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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ________
Commission File Number: 0-13181
CAPITAL BEVERAGE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-3878747
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
700 Columbia Street, Erie Basin, Building # 302, Brooklyn, New York 11231
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(718) 488-8500
-----------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
The number of shares common stock, $.001 par value, outstanding as of May
23, 2005 was 3,792,045.
CAPITAL BEVERAGE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets.................................... F-1
Consolidated Statements of Operations.......................... F-2
Consolidated Statements of Cash Flows.......................... F-3
Notes to Consolidated Financial Statements................F-4 to F-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risks.... 12
Item 4. Controls and Procedures........................................ 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes in Securities and Use of Proceeds...................... 13
Item 3. Defaults Upon Senior Securities................................ 13
Item 4. Submission of Matters to Vote of Securities Holders............ 13
Item 5. Other Information.............................................. 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
Signatures................................................................. 14
- 2 -
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
d/b/a DIVERSIFIED DISTRIBUTORS NETWORK
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2005 2004
----------------- -----------------
(Unaudited)
CURRENT ASSETS:
Cash $ 170,380 $ 96,220
Accounts receivable - net 614,760 698,792
Inventories 2,285,561 2,097,338
Prepaid expenses and other
current assets 223,014 147,905
----------------- -----------------
TOTAL CURRENT ASSETS 3,293,715 3,040,255
PROPERTY AND EQUIPMENT 117,310 127,765
DISTRIBUTION LICENSE 1,065,718 1,065,718
OTHER ASSETS 195,293 288,122
----------------- -----------------
$ 4,672,036 $ 4,521,860
================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
(Accounts payable $ 3,524,354 $ 2,846,455
Cash overdraft 474,271 367,424
Accrued expenses and taxes 86,742 117,328
Revolving loans 1,612,928 2,007,356
Loans payable 2,850,531 2,500,000
Current portion of long-term debt 105,367 104,738
Current portion of capital lease
obligations 36,847 12,716
Deposits payable 15,000 -
----------------- -----------------
TOTAL CURRENT LIABILITIES 8,706,040 7,956,017
----------------- -----------------
CAPITAL LEASE OBLIGATIONS 25,373 56,204
LONG-TERM DEBT - 18,905
STOCKHOLDERS' DEFICIT:
Preferred stock, no shares
issued and outstanding - -
Common stock, $.001 par value;
authorized 20,000,000 shares;
issued and outstanding
3,792,045 shares 3,793 3,793
Additional paid-in capital 5,986,249 5,986,249
Accumulated deficit (10,049,419) (9,499,308)
----------------- -----------------
TOTAL STOCKHOLDERS' DEFICIT (4,059,377) (3,509,266)
----------------- -----------------
$ 4,672,036 $ 4,521,860
================= =================
See notes to consolidated financial statements.
F-1
CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
d/b/a DIVERSIFIED DISTRIBUTORS NETWORK
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
-------------------------------------
2005 2004
----------------- -----------------
(Unaudited) (Unaudited)
NET SALES $ 5,084,278 $ 7,749,854
COST OF SALES 3,738,602 5,845,680
----------------- -----------------
GROSS PROFIT 1,345,676 1,904,174
COSTS AND EXPENSES:
Selling and delivery 352,985 377,832
General and administrative 1,302,732 1,353,937
Non-cash compensation - 91,724
Amortization and depreciation 37,570 37,648
----------------- -----------------
1,693,287 1,861,141
----------------- -----------------
(LOSS) INCOME FROM OPERATIONS (347,611) 43,033
INTEREST EXPENSE, net (202,499) (188,276)
----------------- -----------------
NET LOSS $ (550,110) $ (145,243)
================= =================
LOSS PER SHARE - BASIC AND DILUTED $ (0.15) $ (0.04)
================= =================
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN CALCULATION OF BASIC AND
DILUTED LOSS PER SHARE 3,792,045 3,792,045
================= =================
See notes to consolidated financial statements.
