BEV TYME INC, 10KSB/A, 1996-05-30

BEV TYME INC
10KSB/A, 1996-05-30
GROCERIES & RELATED PRODUCTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

REPORT ON FORM 10-KSB/A No.1

Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended December 31, 1995.

Transition Report pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

For the transition period from ______________ to ______________.

Commission File No. 0-21166

BEV-TYME, INC.
(Exact name of registrant as specified in its charter)

Delaware 36-3769323
(State of or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

134 Morgan Avenue
Brooklyn, New York 11237
(Address of Principal (Zip Code)
Executive Officers)

Registrant's telephone number, including area code: (718) 894-4300

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.0001 per share
(Title of Class)

Redeemable Common Stock Purchase Warrants
(Title of Class)

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Units consisting of one (1) share of Series C Convertible Preferred Stock, par
value $.0001 per share and two (2) Series C Redeemable Preferred Stock Purchase
Warrants
(Title of Class)

Series C Convertible Preferred Stock, par value $.0001 per share
(Title of Class)

Series C Redeemable Preferred Stock Purchase Warrants
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of the Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year were $12,730,722.

The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of such stock as
of March 29, 1996, was approximately $11,154,386.

Number of shares outstanding of the issuers Common Stock and Series C Preferred
Stock, as of March 29, 1996, was 7,292,209 and 1,502,225, respectively.

DOCUMENTS INCORPORATED BY REFERENCE:

<PAGE>
PART I

Item 1. BUSINESS.

New Day Beverage, Inc. (the "Company") was incorporated in the State of
Delaware on August 6, 1992 and changed its name to Bev-Tyme, Inc. on January 11,
1996. The Company and its wholly owned subsidiaries are engaged in the business
of developing, marketing and distributing spring and carbonated water, soft
drinks and "New Age" beverages. In 1995, the Company also commenced distributing
beer and other malt beverages. Initially, the Company commenced its operations
by creating and marketing a line of "New Age" beverage products under the
trademark "Sunsprings." Because of increased competition in the "New Age"

beverage market and continuing operating losses in the sale of its
SunSprings(Trademark) beverage products, the Company has increased its focus on
the distribution business by acquiring Mootch & Muck, Inc. ("M&M"), a beverage
distributor. The Company then added "Taste of Jamaica", a Jamaican style soda.
Currently, the Company's principal activity is the distribution of beverage
products through M&M, its wholly owned subsidiary. See "Certain Transactions."

As of November 18, 1994, M&M entered into an Asset Purchase Agreement
with Sclafani Beer and Soda Distributors, Inc., a distributor of non-alcoholic
drinks, as well as beer and other malt beverages in the New York City boroughs
of Brooklyn and Queens ("SB&S"), pursuant to which M&M purchased in June, 1995,
substantially all of the assets of the SB&S business. M&M paid $500,000 in cash,
200,000 shares of Common Stock and issued options to purchase 75,000 shares of
the Company's Common Stock (collectively the "Purchase Price"). In June, 1995,
M&M entered into an employment agreement with John Sclafani, pursuant to which
Mr. Sclafani served as Vice President of Beer Sales for M&M. Mr. Sclafani
received an annual salary of $90,000. In August, 1995, the Company accepted Mr.
Sclafani's resignation.

On May 15, 1995, the Company completed a secondary public offering
pursuant to which the Company sold 460,000 Units ("Preferred Stock Units") to
the public at $5.00 per Unit. Each Preferred Stock Unit consisted of one (1)
share of Series C Convertible Preferred Stock ("Preferred Stock") and two (2)
Series C Preferred Stock Purchase Warrants ("Preferred Stock Purchase
Warrants"). Each share of Series C Preferred Stock is convertible at the option
of the holder, at any time after May 15, 1996, into 18 shares of the Company's
Common Stock, $.0001 par value per share. The Series C Warrants entitle the
registered holder thereof to purchase one (1) share of Series C Preferred Stock
at an exercise price of $6.00 per share through May 15, 2000 and may be redeemed
by the Company under certain conditions. To date, none of the Preferred Stock
Warrants have been exercised or redeemed. The Company used a significant portion
of the proceeds of the secondary public offering to expand the current business
of M&M into the beer and malt beverage distribution business.

The Company's executive offices are currently located at 134 Morgan
Avenue, Brooklyn, New York 11237 and its telephone number is (718) 894-4300. The
Company's fiscal year end is December 31.

<PAGE>

Recent Developments

well as stock options based upon performance. In January 1996, the Company
assigned its rights under the letter of intent to Perry's Majestic Beer, Inc., a
subsidiary of the Company ("Perry's Majestic"), which entered into a definitive
agreement with Riverosa on March 29, 1996, pursuant to which the Company agreed
to pay the sum of $250,000 to acquire Riverosa. The closing is contingent upon,
among other things, the receipt of all necessary consents, permits and
government approvals. Mark Butler, one of the principal shareholders of Riverosa
was appointed to the board of directors of Perry's Majestic on April 1, 1996. A
contract deposit of $150,000 was paid into escrow upon execution of the
agreement and the balance of $100,000 is payable by the issuance of a promissory
note. The promissory note is payable upon the earlier of (i) one year from the
date of issuance or (ii) the closing of the closing of initial public offering
of Perry's Majestic.

In January 1996, the Perry's Majestic issued an aggregate of 2,500,000
shares of its common stock to seven (7) parties for total consideration of
$50,000. In March 1996, Perry's Majestic issued to the Company 500,000 shares of
convertible Series A Preferred Stock and 7,000,000 shares of Series B Preferred
Stock for $150,000 and 400,000 shares of the Company's Series C Preferred Stock.
As a result of these transactions, the Company holds approximately 75% of the
voting stock of Perry's Majestic.

In March, 1996, Perry's Majestic borrowed an aggregate of $150,000 from
seven (7) unaffiliated lenders (the "Bridge Lenders"). In exchange for making
loans to Perry's Majestic, each Bridge Lender received a promissory note (the
"Bridge Note"). Each of the Bridge Notes bears interest at the rate of eight
percent (8%) per annum. The Bridge Notes are due and payable upon the earlier of
(i) July 31, 1996 or (ii) the closing of an initial underwritten public offering
of the Perry's Majestic's securities. Perry's Majestic intends to use a portion
of the proceeds of its initial public offering to repay the Bridge Lenders. The
Bridge Lenders have the right to receive a total of 3,000,000 Class A Warrants
of Perry's Majestic. Perry's Majestic entered into the bridge financing
transactions because it required additional financing and no other sources of
financing were available to it at that time. Further, Perry's Majestic agreed to
register the Class A Warrants issuable in connection with the Bridge Loans and
the shares of Common Stock underlying the Class A Warrants in the first
registration statement filed by the Company following the date of the loan.

<PAGE>

345,000 Class A Warrants and 345,000 shares of Common Stock
issuable upon the exercise of the Class A Warrants. Perry's Majestic is
registering on behalf of the Selling Securityholders, under an alternate

prospectus, (i) 1,850,000 shares of Common Stock, and (ii) 3,000,000 Class A
Warrants issuable upon conversion of the Bridge Notes.

The Beverage Distribution Business

Since 1977, M&M has been engaged in the business of distributing
non-alcoholic beverages items to retail accounts in New York City, primarily in
Manhattan. Of the approximately 25 different brands sold by M&M to a variety of
retail and wholesale establishments, sparkling and spring water currently
account for approximately 60% of sales. M&M has approximately 81 full time
employees 26 of which are engaged in sales. See "Management's Discussion and
Analysis".

M&M distributes a number of products, including the sparkling and
spring waters of Poland Spring and Spa Spring. Sales of waters accounted for
approximately 60% of M&M's sales. M&M also distributes Cloister Spring Water,
Glacier Ridge, Appollinaris Mineral Waster, Boruassa Glacial Water, Cinciano
Mineral Water, Glaceau, Loka Mineral Water, Mountain Valley Spring Water,
Everfresh Clearfruit and juices, SunSprings Sparkling Water w/Natural Flavor,
After The Fall Fruit Juices and Spritzers, Everfresh Fruit Juices and Drinks,
Martinelli Apple Juice & Ciders, Jamaican Gold Iced Coffee, Sioux City Iced Tea,
Punch & Lemonade, Sioux City Soda, White Rock Seltzer and Soda, Clearly
Canadian, Artisian Water, San Pellegrino, Vittel Spring Water, Clearly Canadian
Beverages, China Tea, PEK, Old Tyme Soda and Taste of Jamaica. In addition, M&M
distributes some snack products, including Dirty Potato Chips and Roberts
American Gourmet Snacks. In June 1995, M&M commenced distributing a number of
beers and malt beverage products.

M & M distributes products in Manhattan, Brooklyn and Queens through a
resale sales force consisting of 26 salespeople, including a sales manager and
four supervisors. Each salesperson visits his/her accounts once per week.
Additionally, M & M sells products in Manhattan, Brooklyn and Queens to other
beverage distributors and beer and soda stores. Sales are primarily divided into
four divisions: retail, chain stores, food service and distributor sales.

Retail sales consist of sales to deli's, bodega's, mom & pop retail
stores, gourmet stores, tobacco shops, health food stores, and convenience
stores. Most beverages that are sold in these stores are kept in refrigerators
for sale to retail customers. Approximately 55% of M&M's annual sales are sold
to retail sales accounts. Chain store sales consist of sales to food
supermarkets, drug store chains and department stores. Approximately 7% of M&M's
annual sales are sold to chain store accounts. Food service sales consist of
sales to corporate catering, corporate cafeterias, hotels, restaurants, gyms,
health clubs and dance studios. Approximately 16% of M&M's annual sales are sold
to food service accounts. Distributor sales consist of sales to other
distributors. Approximately 19% of M&M's annual sales are sold to other
distributors.

A sales manager oversees all three divisions which are managed by a
divisional supervisor. The sales manager and four sales supervisors meet every
morning with the sales force and check to ensure they are prepared to properly
service M&M customers.

Orders are taken by the salespeople on a daily basis. Upon receiving

the order it is input into a hand held computer. The orders are transmitted
telephonically twice a day, directly into a

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computer at the M & M office, where the invoice is printed. The printed invoices
are then sent to the routing department where they are routed for shipping. Each
salesperson makes approximately 40 sales calls per day.

After the orders are routed and manifested for the warehouse, the
warehouse manager assigns warehouse employees to pull the products as set forth
on the manifests. After the products are pulled it is loaded onto the trucks.
All truck drivers are assigned a minimum of one helper on a daily basis.

The Beer Distribution Business

As a result of the acquisition of substantially all of the assets of
SB&S, M&M is currently the exclusive distributor in New York City of a number of
beers including Holsten, Perry's Majestic, Wild Goose, La Brasserie Binchoise,
La Brasserie Jeanne D'Arc, Brasal Bier, Maccabee and Zambezi. M&M also
distributes Budweiser, Coors, Miller High Life and other popular brands. M&M
buys the popular brands such as Budweiser, Coors and Miller High Life from
authorized distributors and redistributes the product to its retail customers.
M&M is not an exclusive distributor of any of such popular brands. M&M competes
in the beer distribution business with such distributors as Phoenix Beverages,
Budweiser, Coors of New York, Manhattan Beer and Prospect Beer. M&M is a niche
brand distributor which also distributes microbrewed beers which is the fastest
growing category in the beer industry.

Products

The Company has developed two distinct product lines, one under its
SunSprings(Trademark) trademark and one under its Taste of Jamaica(Registered)
trademark. Currently, the Company has ceased developing and marketing the
SunSprings(Trademark) line of beverages which was a sparkling water beverage
with natural fruit and juice flavors.

In order to expand its product line and respond to consumer
preferences, the Company acquired, as of April 1, 1994, the Taste of Jamaica
name and product concept from A. Alexander Watson. No other assets or
liabilities were acquired from Mr. Watson. As consideration for these assets
purchased from Mr. Watson, the Company hired Mr. Watson as its Manager of
Marketing and Product Development and entered into a five year employment
agreement with him. Under the terms of the Employment Agreement, Mr. Watson is
entitled to an annual salary of $20,800 and a commission based upon all sales of
Taste of Jamaica(Registered) products. To date, the Company has sold
approximately [7,000] cases of Taste of Jamaica(Registered) products. M&M became
acquainted with Mr. Watson several years ago when he contacted M&M to determine
whether M&M was interested in distributing Jamaican sodas.

Packaging

Previously, bottles were purchased from major glass manufacturers.
However, the Company believes that by switching its products to 20 ounce plastic
bottles, it can significantly reduce its bottling cost, while providing its
customers with a larger beverage.

The Company develops and markets products under the Taste of
Jamaica(Registered) label. Taste of Jamaica is a Jamaican style soda produced in
six island flavors: Ginger Beer, Kola Champagne, Pineapple, Cream, Grapefruit
and Fruit Punch. The Company's products are distinctively packaged

<PAGE>

to attract consumer interest and establish a strong identity. The Taste of
Jamaica(Registered) is produced in 20 oz. plastic bottles and has an "island"
looking label giving it a friendly, relaxed look.

Production

The Company owns the rights to all formulas utilized for its Taste of
Jamaica products. Consequently, the Company may in the future choose to
manufacture its products at different or additional production facilities.
Production will be accomplished on a contractual basis utilizing independent
bottlers ("packers") including those already providing such services to the
Company. The role of bottlers is critical to production of the Company's
beverages. The product is produced and bottled, packed in cases, and shipped to
distributors by the bottlers. The Company also purchases the various flavors for
its products from a third party.

The Taste of Jamaica products are produced and bottled by Paul's
Beverages. Under the agreement with Paul's, the Company pays a flat per case fee
and Paul's provides the bottles, closures and labels and bottles the Company's
beverages as well. The Company may develop relationships with other bottlers
with such other facilities as it may find necessary in the future to produce its
products.

Competition

The Company faces significant competition in the marketing and sale of
its Taste of Jamaica products from D & G soda, Old Tyme Soda and Goodo Soda. The
Company's beverages compete with other beverages which have achieved significant
national, regional and local brand name recognition and consumer loyalty. These
products are marketed by companies with significantly greater financial,
marketing, distribution, personnel and other resources than the Company, thereby
permitting such companies to implement extensive advertising and promotional
programs, both generally and in response to efforts by new competitors or
products. Further, the beverage industry is also characterized by the frequent
introduction of new products, accompanied by substantial promotional campaigns.

M&M faces significant competition from other distributors such as Coca
Cola of New York, Pepsi Cola Bottling of New York, Canada Dry Bottling Company
of New York, 7 UP and Snapple Beverages, Inc. M&M depends upon its distribution

techniques and extensive product line to compete against other distributors. M&M
has the ability to provide most types of non-alcoholic and snack products to
retail establishments. M&M competes in the beer distribution business with such
distributors as Phoenix Beverages, Budweiser, Coors of New York, Manhattan Beer
and Prospect Beer. M&M is a niche brand distributor which also distributes
microbrewed beers which is the fastest growing category in the beer industry.

Marketing

The Company is currently focusing its consumer marketing efforts on the
single serve cold bottle market. Since specialty food/beverage outlets account
for a significant portion of beverage sales, the Company distributes its
products through M&M to that category of outlets in New York City, including
delicatessens, gourmet shops, grocery stores, discount clubs, vegetable markets,
restaurants, convenience outlets, corporate and institutional feeders and "mom
and pop" stores.

