no identifiable source.  However, we have signed a non-binding letter of intent with Think Equity Partners LLC, a member of the NASD, which could provide the Company with up to $10,000,000 of new capital less commission of 7%, and the issuance of warrants to Think Equity equal to 3% of the total shares sold in the offering. Think Equity has indicated that it will not commence an offering until all comments of the SEC with respect to this Form 10-SB have been answered. Moreover, there can be no assurance that Think Equity or any other company will raise equity investments for us. The letter agreement is an exhibit to this filing.  Should this financing be successful, the Company intends to utilize the net proceeds of these funds to package, advertise and promote its nutritional beverages primarily into national and regional grocery and club store accounts.  Historically the Sweet Success brand was sold by most retail food outlets until Nutri/System terminated production of the product in the second quarter of 2001 due to lack of available capital.   Our business plan contemplates regaining many of the historical grocery accounts and creating trial and repeat purchases through advertising, sampling and promotions. Subject to funding, we intend to purchase point of sale cold boxes( 3’x 5’ refrigerated coolers provided to grocery stores for storage and display of our products) that would hold a limited amount of product to encourage trial by retail customers.  As the products mature and we experience repeat use by retail customers we anticipate relying less on financing activities to operate our business.

 

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As of June 30, 2005, we had $9,134 cash on hand and working capital of $532,540.

 

At June 30, 2005, we had approximately $180,495 in accounts payable, accrued expenses and advances from an officer.

 

In September 2003, the Company sold seven units of its securities to six investors, two units to Robert Lippincott and one unit each to Robert Parks, Theodore Heesch, Keith Darling and John Girdley, for $27,500 per unit. Each unit consisted of 10,000 shares of common stock and 10,000 Class A, 10,000 Class B and 10,000 Class C warrants. In July 2004 the Company sold 2,500,000 shares of its common stock to Kick a Rock Productions, Inc. for $.072 per share. Subsequently, the Company sold 312,500 shares to Kick a Rock for $.08 per share in March 2005. In June 2005 the Company sold 1,000,000 shares of its common stock to Kick a Rock Productions, Inc. for $2.25 per share.

 

The Company has no funding available for marketing and will rely solely on its ability to raise debt or equity funds in the immediate future.

 

An officer of the Company has made advances, which are due on demand, to the Company to help fund operations. The balances due to this officer amounted to $40,207 and $19,993 at June 30, 2005 and December 31, 2004, respectively, totaling $60,200. The Company made net repayments of $4,354 to the officer during 2004 and had net borrowings of $20,214 from the officer during the six months ended June 30, 2005. The balance of $60,200 is due on demand.

 

The Company can continue to operate at its historic levels of overhead for at least six months but will be unable to expand its operations unless it raises additional funds through debt or equity financings. Accordingly, the Company will be forced to severely limit its operations if such funding is not available to it within the next six months.

 

Net Cash Flows

 

Net cash used in operating activities for the year ended December 31, 2004 was $116,600 compared to cash used in operating activities of $9,931 during 2003. The increase in cash used by operating activities of $112,669 was primarily attributable to the increase in operating expenses net of stock based compensation. Net cash used in operating activities for the six months ended June 30, 2005 was $271,903 compared to cash used in operating activities of $11,638 during the six months ended June 30, 2004. The increase in cash used by operating activities of $260,265 was primarily attributable to the increase in operating expenses discussed above.

 

Net cash provided by (used in) investing activities was ($2,660) and ($60,790) for the years ending December 31, 2003 and 2004 and ($2,690) and $30,131 for the six months ending June 30, 2004 and 2005.  The Company’s investing activities consisted of mainly payments and collections on loans to affiliates.

 

 

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ITEM 3:  DESCRIPTION OF PROPERTY

 

The Company leases from North Frost Center, on a month-to-month basis, approximately 3,000 square feet of furnished office space at the North Frost Center located at 1250 NE Loop 410, Suite 630, San Antonio, Texas 78209, for $1,300 per month.

 

ITEM 4:  SECURITY AND OWNERSHIP

 

The following table sets forth the current common stock ownership of (i) each person known by the Company to be the beneficial owner of five percent or more of the Company’s common stock, (ii) each director individually and (iii) all officers and directors of the Company as a group.  Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial and includes stock options exercisable within 60 days from the date hereof. The address of each owner who is an officer or director is in care of the Company at 1250 NE Loop 410, Suite 630, San Antonio, Texas 78209.

