SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
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 9, 1999 was 2,378,409 shares.
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<CAPTION>
CAPITAL BEVERAGE CORPORATION
FORM 10-QSB
September 30, 1999
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements (Unaudited) NUMBER
<S> <C>
Balance Sheet as of September 30, 1999 3
Statements of Operations for the three-month periods
ended September 30, 1999 and 1998 and the nine-month
periods ended September 30, 1999 and 1998 4
Statements of Cash Flows for the nine-month periods
ended September 30, 1999 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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2
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<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED BALANCE SHEET
September 30,
1999
-----------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C>
Cash ......................................................................... $ 1,559,772
Accounts receivable - trade, net of allowance for doubtful accounts of $60,000 683,143
Inventories .................................................................. 874,055
Prepaid expenses and other ................................................... 124,756
-----------
TOTAL CURRENT ASSETS ..................................................... 3,241,726
PROPERTY AND EQUIPMENT, less accumulated depreciation of $29,732 .................. 95,339
OTHER ASSETS: ..................................................................... --
Intangible assets, less accumulated amortization of $600,000 ................. 1,000,000
Deposits ..................................................................... 3,290
-----------
$ 4,340,355
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................. $ 373,607
Accrued expenses and taxes ................................................... 300,613
Current portion of long-term debt ............................................ 72,702
Accrued dividends on preferred stock ......................................... 333,113
-----------
TOTAL CURRENT LIABILITIES ................................................ 1,080,035
-----------
LONG-TERM DEBT .................................................................... 504,432
-----------
STOCKHOLDERS' EQUITY:
7% Cumulative Series B Preferred Stock, par value $.01;
issued and outstanding 300,000 shares (Liquidation value $1,200,000) ..... 3,000
Common stock, $ .001 par value; authorized 20,000,000 shares;
issued and outstanding 2,378,409 shares .................................. 2,379
Additional paid-in capital ................................................... 5,365,573
Accumulated deficit .......................................................... (2,615,064)
-----------
TOTAL STOCKHOLDERS' EQUITY ............................................... 2,755,888
-----------
4,340,355
===========
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The accompanying note is an integral part of the financial statements.
3
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<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------- --------------------------
1999 1998 1999 1998
-------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SALES .................................... $ 4,030,213 $ 2,255,136 $ 9,391,316 $ 6,967,264
COST OF GOODS SOLD ....................... 3,267,224 2,067,401 7,485,265 6,396,070
----------- ----------- ----------- ------------
GROSS PROFIT ............................. 762,989 187,735 1,906,051 571,194
----------- ----------- ----------- ------------
OPERATING EXPENSES
Selling and delivery ................ 333,081 121,025 694,529 225,677
General and administrative .......... 509,619 310,975 1,555,403 1,075,439
----------- ----------- ----------- ------------
842,700 432,000 2,249,932 1,301,116
----------- ----------- ----------- ------------
INCOME (LOSS) FROM OPERATIONS ............ (79,711) (244,265) (343,881) (729,922)
INTEREST EXPENSE ......................... (13,544) (14,217) (40,381) (43,653)
INTEREST INCOME .......................... 17,344 29,232 56,151 91,608
----------- ----------- ----------- ------------
NET INCOME (LOSS) ........................ (75,911) (229,250) (328,111) (681,967)
PREFERRED STOCK DIVIDENDS ................ (21,000) (21,000) (63,000) (63,000)
----------- ----------- ----------- ------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (96,911) $ (250,250) $ (391,111) $ (744,967)
=========== =========== =========== ============
LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.04) $ (0.11) $ (0.16) $ (0.31)
=========== =========== =========== ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES . 2,378,409 2,378,409 2,378,409 2,378,409
=========== =========== =========== ============
</TABLE>
The accompanying note is an integral part of the financial statements.
4
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<TABLE>
<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30,
-------------------------
1999 1998
-------------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ............................................ $ (328,111) $ (681,967)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .................. 127,841 123,335
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ...... (341,374) 498,468
(Increase) in inventories ....................... (294,956) (214,384)
(Increase) decrease in prepaid expenses ......... 31,843 (135,599)
Decrease in deposits ............................ 72,372 --
Increase in accounts payable and accrued expenses 303,278 69,852
----------- -----------
(100,995) 341,672
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES .................... (429,106) (340,295)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................................ (49,322) (4,731)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in note payable ........................... (50,541) (46,350)
----------- -----------
NET DECREASE IN CASH ..................................... (528,969) (391,376)
CASH - BEGINNING OF PERIOD ............................... 2,088,741 2,843,870
----------- -----------
CASH - END OF PERIOD ..................................... $ 1,559,772 $ 2,452,494
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest .............................. $ 40,381 $ 43,653
=========== ===========
Cash paid for income taxes .......................... $ -- $ 9,620
=========== ===========
</TABLE>
The accompanying note is an integral part of the financial statements.
5
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CAPITAL BEVERAGE CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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-
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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.