<PAGE>

As a multibrand distributor, M&M depends upon beverage manufacturers to
market their beverages. When possible, M&M participates in promotional programs
initiated by beverage producers.

Government Regulation

The distribution and sale of the Company's products are subject to the
U.S. Food, Drug and Cosmetic Act, and various other federal, state and local
laws governing the production, sale, safety, advertising, labeling and
ingredients of such products and the regulations promulgated thereunder by the
United States Food and Drug Administration and other regulatory agencies.
Although the Company believes it and its distributors and sub-distributors are
in compliance with all material federal, state, and local governmental laws and
regulations concerning the production, distribution and sale of the Company's
products, there can be no assurance that the Company and its distributors and
sub-distributors will be able to comply with such regulations in the future or
that new governmental regulations will be introduced which would prevent or
temporarily inhibit the sale of the Company's products to consumers. The Company
is not aware of any pending legislation or regulation with which, if
implemented, the Company would be unable to comply. M&M is required to be
licensed as wholesale beer distributor by the United States Bureau of Alcohol,
Tobacco and Firearms and the New York State Liquor Authority. The Company
obtained such licenses in March 1995. In addition, each salesperson is required
to obtain a solicitors permit from the New York State Liquor Authority. There
can be no assurance that M&M will be successful in maintaining such licenses and
permits, that M&M will be able to comply with applicable regulations in the
future, or that individual employees will be successful in maintaining necessary
licenses and permits.

Product Liability Insurance

The Company has purchased product liability insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate. In addition, the

Company has a $3,000,000 umbrella liability policy. The Company believes that
its present insurance coverage is sufficient for its current level of business
operations.

Trademark

The trademark SunSprings(Trademark) is the property of the Company.
Although such trademark is not registered with the United States Patent and
Trademark Office, the Company has the common law right to the use of such
trademark on its labels and in the marketing of its products and the Company
believes that such trademark does not infringe upon existing trademarks in the
United States. On February 8, 1994, The Taste of Jamaica(Registered) trademark
was registered with the United States Patent and Trademark office.

Seasonality

Historically, the beverage industry in the New York metropolitan area
experiences

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significantly higher demand for its products during the second and
third quarters of the year. As a result, the Company receives in excess of 60%
of its revenue during this period. Large variances in cash flow may make it more
difficult for the Company to meet its fixed expenses in a timely manner. The
inability to pay such expenses or a delay in paying such expenses could have a
material adverse effect on the Company and its relationships with its suppliers.

Employees

As of March 30, 1996, the Company employs 81 employees, 2 of whom are
executive officers and are also officers of M&M. One of the executive officers
is engaged in marketing, sales and operations and the other is the chief
financial officer of the Company. As of January 15, 1996, M&M and the
Subsidiaries employed 81 full time employees. None of the Company's employees
are represented by a labor organization. The Company believes its relations with
its employees are excellent.

Item 2. PROPERTIES.

The Company leases its executive offices and warehouse space from an
unaffiliated third party at 134 Morgan Avenue, Brooklyn, New York at an annual
base rent of $258,600 per year. The term of such lease expired in February,
1996. The Company is currently leasing the space on a month to month basis with
monthly rent of $20,500. The Company also leases on a month to month basis
office space at 141 West 41st Street in Manhattan for a monthly rent of $600.

Item 3. LEGAL PROCEEDINGS.

The Company is not presently a party to any material litigation nor are
any such proceedings pending or threatened.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On November 21, 1995, an annual meeting of stockholders (the"Annual
Meeting") was held and the following matters were submitted for a vote of
securityholders:

The following directors were elected to the Board of Directors of the
Company for a one (1) year term: Robert Sipper, Alfred Sipper, Hartley T.
Bernstein and Bruce Logan. The first matter considered at the Annual Meeting was
the election of the aforementioned four (4) directors to the Board of the
Company for a one (1) year term. A majority of the shares of Series C Preferred
Stock and Common Stock of the Company present in person or by proxy voted for
the election of the four (4) Directors nominated by the management of the
Company. Specifically, 1,318,172 shares, representing 97.4% of the issued and
outstanding shares of Series C Preferred Stock voted for the election of the
four 4 directors, and 3,942,189 shares, representing 85.9% of the issued and
outstanding shares of Common Stock, voted for the election of the four (4)
Directors.

<PAGE>

The second matter considered at the Annual Meeting was to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Preferred Stock from 3,000,000 shares to 6,00,000 shares, specifically
increasing the number of authorized shares of Series C Convertible Preferred
Stock from 2,800,000 to 5,800,000 shares. An affirmative vote of the holders of
a majority of the shares of Preferred Stock and a majority of the shares of
Preferred Stock and Common Stock voting together as a class in person and by
proxy voted to approve the increase in the number of authorized shares of
Preferred Stock. Specifically, 822,685 shares, representing 60.8% of the issued
and outstanding shares of Series C Preferred Stock voted for the increase and
1,694,262 shares, representing 36.9% of that issued and outstanding shares of
Common Stock voted for the increase, or approximately 57% of the total votes
outstanding.

The third matter considered at the Annual Meeting was to amend the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 15,000,000 shares to 75,000,000 shares. An affirmative vote of
the holders of a majority of the shares of Preferred Stock and Common Stock of
the Company in person or by proxy voted to approve the increase in the number of
authorized shares of Preferred Stock. Specifically, 1,290,837 shares,
representing 95.4% of the issued and outstanding shares of Series C Preferred
Stock voted for the increase and 3,638,101 shares, representing 79.3% of the
issued and outstanding shares of Common Stock voted for the increase.

The fourth matter considered at the Annual Meeting was to amend the
Company's Certificate of Incorporation to change the name of the Company to
"Bev-Tyme, Inc.". An affirmative vote of the holders of a majority of the shares
of Preferred Stock and Common Stock of the Company in person or by proxy voted
to change the Corporation's name. Specifically, 1,288,212 shares, representing
95.2% of the issued and outstanding shares of Series C Preferred Stock, voted
for the name change and 3,829,654 shares, representing 83.4% of the issued and

outstanding shares of Common Stock, voted for the name change.

The fifth and final matter considered at the Annual Meeting was to
ratify the appointment of Mortenson & Associates, P.C. as the Company's
independent certified public accountants. An affirmative vote of the holders of
a majority of the shares of Preferred Stock and Common Stock of the Company in
person or by proxy voted to ratify the selection of Mortenson & Associates, P.C.
Specifically, 1,315,542 shares, representing 97.2% of the issued and outstanding
shares of Series C Preferred Stock voted for the appointment of Mortenson &
Associates, P. C. and 3,909,476 shares, representing 85.2% of the issued and
outstanding shares of Common Stock voted for the appointment of Mortenson &
Associates, P.C.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock Units, Common Stock and Common Stock
Purchase

<PAGE>

Warrants commenced trading on the NASDAQ SmallCap Market system on the
effectiveness of the Company's initial public offering on January 29, 1993 in
the form of Units, under the symbol "SUNSU," each consisting of two (2) shares
of Common Stock (the "Common Stock") and one (1) redeemable Common Stock
Purchase Warrant (the "Common Stock Warrants"). Effective January 29, 1993, the
Common Stock and Warrant component parts of the Common Stock Units were
separated and began trading under the symbols "SUNS" and "SUNSW," respectively.
The Units, the Common Stock and the Common Stock Warrants are regularly quoted
and traded on the NASDAQ SmallCap Market system. As of March, 1996, these
securities traded under the symbols "BEVTU", "BEVT" and "BEVTW", respectively.

The Company's Preferred Stock Units, Series C Convertible Preferred
Stock (the "Preferred Stock") and Preferred Stock Purchase Warrants commenced
trading on the NASDAQ SmallCap Market on the effectiveness of the Company's
secondary public offering on May 15, 1995 in the form of Units, under the symbol
"SUNSL,"each Unit consisting of one (1) share of Series C Convertible Preferred
Stock and two (2) Series C Redeemable Preferred Stock Purchase Warrants.
Effective June 15, 1995, the Preferred Stock and Preferred Stock Warrant
components of the Preferred Stock Units were separated and began trading under
the symbols "SUNSP" and "SUNSZ," respectively. These Units, Series C Preferred
Stock and Preferred Stock Warrants are regularly quoted and traded in the Nasdaq
SmallCap Market System. As of March, 1996, these securities traded under the
symbols "BEVTL", "BEVTP" and "BEVTZ", respectively.

The following table indicates the high and low bid prices for the
Company's Common Stock Units, Common Stock and Warrants for the period from
January 29, 1994 to December 31, 1995 and the Company Preferred Stock Units,
Preferred Stock and Warrants for the period from May 12, 1995 to December 31,
1995 based upon information supplied by the NASDAQ system. Prices represent

quotations between dealers without adjustments for retail markups, markdowns or
commissions, and may not represent actual transactions. As of March 29, 1996,
the Company had 25 holders of record of its shares of Preferred Stock and 414
holders of record of its shares of Common Stock.

<TABLE>
<CAPTION>
Common Stock Common Stock Purchase Warrants Common Stock Units
Year Ended December
31, 1994
<S> <C> <C> <C> <C> <C> <C>
High Low High Low High Low
First Quarter* $4.625 $3.75 $2.375 $1.50 $12.50 $9.25
Second Quarter $4.156 $1.875 $1.75 $0.49 $9.50 $4.75
Third Quarter $1.875 $5.63 $1.25 $0.125 $5.00 $1.25
Fourth Quarter $0.9375 $0.281 $0.25 $0.0625 $1.25 $1.50
</TABLE>

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*From January 29, 1993, the closing of the Company's initial public
offering, through March 31, 1993.

<PAGE>

<TABLE>
<CAPTION>
Common Stock Common Stock Series C Series C Preferred Common Stock Preferred
Purchase Warrants1 Preferred Stock Purchase Units3 Stock Units2
Stock2 Warrants2
Year Ended
December 31, 1995 High Low High Low High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $0.3125 $0.25 $0.0938 $0.0625 $0.875 $0.50
Second Quarter $0.3438 $0.125 $0.0938 $0.0625 $7.8125 $5.00 $2.50 $1.375 $0.75 $0.625 $11.50 $5.50
Third Quarter $0.3125 $0.0938 $0.0625 $0.0625 $8.125 $5.75 $2.375 $1.875 $10.375 $9.625
Fourth Quarter $0.25 $0.125 $7.50 $5.75 $1.875 $1.00 $10.375 $8.50
</TABLE>

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1 Common Stock Purchase Warrants ceased trading on August 2, 1995 and expired on
January 29, 1996.
2 Commenced trading on May 12, 1995.
3 Common Stock Units ceased trading on June 20, 1995.

On January 2, 1996, the Company issued to the holders of record of the
Series C Preferred Stock as of December 24, 1995 a dividend of two (2) shares of
the Company's Common Stock.

On March 29, 1996, the closing price of the Common Stock, Preferred
Stock and Preferred Stock Warrants as reported on the NASDAQ SmallCap Market
System were $.0625, $7.125 and $1.50, respectively. The Company's Common Stock

Units, Common Stock Warrants and Preferred Stock Units were delisted from the
NASDAQ on June 20, 1995, August 2, 1995 and March 11, 1996 respectively.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

Year ended December 31, 1995 compared with the year ended December 31, 1994

The following discussion of the Company's financial condition as of December 31,
1995 and results of operations for the years ended December 31, 1995 and 1994,
includes Bev-Tyme, Inc. and its wholly-owned subsidiaries [collectively, the
"Company"] and should be read in conjunction with the Consolidated Financial
Statements and Notes appearing elsewhere in this 10-KSB.

Business Structure

<PAGE>

the "New Age" beverage market and continuing operating losses related to the
sale of its SunSprings(Trademark) beverage products, the Company increased its
focus on its beverage and snack food distribution. In March 1994, the Company
acquired the remaining 49% interest in the Combined Subsidiaries from Alfred
Sipper, in exchange for 600,000 newly issued shares of New Day's common stock
and $250,000 payable at the Company's option in cash or common stock over a
period of sixteen months [the "M&M Debt"].

The Company believes that the purchase of M&M enhances its soft drink
distribution capabilities, gives the Company more control over distribution of
its own products in the significant New York City metropolitan area market, and
enables the Company to test new product concepts and remain abreast of current
market trends.

In June 1995, the Company purchased the net assets of SB&S, another beverage
distributor, which will increase its current customer distribution base,
territory and enable the Company to commence distribution of beer and other malt
beverages. The Company acquired the net assets of SB&S for $500,000 in cash,
200,000 shares of the Company's common stock valued at $31,250 and options to
purchase 75,000 shares of the Company's common stock.

As a result of the Company's recurring losses from operations, the Company's
auditors believed there was substantial doubt about the Company's ability to
continue as a going concern at December 31, 1995 and issued a going concern
qualification to their report dated March 21, 1996.

Results of Operations

For the year ended December 31, 1995, the Company had a loss from operations of
$3,775,882 and a net loss of $3,826,230 [$.90 per share], as compared to a loss
from operations of $1,157,297 and a net loss of $1,192,542 [$.34 per share] for
the year ended December 31, 1994. The primary reason for the increase of
approximately $1,600,000 in net loss is the compensation expense in 1995 of
approximately $1,200,000 resulting from the issuance of the Company's common and
preferred stock and the Company's reduced gross profit of approximately
$300,000.

The change in the elements of revenues and expenses reflect the Company's shift
to primarily focusing on the distribution of beverage products rather than the
manufacturing and marketing of its SunSprings(Trademark) products.

For the year ended December 31, 1995, the Company's gross profit was $1,756,430
or 14% as compared to $2,043,291 or 21% in 1994. The change in the gross profit
percentage was attributable to a change in the Company's product mix, primarily
resulting from the beers and malt beverages. The Company intends to de-emphasize
the sale of common beer and increase the focus on the sale of imported and
microbrewed beers. Additionally, the Company liquidated a large amount of its
"closeout" products in 1995 and does not anticipate a large amount of closeouts
in 1996.

Selling, advertising and promotion expense for 1995 and 1994 amounted to
$1,128,782 and $913,762, respectively, and primarily consisted of salesmen's
salaries, commissions and related

<PAGE>

expenses of the companies' distribution sales force.

General and administrative expenses in 1995 were $2,405,738 or 19% of net sales
as compared to $1,773,076 or 18% of net sales in 1994. General and
administrative expenses in 1995 included compensation and related payroll taxes
of approximately $900,000, rent and related office expenses of $250,000 and
insurance expense of approximately $260,000. General and administrative expenses
in 1994 included compensation and related payroll taxes of approximately
$492,600 [which included $269,000 of compensation related to stock options
recorded in the first quarter of 1994 offset by an adjustment of 340,000 due to
the relinquishment of these options], rent and related office expenses of
approximately $824,800 and insurance expense of approximately $303,300.

Because of the Company's severe cash shortages and numerous unsuccessful
attempts at finding traditional debt financing, the Company entered into bridge
financing which resulted in a total non-cash financing cost of $580,000
[$193,350 in 1994 and $386,650 in 1995]. This represented the fair value
assigned to the Bridge Units issued upon conversion of the Convertible Bridge
Notes. The effective annual interest rate on these Bridge Loans was
approximately 300%.

Interest expense relates primarily to commercial loans on the transportation
equipment.

Liquidity and Capital Resources

For the year ended December 31, 1995, the Company utilized approximately
$715,000 in operating activities. This utilization was primarily attributable to
the net loss of approximately $3,800,000 as adjusted for non-cash transactions
of approximately $2,100,000.