 

Name				Number of Shares				Percent of Class
William J. Gallagher				2,975,000				21.7			%
Graydon Webb				150,000				1.1			%
Glenn Williamson				500,000				3.7			%
Jon Barron				250,000				1.8			%
Robert Lippincott				120,000				.9			%
Theodore M. Heesch				50,000				.4			%
W. H. Benjamin Gallagher				800,000				6.0			%
Mark Burnett Productions, Mark Burnett, President 640 N. Sepulveda Los Angeles, CA 90049				850,000				6.2			%
Kick a Rock Productions, Inc. Benny Doro, President 7705 S. Post Oak Lane, Suite 450 Houston, TX 77056				1,250,000				9.1			%
All officers and directors as a group (6 persons)				4,045,000				29.6			%

 

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ITEM 5:  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

The officers and directors of the Company, their ages and present positions held in the Company are as follows:

 

Name		Age		Position		Officer and Director Since
William J. Gallagher		65		Chief Executive Officer, Chief Financial Officer and Director		2002
Graydon Webb		58		Director		2003
Glenn Williamson		48		Director		2005
Jon Barron		55		Director		2005
Robert Lippincott		50		Director		2005
Theodore M. Heesch		69		Director		2005

 

The Company’s directors serve in such capacity until the next annual meeting of the Company’s shareholders and until their successors have been elected and qualified. The Company’s officers serve at the discretion of the Company’s Board of Directors, until their death, or until they resign or have been removed from office.

 

There are no agreements or understandings for any director or officer to resign at the request of another person and none of the directors or officers is acting on behalf of or will act at the direction of any other person. The activities of each director and officer are material to the operation of the Company. No other person’s activities are material to the operation of the Company.

 

William J. Gallagher founded and has been President of JagCapital, Inc. a merchant bank headquartered in San Antonio, Texas since September 1992.  Mr. Gallagher has extensive experience developing and marketing consumer products. From 1968 to 1973, Mr. Gallagher founded and was chairman of the 150-unit Sunny’s stores. He was the founder in 1989 of Billy Blues BBQ sauce and was its CEO until 1995. Billy Blues distributed the nationally known Chris & Pitts Barbecue Sauce, from 1992 to 1995. In 1973 Mr. Gallagher founded and was President until 1984 of the Guadalupe Valley

 

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Winery Corporation, a company which developed the Guadalupe Valley Winery in Gruene, Texas. Also in 1973, Mr Gallagher purchased and restored most of Gruene, TX which was a ghost town from 1925 until 1973.  Mr. Gallagher is a graduate of the University of Texas at Austin.

 

Graydon D. Webb has been Managing Director of Chapman Partners, LLC, a company engaged in mergers and acquisitions for food related companies since 1996. From February 2001 to November 2002, he was also Chief Operating Officer of Diet Centers of America, a 300 unit chain of weight loss centers. Mr. Webb served as Vice President of franchise sales for Wendy’s from 1973 to 1980. He founded G.D. Ritzy’s Inc., a fast food franchiser, in 1980 and served as chairman until 1988. From 1991 to 1998, he was founder and sole proprietor of Auric Group, a consulting group specializing in restaurant and general franchising activities. Auric’s clients included Pepsi Co., Bunge Foods International and Rally’s. During 2001 he was also Chief Executive Officer of OneDentist Resources, Inc. Mr. Webb is a graduate of Ohio State University and participated in its executive MBA Program.

 

Glenn Williamson has been employed as an investment banker with Meyers & Associates since June 2002 and has been President of Nest Ventures, a private equity consulting firm, since 1999. He was the founder or a senior officer of four NASDAQ National Market companies, GO-VIDEO, Wavo Inc, Interactive Media Technologies, Inc. and Interactive Laser Technologies, Inc. He has more than 25 years of entrepreneurial executive level experience and has been involved as a consultant or banker on scores of engagements in locations ranging from China to Montreal to Paris. He is founder and CEO of The Canada Arizona Business Council, a private sector group organized in 2003 and sanctioned by the Canadian Government and the State of Arizona to work on increasing trade between Canada and Arizona.

 

Jon Barron joined the Company in 2005 and helped develop the formula for Sweet Success Complete Fuel™. He has served since 2003 as President of International Health Resources, a marketer of herbal and nutraceutical formulations. His online Baseline of Health Newsletter is now read in countries around the world and he is the author of  “Lessons from the Miracle Doctors,” a book on alternative health and cutting-edge nutritionals. From 1999 to 2003 he acted as a consultant.

 

Robert Lippincott is a founder and an owner since 1986 of the Guero’s Taco Bar in Austin, Texas and the Guero’s line of sauces. His broad business background includes developing real estate projects in Austin, Texas since 2000. Mr. Lippincott attended the University of Texas at Austin.

 

Theodore M. Heesch has since 1968 owned Houston-based TMHL, Inc., an architecture and consulting firm responsible for the design and development of many food and beverage facilities nationally. In the last five years he has designed new restaurants in Texas and Florida. He was responsible for the well-known “Blue Martini” bar concept in Florida. He is a graduate of the Rice University School of Architecture.

