<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 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 August 15, 1997 was 2,040,909 shares.
<PAGE> 2
CAPITAL BEVERAGE CORPORATION
INDEX
Page No.
PART I - FINANCIAL INFORMATION:
Balance Sheet - June 30, 1997 and December 31, 1996 1
Statement of Operations - Three months and six months ended
June 30, 1997 and 1996 2
Statement of Cash Flows - Six months ended June 30, 1997
and 1996 3
Notes to Financial Statements 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-6
PART II - OTHER INFORMATION 7
SIGNATURES 8
<PAGE> 3
CAPITAL BEVERAGE CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 157,523 $ 126,927
Accounts Receivable - trade, net of allowance
for doubtful accounts of $20,000 in 1997 and $50,000 in 1996 611,787 496,479
Inventory 499,279 343,344
Prepaid insurance 6,859 1,521
----------- -----------
TOTAL CURRENT ASSETS 1,275,448 968,271
MACHINERY AND EQUIPMENT, net of
accumulated depreciation of $58,139 in 1997 and $54,674 in 1996 46,860 50,327
OTHER ASSETS:
Intangible assets less accumulated amortization 1,360,000 1,440,000
of $240,000 in 1997 and $160,000 in 1996
Deferred expenses 134,878 130,783
Due from affiliate -- 57,837
Deposits 3,290 3,290
----------- -----------
$ 2,820,476 $ 2,650,508
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 283,700 $ 104,904
Accrued expenses and taxes 127,428 174,315
Notes payable - Bridge Loan 250,000 250,000
Current portion of long term debt 59,832 56,886
Accrued dividends on preferred stock 207,750 136,500
Note payable 150,000 --
----------- -----------
TOTAL CURRENT LIABILITIES 1,078,710 722,605
----------- -----------
LONG TERM DEBT 659,592 695,123
STOCKHOLDERS' EQUITY:
7 % Cumulative Convertible Series A Preferred
Stock $.01 par value; 1,000,0000 authorized shares,
337,500 issued and outstanding at June 30, 1997;
liquidation preference $1,350,000 1,215,000 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; 1,240,909 outstanding after
deducting 886,364 in treasury 1,241 1,241
Additional paid in capital 348,333 348,333
Accumulated deficit (485,400) (334,794)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,082,174 1,232,780
----------- -----------
$ 2,820,476 $ 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 Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE
Sales $3,755,798 $3,509,442 $ 5,635,837 $6,013,039
Cost of goods sold 3,293,000 3,244,186 4,915,111 5,453,874
---------- ---------- ----------- ----------
Gross profit 462,798 265,256 720,726 559,165
COST AND EXPENSES
Selling and delivery 103,802 52,822 147,949 58,433
General and administrative 259,450 190,206 593,071 342,833
---------- ---------- ----------- ----------
363,252 243,028 741,020 401,266
---------- ---------- ----------- ----------
INCOME (LOSS) FROM OPERATIONS 99,546 22,228 (20,294) 157,899
Interest expense 28,393 15,883 53,960 23,720
---------- ---------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 71,153 6,345 (74,254) 134,179
Income taxes 1,572 300 5,100 12,300
---------- ---------- ----------- ----------
NET INCOME (LOSS) 69,581 6,045 (79,354) 121,879
Pro forma income taxes -- 2,116 -- 42,657
---------- ---------- ----------- ----------
PRO FORMA NET INCOME (LOSS) 69,581 3,929 (79,354) 79,222
========== ========== =========== ==========
PRO FORMA INCOME (LOSS) PER COMMON SHARE $ 0.03 $ 0.00 $ (0.12) $ 0.06
========== ========== =========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 1,240,909 1,240,909 1,240,909 1,240,909
========== ========== =========== ==========
</TABLE>
See notes to financial statements.