The Company utilized approximately $800,000 from net investing activities during
1995. This was primarily attributable to the acquisition of the net assets of
SB&S for approximately $526,000 and acquisition of equipment for approximately
$250,000.

The Company generated $1,581,219 from net financing activities during 1995. This
was primarily attributable to the net proceeds of $1,688,787 from the Series C
Preferred Stock Offering.

At December 31, 1995, the Company had a working capital deficit of approximately
$260,000 reflecting primarily the excess of accounts payable, accrued expenses
over cash, accounts receivable and inventory. The Company's cash balance at
December 31, 1995 was $153,714.

For the year ended December 31, 1994, the Company utilized $1,176,523 in
operating activities, utilized $149,062 in investing activities and generated
$664,480 in net financing activities. The Company generated $416,503 from
financing activities during the first quarter 1994. This was attributable
primarily to the net proceeds of approximately $375,000 from the Company's
issuance of warrants. The Company also raised an additional $12,890 through the
exercise of bridge units and $118,171 from the proceeds from sale of its common
stock. This represented a decrease of $661,105 in cash and cash equivalents
since December 31, 1993. The funds utilized in operating activities were
attributable primarily to the $1,192,542 net loss for the period.

<PAGE>

Year ended December 31, 1995 compared with the year ended December 31, 1994

In November and December 1994, the Company borrowed an aggregate of $200,000
from certain lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, each Bridge Lender received two [2] promissory notes [the "Bridge
Notes"]. Certain Bridge Notes are in the aggregate principal amount of $180,000
[the "Principal Bridge Notes"] and the other Bridge Notes are in the aggregate
principal amount equal to $20,000 [the "Convertible Bridge Notes"]. Each of the
Bridge Notes bears interest at the rate of eight percent [8%] per annum. The
Principal Bridge Notes were due and payable upon the earlier of (i) June 15,
1995, or (ii) the closing of the Offering. The Convertible Bridge Notes are due
and payable on December 1, 1995. In addition, each Bridge Lender had the right
to convert a Convertible Bridge Note into a number of units ["Bridge Units"]
equal to the total dollar amount loaned to the Company by such Bridge Lender;
provided, however, that one Bridge Lender may convert its Convertible Bridge
Note into the total dollar amount loaned to the Company plus an additional
50,000 Bridge Units because such Bridge Lender surrendered 1,000,000 warrants
exercisable for 1,000,000 shares of Common Stock. In February 1995, the Bridge

Lenders converted the Convertible Bridge Notes into an aggregate of 250,000
Bridge Units at a conversion price of $.10 per Bridge Unit. The Company entered
into the bridge financing transactions because it required additional financing
and no other sources of financing were available to the Company at that time.
The conversion price to the Bridge Lenders is significantly less than the
offering price of the Units offered hereby because of the risk associated with
the repayment of the Bridge Loans. Further, the Company agreed to register such
Bridge Units in the first registration statement filed by the Company following
the date of the loan. The bridge notes were repaid on May 23, 1995, the close of
the Public Offering.

On May 15, 1995, the Company completed a secondary public offering for sale
460,000 units, each consisting of one share of Series C Convertible Preferred
Stock, par value $.0001 per share and two Series C Redeemable Preferred Stock
purchase warrants. Each share of Series A Preferred Stock is convertible at the
option of the holder, at any time after May 15, 1996, into 18 shares of the
Company's common stock. The Series C Warrants entitle the holder to purchase one
share of Series C Preferred Stock at an exercise price of $6.00 per share
through May 15, 2000 and may be redeemed by the Company under certain
conditions. To date, none of the Preferred Stock Warrants have been exercised or
redeemed. The Company realized net proceeds of $1,688,787 after deducting, the
underwriters discount and other costs of the offering.

In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, recorded an expense of $1,076,250. In October 1995,
525,000 Series C Preferred Stock Options were exercised and the Company recorded
a stock subscription receivable of $1,050,000, which was paid in January and
February of 1996.

In November 1995, the Company issued to certain employees and the directors of
the Company options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share for services to be
rendered in 1996. None of such options have been exercised.

<PAGE>

In February 1996, the Company engaged a consultant to assist the Company in
connection with acquisitions, divestitures, joint ventures and other strategic
business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 300,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.

Year ended December 31, 1995 compared with the year ended December 31, 1994

The Company intends to pursue outside financing as a vehicle to meet its
short-term working capital requirements. This pursuit may include loan
negotiations with lending institutions and negotiations with receivable factors
for the financing of the Company's accounts receivable. The Company has not
established any sources of financings and has no lines of credit available. The
Company's cash requirements have been and will continue to be significant. The
Company anticipates, based on its current plans to expand its distribution

business. In the event that these plans change or costs of operations prove
greater than anticipated, the Company could be required to modify its operations
or seek additional financing sooner than anticipated. However, there can be no
assurance that additional financing will be available to the Company. The
absence of such additional financing or the lack of availability of funds on
terms favorable to the Company could have a material adverse effect on the
business and operations of the Company. Due to the low current fair market value
of the shares of common stock, it most likely will be difficult for the Company
to attract purchasers of such shares.

The Company's long-term liquidity requirements may be significant in order to
continue to implement its business plan, expand its product base and establish a
distribution network. In the event that those plans change, or the costs or
development of operations prove greater than anticipated, the Company could be
required to modify its operations, liquidate inventory or seek additional
financing. The Company has no current arrangements with respect to such
additional financing, and there can be no assurance that such additional
financing, if available, will be on terms acceptable to the Company.

New Authoritative Accounting Pronouncements

The Financial Accounting Standards Board ["FASB"] has issued Statement of
Financial Accounting Standards ["SFAS"] No. 107, "Disclosure about Fair Value of
Financial Instruments," which is effective for fiscal years beginning after
December 15, 1995. The Company will adopt SFAS No. 107, as amended by FAS No.
119, "Disclosure About Derivative Financial Instruments in Debt and Equity
Securities," on January 1, 1996. Adoption of SFAS No. 107 and SFAS No. 119 is
not expected to have a material impact on the Company's financial position or
results of operations.

<PAGE>

to hold to maturity will be classified as available-for-sale, along with most
investments in equity securities. Securities available-for-sale are to be
carried at fair vale, with any unrealized holding gains and losses, net of tax,
reported in a separate component of shareholders' equity until realized.

The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in March of 1995.
SFAS No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable

intangibles to be disposed of. SFAS No. 121 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. Adoption
of SFAS No. 121 is not expected to have a material impact on the Company's
financial statements.

Year ended December 31, 1995 compared with the year ended December 31, 1994

The FASB has also issued SFAS No. 123, Accounting for Stock-Based Compensation,
in October 1995. SFAS No. 123 uses a fair value based method of accounting for
stock options and similar equity instruments as contrasted to the intrinsic
value based method of accounting prescribed by Accounting Principles Board
["APB"] Opinion No. 25, Accounting for Stock Issued to Employees. The Company
has not decided if it will adopt SFAS No. 123 or continue to apply APB Opinion
No. 25 for financial reporting purposes. SFAS No. 123 will have to be adopted
for financial statement note disclosure purposes in any event. The accounting
requirements of SFAS No. 123, are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.

Impact of Inflation

The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods. Increases in supplies or other
operating costs could adversely affect the Company's operations; however, the
Company believes it could increase prices to offset increases in costs of goods
sold or other operating costs.

Item 7. FINANCIAL STATEMENTS.

See Index to Consolidated Financial Statements on page F-1 for a
listing of the Consolidated Financial Statements.

Item 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

17
<PAGE>

PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers

The names and ages of the directors and executive officers of the Company are
set forth below:

Name Age Position

Robert Sipper....................... 42 Chief Executive Officer,

President and Director

Hartley T. Bernstein.............. 44 Director

Alfred Sipper...................... 62 Director

Bruce Logan....................... 64 Director

Joseph Vigliarolo(1)............... 34 Chief Financial Officer

Robert Forst(2)...................... 46 Chief Financial Officer

- -----------------
(1) Mr. Vigliarolo resigned in February 1996.
(2) Mr. Forst commenced working for the Company in March 1996.

Robert Sipper has been a director of the Company since November 1993
and Chief Executive Officer and President of the Company since January, 1994. He
graduated with a J.D. degree from Vermont Law School in 1978 and entered private
practice, He was associated with Dubbs, Leopold, Davis & DePodwin, Attorneys at
Law from 1979-1981. He became a partner in the law firm of Leopold & Sipper.
Attorneys at Law, from 1981 to March 1989. In March, 1989, Mr. Sipper left the
private practice of law and became Chief Operating Officer/Executive Vice
President of Mootch & Muck, a position he holds today, which was the master
Evian distributor for the Metropolitan New York - New Jersey territory as well
as the distributor of many other beverages and selected specialty foods. Mr.
Sipper established a subdistributor network for Evian and other products in this
territory. In 1990, Mr. Sipper negotiated the sale of Mootch & Muck's Evian
Master Distributor Agreement to Canada Dry Bottling Company of New York.

Hartley T. Bernstein has been a Director since June, 1992 and is a
member of the law firm of Bernstein & Wasserman specializing in corporate and
securities law. Mr. Bernstein graduated from Columbia University with a B.A. in
1973 and received his J.D. from New York University School of Law in 1976. He
was associated with the firm of Parker Chapin Flattau & Klimpl from

<PAGE>

1976-1977, served as an Assistant District Attorney for New York County from
1977-1979 and was associated with the law firm of Guggenheimer & Untermyer from
1979-1982. In 1982, Mr. Bernstein formed his own law practice which subsequently
merged with his present firm. Mr. Bernstein also serves as a director of PDK
Labs Inc., and Futurebiotics, Inc., each a public company. Mr. Bernstein has
served as a director of Celebrity Resorts, Inc. from November 20, 1989 to
February 27, 1992. Mr. Bernstein also served as a director of DreamCar Holdings,
Inc., commencing July 13, 1989 and ending as of August 1992. Mr. Bernstein is a
member of the adjunct faculty of Yale Law School where he teaches a course in
securities law and has served previously on the adjunct faculties of New York
Law School and Mercy College. He is also an instructor at the National Institute
of Trial Advocacy and a member of the Boards of Arbitration of the National

Association of Securities Dealers, Inc. and the New York Stock Exchange. Mr.
Bernstein serves as a commentator on securities law matters on the nationally
syndicated Business Radio Network and Money Radio. The law firm of Bernstein &
Wasserman, of which Mr. Bernstein is a partner, has acted as legal counsel to
the Company and has represented the Underwriter on matters unrelated to this
offering.

Joseph Vigliarolo, a certified public accountant, was the Chief
Financial Officer, Senior Vice President and Secretary of the Company from May
1994 to February 1996 when he resigned. He also held the position, since
February of 1993, of Chief Financial Officer of the Company's wholly owned
subsidiary, Mootch and Muck, Inc.. He was associated with the accounting firm of
Ganer & Ganer from November 1983 to August 1985 and November 1990 to August
1991, was with the accounting firm of Chassin, Levine and Rosen from August 1985
to November 1986 and was a Manager at the accounting firm of Ernst & Young from
November 1986 to May 1989. Mr. Vigliarolo also worked at the New York
Chiropractic College as Controller and Assistant Treasurer from May 1989 to May
1990. Mr. Vigliarolo worked for the investment banking firm of Whyte Lyon & Co.
from August 1991 to February 1993. In 1991, Mr. Vigliarolo was declared
personally bankrupt by the United States Bankruptcy Court, Mr. Vigliarolo
received his undergraduate degree from Boston College.

Bruce Logan, has been a director of the Company since August 1994.
Since 1991, Mr. Logan has been the chairman of New York Media, Inc., a New York
City based producer of custom publications, and newsletters for the restaurant
industry. Mr. Logan co-founded Magazine Networks and it was subsequently sold
to 3M Corporation. Mr. Logan is currently Chairman of New York Hospital's
Community Advisory Board.

Alfred Sipper, has been a director of the Company since March 1994.
Mr. Sipper has been President of Mootch & Muck, Inc. since 1977 and was
President of PIK Groceries, Inc. from 1952 until 1983.

Robert Forst, has been the Chief Financial Officer of the Company since
March 1996. Mr. Forst was Controller of Empire Taxi and Limo Co. from August,
1985 through August, 1995. Mr. Forst was the Assistant Controller of Value
Line, Inc. from July, 1979 through July, 1985. He also

<PAGE>

worked for Americana Hotels, Inc. from June 1972 through July 1979. Mr. Forst
received his undergraduate degree from St. John's University.

There are no family relationships among any of the directors or
executive officers of the Company, except that Alfred Sipper, a director of the
Company and Chief Executive Officer of Mootch & Muck, Inc., is the father of
Robert Sipper, President and Chairman of the Board of the Company and Chief
Operating Officer of Mootch & Muck. The Company pays its directors who are not
also employees of the Company $500 for each meeting attended and reimburses such
directors for travel and other expenses incurred by them in connection with
attending Board of Directors meetings. In November 1993, the board suspended the
payment of director's fees indefinitely. Directors are elected annually at the

Company's regular annual meeting of stockholders.

In May, 1995, the Company issued to certain of the Company's officers,
directors and employees options to purchase an aggregate of 525,000 shares of
Series C Preferred Stock at an exercise price of $2.00 per share, all of which
shares were registered with the Securities and Exchange Commission on Form S-8
for sale to the public. In October, 1995, all of such options were exercised.

In November 1995, the Company issued to certain employees and the
directors of the Company options to purchase an aggregate of 525,000 shares of
Series C Preferred Stock at an exercise price of $2.00 per share for services to
be rendered in 1996. None of such options have been exercised.

Compliance with Section 16(a) of
The Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

Except as provided below, to the Company's knowledge, based solely on
its review of the copies of such reports furnished to the Company during the
years ended December 31, 1994 and December 31, 1995, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were satisfied.

ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid to the Named
Executive Officers for

<PAGE>

the calendar years ending December 31, 1995, December 31, 1994 and December 31,
1993.

Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Awards Long-Term Compensation
(a) (b) (c) (d) (e) (f)

Other Annual Restricted Stock Option
Name and Principal Position Year Salary Compensation Award Grants
<S> <C> <C> <C> <C> <C>
Robert Sipper, President and 1995 $ 95,457 150,000
Chief Executive Officer 1994 $ 87,333 -- -- 75,000

Marshall Becker, President 1993 $140,192 -- -- --
and Chief Executive 1992 62,790 -- -- 67,259
Officer(1) 1991 --- $41,052 $42,000 --

Alfred Sipper 1995 155,235 150,000
President and Chief 1994 $142,024 -- -- 75,000
Executive Officer of 1993 $124,685 -- -- --
Mootch & Muck, Inc. (2)
</TABLE>

(1) Resigned as Chairman of the Board and Chief Executive Officer on January 7,
1994. Of the 67,259 stock options granted 40,299 options did not vest as
of the date of Mr. Becker's resignation. Mr. Becker has waived all rights
to the remaining stock options. In April 1991, Mr. Becker received 84,996
shares of restricted stock in exchange for services rendered.

(2) Mootch & Muck, Inc. became a subsidiary when the Company acquired a 51%
interest in May 1993. Prior to that Mootch & Muck, Inc. was an
unaffiliated company.

The following table sets forth certain information with respect to
options granted during the last fiscal year to the Company's Chief Executive
Officer and the other executive officers named in the above Summary Compensation
Table.