 

Consultants

 

In August 2005 the Company retained Alicia Smith Kriese to act as its marketing director, on a part-time basis. Ms. Kriese will provide 40 hours per month of marketing services for $12,500 per month plus a one-time issuance of 60,000 stock options to purchase shares of the Company’s common stock exercisable at $1.50 per share until August 2010. Additional services will be billed by Ms. Kriese at $250 per hour.

 

In September 2005, Ms. Kriese received an additional 10,000 stock options to purchase shares of the Company’s common stock exercisable at $1.50 per share until August 2010.

 

The Company has also entered into many consulting agreements with marketing and investor relations firms to promote the Company’s products or to provide investor and public relations services to it. These agreements all provide for the issuance of stock options for such services. Common stock issuable under the agreements total 3,770,000 shares, 1,150,000 of which are currently exercisable. See “Item 8 Description of Securities – Stock Options.”

 

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ITEM 6:  EXECUTIVE COMPENSATION

 

The Company was formed in September 2002 and has not paid any cash compensation to its executive officers or directors since inception. In June 2005 the Company executed employment contracts with Messrs. Gallagher, Gallagher and Williamson which provide for annual salaries ranging from $160,000 to $400,000 for William Gallagher, $90,000 to $120,000 for W. H. Benjamin Gallagher and $150,000 to $320,000 for Mr. Williamson. All employment agreements are contingent upon the Company completing its equity financing of at least $5,000,000.

 

The following table sets forth compensation paid to William J. Gallagher, our Chief Executive Officer, for the years ended December 31, 2003 and 2004 and the six months ended June 30, 2005. There were no other compensated executive officers during the periods reported.

 

Summary Compensation Table

 

				Annual Compensation									Long-Term Compensation
Name and Principal Position		Year		Salary			Bonus			Other Annual Compensation			Restricted Stock Award(s) ($)			Securities Underlying Options/SARs (#)		All Other Compensation($ )
William J. Gallagher		2005		$	0.00	(1)	$	0.00		$	0.00		$	320,000	(2)	—		—
Chairman and CEO		2004		$	0.00		$	0.00		$	0.00		$	120,000	(3)	—		—
		2003		$	0.00		$	0.00		$	0.00		—			—		—

 

(1)        Mr. Gallagher has an employment contract under which he is to receive $160,000 in salary for 2005 if we obtain equity funding in excess of $5,000,000 during the year.

(2)        Convertible Preferred Stock. Each convertible share is valued at $3.20.

(3)        Mr. Gallagher received 1,000,000 restricted common shares in September 2004.

 

In 2004 and 2005, the Company did not issue any incentive stock options to its officers. The following table sets forth certain information regarding incentive stock options.

 

Options/SAR Grants in Last Fiscal Year

 

Potential Realizable Value at Assumed Annual Rate of Stock Price Appreciation for Option Term

Name and Principal Position

Number of Securities Underlying Options/SARs(#)

Percent of Total Options Granted to Employees in Fiscal Year

Exercise Price

Expiration Date

5%

10%

William J. Gallagher

-0-

(1)

0

%

N/A

N/A

N/A

N/A

Chairman and CEO

 

(1)        To date, Mr. Gallagher has received no stock options or warrants.

 

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Mr. Gallagher did not receive or exercise any options during fiscal year 2004. Shown below is information with respect to unexercised options to purchase shares of the Company’s common stock granted in prior years to Mr. Gallagher.

 

Aggregated Option Exercises in Last Fiscal Year

and Year-End Option Values

 

		Number of Securities Underlying Unexercised Options at Fiscal Year-End				Value of Unexercised In-The-Money Options at Fiscal Year-End
Name and Principal Position		Exercisable		Unexercisable		Exercisable		Unexercisable
William J. Gallagher		0	(1)	0		0		$	0.00
Chairman and CEO

 

(1)                Mr. Gallagher did not receive or exercise any options during fiscal year 2004.

 

In September 2004 the Company issued 1,000,000 shares of its common stock to William Gallagher, 150,000 shares to Graydon Webb, a director, and 50,000 shares to Joseph Fazzone for services rendered valued at $.12 per share.

 

In June 2005 the Company issued 250,000 warrants to Nest Ventures, a company owned and controlled by Glen Williamson, one of its directors, as compensation to Mr. Williamson.

 

In July 2005 the Company issued 150,000 shares to Jon Barron for his assistance with the initial two formulas of Sweet Success Complete Fuel. Also in July 2005, the Company issued options to purchase 400,000 shares of its common stock to Mr. Barron, exercisable at $.70 per share and 40,000 shares at $2.50 per share in exchange for assisting the Company in developing new product formulations. Mr. Barron will also receive a 1% royalty on sales of products formulated by him.

