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 March 31, 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 August 12, 1998 was 2,378,409 shares.
<PAGE>
CAPITAL BEVERAGE CORPORATION
FORM 10-QSB
March 31, 1999
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Financial Statements (Unaudited) NUMBER
Balance Sheet as of March 31, 1999 3
Statements of Operations for the three-months
ended March 31, 1999 and 1998 4
Statements of Cash Flows for the three-months
ended March 31, 1999 and 1998 5
Note to Financial Statements 6
Item 2. Management's Discussion and Analysis 7 - 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
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<TABLE>
<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED BALANCE SHEET
March 31,
1999
-------------------
ASSETS (Unaudited)
<S> <C>
CURRENT ASSETS:
Cash $ 2,124,197
Accounts receivable - trade, net of allowance for doubtful
accounts of $60,000 365,361
Inventories 465,194
Prepaid expenses and other 135,712
-------------------
TOTAL CURRENT ASSETS 3,090,464
PROPERTY AND EQUIPMENT, less accumulated depreciation of $23,672 60,611
OTHER ASSETS:
Intangible assets, less accumulated amortization of $520,000 1,080,000
Deposits 3,290
-------------------
$ 4,234,365
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 289,641
Accrued expenses and taxes 181,275
Current portion of long-term debt 69,621
Accrued dividends on preferred stock 291,113
-------------------
TOTAL CURRENT LIABILITIES 831,650
-------------------
LONG-TERM DEBT 541,570
-------------------
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 (2,509,807)
-------------------
TOTAL STOCKHOLDERS' EQUITY 2,861,145
-------------------
$ 4,234,365
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
------------------------------------------
1999 1998
-------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
SALES $ 1,994,222 $ 2,223,715
COST OF GOODS SOLD 1,628,903 2,090,542
-------------------- -------------------
GROSS PROFIT 365,319 133,173
-------------------- -------------------
OPERATING EXPENSES
Selling and delivery 158,213 53,915
General and administrative 478,691 409,520
-------------------- -------------------
636,904 463,435
-------------------- -------------------
LOSS FROM OPERATIONS (271,585) (330,262)
INTEREST EXPENSE (13,516) (14,883)
INTEREST INCOME 20,247 31,836
-------------------- -------------------
NET LOSS (264,854) (313,309)
PREFERRED STOCK DIVIDENDS (21,000) (21,000)
-------------------- -------------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (285,854) $ (334,309)
==================== ===================
LOSS PER COMMON SHARE - BASIC $ (0.12) $ (0.14)
==================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 2,378,409 2,378,409
==================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL BEVERAGE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
------------------------------------------
1999 1998
------------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (264,854) $ (313,309)
------------------- --------------------
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 41,634 41,046
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (23,592) 230,497
(Increase) decrease in inventories 113,905 (97,834)
(Increase) decrease in prepaid expenses 20,887 (234,074)
Increase in accounts payable and accrued expenses 172,346 72,434
------------------- --------------------
325,180 12,069
------------------- --------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 60,326 (301,240)
------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (8,386) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in of note payable (16,484) (15,117)
NET INCREASE (DECREASE) IN CASH 35,456 (316,357)
CASH - BEGINNING OF PERIOD 2,088,741 2,843,870
------------------- --------------------
CASH - END OF PERIOD $ 2,124,197 $ 2,527,513
=================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 13,516 $ 14,883
=================== ====================
Cash paid for taxes $ - $ -
=================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
CAPITAL BEVERAGE CORPORATION, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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-
<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.
Statements in this Form 10-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 three months ended March 31, 1999 were $1,994,222 as
compared to sales of $2,223,715 for the three months ended March 31,1998. The
cost of goods sold as a percentage of sales for the 1999 period was 82% as
compared to 94% for the comparable 1998 period. The decrease in cost of goods
sold as a percentage of sales for the three months ended March 31, 1999, is due
primarily to the additional sales of products from the Pittsburgh Brewery Co.,
which afford Capital a significantly greater gross margin percentage.
Selling, general and administrative expenses for the three month period
ended March 31, 1999 were $636,904 as compared to $463,435 for the respective
1998 period. The increase in the three month period ended March 31, 1999 is due
primarily to the additional territory we expanded into in relation to new
products from 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 three month period ended March 31, 1999 was
$13,516 as compared to $14,883 for the respective 1998 period. The decrease in
the three month period ended March 31, 1999 is due to the reduction of debt.
Interest income for the three month period ended March 31, 1999 was $20,247 as
compared to $31,836 for the respective 1998 period. The decrease in the three
month period resulted from the decrease in average cash balance invested in the
Vista account.
-7-
<PAGE>
b. Liquidity and Capital Resources
Cash provided by operations for the three months ended March 31, 1999 was
$60,326. This was primarily attributable to a decrease in inventories of
$113,905 and an increase in accounts payable and accrued expenses of $172,346.
Working capital decreased from $2,457,022 at December 31, 1998 to
$2,258,814 at March 31, 1999 as a result of the cash required in operating
activities.
At March 31, 1999, the Company's primary sources of liquidity were
$2,124,197 in cash, $365,361 in accounts receivable and $465,194 in inventories.
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 through
April 1999 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
computer 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-
<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,
1999.
-9-
<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 18, 1999
Carmine N. Stella, President and
Chief Executive Officer,
as Registrant's duly authorized officer
Carol Russell,
Secretary and Treasurer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001020186
<NAME> CAPITAL BEVERAGE
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,124,197
<SECURITIES> 0
<RECEIVABLES> 425,361
<ALLOWANCES> 60,000
<INVENTORY> 465,194
<CURRENT-ASSETS> 3,090,464
<PP&E> 84,283
<DEPRECIATION> 23,672
<TOTAL-ASSETS> 4,234,365
<CURRENT-LIABILITIES> 831,650
<BONDS> 0
0
3,000
<COMMON> 2,379
<OTHER-SE> 2,855,766
<TOTAL-LIABILITY-AND-EQUITY> 4,234,365
<SALES> 1,994,222
<TOTAL-REVENUES> 1,994,222
<CGS> 1,628,903
<TOTAL-COSTS> 1,628,903
<OTHER-EXPENSES> 636,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,516
<INCOME-PRETAX> (264,854)
<INCOME-TAX> 0
<INCOME-CONTINUING> (264,854)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264,854)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