<PAGE>

Option/SAR Grants In Last Fiscal Year

<TABLE>
<CAPTION>
Number of Percent of Total Exercise or
Securities Options/SARS Granted Base Price
Underlying to Employees in ($/Sh) Expiration
Options/SARS Fiscal Year Date
Name Granted (#)(1)
<S> <C> <C> <C> <C>
Robert 75,000 9.1% 2.00 May 31, 2000
Sipper 75,000 9.1% 2.00 Nov. 30, 2000

9.1% 2.00 May 31, 2000
Alfred Sipper 75,000 9.1% 2.00 Nov. 30, 2000
75,000
</TABLE>

- ------------------------
(1) Options are exercisable for shares of Series C Preferred Stock.

Aggregate Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End
Option/SAR Values

The following table sets forth certain information with respect to options
exercised during the last fiscal year by the Company's Chief Executive Officer
and the executive officers named in the Summary Compensation Table, and with
respect to unexercised options held by such persons at the end of the last
fiscal year:

<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised in
Acquired on Value Underlying Unexercised the Money Options/SARs at
Name Exercise (#)(1) Realized $ Options/SARS at FY-End (#) FY-End ($) (2)
---- --------------- ---------- ------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Sipper 75,000 168,750 -------- 75,000 ------- 375,000
-------- -------
Alfred Sipper 75,000 168,750 -------- 75,000 ------- 375,000
-------- -------
</TABLE>
- ----------------------

(1) Options are exercisable for shares of Series C Preferred Stock.
(2) Based upon a closing bid price December 29, 1995 of $7.00 per
share as reported by The Nasdaq Stock Market.

The Company pays its directors who are not also employees of the Company
$500 for each meeting attended and reimburses such directors for travel and
other expenses incurred by them in connection with attending Board of Directors
meetings. In November 1993, the board suspended the payment of director's fees
in order to conserve its working capital. Juan Metzger, formerly a director of
the Company, was paid $1,000 per month under a consulting arrangement with the
Company,

<PAGE>

pursuant to which Mr. Metzger advised the Company in the area of product
distribution. Mr. Metzger resigned from the Board of Directors in April, 1994.

On August 5, 1994, the Company issued options to purchase 75,000 shares of
Common Stock at $.69 per share (the fair market value of the Company's Common
Stock on the date of grant) to certain members of senior management and to each
of the members of the Company's Board of Directors.

In May 1995, the Company issued to certain officers and directors options
to purchase an aggregate of 525,000 shares of the Company's Series C Preferred
Stock at an exercise price of $2.00 per share, all of which shares were
registered with the Securities and Exchange Commission on Form S-8. In October,
1995, the holders thereof exercised such options.

In November 1995, the Company issued to certain employees and the

directors of the Company options to purchase an aggregate of 525,000 shares of
Series C Preferred Stock at an exercise price of $2.00 per share for services
rendered in 1996. None of such options have been exercised.

Employment Agreements

On May 12, 1993, Mootch & Muck, Inc., the Company's wholly owned
subsidiary, entered into a twelve (12) year full-time employment agreement with
Alfred Sipper, which may be extended for two years at Mr. Sipper's option.
Pursuant to the agreement, he will serve as President and Chief Executive
Officer of M&M at an annual compensation of $140,000 per year, subject to
cost-of-living adjustments, bonuses and salary increases based upon performance.
As of May 12, 1995, Alfred Sipper's employment agreement with Mootch & Muck,
Inc. was amended and restated. Pursuant to the terms of the amended and restated
employment, (i) Mr. Sipper has agreed to serve as President and Chief Executive
Officer of Mootch & Muck, Inc. until May 12, 2009, (ii) Mr. Sipper will receive
an annual salary of $165,200 per year, plus an annual salary increase of 5% or
such greater amount as determined by the Board of Directors of the Company based
upon reasonable criteria. The Company also agreed to provide (i) an annual bonus
of options to purchase (x) 75,000 shares of Series C Preferred Stock at an
exercise price equal to 80% of the fair market value of the Company's Series C
Preferred Stock at the time of grant and (y) 150,000 shares of Common Stock at
an exercise price equal to 80% of the fair market value of the Company's Common
Stock of the time of grant and (ii) to reimburse Mr. Sipper for all
out-of-pocket business expenses, including automobile expenses up to $800 per
month.

On May 12, 1993, the Company entered into Employment Agreements with
Robert J. Sipper, the Company's Chief Executive Officer and President, Khosrow
Foroughi, the Company's Executive Vice President, and William Swedelson, the
Company's Vice President of Sales. Each of the Agreements was for a period of
four years and contained customary provisions regarding

<PAGE>

termination, confidentiality and reimbursement of bona fide business expenses.
Mr. Sipper, Mr. Foroughi and Mr. Swedelson each received an annual salary of
$85,750, $64,090 and $70,720, respectively, subject to increase by the Board of
Directors based upon the Company's performance and other reasonable criteria.

As of May 12, 1995, Robert Sipper's employment agreement with Mootch &
Muck, Inc. was amended and restated. Pursuant to the terms of the amended and
restated employment, (i) Mr. Sipper has agreed to serve as Senior Vice President
and Chief Operating Officer of Mootch & Muck, Inc. until May 12, 2001, (ii) Mr.
Sipper will receive an annual salary of $101,600 per year, plus an annual salary
increase of 5% or such greater amount as determined by the Board of Directors of
the Company based upon reasonable criteria. The Company also agreed to provide
(i) an annual bonus of options to purchase (x) 75,000 shares of Series C
Preferred Stock at an exercise price equal to 80% of the fair market value of
the Company's Series C Preferred Stock at the time of grant and (y) 150,000
shares of Common Stock at an exercise price equal to 80% of the fair market
value of the Company's Common Stock of the time of grant and (ii) to reimburse

Mr. Sipper for all out-of-pocket business expenses, including automobile
expenses up to $800 per month.

As of May 12, 1995, William Swedelson's employment agreement with Mootch &
Muck, Inc. was amended and restated. Pursuant to the terms of the amended and
restated employment, (i) Mr. Swedelson has agreed to serve as Vice President -
Sales of Mootch & Muck, Inc. until May 12, 2001, (ii) Mr. Swedelson will receive
an annual salary of $83,800 per year, plus an annual salary increase of 5% or
such greater amount as determined by the Board of Directors of the Company based
upon reasonable criteria. The Company also agreed to provide (i) an annual bonus
of options to purchase (x) 75,000 shares of Series C Preferred Stock at an
exercise price equal to 80% of the fair market value of the Company's Series C
Preferred Stock at the time of grant and (y) 150,000 shares of Common Stock at
an exercise price equal to 80% of the fair market value of the Company's Common
Stock of the time of grant and (ii) to reimburse Mr. Swedelson for all
out-of-pocket business expenses, including automobile expenses up to $800 per
month.

As of April 1, 1994, the Company entered into an Employment Agreement with
A. Alexander Watson. Pursuant to the terms of the agreement, Mr. Watson serves
as the Company's Manager of Marketing and Product Development on a full time
basis for a period of five years. Mr. Watson is entitled to receive a base
annual salary of $20,800 plus a monthly commission based upon sales of the
Company's Taste of Jamaica(Registered) products.

Stock Option Plans and Agreements

Incentive Option and Stock Appreciation Rights Plan--In November 1992, the
Directors of the Company adopted and the stockholders of the Company approved
the adoption of the Company's 1992 Incentive Stock Option and Stock Appreciation
Rights Plan ("Incentive Option Plan"). The purpose of the Incentive Option Plan
is to enable the Company to encourage key employees and

<PAGE>

Directors to contribute to the success of the Company by granting such employees
and Directors incentive stock options ("ISOs"), as well as non-qualified options
and stock appreciation rights ("SARs").

The Incentive Option Plan will be administered by the Board of Directors
or a committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs, non-qualified options or SARs (in tandem
with an option or freestanding) or a combination thereof, and the number of
shares to be subject to such options and SARs.

The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted. Non-qualified options and freestanding SARs may be
granted with any exercise price. SARs granted in tandem with an option have the
same exercise price as the related option.

The total number of shares with respect to which options and SARs may be
granted under the Incentive Option Plan is 75,000. ISOs may not be granted to an
individual to the extent that in the calendar year in which such ISOs first
become exercisable the shares subject to such ISOs have a fair market value on
the date of grant in excess of $100,000. No option or SAR may be granted under
the Incentive Option Plan after November 24, 2002 and no option or SAR may be
outstanding for more than ten years after its grant. Additionally, no option or
SAR can be granted for more than five (5) years to a shareholder owning 10% or
more of the Company's outstanding Common Stock.

Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock,
or in a combination of both. The Company may lend to the holder of an option
funds sufficient to pay the exercise price, subject to certain limitations. SARs
may be settled, in the Board of Directors' discretion, in cash, Common Stock, or
in a combination of cash and Common Stock. The exercise of SARs cancels the
corresponding number of shares subject to the related option, if any, and the
exercise of an option cancels any associated SARs. Subject to certain
exceptions, options and SARs may be exercised any time up to three months after
termination of the holder's employment.

The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive options
or SARs under the Incentive Option Plan or materially increase the benefits of
participants.

The Company issued incentive options to purchase an aggregate of 60,000
shares of Common Stock to four sales management personnel. The options are
exercisable at $1.00 per share

<PAGE>

for a period of four years commencing in August 1994.

Non-Qualified Option Plan--In November 1992, the Directors and
stockholders of the Company adopted the 1992 Non-Qualified Stock Option Plan
(the "Non-Qualified Option Plan"). The purpose of the Non-Qualified Option Plan
is to enable the Company to encourage key employees, Directors, consultants,
distributors, professionals and independent contractors to contribute to the
success of the Company by granting such employees, Directors, consultants,
distributors, professionals and independent contractors non-qualified options.
The Non-Qualified Option Plan will be administered by the Board of Directors or
the Committee in the same manner as the Incentive Option Plan.

The Non-Qualified Option Plan provides for the granting of non-qualified
options at such exercise price as may be determined by the Board of Directors,
in its discretion. The total number of shares with respect to which options may
be granted under the Non-Qualified Option Plan is 125,000.

Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations. Subject to certain exceptions, options may be exercised any time up
to three months after termination of the holder's employment.

The Non-Qualified Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the
Non-Qualified Option Plan may not be amended to increase the number of shares
subject to the Non-Qualified Option Plan, change the class of persons eligible
to receive options under the Non-Qualified Option Plan or materially increase
the benefits of participants.

In August 1994, the Company issued to certain sales representatives an
aggregate of 25,000 non-qualified options under the Non Qualified Option Plan.
The options are exercisable at $1.00 per share for a period of four years
commencing in August 1994.

Other Options

In May, 1995, the Company issued to certain officers and directors options
to purchase an aggregate of 525,000 shares of the Company's Series C Preferred
Stock at an exercise price of $2.00 per share, all of which shares were
registered with the Securities and Exchange Commission on Form S-8. In October,
1995, the holders thereof exercised such options.

In November 1995, the Company issued to the directors of the Company
options to purchase

<PAGE>

an aggregate of 300,000 shares of Series C Preferred Stock at an exercise price
of $2.00 per share. None of such options have been exercised.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

The following table sets forth as of March 1, 1996, certain information
with respect to the beneficial ownership of Common Stock and Series C Preferred
Stock by each person or entity known by the Company to be the beneficial owner
of 5% or more of such shares, each officer and director of the Company, and all
officers and directors of the Company as a group:

<TABLE>
<CAPTION>
Shares of Common Stock Shares of Preferred Stock
---------------------------------- -------------------------------
Amount Approximate Amount Approximate

Name and Address Beneficially Percentage (%) Beneficially Percentage (%)
of Beneficial Owner Owned of Class Owned of Class
- ------------------- ------------- --------------- ------ --------
<S> <C> <C> <C> <C>
Robert Sipper.................. 75,000(1) 1.0 75,000(2) 4.8
President and Chairman of
the Board
c/o New Day Beverage
134 Morgan Avenue
Brooklyn, NY 11237

Hartley T. Bernstein........... 75,000(1) 1.0 75,000(2) 4.8
Director
c/o Bernstein & Wasserman
950 Third Avenue
New York, NY 10022

Alfred Sipper .................. 150,676(1) 2.0 75,000(2) 4.8
Director
c/o Mootch & Muck, Inc.
134 Morgan Avenue
Brooklyn, NY 11237

Bruce Logan................... 75,000(1) 1.0 75,000(2) 4.8
Director
25 Central Park West
New York, NY 10023

All Officers & Directors 375,676 4.9 300,000 16.6%
as a Group (4 Persons)
</TABLE>
- --------------

(1) Includes 75,000 shares of Common Stock issuable upon the exercise
of 75,000 stock options at an exercise price of $0.69 per share.

(2) Includes 75,000 shares of Series C Preferred Stock issuable upon
the exercise of 75,000 stock options at an exercise price of $2.00
per share.

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In June 1991, M&M established a line of credit with Manufacturers Hanover
Trust Company in the aggregate amount up to $250,000. In connection therewith,
Alfred Sipper, a director of the Company and President of M&M, executed a
Guarantee in respect of such line of credit. The Company repaid in May 1995
approximately $130,000, the total outstanding amount, under such line of credit
with the proceeds from the secondary public offering.

In June of 1992, the Company sold to New Day Investors Corp., a

non-affiliated party ("New Day Investors") shares of its Common Stock equal to
sixty-five (65%) percent of all outstanding stock of the Company pursuant to a
stock sale agreement (the "Stock Sale Agreement") for $325,000 for the purpose
of raising capital for the Company. None of the shareholders of New Day
Investors were affiliated with the Company. In November 1992, New Day Investors
Corp. distributed all of the shares of Common Stock of the Company held by New
Day Investors Corp. to its shareholders on a prorated basis.

On June 5, 1992, the Company sold to M&M five (5%) percent of its then
outstanding stock for $25,000 for the purpose of raising capital for the
Company. Pursuant to that agreement, M&M executed a promissory note to the
Company, in consideration for the shares in the sum of $25,000 (the "Note"). M&M
satisfied the Note in September of 1992. As of March 23, 1993, the Chief
Executive Officer and President of M&M is also a director of the Company.

In June through August 1991, the Company borrowed $135,000 from Morris
Friedell, a principal shareholder of the Company, and the Company executed
demand notes pursuant thereto, with interest payable quarterly at the rate of
ten and one-half percent (10.5%) per annum.

On March 12, 1992, Mr. Friedell agreed to convert the outstanding demand
notes to promissory notes (the "Initial Notes") to be paid in equal quarterly
installments of interest and principal over a two (2) year period with the first
payment due on August 15, 1992, provided that all payments on said notes are to
be made each quarter prior to the payment of any salaries. The Company paid all
interest with respect to the Initial Notes up through June 30, 1992, and made
the August 15, 1992 principal payment. On October 19, 1992, the Company reached
an oral understanding with Mr. Friedell pursuant to which it shall deliver a
promissory note to Mr. Friedell in substitution of the Initial Notes (the
"Substitute Note") which provides that Mr. Friedell's loan shall be fully
amortized over eighteen (18) months and accordingly, commencing November 15,
1992, Mr. Friedell shall receive quarterly payments of principal and interest
with the final payment due on May 15, 1994. The promissory note provides further
that the Company will withhold payments of salaries and bonuses to its officers
if it fails to make any payment under the Substitute Note within ten (10) days
of when due.