 

ITEM 7:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

In September 2004 the Company issued 1,000,000 shares of its common stock to William Gallagher, 150,000 shares to Graydon Webb, a director, and 50,000 shares to Joseph Fazzone for organizational services rendered including providing executive management and financial reporting services and valued at $.12 per share.

 

In February 2005 the Company issued 500,000 shares of its common stock to W. H. Benjamin Gallagher and 300,000 shares to Micheraie Cruz Canales and 200,000 shares to Keith Darling for product image and brand development services and valued at $.32 per share.

 

In June 2005 the Company issued 250,000 warrants to Nest Ventures, a company owned and controlled by Glen Williamson, one of its directors, as consulting compensation to Mr. Williamson, valued at $15,720.

 

In July 2005 the Company issued 100,000 shares of its preferred stock to William Gallagher, 30,000 shares to W. H. Benjamin Gallagher, William Gallagher’s son, and 10,000 shares to Micheraie Cruz Canales, an employee, for brand development services valued at $3.20 per share. Each share of preferred stock is convertible into ten shares of common stock. The preferred stock does not carry a dividend and is non-voting.

 

In July 2005 the Company issued 150,000 shares to Jon Barron for his assistance with the initial two formulas of Sweet Success Complete Fuel valued at $.21. Also, in July 2005 the Company issued

 

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options to purchase up to 400,000 shares of its common stock to Jon Barron, a director, exercisable at $.70 per share and 40,000 shares at $2.50 per share in exchange for assisting the Company in developing each new product formulation, with a potential to receive options to purchase up to 400,000 shares. Mr. Barron will also receive a 1% royalty on sales of products formulated by him.

 

ITEM 8:  DESCRIPTION OF SECURITIES

 

The Company is authorized to issue 60,000,000 shares of common stock, $.0001 par value per share, and 10,000,000 shares of $.0001 par value Preferred Stock.

 

Common Stock

 

There are currently 13,697,545 shares of the Company’s common stock outstanding. All shares of common stock have equal voting rights and are not assessable. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors of the Company. Upon liquidation, dissolution or winding up of the Company, the assets of the Company, after the payment of liabilities, will be distributed pro rata to the holders of the common stock. The holders of the common stock do not have preemptive rights to subscribe for any securities of the Company and have no right to require the Company to redeem or purchase their shares. The shares of common stock currently outstanding are validly issued, fully paid and non-assessable.

 

Preferred Stock

 

The preferred stock may be issued in series from time to time with such designation, rights, preferences and limitations as the Board of Directors of the Company may determine by resolution. The rights, preferences and limitations of separate series of preferred stock may differ with respect to such matters as may be determined by the Board of Directors, including, without limitation, the rate of dividends, method and nature of payment of dividends, terms of redemption, amounts payable on liquidation, sinking fund provisions (if any), conversion rights (if any) and voting rights. There are currently 140,000 shares of convertible preferred stock outstanding. These shares of convertible preferred stock do not pay dividends, are non-voting and each share is convertible into ten shares of the Company’s common stock.

 

Common Stock Purchase Warrants

 

The Company has outstanding 75,000 Class A Common Stock Purchase Warrants (“Class A Warrants”), 75,000 Class B Common Stock Purchase Warrants (“Class B Warrants”) and 75,000 Class C Common Stock Purchase Warrants (“Class C Warrants”). Each Class A, Class B and Class C warrant is exercisable to purchase one share of the Company’s common stock at $1.50, $2.00 and $3.00, respectively, at any time until December 31, 2005. As part of the purchase agreement, Nutri/System, Inc. was granted a purchase warrant for 200,000 common shares exercisable at $5.00 per share at any time until December 24, 2005. The Company has also issued an aggregate of 2,275,000 warrants to three other persons.

 

Stock Options

 

The Company currently has outstanding an aggregate of 2,070,000 stock options, each such option exercisable to purchase one share of the Company’s common stock at prices ranging from $.17 per share to $2.00 per share. Of these stock options, the Company officers, directors and 5% or greater shareholders own a total of 350,000 options and 1,220,000 options have been issued to marketing and investor relations firms retained by the Company. The Company also has issued 1,900,000 options which are not currently exercisable but vest upon the optionee meeting certain conditions.

 

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Dividends

 

Holders of the common stock are entitled to share equally in dividends when, as and if declared by the Board of Directors of the Company, out of funds legally available therefore. No dividend has been paid on the common stock since inception, and none is contemplated in the foreseeable future. The Company’s ability to pay cash dividends is not restricted.

 

Transfer Agent

 

Executive Registrar & Transfer Company, 3615 S. Huron Street # 107, Englewood Colorado 80110, is the Company’s transfer and warrant agent.

