<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-13181
CAPITAL BEVERAGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3878747
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1111 East Tremont Avenue, Bronx, New York 10460
(Address of Principal Executive Office) (Zip Code)
(718) 409-2337
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of November 14, 1997 was 2,378,409 shares.
<PAGE> 2
CAPITAL BEVERAGE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
PART I - FINANCIAL INFORMATION: --------
<S> <C>
Balance Sheet - September 30, 1997 and December 31, 1996 1
Statement of Operations - Three months and nine months
ended September 30, 1997 and 1996 2
Statement of Cash Flows - Nine months ended September 30,
1997 and 1996 3
Notes to Financial Statements 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5
PART II - OTHER INFORMATION 6
SIGNATURES 7
</TABLE>
<PAGE> 3
CAPITAL BEVERAGE CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 3,131,995 $ 126,927
Accounts Receivable - trade, net of allowance
for doubtful accounts of $20,000 in 1997 and $50,000 in 1996 811,676 496,479
Inventory 486,793 343,344
Prepaid insurance 1,858 1,521
----------- -----------
TOTAL CURRENT ASSETS 4,432,322 968,271
MACHINERY AND EQUIPMENT, net of
accumulated depreciation of $59,871 in 1997 and $54,674 in 1996 48,129 50,327
OTHER ASSETS:
Intangible assets less accumulated amortization 1,280,000 1,440,000
of $280,000 in 1997 and $160,000 in 1996
Deferred expenses - 130,783
Due from affiliate - 57,837
Deposits 3,290 3,290
----------- -----------
$ 5,763,741 $ 2,650,508
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 77,047 $ 104,904
Accrued expenses and taxes 114,265 174,315
Notes payable - Bridge Loan - 250,000
Current portion of long term debt 61,142 56,886
Accrued dividends on preferred stock 136,500 136,500
----------- -----------
TOTAL CURRENT LIABILITIES 388,954 722,605
----------- -----------
LONG TERM DEBT 643,806 695,123
STOCKHOLDERS' EQUITY:
7% Cumulative Convertible Series A Preferred
Stock $.01 par value; 1,000,0000 authorized shares,
337,500 issued and outstanding at December 31, 1996;
liquidation preference $1,350,000 - 1,215,000
7% Cumulative Series B Preferred Stock, par
value $.01, 300,000 shares issued and outstanding 3,000 3,000
Common Stock, $.001 par value; 20,000,000
authorized shares; 2,378,409 and 1,240,909 outstanding after
deducting 886,364 in treasury 2,379 1,241
Additional paid in capital 5,365,573 348,333
Accumulated deficit (639,971) (334,794)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,730,981 1,232,780
----------- -----------
$ 5,763,741 $ 2,650,508
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 4
CAPITAL BEVERAGE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUE
Sales $ 5,021,824 $ 3,696,481 $ 10,657,661 $ 9,709,520
Cost of goods sold 4,676,265 3,283,883 9,591,376 8,737,757
----------- ----------- ------------ -----------
Gross profit 345,559 412,598 1,066,285 971,763
COST AND EXPENSES
Selling and delivery 54,408 20,317 202,357 78,750
General and administrative 464,006 337,495 1,057,077 680,328
----------- ----------- ------------ -----------
518,414 357,812 1,259,434 759,078
----------- ----------- ------------ -----------
INCOME (LOSS) FROM OPERATIONS (172,855) 54,786 (193,149) 212,685
OTHER INCOME(EXPENSE) FROM OPERATIONS
Interest income 27,425 - 27,425 -
Interest expense 28,078 10,776 82,038 34,496
----------- ----------- ------------ -----------
(653) (10,776) (54,613) (34,496)
INCOME (LOSS) BEFORE INCOME TAXES (173,508) 44,010 (247,762) 178,189
Income taxes (4,100) 4,700 1,000 17,000
----------- ----------- ------------ -----------
NET INCOME (LOSS) (177,608) 39,310 (248,762) 161,189
Pro forma income taxes - 13,758 - 56,415
----------- ----------- ------------ -----------
PRO FORMA NET INCOME (LOSS) (177,608) 25,552 (248,762) 104,774
=========== =========== ============ ===========
PRO FORMA INCOME (LOSS) PER COMMON SHARE $ (0.08) $ 0.02 $ (0.16) $ 0.08
=========== =========== ============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 2,188,825 1,240,909 1,556,881 1,240,909
=========== =========== ============ ===========
</TABLE>
See notes to financial statements
-2-
<PAGE> 5
CAPITAL BEVERAGE CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30
-------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (248,762) $ 161,189
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation and amortization 165,197 127,625
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (315,197) (400,416)
(Increase) decrease in inventories (143,449) 28,026
(Increase) decrease in prepaid expenses (337) (17,802)
Increase (decrease) in accounts payable and accrued expenses (87,907) (61,415)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (630,455) (162,793)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (2,999) -
Acquisition of Pabst Rights - (800,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,999) (800,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of bank loan (47,061) -
Proceeds from Bridge Loan - 180,000
Payment of Bridge loan (250,000)
Loan to stockholder - 5,000
Payment of note payable - (84,833)
Distribution to stockholder - (29,197)
Deferred registration cost 130,783 (390,705)
Due from affiliate 57,837 -
Increase in additional paid-in capital 3,803,378 -
Issuance of preferred stock - 1,350,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,694,937 1,030,265
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,061,483 67,472
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 126,927 30,383
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,188,410 $ 97,855
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 6
CAPITAL BEVERAGE CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair
presentation of the financial position and the results of operations
for the interim periods presented.