In February 1992, Mr. Friedell agreed to pay the sum of $65,156.01, owed
by the Company to Continental Glass & Plastic, Inc., the Company's bottle
supplier. As a result, the Company executed a collateral note payable to Mr.
Friedell dated February 13, 1992 in the sum of $65,156.01

<PAGE>

with interest payable at the rate of eleven percent (11%) per annum until the
debt is paid in full (the "Second Note"). The Second Note was guaranteed jointly
and severally by Marshall E. Becker and Wilford L. Adkins, Jr. As further
security, the Company agreed to assign to Mr. Friedell the proceeds of certain
purchase orders from M&M, in the amount of $110,687.50. In addition, Mr.
Friedell was granted a security interest with respect to all of the Company's
accounts receivable, as reflected by a UCC-1 financing statement filed in the

State of Illinois. Any amount received by Mr. Friedell over the $65,956 from the
M&M purchase orders was to be applied to reduce the outstanding interest and
then principal due under the Initial Notes.

Pursuant to this Agreement, Mr. Friedell received payments from M&M in the
amount of $75,600 in 1992, which was used to satisfy the interest and principal
balance of the Second Note and the balance of which was applied to the Initial
Notes. In May 1993, the Company paid approximately $93,000 to Mr. Friedell in
full satisfaction of all outstanding notes.

In September 1992, the Company issued 200 shares of Series A Preferred
Stock to unaffiliated parties in consideration of $200,000 in connection with a
bridge financing. Upon the closing of the Public Offering, the Series A
Preferred Stock was redeemed by the Company, at a price of $1,000 per share. As
additional consideration, the Company issued to the purchasers of the Series A
Preferred Stock an aggregate of 250,000 bridge units, which upon exercise
thereof, entitled the holders to purchase an aggregate 250,000 bridge shares and
250,000 bridge warrants, for an aggregate purchase price of $125,000. All of the
bridge units were exercised and the Company registered all 250,000 bridge shares
and 250,000 bridge warrants and the shares of common stock underlying the bridge
warrants.

As of September 30, 1992, in order to raise capital, the Company sold to
unaffiliated parties four (4) units, each unit consisting of twenty-five (25)
shares of the Company's Series B Preferred Stock at a price of $25,000 per unit
(the "Series B Units"). The securities were sold pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933. The Series B Preferred
Stock had an annual dividend of 5% of the liquidation preference, or $50 per
share. In addition, the Series B Preferred Stock provided that each share of the
Series B Preferred Stock was convertible by its holder into one thousand (1,000)
shares of Common Stock at any time commencing ninety (90) days after receipt of
the Company of the subscription therefor. If the holder converted the Series B
Preferred Stock on or before six (6) months from the holder's subscription for
such Series B Preferred Stock, the holder was also entitled to receive 1,000
Warrants for each share of Series B Preferred Stock which was converted, which
Warrants would have the same terms and conditions as the Warrants included in
the Company's initial public offering. In accordance with its terms, the holders
of all of the Series B Preferred Stock converted their shares into an aggregate
of 100,000 common shares and 100,000 warrants in February 1993.

In December 1992, the Company borrowed an aggregate of $150,000 from 11
individual lenders. The loan proceeds were used by the Company for working
capital purposes. The loan bore interest at a rate of eight (8%) percent per
annum and was payable upon the earlier of (i) December 23, 1993 or (ii) the
closing of the Company's first public offering of securities. The loan was
repaid

<PAGE>

with interest of $1,472 on February 5, 1993. As additional consideration for the
Bridge Loan, the Company issued to the lenders an aggregate of 93,750 Bridge
Units which upon exercise were issuable for an aggregate of 93,750 Bridge Shares

and 93,750 Bridge Warrants for an aggregate price of $46,875. Simultaneously
with the initial public offering, the Company registered all 93,750 Bridge
Units, 93,750 Bridge Shares and 93,750 Bridge Warrants and the shares of Common
Stock underlying the Bridge Warrants.

On February 5, 1993 the Company completed an initial public offering of
its securities whereby the Company sold 575,000 Units at $10 per Unit. Each Unit
consists of two (2) shares of Common Stock and one Common Stock Purchase
Warrant. The components of the Units became transferrable immediately upon
completion of the initial public offering. Each Warrant entitles its holder to
purchase one (1) share of Common Stock at a price of $6.00 per share through
January 1996 and may be redeemed by the Company under certain conditions.

In May 1993, Mootch & Muck, Inc., the Company's primary distributor of its
SunsSprings products, approached the Company regarding a loan to fund certain of
it working capital needs. If the Company was unable to provide funds to Mootch &
Muck, Inc., the Company was advised that Mootch & Muck, Inc. would be forced to
approach a competitor for financing. In such event, any acquiring competitor
would have likely discontinued distribution of the Company's beverage products.
Rather than make an unsecured loan, the Company elected to make an equity
investment in Mootch & Muck, Inc., the primary distributor of its beverages.

On May 12, 1993, the Company acquired a 51% interest in each of the three
(3) companies: Mootch & Muck, Bev-Tyme, and Irving Food Center, all of which
were under the common control of Alfred Sipper who subsequently became, and
currently is, a director of the Company, for an aggregate purchase price of
$1,000,000 all the cash proceeds of which were invested in the Company. The
purchase price was as a result of arms length negotiations and consisted of the
conversion to equity of a $300,000 loan made by the Company to Mootch & Muck in
March 1993, bearing interest at the rate of 9%, scheduled to mature on September
12, 1993, the payment of an additional $600,000 in cash which the Company had
raised in its initial public offering and the issuance of a twelve-month note in
the principal amount of $100,000 bearing interest at the rate of six (6%)
percent per annum. The Company believes that the terms the Company received
under this transaction were not less favorable to the Company than terms
obtainable from an unaffiliated party, although it did not receive a valuation
from any third party. On March 23, 1994, the Company agreed to offset the
$100,000 note against a $100,000 loan made to M&M by the Company during 1993.

Because of increased competition in the "New Age" beverage market and
continuing operating losses in the sale of its SunSprings beverage products, the
Company has intensified its focus on the beverage and snack food distribution.
As a result, in March 1994, the Company acquired the remaining 49% interest in
its subsidiaries, in exchange for 600,000 newly issued shares of the Company's
Common Stock and $250,000 payable at the Company's option in cash or Common
Stock over a period of sixteen (16) months (the "M&M Debt"). In addition, the
seller,

<PAGE>

Alfred Sipper, the President and founder of M&M, was entitled to receive
an additional 200,000 shares of Common Stock if the Subsidiaries reported

positive earnings before the payment of taxes for the year ended December 31,
1994 and an additional 200,000 shares of Common Stock if the Company reported
not less than $100,000 in earnings before the payment of taxes for the year
ended December 31, 1995. On October 28, 1994, the Company issued 50,676 shares
of Common Stock as payment of $150,000 due and owing under the M&M Debt to Mr
Alfred Sipper, a director of the Company and President of M&M. Under the terms
of the original agreement, in the event that Mr. Sipper sold such shares and
received less than $150,000 from the proceeds therefrom, the Company was
obligated to issue Mr. Sipper sufficient number of additional shares of Common
Stock so that the aggregate proceeds from both sales was not less than $150,000.
The Company was obligated to register such shares for public sale. On February
13, 1995, the Company and Mr. Sipper amended their agreement so that Mr. Sipper
would receive shares of Series C Preferred Stock and the Company would be
relieved from all of its obligations to make future payments to Mr. Sipper and
to register the shares of Common Stock previously issued to Mr. Sipper. Under
the amended agreement, the Company issued to Mr. Sipper 83,333 shares of Series
C Preferred Stock (the "Shares") (based upon an attributed value of $3.00 per
share) and Mr. Sipper has released the Company from all of its obligations,
include making payments in the future to Mr. Sipper. Further, in the event that
Mr. Sipper receives within two years following the Effective Date aggregate, net
proceeds in excess of $250,000, Mr. Sipper shall deliver such amount in excess
of $250,000 to the Company and surrender for cancellation all of the remaining
Shares held thereby, if any. The Company did not receive any valuation from any
third party with respect to this transaction. Mr. Sipper sold such shares in
1995 and did not receive proceeds from the sale thereof in excess of $250,000 in
the aggregate.

On February 15, 1994, the Company entered into a consulting agreement with
Marshall Becker, the Company's former Chief Executive Officer and director,
pursuant to which (i) Mr. Becker would serve as an outside consultant to the
Company in connection with the sale of the Company's SunSprings(Trademark)
products for six months commencing on January 10, 1994, at the rate of $1,000
per week, (ii) Mr. Becker would be entitled to 50% of the net proceeds derived
from international licensing of the SunSprings(Trademark) products, and (iii)
Mr. Becker received an option exercisable before April 15, 1994 to purchase
certain assets of the Company used in connection with the manufacturing,
marketing and sale of the Registrant's SunSprings(Trademark) products for
$1,150,000. The Company entered into the Consulting Agreement with Mr. Becker in
order to have Mr. Becker continue his efforts to obtain international licensing
agreements for the sale and distribution of the SunSprings products. The Company
has not received any international licensing fees of any value, either as a
result of Mr. Becker's efforts, or otherwise. Mr. Becker did not exercise his
option to acquire certain assets of the Company, which option has expired. In
addition, Mr. Becker's Consulting Agreement with the Company expired in July
1994.

On February 2, 1994 the Company issued 1,500,000 warrants, at a price of
$.25 per warrant to Morgan Steel Ltd and Davstar II. The warrants possess the
same terms and conditions as those offered to the public in connection with the
Company's initial public offering. Of the 1,500,000 warrants issued, 1,000,000
warrants have been surrendered by Morgan Steel, Ltd. for cancellation

<PAGE>

by the Company.

The Company issued in February 1994, 75,000 shares of Common Stock to the
law firm of Bernstein & Wasserman in consideration for legal services rendered.
Hartley T. Bernstein, a director of the Company, is a partner of the law firm.

On August 5, 1994, the Company issued an aggregate of 525,000 options to
purchase shares of Common Stock at $.69 per share (the fair market value of the
Company's Common Stock on the date of grant) to certain members of senior
management and to each of the members of the Company's Board of Directors in
order to compensate such persons for their contribution to the Company.

In November and December 1994, the Company borrowed an aggregate of
$200,000 from certain lenders (the "Bridge Lenders"), some of whom were
previously lenders to, or investors in, the Company, or customers of the
underwriter of the Company's initial public offering. In exchange for making
loans to the Company, each Bridge Lender received two (2) promissory notes (the
"Bridge Notes"). Certain Bridge Notes were in the aggregate principal amount of
$180,000 (the "Principal Bridge Notes") and the other Bridge Notes were in the
aggregate principal amount equal to $20,000 (the "Convertible Bridge Notes").
Each of the Bridge Notes bore interest at the rate of eight percent (8%) per
annum. The Principal Bridge Notes were due and payable upon the earlier of (i)
May 1, 1995 and (ii) the closing of the next underwritten public offering of the
Company's securities, or the closing of this offering. The Company used a
portion of the proceeds from its secondary offering to repay the Bridge Lenders.
Each Bridge Lender had a Convertible Bridge Note convertible into a number of
units ("Bridge Units") equal to the total dollar amount loaned to the Company by
such Bridge Lender; provided however, that one Bridge Lender converted its
Convertible Bridge Note into the total dollar amount loaned to the Company plus
an additional 50,000 Bridge Units because such Bridge Lender surrendered
1,000,000 warrants exercisable for 1,000,000 shares of Common Stock. Such
transaction was as a result of an arms length negotiation between the Company
and such Bridge Lender. In February 1995, the Bridge Lenders converted the
Convertible Bridge Notes into an aggregate of 250,000 Bridge Units. The
registration statement filed in connection with the Company's secondary offering
also related to the 250,000 Bridge Units held by the Bridge Lenders.

As of February 1995, holders of a majority of the shares of the Company's
outstanding Common Stock and Series C Preferred Stock voting together as a
class, delivered to the Company written consents in lieu of a meeting of the
stockholders of the Company adopting an amendment to the Company's certificate
of incorporation (the "Amendment"). The Amendment authorized the increase of the
number of authorized shares of Series C Preferred Stock from 1,000,000 shares to
3,000,000 shares.

In February 1995, the Company agreed to issue 33, 892 shares of Series C
Preferred Stock to Alfred Sipper in exchange for the cancellation by Mr. Sipper
of certain indebtedness of M&M in the aggregate principal amount of $101,675. In
February 1995, the Company also borrowed $45,000

<PAGE>

from Alfred Sipper which the Company repaid in June 1995.

On May 15, 1995, the Company completed a secondary public offering
pursuant to which the Company sold 460,000 Units ("Preferred Stock Units") to
the public at $5.00 per Unit. Each Preferred Stock Unit consisted of one (1)
share of Series C Convertible Preferred Stock ("Preferred Stock") and two (2)
Series C Preferred Stock Purchase Warrants ("Preferred Stock Purchase
Warrants"). Each share of Series C Preferred Stock is convertible at the option
of the holder, at any time after May 15, 1996, into a number of shares of the
Company's Common Stock, $.0001 par value per share, equal to the price of the
Units offered in the Secondary Public Offering divided by the fair market value
of Common Stock as of May 15, 1995. The Series C Warrants entitle the registered
holder thereof to purchase one (1) share of Series C Preferred Stock at an
exercise price of $6.00 per share through May 15, 2000 and may be redeemed by
the Company under certain conditions. To date, none of the Preferred Stock
Warrants have been exercised or redeemed.

In May, 1995, the Company issued to the Company's officers, directors and
employees options to purchase an aggregate of 525,000 shares of Series C
Preferred Stock at an exercise price of $2.00 per share, all of which shares
were registered with the Securities and Exchange Commission on Form S-8 for sale
to the public. In October, 1995, all of such options were exercised.

In November 1995, the Company issued to certain employees and the
directors of the Company options to purchase an aggregate of 525,000 shares of
Series C Preferred Stock at an exercise price of $2.00 per share for services to
be rendered in 1996. None of such options have been exercised.

In December 1995, the Company borrowed $309,000 form Alfred Sipper,
$50,000 of which was repaid in December 1995, and $259,000 plus 5.75% interest
was repaid in January 1996.

In February 1996, the Company engaged a consultant to assist the Company
in connection with acquisitions, divestitures, joint ventures and other
strategic business initiatives. In exchange for services to be performed by the
consultant, the Company issued options to purchase an aggregate of 300,000
shares of Series C Preferred Stock at an exercise price of $2.00 per share.

On October 26, 1995, the Company entered into a letter of intent to
acquire Riverosa Company, Inc. ("Riverosa"), a corporation engaged in the sale
and marketing of Perry's Majestic Beer, for the sum of $250,000. As part of that
understanding, the Company agreed that Riverosa or its successors would enter
into a three (3) year employment agreement with Mark Butler, Riverosa's
President, at an annual salary of $25,000 year, subject to appropriate increase
in the event Riverosa (or it successors) successfully completes an initial
public offering of its securities resulting in net proceeds in excess of
$2,000,000. The Employment Agreement would also provide for an annual bonus as
well as stock options based upon performance. In January 1996, the Company
assigned its rights under the letter of intent to Perry's Majestic Beer, Inc., a
subsidiary of the Company ("Perry's Majestic"), which entered into a definitive
agreement with Riverosa on March 29, 1996, pursuant to which the Company agreed
to pay the sum of $250,000

<PAGE>

to acquire Riverosa. The closing is contingent upon, among other things, the
receipt of all necessary consents, permits and government approvals. Mark
Butler, one of the principal shareholders of Riverosa was appointed to the board
of directors of Perry's Majestic on April 1, 1996. A contract deposit of
$150,000 was paid into escrow upon execution of the agreement and the balance of
$100,000 is payable by the issuance of a promissory note. The promissory note is
payable upon the earlier of (i) one year from the date of issuance or (ii) the
closing of the closing of initial public offering of Perry's Majestic.