 

Penny Stock

 

The Commission has adopted rules that define a “penny stock” as equity securities under $5.00 per share which are not listed for trading on Nasdaq (unless the issuer (i) has a net worth of $2,000,000 if in business for more than three years or $5,000,000 if in business for less than three years or (ii) has had average annual revenue of $6,000,000 for the prior three years). The Company’s securities are characterized as penny stock, and therefore broker-dealers dealings in the securities are subject to the disclosure rules of transactions involving penny stock which require the broker-dealer, among other things, to (i) determine the suitability of purchasers of the securities and obtain the written consent of purchasers to purchase such securities and (ii) disclose the best (inside) bid and offer prices for such securities and the price at which the broker-dealer last purchased or sold the securities. The additional requirements imposed upon broker-dealers discourage them from engaging in transactions in penny stocks, which reduces the liquidity of the Company’s securities.

 

Anti-Takeover Provisions

 

Certain provisions of the Company’s Articles of Incorporation (the “Articles”) may have the effect of delaying, deferring or preventing a change of control of the Company. There are no preemptive rights in connection with the Company’s common stock. Cumulative voting in the election of directors is not allowed. Accordingly, the holders of a majority of the shares of common stock, present in person or by proxy, will be able to elect all of the Company’s Board of Directors. The Company’s Articles provide that the Company will indemnify officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to the Company, which may be broad enough to include services in connection with takeover defense measures. Such provisions may have the effect of preventing changes in the management of the Company.

 

PART II

 

ITEM 1.  MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS

 

Market Information

 

The Company’s common stock is quoted on the Pink Sheets of the National Quotation Bureau under the symbol SWTS since December 2002. The following table sets forth the high and low closing prices for the Company’s common stock for the periods indicated. The prices below reflect inter-dealer quotations, without retail mark-up, mark-down or commissions and may not represent actual transactions.

 

23

 

Quarter ended		Low price			High price
September 30, 2005		$	.74		$	2.74
June 30, 2005		$	.15		$	.70
March 31, 2005		$	.18		$	.36
December 31, 2004		$	.11		$	.33
September 30, 2004		$	.11		$	.37
June 30, 2004		$	.20		$	.51
March 31, 2004		$	.20		$	.75
December 31, 2003		$	.60		$	1.20
September 30, 2003		$	1.00		$	1.00
June 30, 2003		$	1.00		$	2.00
March 31, 2003		$	1.80		$	6.00

 

Holders

 

A total of 13,697,545 shares of the Company’s common stock are currently outstanding held by approximately 150 shareholders of record. Of this amount, 10,607,545 shares are free trading or may be sold under Rule 144 and the remaining 3,090,000 shares may be sold under Rule 144 commencing in May 2006. There are 1,550,000 warrants and 2,070,000 stock options currently outstanding.

 

Dividends

 

The Company has not paid any dividends since its inception. The Company currently intends to retain any earnings for use in its business, and therefore does not anticipate paying dividends in the foreseeable future.

 

ITEM 2.  LEGAL PROCEEDINGS

 

The Company is not a party to any litigation and, to its knowledge, no action, suit or proceeding has been threatened against the Company.

 

ITEM 3.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

 

There have been no disagreements on accounting and financial disclosures nor any change in accountants from the inception of the Company through the date of this Registration Statement.

 

ITEM 4.  RECENT SALES OF UNREGISTERED SECURITIES.

 

In the last three years, the Company has issued the following shares of its unregistered securities:

 

(i)                In November 2002 pursuant to a Share Exchange Agreement, the Company issued 2,750,000 shares of its common stock for all 4,000,000 shares of Beverage Acquisition Corporation’s outstanding common stock.

 

(ii)                In December 2002 the Company issued 95,000 shares of common stock upon exercise of common stock purchase warrants issued upon approval of the Bankruptcy Court in connection with the Chapter 11 filing instituted by New Bridge Products, Inc. for an aggregate of $172,500.

 

24

 

(iii)                In March 2003 the Company issued 30,000 shares of its unregistered common stock to Ernest Mathis, Jr., a principal shareholder, as consideration for the conveyance of 10,000 shares of free trading common stock which Mr. Mathis transferred to a consultant of the Company.

 

(iv)                In March 2003 the Company issued the following shares to the following individuals in consideration for services rendered valued at $2.00 per share:

 

Name		Share Amount		Type of Services Rendered
Capital Direct, LLC		90,000		Introductions to investor relations firms
Leslie G. Spira		10,000		Introductions to investor relations firms
Shirley Goldstein		10,000		Introductions to investor relations firms
Robert Spira		50,000		Introductions to investor relations firms
Chapman Spira and Carson, LLC		30,000		Introductions to investor relations firms

 

(v)                In September 2003 the Company sold seven units of its securities to the following investors for $27,500 per unit. Each unit consisted of 10,000 shares of common stock and 10,000 Class A, 10,000 Class B and 10,000 Class C warrants. Subsequently, all of the warrants were exercised for $.01 per share, for a total of 210,000 shares of common stock.  In addition,  the Company issued an additional 10,000 shares to the holders for each unit owned by them. 

