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 March 31, 1998
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 May 12, 1998 was 2,378,409 shares.
<PAGE>
CAPITAL BEVERAGE CORPORATION
FORM 10-Q
March 31, 1998
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements (Unaudited) NUMBER
Balance sheets as of March 31, 1998 and December 31, 1997 3
Statements of Operations for the three-month periods
ended March 31, 1998 and 1997 4
Statements of Cash Flows for the three-month periods
ended March 31, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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<PAGE>
CAPITAL BEVERAGE CORPORATION
BALANCE SHEETS
March 31, December 31,
1998 1997
(Unaudited)
-------------- --------------
ASSETS
CURRENT ASSETS:
Cash $ 2,527,513 $ 2,843,870
Accounts receivable - trade,
net of allowance for doubtful
accounts of $65,000 624,975 855,472
Inventories 524,124 426,290
Prepaid expenses and other 243,622 9,548
-------------- --------------
TOTAL CURRENT ASSETS 3,920,234 4,135,180
PROPERTY AND EQUIPMENT, less accumulated
depreciation of $18,011 and $61,965,
respectively 49,012 50,058
OTHER ASSETS:
Intangible assets, less accumulated
amortization of $360,000 and
$320,000, respectively 1,240,000 1,280,000
Deposits 3,290 3,290
-------------- --------------
$ 5,212,536 $ 5,468,528
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 150,012 $ 67,135
Accrued expenses and taxes 102,158 112,601
Current portion of long-term debt 63,848 62,480
Accrued dividends on preferred stock 207,113 186,113
-------------- --------------
TOTAL CURRENT LIABILITIES 523,131 428,329
-------------- --------------
LONG-TERM DEBT 611,191 627,676
-------------- --------------
STOCKHOLDERS' EQUITY:
7% Cumulative Series B Preferred
Stock, par value $.01; issued
and outstanding 300,000 shares
(Liquidation value $1,200,000) 3,000 3,000
Common stock, $ .001 par value;
authorized 20,000,000 shares;
issued and outstanding 2,378,409
shares 2,379 2,379
Additional paid-in capital 5,365,573 5,365,573
Accumulated deficit (1,292,738) (958,429)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 4,078,214 4,412,523
-------------- --------------
$ 5,212,536 $ 5,468,528
============== ==============
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CAPITAL BEVERAGE CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended March 31,
------------------------------------------
1998 1997
-------------------- -------------------
(Unaudited) (Unaudited)
SALES $ 2,223,715 $ 1,880,039
COST OF GOODS SOLD 2,090,542 1,622,111
-------------------- -------------------
GROSS PROFIT 133,173 257,928
-------------------- -------------------
OPERATING EXPENSES
Selling and delivery 53,915 44,147
General and administrative 408,362 333,621
-------------------- -------------------
462,277 377,768
-------------------- -------------------
LOSS FROM OPERATIONS (329,104) (119,840)
INTEREST EXPENSE (14,883) 25,567
INTEREST INCOME 31,836 -
-------------------- -------------------
LOSS BEFORE INCOME TAXES (312,151) (145,407)
INCOME TAXES 1,158 3,528
-------------------- -------------------
NET LOSS (313,309) (148,935)
CUMULATIVE PREFERRED
STOCK DIVIDENDS 21,000 35,625
-------------------- -------------------
NET LOSS APPLICABLE TO
COMMON SHAREHOLDERS $ (334,309) $ (184,560)
==================== ===================
LOSS PER COMMON SHARE - BASIC $ (0.14) $ (0.15)
==================== ===================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 2,378,409 1,240,909
==================== ===================
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CAPITAL BEVERAGE CORPORATION
STATEMENT OF CASH FLOWS
Three Months Ended March 31,
------------------------------------------
1998 1997
------------------- --------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (334,309) $ (148,935)
------------------- --------------------
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and amortization 41,046 42,670
Changes in assets and
liabilities:
Decrease in accounts receivable 230,497 143,226
(Increase) in inventories (97,834) (35,896)
(Increase) decrease in prepaid
expenses (234,074) 167
Increase (decrease) in accounts
payable and accrued expenses 72,434 (79,330)
------------------- --------------------
12,069 70,837
------------------- --------------------
NET CASH USED IN OPERATING
ACTIVITIES (322,240) (78,098)
------------------- --------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Due from affiliate - 57,837
Payments of note payable (15,117) (18,418)
------------------- --------------------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (15,117) 39,419
------------------- --------------------
NET DECREASE IN CASH (337,357) (38,679)
CASH - BEGINNING OF PERIOD 2,843,870 126,927
------------------- --------------------
CASH - END OF PERIOD $ 2,506,513 $ 88,248
=================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 14,883 $ 10,567
=================== ====================
Cash paid for taxes $ 1,158 $ 11,877
=================== ====================
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
CAPITAL BEVERAGE CORPORATION, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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.
-6-
<PAGE>
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 March 31, 1998 were $2,223,715 as
compared to sales of $1,880,039 for the quarter ended March 31, 1997.
The cost of goods sold as a percentage of sales for the 1998 period was
94% as compared to 87% for the comparable 1997 period. The increase in
cost of goods sold, as a percentage of sales for the three months ended
March 31, 1998, is due primarily to discounting which the Company
needed to maintain to be competitive both on an intrabrand and
interbrand brand basis with other wholesalers.
Selling, general and administrative expenses for the three
month period ended March 31, 1998 were $462,277 as compared to $377,768
for the respective 1997 period. The increase in the three month period
ended March 31, 1998 is due to fees with respect to being a public
company and increases in office expense, employee benefits, utilities,
repairs, supplies and maintenance expenses which were necessary to
support the increased level of sales in fiscal 1998 as compared to
fiscal 1997.
Interest expense for the three month period ended March 31,
1998 was $14,883 as compared to $25,567 for the respective 1997 period.
The decrease in the three month period ended March 31, 1998 is due to
the reduction of debt. Interest income of $31,836 resulted from
interest earned on cash proceeds received from the public offering of
the Company's stock.
b. Material Change in Financial Condition, Liquidity and Capital Resources
Cash used in operations for the first quarter of 1998 was
$322,240. The increase in prepaid expenses of $234,074 was partially offset by
a $230,497 decrease in accounts receivable.
Working capital decreased from $3,706,851 at December 31, 1997
to $3,397,103 at March 31, 1998 as a result of the cash required in operating
activities.
At March 31, 1998, the Company's primary sources of liquidity
were $2,527,513 in cash, $624,975 in accounts receivable, $524,124 in
inventories, and $243,622 in prepaid and other expenses.
Management believes it has sufficient sources of working
capital to adequately meet the Company's needs through the end of 1998.
-7-
<PAGE>
PART II - OTHER INFORMATION
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1998.
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<PAGE>
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
Date: May 12, 1998 /s/ Carmine N. Stella
----------------------
Carmine N. Stella, President and
Chief Executive Officer,
as Registrant's duly authorized officer
/s/ Carol Russell
----------------------
Carol Russell,
Secretary and Treasurer
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<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
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<CIK> 0001020186
<NAME> CAPITAL BEVERAGE
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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<PP&E> 61,023
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