On April 11, 1996, Perry's Majestic filed a registration statement on Form
SB-2 with the Securities and Exchange Commission which provided for the
registration of Units consisting of two (2) shares of Common Stock and one Class
A Warrant by Perry's Majestic and the concurrent offering of securities by
certain selling securityholders ("Selling Securityholders"). Perry's Majestic is
registering, under the primary prospectus, 345,000 Units (including 45,000 Units
subject to an over-allotment option granted to the underwriter), 690,000 shares
of Common Stock, 345,000 Class A Warrants and 345,000 shares of Common Stock
issuable upon the exercise of the Class A Warrants. Perry's Majestic is
registering on behalf of the Selling Securityholders, under an alternate
prospectus, (i) 1,850,000 shares of Common Stock, and (ii) 3,000,000 Class A
Warrants issuable upon conversion of the Bridge Notes.

<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Item a. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1) Financial Statements.

The following financial statements are included in Part II, Item 7:

Index to Financial Statements

Report of Independent Certified Public Accountants [F-1]

Consolidated Balance Sheet as of December 31, 1995 [F-2]

Consolidated Statements of Operations for the years ended
December 31, 1995 and 1994 [F- 3]

Consolidated Statements of Stockholders' [Deficit] for the years
ended December 31, 1995 and 1994, [F-4 - F-5]

Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994, [F-6 -F-8]

Consolidated Notes to financial statements [F-9-F-17]

(a) (2) Exhibits

A list and description of exhibits filed as part of this Form 10-KSB is
provided in the attached Exhibit Index.

*1.01 Revised Form of Underwriting Agreement.

*1.02 Revised Form of Agreement Among Underwriters.

*1.03 Revised Form of Selected Dealers Agreement.

1.04 Form of Series C Preferred Unit Underwriting Agreement.

1.05 Agreement Among Underwriters

1.06 Selected Dealers Agreement

*3.01 Certificate of Incorporation of the Company filed on August 6,
1992.

<PAGE>

*3.02 Certificate of Amendment of Certificate of Incorporation of the
Company filed August 31, 1992.

*3.03 By-Laws of the Company.

3.04 Form of Certificate of Designation of Series C Preferred Stock.

*3.05 Form of Certificate of Designation of Series B Preferred Stock.

*4.01 Specimen Certificate for Shares of Common Stock.

*4.02 Specimen Certificate for Shares of Series A Preferred Stock.

*4.03 Specimen Certificate for Shares of Series B Preferred Stock.

+4.04 Specimen Certificate for Shares of Series C Preferred Stock.

*4.05 Revised Form of Warrant Agreement by and among the Company, J.
Gregory & Company, Inc. and American Stock Transfer & Trust
Company.

*4.06 Specimen Certificate for Warrants.

*4.07 Revised Form of Underwriters' Unit Purchase Option.

*4.08 Form of Lockup Letter with Selling Stockholders.

*4.09 Form of Lockup Letter with Officers, Directors and other
Shareholders.

4.10 Form of Series C Preferred Stock Warrant Agreement.

4.11 Series C Preferred Unit Purchase Option

+4.12 Specimen Certificate for Series C Preferred Warrants.

*5.01 Opinion of Brandeis, Bernstein & Wasserman.

****5.02 Opinion of Bernstein & Wasserman

*10.01 Form of Distribution Agreement of Mootch & Muck, Inc. dated
October 30, 1991, as amended by letter dated February 26, 1992.

*10.02 Stock Sale Agreement by and between Company and the Company
Investors dated June 8, 1992.

<PAGE>

*10.03 Form of Employment Agreement of Marshall Becker.

*10.04 Form of Employment Agreement of Gary Kaufman.

*10.05 Form of Employment Agreement of Wilford Adkins, Jr.

*10.06 Form of Brokerage Agreement with H & H Day Brokerage.

*10.07 Form of Option Agreement by and between the Company and
Marshall Becker.

*10.08 Form Option Agreement by and between the Company and Wilford
Adkins, Jr.

*10.09 Form of Option Agreement by and between the Company and Gary
Kaufman.

*10.10 Loan Documents with respect to $135,000 Loan from Morris
Friedell.

*10.11 Loan Documents with respect to $65,956.01 Loan from Morris
Friedell.

*10.12 Revised Form of Financial Consulting Agreement by and between
the Company and J. Gregory & Company, Inc.

*10.14 Lease for office space at 625 Michigan Avenue, Chicago, Illinois.

*10.15 Form of Incentive Stock Option Plan.

*10.16 Form of Non-Qualified Stock Option Plan.

*10.17 Form of Voting Trust Agreement with respect to the Company's
Common Stock owned by Kial, Ltd.

*10.18 Form of Voting Trust Agreement with respect to the Company's
Common Stock owned by K.A.M. Group, Inc.

*10.19 Stock Purchase Agreement by and between the Company and Mootch &
Muck dated June 5, 1992.

*10.20 Form of Bridge Loan Documents.

*10.21 Form of Amendment to Option Agreement by and between the
Company and Marshall Becker.

*10.22 Form of Amendment to Option Agreement by and between the
Company and Wilford Adkins, Jr.

<PAGE>

*10.23 Form of Amendment to Stock Sale Agreement by and between
Company and the Company Investors dated June 8, 1992

**10.24 Form of Employment Agreement of Howard Shapiro.
**10.25 Form of Option Agreement by and between the Company and Howard
Shapiro.

**10.26 Agreement of Subordination and Security Agreement dated March

12, 1993 by Alfred Sipper.
**10.27 Shareholder's Agreement and Irrevocable Proxy dated as of May
12, 1993 by and between Alfred Sipper, M&M and the Registrant.

**10.29 Letter Agreement and Irrevocable Proxy dated as of May 12, 1993
by and between the Registrant and M&M.

*10.30 Form of Employment Agreement with Alfred Sipper.

o10.31 Consulting Agreement by and between the Company and Marshall E.
Becker, dated February 15, 1994.

o10.32 License Agreement by and between the Company and Ahmadi
Industries, W.C.C. dated November 30, 1993.

o10.33 Agreement and Plan of Merger by and between the Company M&M
Acquisition Corp., Alfred Sipper, Bev-Tyme, Inc. and Mootch &
Muck, Inc., dated March 1994.

**10.34 Secured Convertible Loan Agreement dated March 12, 1993 by and
between New Day Beverage, Inc. and Mootch & Muck, Inc.

**10.35 Guarantee of Payment dated March 12, 1993 by Alfred Sipper.

**10.36 Non-Negotiable Note in the principal amount of $300,000 dated
March 12, 1993 from New Day Beverage, Inc. to Mootch & Muck, Inc.

**10.37 Security Agreement dated March 12, 1993 by and among New Day
Beverage, Inc., Mootch & Muck, Inc. and Bev-Tyme, Inc.

**10.38 Agreement of Subordination and Security Agreement dated March
12, 1993 by Alfred Sipper.

o10.39 Purchase Agreement among M&M, Sclafani Beer and Soda
Distributors, Inc. and John Sclafani.

<PAGE>

10.40 Amendment No. 1 to Agreement and Plan of Merger by and among the
Company, Mootch & Muck, Inc. and Alfred Sipper.

10.41 Consulting Agreement between the Company and Harold Yordy.

10.42 Consulting Agreement between the Company and James Solakian.

10.43 Consulting Agreement between the Company and Jack Maguire.

*21.01 List of Subsidiaries of the Registrant as of December 31, 1993.

* Incorporated by reference to Registrant's Registration Statement on Form
SB-2, and amendments thereto, Registration No. 33-53748C declared effective

on January 29, 1993.

** Incorporated by reference to Registrant's Form 8-K, dated March 17, 1993.

*** Incorporated by reference to Registrant's Form 8-K, dated May 1993.

o Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 declared effective in February 1994.

o Incorporated by reference to the Registrant's Form 8-K filed with Securities
and Exchange Commission on December 2, 1994.

+ Incorporated by reference Form SB-2 filed with the Securities and Exchange
Commission on December 15, 1994

++ Incorporated by reference to Form SB-2 filed with the Securities and
Exchange Commission on December 15, 1994.

<PAGE>

(b) A report on Form 8-K was filed on behalf of the Company during the last
quarter of the period covered by this report. On January 4, 1996, a Form 8-K was
filed with the Securities and Exchange Commission reporting on Item 5 of the
Form 8-K, the annual meeting of the Company's stockholders held on December 21,
1995.

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page to Page
------------
Item 7. Financial Statements

Independent Auditor's Report................................. F-1....

Consolidated Balance Sheet as of December 31, 1995........... F-2....

Consolidated Statements of Operations for the years ended
December 31, 1995 and 1994................................... F-3....

Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995 and 1994....................... F-4.... F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994 .................................. F-6.... F-8

Notes to Consolidated Financial Statements................... F-9.... F-17

Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................

................

<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Stockholders of
Bev-Tyme, Inc.
New York, New York

We have audited the accompanying consolidated balance sheet of
Bev-Tyme, Inc. and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Bev-Tyme, Inc. and subsidiaries as of December 31, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

The accompanying consolidated financial statements have been
prepared assuming that Bev-Tyme, Inc. and subsidiaries will continue as a going
concern. As discussed in Note 13 to the consolidated financial statements, the
Company has suffered recurring losses from operations and has a net working
capital deficiency that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 13. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.

Cranford, New Jersey
March 21, 1996
[Except for Note 17C
as to which the date is
April 11, 1996]

F-1

<PAGE>

Item 7. Financial Statements

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995.

Assets:
Current Assets:
Cash $ 153,714
Accounts Receivable - Net 704,870
Inventory 780,938
Prepaid Expenses 153,955
Stock Subscription Receivable 1,050,000
-----------

Total Current Assets 2,843,477
Property and Equipment - Net 867,752
-----------

Other Assets:
Restricted Cash 5,073
Security Deposits 48,096
Goodwill - Net 2,924,863
Other Assets 3,751
Deferred Costs 1,155,000
-----------

Total Other Assets 4,136,783
-----------

Total Assets $ 7,848,012
===========

Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 2,200,468
Accrued Expenses 289,239
Payroll and Corporate Income Taxes Payable 254,699
Notes Payable 97,937
Loan Payable - Shareholder 259,000
-----------

Total Current Liabilities 3,101,343
-----------
Long-Term Debt:
Notes Payable 322,952
-----------
Commitments and Contingencies [12] --
-----------
Stockholders' Equity:
Series C Convertible Preferred Stock - Authorized
5,800,000 Shares, 1,352,225 Shares Issued and

Outstanding, Par Value of $.0001 135

Common Stock - Authorized 75,000,000 Shares, 4,587,759
Shares Issued and Outstanding, Par Value of $.0001 458

Additional Paid-in Capital 13,361,845

Accumulated [Deficit] (8,938,721)
-----------
Total Stockholders' Equity 4,423,717
-----------
Total Liabilities and Stockholders' Equity $ 7,848,012
===========

See Notes to Consolidated Financial Statements.

F-2

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended
December 31,
1 9 9 5 1 9 9 4
------- -------

Sales - Net $12,730,722 $ 9,773,013

Total Cost of Goods Sold 10,974,292 7,729,722
---------- -----------

Gross Profit 1,756,430 2,043,291
---------- -----------

Selling, General and Administrative Expenses:
Selling, Advertising and Promotion 1,128,782 913,762
Amortization of Goodwill 387,892 320,400
General and Administrative Expenses 2,405,738 1,773,076
Compensation Expense - Issuance of Stock 1,223,250 --
Amortization of Financing Costs 386,650 193,350
---------- -----------

Total Selling, General and Administrative Expenses 5,532,312 3,200,588
---------- -----------

[Loss] from Operations (3,775,882) (1,157,297)
---------- -----------

Other [Income] Expense:
Interest Expense 50,422 41,454
Interest Income (74) (6,209)
---------- -----------

Other Expense [Income] - Net 50,348 (35,245)
---------- -----------

[Loss] Before Provision for Income Taxes (3,826,230) (1,192,542)

Provision for Income Taxes -- --
---------- -----------

Net [Loss] $(3,826,230) $(1,192,542)
=========== ===========

Weighted Average Number of Shares 4,759,334 3,523,680
========== ===========

Net [Loss] Per Share $ (.80) $ (.34)
========== ===========

See Notes to Consolidated Financial Statements.

F-3

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Total
Series C Convertible Additional Deferred Stock-
Common Stock Preferred Stock Paid-in Accumulated Treasury Compensation holders'
Shares Amount Shares Amount* Capital [Deficit] Stock Expense Equity
------ ------ ------ ------ ------- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 2,936,303 $ 294 -- $ -- $5,345,726 $(3,919,949) $ (25,000) $(269,167) $1,131,904

Stock Issued in Exchange for
Services in February 1994 75,000 7 -- -- 202,271 -- -- -- 202,278

Exercise of Bridge Units in
February 1994 at $.50 Per
Unit 7,812 1 -- -- 3,906 -- -- -- 3,907

Issuance of Stock to Purchase
the remaining 49% Interest of
Subsidiaries in March 1994 at
$2.70 600,000 60 -- -- 1,619,940 -- -- -- 1,620,000

Exercise of 1,500,000 Warrants
in February 1994 Net of
Offering Costs -- -- -- -- 258,116 -- -- -- 258,116

Exercise of Bridge Units in
March 1994 at $.50 Per Unit 7,812 1 -- -- 3,905 -- -- -- 3,906

Sale of Treasury Stock -- -- -- -- 93,171 -- 25,000 -- 118,171

Exercise of Bridge Units in
April 1994 at $.50 Per Unit 10,156 1 -- -- 5,077 -- -- -- 5,078

Deferred Compensation
Adjustment for Options in
March 1994 -- -- -- -- -- -- -- 269,167 269,167

Relinquishment of Stock
Options in June 1994 -- -- -- -- (340,000) -- -- -- (340,000)

Imputed Interest on Note
Payable - Stockholder -- -- -- -- 21,000 -- -- -- 21,000
---------- ----- -- ---- ---------- ----------- ----- ----- ----------
Totals - Forward 3,637,083 $ 364 -- $ -- $7,213,112 $(3,919,949) $ -- $ -- $3,293,527
</TABLE>

* No allocation has been made to par value for the preferred stock because of
the insignificant dollar amounts.

See Notes to Consolidated Financial Statements.