 

Name		Number of Units Issued
Robert Lippincott		2
Robert Parks		1
Theodore Heesch		1
Keith Darling		1
John Girdley		1

 

(vi)                In July 2004 the Company sold 2,500,000 shares of its common stock to Kick a Rock Productions, Inc. for $.072 per share. Subsequently, the Company sold 312,500 shares to Kick a Rock for $.08 per share in March 2005.

 

(vii)                In September 2004 the Company issued 1,000,000 shares of its common stock to William Gallagher, its Chief Executive Officer, 150,000 shares to Graydon Webb, a director, and 50,000 shares to Joseph Fazzone for services rendered valued at $.12 per share.

 

(viii)                In February 2005 the Company issued 500,000 shares of its common stock to W. H. Benjamin Gallagher, 300,000 shares to Micheraie Cruz Canales and 200,000 shares to Keith Darling for services rendered valued at $.32 per share.

 

25

 

(ix)                In June 2005 the Company sold 1,000,000 shares of its common stock to Kick a Rock Productions, Inc. for $.265 per share.

 

(x)                Between June 2003 and August 2004, the Company issued the following shares upon exercise of warrants at $.01 per share:

 

Date		Name		Shares
6/03		Earnest Mathis, Jr.		186,000
7/03		Surfco		60,000
8/03		Surfco		20,000
4/04		CLX		372,000
5/04		Surfco		47,000
6/04		Surfco		120,000
8/04		Various		280,000

 

(xi)                In July 2005 the Company issued 100,000 shares of its preferred stock to William Gallagher, 30,000 shares to W. H. Benjamin Gallagher, William Gallagher’s son, and 10,000 shares to Micheraie Cruz Canales, an employee, for employee services rendered valued at $3.20 per share. Each share of preferred stock is convertible into ten shares of common stock. The preferred stock does not carry a dividend and is non-voting.

 

(xii)                Between January and September 2005, the Company issued stock options and warrants to purchase up to an aggregate of 5,945,000 shares of its common stock to the following consultants at exercise prices set forth below, and for services described and valued below:

 

Name of Consultant		Number of Stock Options and Warrants Issued		(1) Contingent Stock Options and Warrants		Exercise Price			(2) Value of Consideration			Type of Consideration
Jon Barron		400,000		300,000		$	0.70		$	12,576		Nutritional and Formulation Advisor
Jon Barron		400,000		400,000		$	2.50		—			Nutritional and Formulation Advisor
Mark Burnett Productions		1,250,000		400,000		$	0.70		106,893			Television Promotion
Mark Burnett Productions		750,000		750,000		$	1.25		—			Television Promotion
Sam Freeman		25,000		—		$	0.70		—			Introduction to key account relationships
Sam Freeman		650,000		650,000		$	0.50		—			Introduction to key account relationships
Jennifer Horsfall		600,000		—		$	0.17		256,826			Assistance with Public Relations
Alicia Smith Kriese		70,000		—		$	1.50		27,328			Acting Marketing Director
John Milgrim		100,000		—		$	0.22		952			Company and public communications
John Milgrim		100,000		—		$	0.50		—			Company and public communications
John Milgrim		100,000		—		$	0.80		—			Company and public communications
Jeff Morehouse		100,000		—		$	0.80		—			Introduction to key relationships
Nest Ventures LLC		250,000		—		$	0.35		15,720			Development of Corporate policies etc
Nutrisystems Inc		200,000		—		$	5.00		—			Part of brand Purchase agreement
Frederick Nader		50,000		—		$	0.70		1,359			Introduction to vendors and investors
Frederick Nader		50,000		50,000		$	1.25		—			Introduction to vendors and investors
James Stock		50,000		—		$	1.00		—			Investor and Public Relations
James Stock		50,000		—		$	2.00		—			Investor and Public Relations
R. Glenn Williamson		750,000		500,000		$	0.35		425,190			Development of Financial Plan
Total Outstanding Stock Options and Warrants		5,945,000		3,050,000

 

(1)    Represents stock options and warrants which are contingent upon the completion of certain performance milestones.  Performance milestones not completed by September 30, 2005 have been included as contingent stock options and warrants.

(2)    Represents the fair value as calculated using the Black-Scholes model in accordance with SFAS No. 123.  In accordance with SFAS No. 123, no value has been assigned to stock options and warrants issued in which the performance milestone has not yet been reached.  All contingent stock options and warrants have been included in the above table with a value of $0.