Statements in this Form 1O-QSB that are not statements of historical
or current fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other unknown
factors that could cause the actual results of the Company to be materially
different from the historical results or from any future results expressed or
implied by such forward-looking statements. In addition to statements that
explicitly describe such risks and uncertainties, readers are urged to
consider statements labeled with the terms "believes," "belief," "expects,"
"intends," "anticipates" or "plans" to be uncertain and forward-looking. The
forward- looking statements contained herein are also subject generally to
other risks and uncertainties that are described from time to time in the
Company's reports and registration statements filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
Sales for the nine months ended September 30, 1999 were $9,391,316 as
compared to sales of $6,967,264 for the nine months ended September 30, 1998.
Sales for the quarter ended September 30, 1999 were $4,030,213 as compared to
sales of $2,255,136 for the quarter ended September 30, 1998. The cost of
goods sold as a percentage of sales for the nine-month period in 1999 period
was 80% as compared to 92% for the comparable 1998 period. The decrease in
cost of goods sold as a percentage of sales for the nine months ended
September 30, 1999, is due primarily to the additional sales of products from
the Pittsburgh Brewery Co., which affords the Company a significantly greater
gross margin percentage.
Selling, general and administrative expenses for the nine-month period
ended September 30, 1999 were $2,249,932 as compared to $1,301,116 for the
respective 1998 period. The increase in the nine months ended September 30,
1999 results from acquisition expenses as a result of the due diligence
process associated with the Pittsburgh Brewery coupled with expansion into new
products provided by the Pittsburgh Brewery Co.,certain expenses increased as
a result of added warehousing and salespeople salaries, automobile expenses,
legal fees, office expenses, repairs and maintenance expenses.
Interest expense for the nine-month period ended September 30, 1999 was
$40,381 as compared to $43,653 for the respective 1998 period. The decrease in
the nine-month period ended September 30, 1999 is due to the reduction of
debt. Interest income for the nine-month period ended September 30, 1999 was
$56,151 as compared to $91,608 for the respective 1998 period. The decrease in
the nine-month period resulted from the decrease in average cash balance
invested in the Vista account.
-7-
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LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations for the nine months ended September 30,
1999 was $429,106. The increase in inventories of $294,956 was mostly
offset by an increase in accounts payable and accrued expenses of
$303,278.
WORKING CAPITAL DECREASED FROM $2,457,022 AT DECEMBER 31, 1998 to
$2,161,691 at September 30, 1999 as a result of the net loss of $328,111
for the nine-month period.
At September 30, 1999, the Company's primary sources of liquidity
were $1,559,772 in cash, $683,143 in accounts receivable.
Management believes it has sufficient sources of working capital
to adequately meet the Company's needs through the end of 1999,
CAP Communications Ltd. was formed in November 1998 to explore,
as an ancillary to beverage sales, the rapidly expanding prepaid phone
card market. Within New York City, the bulk of phone cards sales occur
within ethnic neighborhoods, with major sales occurring within the
Hispanic based communities. Given Capital Beverage's well established
position in local Hispanic retail markets and its connection with the
business owners, phone cards may serve as a significant source of new
revenues to Capital's expanding beverage sales. The synergism of the two,
beer sales and phone cards, may prove to be the catalyst, which sparks
continued revenue growth for Capital Beverage. Working in conjunction with
Orion Telecommunications Corporation, with offices in New York, Capital
Beverage has begun an infrastructure development to explore this new
potential market Orion has agreed to provide funding to Capital Beverage
which will allow Capital Beverage to determine what course of action to
take to make their card a success here in New York.
YEAR 2000
The Company recognizes that a challenging problem exists in that
many systems worldwide do not have the capability of recognizing the year
2000 or the years thereafter. No easy technological "quick fix" has yet
been developed for this problem. While the issue is not of significance
for the Company because of its minimal reliance on computers, this "Year
2000 Computer Problem" creates risk for the Company from unforeseen
problems in its own computer systems and from third parties with whom the
Company deals. Such failures of third parties' computer systems could have
a material adverse effect on the Company and its ability to conduct its
business in the future.
-8-
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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 September 30,
1999.
-9-
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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: November 9, 1999 /s/Carmine N. Stella, President and
Chief Executive Officer,
as Registrant's duly authorized officer
/s/Carol Russell,
Secretary and Treasurer
-10-
<TABLE> <S> <C>
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<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001020186
<NAME> CAPITAL BEVERAGE CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,559,772
<SECURITIES> 0
<RECEIVABLES> 743,143
<ALLOWANCES> 60,000
<INVENTORY> 874,055
<CURRENT-ASSETS> 3,241,726
<PP&E> 125,071
<DEPRECIATION> 29,732
<TOTAL-ASSETS> 4,340,355
<CURRENT-LIABILITIES> 1,080,035
<BONDS> 0
0
3,000
<COMMON> 2,379
<OTHER-SE> 2,750,509
<TOTAL-LIABILITY-AND-EQUITY> 4,340,355
<SALES> 9,391,316
<TOTAL-REVENUES> 9,391,316
<CGS> 7,485,265
<TOTAL-COSTS> 7,485,265
<OTHER-EXPENSES> 2,249,932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (40,381)
<INCOME-PRETAX> (328,111)
<INCOME-TAX> 0
<INCOME-CONTINUING> (328,111)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (328,111)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