F-4

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Total
Series C Convertible Additional Deferred Stock-
Common Stock Preferred Stock Paid-in Accumulated Treasury Compensation holders'
Shares Amount Shares Amount* Capital [Deficit] Stock Expense Equity
------ ------ ------ ------ ------- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Totals - Forward 3,637,083 $ 364 -- $ -- $7,213,112 $(3,919,949) $ -- $ -- $ 3,293,527

Stock Issued as Installment
Payment on Stockholder Note
Payable 50,676 5 -- -- 149,995 -- -- -- 150,000

Deferred Financing Costs on
Convertible Bridge Notes -- -- -- -- 580,000 -- -- -- 580,000

Net [Loss] for the Year Ended
December 31, 1994 -- -- -- -- -- (1,192,542) -- -- (1,192,542)
--------- ------- --------- ----- ---------- ----------- ----- ----- ----------
Balance - December 31, 1994 3,687,759 369 -- -- 7,943,107 (5,112,491) -- -- 2,830,985

Issuance of Stock Upon
Conversion of Bridge Notes
in February 1995 -- -- 250,000 25 19,975 -- -- -- 20,000

Issuance of Stock Upon
Cancellation of Indebtness
to a Shareholder in
February 1995 -- -- 117,225 12 201,663 -- -- -- 201,675

Issuance of Stock in Exchange
for Services in March 1995 700,000 70 -- -- 195,930 -- -- -- 196,000

Issuance of Stock to Purchase
Net Assets of SB&S 200,000 19 -- -- 31,231 -- -- -- 31,250

Public Offering - Net of
Offering Expenses of
$611,213 - May 1995 -- -- 460,000 46 1,688,741 -- -- -- 1,688,787

Issuance of Series C Preferred
Stock Options - May 1995 -- -- -- -- 1,076,250 -- -- -- 1,076,250

Issuance of Series C Preferred
Stock Options - November
1995 -- -- -- -- 1,155,000 -- -- -- 1,155,000

Exercise of Series C Preferred
Stock Options in October
1995 -- -- 525,000 52 1,049,948 -- -- -- 1,050,000

Net [Loss] for the year ended
December 31, 1995 -- -- -- -- -- (3,826,230) -- -- (3,826,230)
--------- ------- --------- ----- ---------- ----------- ----- ----- ----------
Balance - December 31, 1995 4,587,759 $ 458 1,352,225 $ 135 $13,361,845 $(8,938,721) $ -- $ -- $4,423,717
========= ======= ========= ===== =========== =========== ===== ===== ==========

</TABLE>

* No allocation has been made to par value for the preferred stock because of
the insignificant dollar amounts.

See Notes to Consolidated Financial Statements.

F-5

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended
December 31,
1 9 9 5 1 9 9 4
------- -------
Operating Activities:
Net [Loss] $(3,826,230) $(1,192,542)
----------- -----------
Adjustments to Reconcile Net [Loss] to Net Cash
[Used for] Operating Activities:
Depreciation 120,500 70,297
Amortization of Intangibles 386,650 193,350
Amortization of Goodwill 387,892 320,400
Bad Debt Expense 93,249 --
Compensation Expense on Issuance of Common and
Preferred Stock 1,272,250 417
Imputed Interest on Stockholder Note Payable -- 21,000

Changes in Assets and Liabilities:
[Increase] Decrease in Assets:
Accounts Receivable 33,406 (257,339)
Inventory 23,743 225,690
Prepaid Expenses 63,446 (139,662)
Prepaid Offering Cost 71,182 (71,182)
Other Assets -- (21,141)

Increase [Decrease] in Liabilities:
Accounts Payable and Accrued Expenses 404,430 (325,811)
Payroll and Corporate Income Taxes Payable 254,699 --
----------- -----------
Total Adjustments 3,111,447 16,019
----------- -----------
Net Cash - Operating Activities - Forward (714,783) (1,176,523)
----------- -----------

Investing Activities:
Equipment Acquisitions (249,464) (162,869)
Purchase of Subsidiaries - Net of Cash Acquired (526,562) --
Acquisition Costs -- 250
Collections of Loans Receivable - Stockholders -- 13,557
Restricted Cash (5,073) --
----------- -----------
Net Cash - Investing Activities - Forward $ (781,099) $ (149,062)

See Notes to Consolidated Financial Statements.

F-6

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended
December 31,
1 9 9 5 1 9 9 4
------- -------

Net Cash - Operating Activities - Forwarded $ (714,783) $(1,176,523)
---------- -----------

Net Cash - Investing Activities - Forwarded $ (781,099) $ (149,062)
---------- -----------

Financing Activities:
Proceeds from Public Offering 1,688,787 --
[Acquisition] Redemption of a Certificate of
Deposit -- 110,427
Proceeds from Bridge Loan Payable -- 200,000
Payments of Capital Lease Obligations (5,891) (16,865)
Payments of Note Payable - Related Parties (45,000) --
Proceeds of Note Payable - Related Parties 45,000 --
Payment of Bridge Loan Obligation (180,000) --
Proceeds from Sale of Common Stock -- 118,171
Exercise of Bridge Units -- 12,890
Payments of Notes Payable (180,677) (135,143)
Proceeds from Shareholder - Loan Payable 309,000 --
Repayment of Shareholder - Loan Payable (50,000) --
Proceeds from Exercise of Warrants -- 375,000
---------- -----------

Net Cash - Financing Activities 1,581,219 664,480
---------- -----------

Net Increase [Decrease] in Cash 85,337 (661,105)

Cash - Beginning of Years 68,377 729,482
---------- -----------

Cash - End of Years $ 153,714 $ 68,377
========== ===========

Supplemental Disclosures of Cash Flow Information:
Cash paid for the years for:
Interest $ 39,665 $ 20,454
Income Taxes $ -- $ --

Supplemental Schedule of Non-Cash Investing and Financing Activities:
In February 1994, the Company issued 75,000 shares of common stock to a law
firm in connection for certain legal services performed during 1993.

In March 1994, in connection with the acquisition of the remaining 49%
interest in the subsidiaries, the Company exchanged 600,000 newly issued shares
of common stock and $250,000 payable at the Company's option in either cash or
common stock.

On October 28, 1994, the Company issued 50,676 shares of common stock,
representing a $150,000 installment payment on the $250,000 stockholder note
payable.

During the year ended December 31, 1994, the Company incurred loan
obligations for transportation equipment, totaling $125,437.

See Notes to Consolidated Financial Statements.

F-7

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Supplemental Schedule of Non-Cash Investing and Financing Activities
[Continued]:

In February 1995, the bridge lenders converted the convertible bridge notes
into an aggregate of 250,000 preferred bridge units.

In February 1995, the Company issued 117,225 shares of Series C Preferred
Stock to a stockholder in exchange for the cancellation by a stockholder who is
also an officer and director of certain indebtness of the Company in the
aggregate principal amount of $201,675.

In March 1995, the Company entered into three one-year consulting agreements
with three unaffiliated individuals and issued a total of 700,000 shares of the
Company's common stock with a fair value of $196,000, which was expensed in
1995.

In May 1995, the Company granted 525,000 Series C Preferred Stock Options to
directors, officers and employees of the Company at an exercise price of $2.00
per share and, accordingly, has recorded an expense of $1,076,250. In October
1995, the directors, officers and employees of the Company exercised the 525,000
Series C Preferred Stock Options and as a result, the Company recorded a stock
subscription receivable for $1,050,000, which was collected in January and
February 1996.

In June 1995, the Company issued 200,000 shares of common stock and utilized
$21,495 of other assets in connection with the acquisition of the net assets of
Sclafani Beer & Soda, Inc.

In November of 1995, the Company issued 525,000 options for the Company's
Series C Preferred Stock to seven directors exercisable at $2.00 per share for
services to be rendered in 1996. The Company recorded a deferred cost of
$1,155,000 which represents the fair market value of the options and will be
amortized in 1996 as compensation to the directors.

During the period ended December 31, 1995, the Company incurred loan
obligations for transportation equipment, totaling $343,465.

See Notes to Consolidated Financial Statements.

F-8

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

[1] General Information and Summary of Significant Accounting Policies

General and Organization - New Day Beverage Co. was an Illinois corporation
originally established in April 1991 and maintained its principal place of
business in Chicago, Illinois. In August of 1992, New Day Beverage Co.
changed its name to New Day Beverage, Inc. and changed its state of
incorporation to Delaware and in February 1994, relocated its principal place
of business to Brooklyn, New York. On January 11, 1996, the Company changed its
name to Bev-Tyme, Inc.

Bev-Tyme, Inc. ["Bev-Tyme"], is engaged in the business of developing and
marketing beverage products and is also engaged in the business of distributing
and selling beverage and snack products to grocery stores, supermarket chains,
restaurants and corporate cafeterias. In 1995, the Company also commenced
distributing beer and other malt beverages. The Company markets beverages and
snack products to retail grocery stores, supermarket chains, restaurants,
corporate cafeterias and wholesale distributors, a substantial portion of which
is concentrated in the New York City metropolitan area.

Principles of Consolidation - The consolidated financial statements include the
accounts of Bev-Tyme and each of its majority-owned subsidiaries [the
"Company"]. Material intercompany transactions and balances have been eliminated
in consolidation. See Note 2 entitled "Acquisitions" for further information.

Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid debt investments with a maturity of three months or less when purchased.
At December 31, 1995, there were no cash equivalents.

Inventories - Inventories are stated at the lower of cost or market [net
realizable value]. Cost, which includes purchases, freight, raw materials,
direct labor and factory overhead, is determined on the first-in, first-out
basis. Management evaluates inventory obsolescence and impairment on a monthly
basis.

Property and Equipment - Property and equipment are stated at cost and are
depreciated over its estimated useful life of 5 to 10 years. Depreciation is
calculated using the straight-line method.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Intangibles - For the year ended December 31, 1995, the Company charged to
operations $386,650 for amortization of financing cost relating to bridge
financing [See Note 8].

Goodwill - Amounts paid for securities of newly-acquired subsidiaries in excess
of the fair value of the net assets of such subsidiaries have been charged to
goodwill. Goodwill is related to revenues the Company anticipates realizing in
future years. These revenues are highly dependent upon current management of the
subsidiaries whose employment contracts cover periods up to seven years. The
Company has decided to amortize its goodwill over a period of up to ten years

under the straight-line method. In 1994, the Company changed its estimate of the
useful life of goodwill from seven to ten years because of the increased term of
the employment contracts and the increase in consolidated sales. Accumulated
amortization at December 31, 1995 was $837,292. The Company's policy is to
evaluate the periods of goodwill amortization to determine whether later events
and circumstances warrant revised estimates of useful lives. The Company also
evaluates whether the carrying value of goodwill has become impaired by
comparing the carrying value of goodwill to the value of projected undiscounted
cash flows from acquired assets or businesses. Impairment is recognized if the
carrying value of goodwill is less than the projected undiscounted cash flow
from the acquired assets or business.

F-9

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2

[1] General Information and Summary of Significant Accounting Policies
[Continued]

Risk Concentrations - Financial instruments that potentially subject the Company
to concentrations of credit risk include cash equivalents and accounts
receivable arising from its normal business activities. The Company places its
cash and cash equivalents with high credit quality financial institutions
located in the New York metropolitan area.

The Company maintains cash balances at a financial institution in New York.
Accounts at this institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1995, the Company's uninsured cash
balance totaled $27,640.

The Company performs certain credit evaluation procedures and does not require
collateral. The Company believes that credit risk is limited due to the large
number of entities comprising the Company's customer base. In addition, the
Company routinely assesses the financial strength of its customers, and based
upon factors surrounding the credit risk of its customers, establishes an
allowance for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowances is limited. The
Company established an allowance for doubtful accounts at December 31, 1995,
which amounted to approximately $180,000. The Company believes any credit risk
beyond this amount would be negligible.

With respect to purchases of inventory for each of the years ended December 31,
1995 and 1994, the Company purchased inventory from two suppliers which
comprised approximately 24% and 10%, respectively, of the Company's total cost
of sales.

Revenue Recognition - Revenue is recognized at the time products are shipped and
title passes.

Net [Loss] Per Share - The net loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the period.

Shares issuable upon the exercise of stock options granted and the effect of
convertible securities are excluded from the computation because the effect on
the net loss per common share would be anti-dilutive.

[2] Acquisitions

[A] Mootch & Muck, Inc. - In March 1994, the Company acquired the remaining 49%
interest in Mootch & Muck, Inc., subject to obtaining certain governmental
approvals, in exchange for 600,000 newly issued shares of common stock and
$250,000 payable at the Company's option in cash or common stock over a period
of sixteen [16] months.

In addition, the seller was entitled to receive an additional 200,000 shares of
common stock if the subsidiaries reported positive earnings before the payment
of taxes for the year ended December 31, 1994, and an additional 200,000 shares
of common stock if the Company reported not less than $100,000 in earnings
before the payment of taxes for the year ended December 31, 1995. On October 28,
1994, the Company issued 50,676 shares of common stock as payment of $150,000
due and owing under the debt to the seller, a director of the Company. Under the
terms of the original agreement, in the event that the seller sold such shares
and received less than $150,000 from the proceeds therefrom, the Company was
obligated to issue the seller a sufficient number of additional shares of common
stock so that the aggregate proceeds from both sales was not less than $150,000.
On February 13, 1995, the Company and the seller amended their agreement so that
the seller would receive shares of Series C Preferred Stock and the Company
would be relieved from all of its obligations to make future payments to the
seller. Under the amended agreement, the Company issued to the seller 83,333
shares of Series C Preferred Stock and the seller has released the Company from
all of its obligations to make payments in the future. Further, in the event
that the seller receives within two years following the effective date
aggregate, net proceeds in excess of $250,000, the seller will deliver such
amount in excess of $250,000 to the Company and surrender for cancellation all
of the remaining shares held thereby, if any. In connection with the Company
acquiring the remaining 49% interest in the subsidiaries, the Company was
obligated to pay the seller $250,000 at the Company's option in cash or common
stock over a period of 16 months.

There was approximately $1,870,000 of additional goodwill recorded as a result
of this transaction.

F-10

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3

[2] Acquisition [Continued]

[B] Sclafani Beer & Soda Distributors, Inc. ["SB&S"] - On June 2, 1995, the
Company purchased the assets and assumed certain liabilities of Sclafani Beer &
Soda Distributors, Inc. ["SBS"] for $500,000 in cash, 200,000 shares of the
Company's common stock valued at market value or $31,250, and options to
purchase 75,000 shares of the Company's common stock valued at $11,720. Goodwill

of approximately $450,000 was recognized for this acquisition.

The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisitions had occurred as of January 1, 1995, after
giving effect to the amortization of goodwill. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made as of that date or of
results which may occur in the future.

Sales - Net $13,176,000
===========

Net [Loss] $(3,832,800)
===========
Net [Loss] Per Common Share $ (.88)
===========

Weighted Average Number of Shares 4,334,334
===========
[3] Inventories

Inventories as of December 31, 1995 consisted of the following:

Raw Materials $ 17,749
Finished Goods 763,189
----------

Total $ 780,938
----- ==========

The Company's inventory consists primarily of finished goods. The Company
evaluates inventory obsolescence and impairment on a monthly basis.

[4] Plant and Equipment and Depreciation and Amortization

Plant and equipment and accumulated depreciation and amortization as of December
31, 1995 are as follows:

Warehouse Equipment $ 224,070
Office Equipment 671,834
Leasehold Improvements 41,046
Transportation Equipment 1,118,858
---------

Total - At Cost 2,055,808
Less: Accumulated Depreciation and
Amortization 1,188,056
---------

Net $ 867,752
==========

Depreciation and amortization for the years ended December 31, 1995 and 1994
was $120,500 and $70,297, respectively.