 

 

 

(xiii)                The following business consultants were issued shares of our common stock on the dates indicated and for the consideration stated below:

 

Date				Name				Shares				Value Per Share					Type of Consulting Services
05/03/05				3-CD Consulting				500,000				$	.17				Introductions to public relations firms, investment relations firms and brokers
05/12/05				Gordon Hill				100,000				$	.49				Business development
05/12/05				John Blackington				100,000				$	.49				Business development
05/12/05				Stern Consulting				150,000				$	.21				Assistance with public relations
05/26/05				Elizabeth Bessary White				137,500				$	.25				Marketing public relations agent
05/26/05				Ann Quinten White				112,500				$	.25				Marketing public relations agent
06/09/05				Jeffrey Pittsburg				120,000				$	.30				Arrange meetings between Company and certain nutritional beverage companies
06/16/05				CEO Cast				300,000				$	.37				Investor relations and public relations
06/27/05				Thomas Puccio				400,000				$	.35				Develop product awareness in Miami Beach area, including launch parties and events
06/27/05				Frederick Nader				50,000				$	.70				Introductions to vendors and investors
07/01/05				Michael Goldberg				250,000				$	.59				Review, analyze and update Company’s formal and informal business and financial plans
07/20/05				Jon Barron				150,000				$	.21				Nutritional and formulation advisor
07/21/05				Jeremy Shockey				500,000				$	.35				Celebrity spokesperson
08/08/05				Stock Enterprises				150,000				$	.39				Investor relations and public relations
08/16/05				Coastal Resource Mgt.				50,000				$	.56				Available to staff, management executives and directors regarding Company policies, concerns and problems
09/15/05				Richard Monsour				20,000				$	.37				Arrange meetings with Company and certain grocery chains

 

26

 

All of the securities set forth above were issued by the Company pursuant to Section 4(2) of the Securities Act of 1933 as amended. All such shares issued contained a restrictive legend and the holders confirmed that they were acquiring the shares for investment and without intent to distribute the shares. All of the purchasers were friends or business associates of the Company’s management, had access to all information related to the Company and all were experienced in making speculative investments, understood the risks associated with investments, and could afford a loss of the entire investment.

 

The shares set forth in sections (ix) and (x) above were issued pursuant to the provisions of Rule 504 of Regulation D promulgated under the Securities Act.

 

ITEM 5.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Article VII, Section 2 of the Company’s Articles of Incorporation and Article VI of the Company’s Bylaws provide for indemnification of the Company’s officers, directors and controlling persons to the full extent provided by Nevada law. Further, the Articles of Incorporation provide that no director or officer is personally liable to the Company or its shareholders for monetary damages for any breach of fiduciary duty by such person as a director or officer. Notwithstanding the foregoing sentence, a director or officer is liable to the extent provided by Nevada law, (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) for the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.

 

27

 

PART III

 

ITEMS 1 AND 2.  INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS

 

Exhibit No.		Description
3.1		Articles of Incorporation, as amended, of the Registrant
3.2		Bylaws of the Registrant
4.1		Specimen Stock Certificate of the Registrant
10.1		Share Exchange Agreement between Beverage Acquisition Corporation and the Registrant
10.2		Purchase Agreement with Nutri/System, Inc.
10.3		Production Agreement with Kiko Foods, Inc.
10.4		Promotion Agreement (Burnett)
10.5		Shockey Agreement
10.6		Puccio Agreement
10.7		Milgrim Agreement
10.8		Lamar Agreement
10.9		Goldberg Agreement
10.10		Freeman Agreement
10.11		Barron Agreement
10.12		3-CD Agreement
10.13		Coastal Resource Management Agreement
10.14		Kriese Agreement
10.15		Horsfall Agreement
10.16		Employment Agreement (Williamson)
10.17		CEO Cast Agreement
10.18		Nest Ventures Agreement
10.19		Think Equity Agreement

 

28

 

Exhibit No.		Description
10.20		Employment Agreement (William Gallagher)
10.21		Employment Agreement (W. H. Benjamin Gallagher)
10.22		Monsour Agreement
10.23		Morehouse Agreement
10.24		California Natural Products Purchase Order(1) (Filed with the Amendment)

 

(1) All other exhibits have been Filed previously.

 

29

 

SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on November 14, 2005.

 

	SWEET SUCCESS ENTERPRISES, INC.
	By:	/s/ William J. Gallagher
		William J. Gallagher
		Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Registration Statement has been signed by the following persons in the capacities indicated on November 14, 2005:

 

 

	Signature				Title
	/s/ William J. Gallagher				Chief Executive Officer, Chief Financial
	William J. Gallagher				Officer (Principal Accounting Officer)
					and Director
	/s/ Graydon Webb				Director
	Graydon Webb
	/s/ Glenn Williamson				Director
	Glenn Williamson
	/s/ Jon Barron				Director
	Jon Barron
	/s/ Robert Lippincott				Director
	Robert Lippincott
	/s/ Theodore M. Heesch				Director
	Theodore M. Heesch

 

30

 

SWEET SUCCESS ENTERPRISES, INC.