-2-
<PAGE> 5
CAPITAL BEVERAGE CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30
-----------------------------
1997 1996
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (74,254) $ 121,879
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation and amortization 83,465 85,084
Changes in operating assets and liabilities:
Increase in accounts receivable (115,308) (393,098)
Increase in inventories (155,935) (208,480)
(Increase) decrease in prepaid expenses (9,433) 3,842
Increase in accounts payable and accrued expenses 126,809 48,714
--------- -----------
NET CASH USED IN OPERATING ACTIVITIES (144,656) (342,059)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Pabst Rights -- (1,600,000)
--------- -----------
NET CASH USED IN INVESTING ACTIVITIES -- (1,600,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 153,331 766,667
Loan to stockholder -- 45,000
Payment of note payable (35,916) (21,000)
Distribution to stockholder -- (29,197)
Payment from affiliate 57,837 --
Issuance of preferred stock -- 1,303,795
--------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 175,252 2,065,265
--------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 30,596 123,206
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 126,927 30,383
--------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,523 $ 153,589
========= ===========
</TABLE>
See notes to financial statements.
-3-
<PAGE> 6
CAPITAL BEVERAGE CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 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. INCOME (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. SUBSEQUENT EVENT
On July 22nd 1997 the company successfully completed its Initial
Public Offering. The company raised gross proceeds of $ 5,000,000
before offering expenses and underwriters discounts based on the sale
of 800,000 units. Each unit was comprised of 1 share of common stock
and 1/2 Class A Warrant.
-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 June 30, 1997 were $3,756,000 as
compared to sales of $3,509,000 for the quarter ended June 30, 1996.
The cost of goods sold as a percentage of sales for the 1997 period was
88 % as compared to 92% for the comparable 1996 period. Sales for the
six months ended June 30, 1997 were $5,636,000 as compared to sales of
$6,013,000 for the six months ended June 30, 1996. The cost of goods
sold as a percentage of sales for the six months ended June 30, 1997
was 87% as compared to 91% for the comparable 1996 period. The decrease
in cost of goods sold, as a percentage of sales for the three and six
months ended June 30, 1997, is due primarily to the sales activity
associated with the Pabst products. The Pabst products generate a
higher gross margin than due the company's other products. Accordingly,
the cost of goods sold on these products are lower.
The sales decrease from 1996 to 1997 was due in part to the change
in product mix, as well as increased competition in the Company's Pabst
products which placed downward pressure on sales prices.
Selling, general and administrative expenses for the three and
six month periods ended June 30, 1997 were $363,000 and $741,000 as
compared to $243,000 and $401,000 for the respective 1996 periods. The
increase in the three and six month periods ended June 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 six month periods ended June
30, 1997 were $28,000 and $54,000 as compared to $16,000 and $24,000
for the respective 1996 periods. The increase in the three and six
month periods ended June 30, 1997 is due to the impact of additional
debt incurred in 1997.
b. Material Change in Financial Condition, Liquidity and Capital Resources
The Company's working capital decreased from $246,000 at December
31, 1996 to $197,000 at June 30, 1997. The decrease of $49,000 was due
in part to the accrual of dividends on its Series A and B preferred
stock.
-5-
<PAGE> 8
At June 30, 1997, the Company's primary sources of liquidity were
$158,000 in cash, $612,000 in accounts receivable and $499,279 in
inventories.
-6-
<PAGE> 9
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
-7-
<PAGE> 10
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
September 2, 1997 /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
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 157,523
<SECURITIES> 0
<RECEIVABLES> 631,787
<ALLOWANCES> 20,000
<INVENTORY> 499,279
<CURRENT-ASSETS> 1,275,488
<PP&E> 104,999
<DEPRECIATION> 58,139
<TOTAL-ASSETS> 28,200,476
<CURRENT-LIABILITIES> 1,078,710
<BONDS> 0
0
1,218,000
<COMMON> 349,574
<OTHER-SE> (485,400)
<TOTAL-LIABILITY-AND-EQUITY> 2,820,476
<SALES> 5,635,837
<TOTAL-REVENUES> 5,635,837
<CGS> 4,915,111
<TOTAL-COSTS> 4,915,111
<OTHER-EXPENSES> 741,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,960
<INCOME-PRETAX> (74,354)
<INCOME-TAX> 5,100
<INCOME-CONTINUING> (79,354)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,354)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