F-11

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4

[5] Debt

Debt as of December 31, 1995 consisted of the following:

Bank notes payable in monthly installments of principal and interest at rates
ranging from 8.5% to 13.9% per annum,
maturing October 1996 through September 2000 [A] $ 420,889

Less: Current Portion 97,937
---------
Non-Current Portion $ 322,952
------------------- =========

[A] Collateralized by transportation equipment.

Maturities of the bank notes and loan payable as of December 31, 1995 are as
follows:

December 31,
- ------------
1996 $ 97,937
1997 $ 96,588
1998 $ 104,872
1999 $ 84,660
2000 $ 36,832

[6] Income Taxes

No provision for income taxes has been made for 1995 and 1994 in the
accompanying consolidated financial statements because the Company incurred
losses for both financial reporting and income tax purposes. As of December 31,
1995, the Company had a net operating loss carryforward of approximately
$7,600,000 that is scheduled to expire between 2007 and 2008. Future tax
benefits related to those losses have not been recognized because their
realization is not assured.

In 1993, the Company adopted the method of accounting for income taxes pursuant
to Financial Accounting Standards No. 109, "Accounting for Income Taxes"
["SFAS No. 109"]. SFAS No. 109 requires the asset and liability method for
financial accounting and reporting for income taxes. The impact of adopting
SFAS No. 109 was not significant to the Company's financial position or results
of operations.

[7] Stock Option Plans, Stock Options and Warrants

[A] As of December 31, 1995, 525,000 common stock options that were issued in

August of 1994 are outstanding and have vested to directors, officers and
employees of the Company at an exercise price of $.69 per share. The Company
also issued in 1995, 300,000 common stock options that vest in May of 1996 to
directors, officers and employees of the Company at an exercise price of $2.00
per share.

[B] As of December 31, 1995, approximately 1,500,000 warrants were outstanding,
which entitle the holders to acquire shares of common stock at a price of $6.00
per share which expire in January 1996.

[C] As of December 31, 1995, 1,420,000 Series C Warrants were outstanding which
entitled the holders to acquire shares of Series C Preferred Stock at a price of
$6.00 per share for a period of four years commencing May 15, 1996.

[D] In November of 1995, the Company issued 525,000 options for the Company's
Series C Preferred Stock to seven directors exercisable at $2.00 per share for
services to be rendered in 1996. The Company recorded a deferred cost of
$1,155,000 which represents the fair market value of the options and will be
amortized in 1996 as compensation to the directors.

F-12

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5

[7] Stock Option Plans, Stock Options and Warrants [Continued]

[E] Incentive Stock Option Plan - In November of 1992, the Company adopted the
"Incentive Stock Option Plan". The total number of shares that may be granted
under this plan is 75,000 shares. The Company issued incentive options to
purchase an aggregate of 60,000 shares of common stock exercisable at $1.00 per
share for a period of four years commencing in August 1994.

[F] Non-Qualified Stock Option Plan -In November of 1992, the Company adopted
the "Non-Qualified Stock Option Plan". The total number of shares that may be
granted under this plan is 125,000 shares. In August of 1994, the Company issued
an aggregate of 25,000 non-qualified options that are exercisable at 1.00 per
share for a period of four years commencing in August 1994.

[G] Options to Underwriter - In June 1993, for a purchase price of $50, the
underwriters of the public offering acquired an option to purchase up to an
aggregate of 50,000 units for a five-year period expiring in February 1998. The
Company has agreed to register, at its expense, under the Securities Act, on one
occasion, the option and/or the underlying securities covered by the option upon
certain conditions.

[8] Bridge Financing

On November 30, 1994, the Company borrowed an aggregate of $200,000. In exchange
for making a loan to the Company, the bridge lenders received two promissory
notes: one note in the aggregate principal amount of $180,000 and the other note
in the aggregate principal amount of $20,000. Each of the bridge notes bears

interest at the rate of eight percent [8%] per annum. The $180,000 bridge loans
were due and payable upon the earlier of (i) May 1, 1995, or (ii) the closing of
the proposed public offering of the Company's securities. The $20,000 bridge
loans are due on December 1, 1995. In addition, each bridge lender had the right
to convert a convertible bridge note into a number of units ["preferred bridge
units"] equal to the total dollar amount loaned to the Company by such bridge
lender; provided, however, that one bridge lender may convert his convertible
bridge note into the total dollar amount loaned to the Company plus an
additional 50,000 preferred bridge units because such bridge lender surrendered
1,000,000 warrants exercisable for 1,000,000 shares of common stock. In
February, the bridge lenders converted the convertible bridge notes into an
aggregate of 250,000 preferred bridge units. Each unit is identical to the units
being offered in the proposed public offering. One bridge lender who loaned
$65,000 to the Company rescinded 1,000,000 warrants that were received in a
private placement on February 2, 1994. Further, the Company agreed to register
such units in the first registration statement filed by the Company following
the date of the loan. The cost of obtaining this bridge financing was $580,000,
which represents the fair value for the bridge units issued. As a result, the
Company expensed $386,650 and $193,350 in 1995 and 1994, respectively, as bridge
financing costs. In May of 1995, the Company was granted an extension for the
maturity of the principal bridge notes until the earlier of (i) June 15, 1995 or
(ii) the closing of the public offering. These bridge notes were repaid on May
23, 1995, the date of the closing of the public offering [See Note 9A].

[9] Stockholders' Equity

[A] Registration Statement for Units - Series C Redeemable Preferred Stock - On
May 15, 1995, the Company completed a secondary public offering for sale 460,000
units, each consisting of one share of Series C Convertible Preferred Stock, par
value $.0001 per share and two Series C Redeemable Preferred Stock purchase
warrants. Each share of Series A Preferred Stock is convertible at the option of
the holder, at any time after May 15, 1996, into 18 shares of the Company's
common stock. The Series C Warrants entitle the holder to purchase one share of
Series C Preferred Stock at an exercise price of $6.00 per share through May 15,
2000 and may be redeemed by the Company under certain conditions. To date, none
of the Preferred Stock Warrants have been exercised or redeemed. The Company
realized net proceeds of $1,688,787 after deducting, the underwriters discount
and other costs of the offering.

F-13

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6

[9] Stockholders' Equity [Continued]

[B] Registration Statement for Common Stock - On February 11, 1994, the
Securities and Exchange Commission declared effective a Registration Statement
filed by the Company for the purposes of registering 2,025,720 shares of common
stock, which included shares of common stock underlying certain stock options
and 1,600,000 warrants and the common stock issuable upon exercise of the
warrants. The Company did not receive any proceeds as a result of this filing.

The Registration Statement included 1,201,800 and 100,000, shares of common
stock and warrants, respectively, which were outstanding as of December 31, 1993
and 675,000 and 1,500,000 shares of common stock and warrants, respectively
issued by the Company subsequent to December 31, 1993. On February 2, 1994, the
Company engaged in a private placement of 1,500,000 unregistered warrants, at a
price of $.25 per warrant. Each warrant entitles the holders to acquire shares
of common stock at a price of $6.00 per share for a period expiring in January
1996 [See Notes 2 and 8].

[C] Series B - Preferred Stock - In September 1992, the Company sold to
unaffiliated parties four units, each unit consisting of twenty-five shares of
the Company's Series B Preferred Stock at a price of $25,000 per unit. The
Series B Preferred Stock had an annual dividend rate of 5%. In accordance with
its terms, the holders of all of the Series B Preferred Stock converted their
shares into an aggregate of 100,000 common shares and 100,000 warrants in
February 1993, which were registered in February 1994 [See Note 9B].

[D] Debt to Equity Conversions - On February 10, 1994, the Company issued 75,000
shares of common stock valued at $2.70 per share to the law firm of Bernstein &
Wasserman in consideration for certain legal services performed during 1993.
Hartley T. Bernstein, a director of the Company, is a partner of the law firm.

On October 28, 1994, the Company issued 50,676 shares of common stock,
representing a $150,000 installment payment on the $250,000 stockholder note
payable [See Note 2A].

In February 1995, the bridge lenders converted the convertible bridge notes into
an aggregate of 250,000 preferred bridge units.

In February 1995, the Company issued 117,225 shares of Series C Preferred
Stock to a stockholder in exchange for his cancellation of certain
indebtedness of the Company in the aggregate principal amount of $201,675.
This stockholder is also an officer and director of the Company.

[E] Acquisition of Mootch & Muck - In March 1994, in connection with the
acquisition of the remaining 49% interest in the subsidiaries, the Company
exchanged 600,000 newly issued shares of common stock and $250,000 payable at
the Company's option in either cash or common stock [See Note 2A].

[F] Authorized Shares - In November of 1995, stockholders of the Company adopted
an amendment to the Company's certificate of incorporation authorizing the
increase of the number of authorized shares of Preferred Stock from 3,000,000
shares to 6,000,000 shares, of which 5,800,000 shares are the Series C Preferred
Stock. In November 1995, the stockholders also approved and consented to amend
the Company's certificate of incorporation by increasing the number of
authorized shares of common stock from 15,000,000 shares to 75,000,000 shares.

[G] Consulting Agreements - In March 1995, the Company entered into three
one-year consulting agreements with three unaffiliated individuals and issued a
total of 700,000 shares of the Company's common stock. In 1995, the Company
recorded an expense of $196,000 for these consulting agreements, which
approximates the fair value of the stock issued.

F-14

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7

[9] Stockholders' Equity [Continued]

[H] Series C Preferred Stock - In May 1995, the Company granted 525,000 Series C
Preferred Stock Options to directors, officers and employees of the Company at
an exercise price of $2.00 per share and, accordingly, recorded an expense of
$1,076,250. In October 1995, 525,000 Series C Preferred Stock Options were
exercised and the Company recorded a stock subscription receivable of
$1,050,000, which was paid in January and February of 1996.

[10] Related Party Transactions

Loan Payable- Stockholder - In February 1995, the Company received $45,000 from
a related party. This loan was repaid in June 1995. In December of 1995, the
Company received an additional $309,000 from the related party, of which $50,000
was repaid in 1995 and the balance of $259,000 was repaid in January 1996 with
interest at 5.75%.

[11] Employment Agreements

As of December 31, 1995, the Company has four employment agreements with senior
executives of the Company that expire in various years through 2009 for total
base annual compensation of approximately $435,000 subject to certain
adjustments plus bonuses of options for Series C Preferred Stock and common
stock.

[12] Commitments and Contingencies

[A] The Company has entered into various operating lease agreements to lease
office space and warehouse space with initial terms ranging from less than one
to five years. Rent expense for the years ended December 31, 1995 and 1994 was
$246,925 and $262,750, respectively. This lease expired in February of 1996.
Commencing March of 1995, the Company revised the nature of this agreement to a
month-to-month arrangement for $20,500 a month.

In addition, the Company has non-cancelable operating leases for a variety of
office and warehouse equipment. Obligations under these leases for the periods
through 2000 are as follows:

1996 $ 121,419
1997 104,420
1998 45,827
1999 13,672
2000 9,039
----------

Total $ 294,377
----- ==========

[12] Commitments and Contingencies [Continued]

[B] The Company has minimum volume commitments on several of their distribution
contracts with vendors, whereby the vendor has the option to terminate an
agreement if certain volume targets are not met.

[13] Going Concern

As shown in the accompanying financial statements, the Company incurred net
losses for the years ended December 31, 1995 and 1994. These factors create an
uncertainty about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The Company intends to
pursue additional equity financing as a vehicle for financing future operations
and to secure debt financing from related and unrelated entities. The
continuation of the Company as a going concern is dependent upon the success of
these plans.

F-15

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8

[14] Litigation

The Company is subject to litigation in the normal course of business.
Management believes that such litigation will not have a material effect on the
Company's financial position, results of operations or cash flows.

[15] New Authoritative Pronouncement

The FASB has also issued SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which the Company adopted on January 1, 1995. SFAS
No. 115 requires management to classify its investments in debt and equity
securities as trading, held-to-maturity, and/or available-for-sale at the time
of purchase and to reevaluate such determination at each balance sheet date. The
Company does not anticipate that it will have many investments that will qualify
as trading or held-to-maturity investments. Debt securities for which the
Company does not have the intent or ability to hold to maturity will be
classified as available-for-sale, along with most investments in equity
securities. Securities available-for-sale are to be carried at fair vale, with
any unrealized holding gains and losses, net of tax, reported in a separate
component of shareholders' equity until realized.

of SFAS No. 121 is not expected to have a material impact on the Company's
financial statements.

[16] Fair Value of Financial Instruments

Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standards ["SFAS"] No. 107, "Disclosure About Fair Value of Financial
Instruments" which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
classifications as of December 31, 1995:

Carrying Fair
Amount Value
-------- -----
Long-Term Debt $ 322,952 $ 322,952
Stock Subscription Receivable $ 1,050,000 $ 1,050,000

F-16

<PAGE>

BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8

[16] Fair Value of Financial Instruments [Continued]

In assessing the fair value of financial instruments, the Company used a variety
of methods and assumptions, which were based on estimates of market conditions
and risks existing at that time. For certain instruments, including cash and
cash equivalents, trade receivables, related party payables, and trade payables,
it was assumed that the carrying amount approximated fair value for the majority
of these instruments because of their short maturities. The fair value of
long-term debt is estimated based on discounting expected cash flows at current
rates at which the Company could borrow funds with similar remaining maturities.
Management believes that the carrying value of the stock subscription receivable
for stock, approximates the fair value as this was collected in January and
February of 1996.

[17] Subsequent Events

[A] Stock Subscription Receivable - In January 1996, $750,000 of the
stockholders subscription receivable was paid and in February 1996 the remaining
$300,000 was repaid.

[B] Consulting Agreement - In February of 1996, the Company issued options to
purchase 300,000 shares of the Company's Series C Preferred Stock at an exercise
price of $2.00 per share to a consultant.

[C] Investment - On March 29, 1996, the Company acquired 500,000 shares of
convertible Class A Preferred Stock and 7,000,000 shares of non-convertible
Class B Preferred Stock of Perry's Majestic Beer, Inc. [valued at $2,000,000] in
exchange for 400,000 shares of the Company's Series C Preferred Stock and
$150,000. As of March 31, 1996, $75,000 of cash was paid and the balance of
$75,000, which was paid on April 4, 1996, is reflected as a note payable on the
financial statements as of March 31, 1996. Each share of Class A Preferred Stock
may be convertible by the Company into one [1] share of Common Stock. Each share
of Class A Preferred Stock and Class B Preferred Stock has attached to it the
right to vote on all matters submitted to the Company. On April 11, 1996,
Perry's Majestic Beer, Inc. filed a registration statement on Form SB-2 with the
Securities and Exchange Commission.

..............

F-17

<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
executed on this day of May, 1996.

BEV-TYME, INC.

By:/s/Robert J. Sipper
--------------------------
Robert J. Sipper
Chairman of the Board, and
Chief Executive Officer

In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities and on the dates
indicated

Signature Title Date
- --------- ----- ----

/s/Robert J. Sipper Chairman of the , 1996
- ------------------------
Robert J. Sipper Board and President

/s/Hartley T. Bernstein Director , 1996
- ------------------------
Hartley T. Bernstein

/s/Robert Forst Vice President, , 1996
- ------------------------
Robert Forst Chief Financial Officer,
Principal Accounting
Officer and Secretary

Director , 1996
- ------------------------
Bruce Logan

/s/Alfred Sipper Director , 1996
- ------------------------
Alfred Sipper

<ARTICLE> 5
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