(a Development Stage Company)

 

Financial Statements

and

Independent Auditors’ Report

December 31, 2004 and 2003 and June 30, 2005 (unaudited)

 

 

SWEET SUCCESS ENTERPRISES, INC.

(a Development Stage Company)

 

Index to Financial Statements

 

Report of Independent Registered Public Accounting Firm
Financial Statements
Balance Sheets – December 31, 2004 and June 30, 2005 (unaudited)
Statements of Operations – For the Years Ended December 31, 2004 and 2003; and the Six Months Ended June 30, 2005 and 2004 (unaudited)
Statement of Changes in Stockholders’ Equity – For the Years Ended December 31, 2004 and 2003; and the Six Months Ended June 30, 2005 (unaudited)
Statements of Cash Flows – For the Years Ended December 31, 2004 and 2003; and the Six Months Ended June 30, 2005 and 2004 (unaudited)
Notes to Financial Statements

 

 

SWEET SUCCESS ENTERPRISES, INC.

(a Development Stage Company)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders

Sweet Success Enterprises, Inc.

San Antonio, Texas

 

 

We have audited the accompanying balance sheets of Sweet Success Enterprises, Inc. (a Development Stage Company) as of December 31, 2004, and the related statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2004 and 2003.  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 audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sweet Success Enterprises, Inc. as of December 31, 2004 and the results of its operations and its cash flows for the years ended December 31, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced circumstances which raise substantial doubt about its ability to continue as a going concern. There have been no significant operations since December 12, 2000.  Management’s plans regarding these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

Ehrhardt Keefe Steiner & Hottman PC

September 6, 2005

Denver, Colorado

 

F-1

 

SWEET SUCCESS ENTERPRISES, INC.

(a Development Stage Company)

 

Balance Sheets

 

				June 30, 2005					December 31, 2004
				(unaudited)
Assets
Current assets
Cash				$	9,134				$	8,414
Accounts receivable - affiliate				9,289					64,420
Note receivable – stockholder				25,000					—
Subscription receivable (received subsequent to June 30, 2005)				40,000					—
Inventories				148,986					—
Prepaid expenses				661,952					—
Total current assets				894,361					72,834
Intangible assets				200,000					200,000
Total assets				$	1,094,361				$	272,834
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable – trade				$	42,888				$	28,722
Accrued compensation				—					256,000
Accrued expenses				97,400					42,000
Advances from officer				40,207					19,993
Note payable				—					27,722
Total liabilities				180,495					374,437
Stockholders’ Equity
Preferred stock, authorized 10,000,000 shares; $.0001 par value, none issued or outstanding				—					—
Common stock, authorized 60,000,000 shares; $.0001 par value; 12,577,545 (2005) and 8,295,045 (2004) shares issued and outstanding				1,258					830
Additional paid-in capital				3,787,944					2,326,515
Deficit accumulated in development stage				(2,875,336				)	(2,428,948				)
Total stockholders’ equity				913,866					(101,603				)
Total liabilities and stockholders’ equity				$	1,094,361				$	272,834

 

See notes to financial statements.

 

F-2

 

SWEET SUCCESS ENTERPRISES, INC.

(a Development Stage Company)

 

Statements of Operations

 

		For the Six Months Ended June 30,						For the Years Ended December 31,						Cumulative from January 1, 2003 to
		2005			2004			2004			2003			June 30, 2005			December 31, 2004
		(unaudited)			(unaudited)									(unaudited)
Revenue		$	—		$	—		$	—		$	—		$	—		$	—
Cost of sales		—			—			—			—			—			—
Gross profit		—			—			—			—			—			—
General and administrative expenses		445,419			18,385			560,141			1,860,678			2,866,238			2,420,819
Loss from operations		(445,419		)	(18,385		)	(560,141		)	(1,860,678		)	(2,866,238		)	(2,420,819		)
Interest expense		(969		)	(1,984		)	(4,127		)	(4,002		)	(9,098		)	(8,129		)
Net loss		$	(446,388	)	$	(20,369	)	$	(564,268	)	$	(1,864,680	)	$	(2,875,336	)	$	(2,428,948	)
Basic and diluted loss per share		$	(.05	)	$	(.01	)	$	(.10	)	$	(.53	)
Weighted average number of common shares outstanding – basic and diluted		9,664,009			3,944,248			5,427,823			3,547,530

 

See notes to financial statements.

 

F-3