Certain financial information which is normally included in
financial statements is prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes has been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form
10-KSB.
2. LOSS PER SHARE
Per share information is computed based on the weighted
average number of common shares and dilutive common share equivalents
outstanding during the respective periods.
3. PRO FORMA INCOME TAXES
Pro forma income taxes, have been provided, to reflect the
taxes that would have been necessary if the company had not operated as
a "S" corporation in 1996.
-4-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the Company's results of operations and financial
condition. This discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein.
a. Results of Operations
Sales for the quarter ended September 30, 1997 were $5,021,824
as compared to sales of $3,696,481 for the quarter ended September 30,
1996. The cost of goods sold as a percentage of sales for the 1997
period was 93 % as compared to 89% for the comparable 1996 period.
Sales for the nine months ended September 30, 1997 were $10,657,661 as
compared to sales of $9,709,520 for the nine months ended September 30,
1996. The cost of goods sold as a percentage of sales for the nine
months ended September 30, 1997 and 1996 was 90%. The increase in cost
of goods sold, as a percentage of sales for the three and nine months
ended September 30, 1997, is due primarily to the unit sales volume
increases associated with the Pabst products offset by lower sales
prices causing a reduction in gross profit dollars and as a percentage
of sales.
Selling, general and administrative expenses for the three and
nine month periods ended September 30, 1997 were $519,414 and
$1,259,434 as compared to $357,812 and $759,078 for the respective 1996
periods. The increase in the three and six month periods ended
September 30, 1997 is due to increased marketing efforts in 1997, as
well as the impact of increases in salaries and officer's salaries that
became effective in July of 1996. Other general and administrative
expenses incurred, are in response to the sales increases anticipated
upon completion of the company's IPO.
Interest expense for the three and nine month periods ended
September 30, 1997 were $28,078 and $82,038 as compared to $10,776 and
$34,496 for the respective 1996 periods. The increase in the three and
nine month periods ended September 30, 1997 is due to the impact of
higher average debt during 1997.
b. Material Change in Financial Condition, Liquidity and Capital Resources
The Company's working capital increased from $245,666 at
December 31, 1996 to $4,043,368 at September 30, 1997. The increase of
$3,797,702 was due to the funds raised in connection with the company's
initial public offering.
At September 30, 1997, the Company's primary sources of
liquidity were $3,131,995 in cash, $811,676 in accounts receivable and
$486,793 in inventories.
-5-
<PAGE> 8
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS - NONE
Item 2 - CHANGES IN SECURITIES - NONE
Item 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - NONE
Item 5 - OTHER INFORMATION - NONE
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) None
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<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL BEVERAGE CORPORATION
/s/Carmine N. Stella
---------------------------------------
Carmine N. Stella, President and
Chief Executive Officer,
as Registrant's duly authorized officer
/s/ Carol Macchiarulo
---------------------------------------
Carol Macchiarulo,
Secretary and Treasurer
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,131,995
<SECURITIES> 0
<RECEIVABLES> 831,676
<ALLOWANCES> 20,000
<INVENTORY> 486,793
<CURRENT-ASSETS> 1,858
<PP&E> 108,000
<DEPRECIATION> 59,871
<TOTAL-ASSETS> 5,763,741
<CURRENT-LIABILITIES> 388,954
<BONDS> 0
0
3,000
<COMMON> 2,379
<OTHER-SE> 5,365,573
<TOTAL-LIABILITY-AND-EQUITY> 5,763,741
<SALES> 10,657,661
<TOTAL-REVENUES> 10,657,661
<CGS> 9,591,376
<TOTAL-COSTS> 9,591,376
<OTHER-EXPENSES> 1,259,434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,038
<INCOME-PRETAX> (247,762)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (248,762)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 0
</TABLE>