F-2
CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
d/b/a DIVERSIFIED DISTRIBUTORS NETWORK
STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
----------------------------------
2005 2004
---------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (550,110) $ (145,243)
---------------- ----------------
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 37,570 129,372
Changes in assets and liabilities:
Accounts receivable 84,032 (574,672)
Inventories (188,223) (671,265)
Prepaid expenses (75,109) 12,846
Other assets 92,829 9,023
Deposits payable (15,000) (15,000)
Accounts payable and
accrued expenses 647,313 1,634,452
---------------- ----------------
Total adjustments 583,412 524,756
---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,302 379,513
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES - -
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loans (394,428) (348,057)
Cash overdraft 106,847 -
Principal payments of capital lease
obligations (3,816) (3,881)
Proceeds from loan payable 350,531 -
Payments of long-term debt (18,276) (25,413)
---------------- ----------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 40,858 (377,351)
---------------- ----------------
NET INCREASE IN CASH 74,160 2,162
CASH - BEGINNING OF PERIOD 96,220 189,276
---------------- ----------------
CASH - END OF PERIOD $ 170,380 $ 191,438
================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 157,339 $ 144,113
================ ================
See notes to consolidated financial statements.
F-3
CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
(d/b/a Diversified Distributors Network)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but which is not required for interim reporting purposes has
been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual Report on
Form 10-K.
2. GOING CONCERN
The accompanying financial statements have been prepared on a going-concern
basis, which presumes that the Company will be able to continue to meet its
obligations and realize its assets in the normal course of business.
As shown in the accompanying financial statements, the Company has a
history of losses with an accumulated deficit of $10,049,419 and $9,499,308
at March 31, 2005 and December 31, 2004, respectively. The Company also has
a working capital deficiency of $5,412,325 and $4,915,762 at March 31, 2005
and December 31, 2004, respectively. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
ultimately attain profitable operations, generate sufficient cash flow to
meet its obligations, and obtain additional financing as may be required.
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The financial statements include the accounts
of the Company and Cap Com, its wholly-owned subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Inventories - Inventories of beer and other beverage products are stated at
the lower of cost, determined by the first-in, first-out method, or market.
F-4
Shipping and handling costs - The Company accounts for shipping and
handling costs as a component of "Cost of Sales".
Property and Equipment - Property and equipment are stated at cost and are
depreciated over the estimated useful lives of the related assets, ranging
from 5 to 39 years. Depreciation is computed on the straight-line and
accelerated methods for both financial reporting and income tax purposes.
Depreciation expense for the three months ended March 31, 2005 and 2004 was
$10,455 and $10,533, respectively.
Income Taxes - The Company follows Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes, which requires recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are
based on the differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
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 revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Fair Value of Financial Instruments - The Company considers its financial
instruments, which are carried at cost, to approximate fair value due to
their near-term maturities.
Distribution License - The Company's license to distribute certain beverage
products in New York City, is recorded at cost. The license has an
indefinite life and is tested annually for impairment under SFAS 142.
Pursuant to SFAS 142 the Company took an impairment of the distribution
license in the first quarter of 2002 in the amount of $860,000 which was
recorded as a cumulative effect of change in accounting principle. At
December 31, 2004, the Company impaired the Distribution License by
$3,336,744. (see Note 4)
Revenue Recognition - Wholesale sales are recognized at the time goods are
shipped.
Loss per Common Share - Loss per common share is based on the weighted
average number of shares outstanding. Potential common shares includable in
the computation of fully diluted per share results are not presented in the
financial statements as their effect would be anti-dilutive.
Stock based compensation - Financial Accounting Statement No. 123,
Accounting for Stock Based Compensation, encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly, compensation cost for
F-5
stock options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock. The Company has adopted the "disclosure
only" alternative described in SFAS 123 and SFAS 148, which require pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied.
New Accounting Pronouncements - In December 2004, the FASB issued Statement
123r (revised 2004) which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. This Statement supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance. This Statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This Statement focuses
primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. This Statement
requires a public entity to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award--the requisite service period (usually the vesting
period). FASB 123r will have a significant impact on the consolidated
financial statements of the Company through the expensing of stock option
grants. However the Company does not anticipate granting any stock options
in the foreseeable future.
4. DISTRIBUTION RIGHTS
The Company acquired these exclusive license rights to distribute within
the five boroughs of New York City valued at $5,218,462 as part of the
agreement with Prospect Beverages Inc. in May 2001. The rights consist of
the Pabst brands which make up approximately 73% of sales and include brand
names such as Colt 45, Champale and Old Milwaukee. The Pittsburgh brands
make up approximately 17% of sales and include brand names such as
Nighflight, Mustang Lager and Primetime. All other brands make up less than
10% of the product line. The Company determined that these rights have an
indefinite life because the terms of the agreements are indefinite.
Furthermore, the franchise law of New York State, states that any
terminated distributor is entitled to get "fair market value" for the brand
distribution rights.
Effective January 1, 2002, the Company adopted SFAS Nos. 141 and 142. SFAS
142 eliminates amortization of goodwill and certain other intangible
assets, but requires annual testing for impairment (comparison of fair
market value to carrying value). Fair value is estimated using the present
value of expected future cash flows and other measures. The Company used a
discount rate of 6%. The transitional impairment test for the distribution
rights resulted in a non-cash charge of $860,000 in the first quarter of
2002 which was recorded as a cumulative effect of change in accounting
principle.
F-6
On April 14, 2003, the Company purchased from Metropolitan Beer
Distributing Corp the exclusive right to purchase the brand rights of Pabst
Blue Ribbon Beer for the additional territory of the Bronx county for
$44,000. This permits the Company to promote, advertise, market, sell and
distribute at wholesale and retail this beverage in the five boroughs of
New York.
At December 31, 2004, the Company recorded an impairment of their
distribution license in the amount of $3,336,744. The decision to impair
the distribution license was based on the Company's net loss for the year
ended December 31, 2004. The Company had revised its cash flow
recoverability analysis to include the year ended December 31, 2004. The
cash flow analysis showed that the Company will recover approximately
$1,021,000 twenty years from the balance sheet date.
5. LOANS PAYABLE AND REVOLVING LOANS
The Company has a revolving loan with Entrepreneur Growth Capital, LLC
("EGC"). The loan limit is $2,500,000 and carries an interest rate of prime
plus 2%. The loan is collateralized by the Company's accounts receivable,
inventory, pledged property and distribution rights. The outstanding
balance was $1,612,928 and $2,007,356 at March 31, 2005 and December 31,
2004, respectively.
On December 11, 2003, the Park Slope Group, LLC ("LLC"), a single member
limited liability company whose sole member is Addie Realty Properties,
Inc. ("Addie"), which in turn is wholly owned by certain officers of the
Company loaned the Company $2,500,000 maturing on December 11, 2005 and
accruing interest at 12% per annum.
Addie and the officers of the Company have entered into this transaction in
order to permit the Company to pay off its term loan with EGC, to pay down
a portion of its revolving credit promissory note and agreement with EGC,
and to restructure and amend its revolving credit agreement with EGC upon
terms more favorable than those presently existing and available to the
Company from EGC. Addie has transferred certain real property to the LLC.
The LLC agreed to borrow $2,500,000, secured by a mortgage to Seaway
Capital Corp. ("Seaway") under credit terms more favorable than those which
could presently be obtained by Capital. The LLC is lending the net proceeds
of its loan from Seaway to Capital. Addie and the officers have also
entered into an agreement with EGC to pay the net proceeds of the Seaway
loan to EGC for the benefit of Capital to pay off its term loan with EGC,
to pay down a portion of Capital's revolving credit promissory note and
agreement with EGC, and to restructure and amend Capital's revolving credit
agreement with EGC upon terms more favorable than those presently existing
and available to Capital from EGC.
On March 17, 2005, the Company received a loan in the amount of $350,531.
This loan is due on demand and does not accrue any interest.
F-7
6. LONG-TERM DEBT
Long-term debt consists of the following:
March 31, December 31,
2005 2004
------------ -------------
Promissory note payable to
Consolidated paid to the
State of New York, due in
monthly installments of
$10,000 including interest
at 10% per annum $ 105,367 $ 123,643
Less current portion (105,367) (104,738)
------------ ------------
$ -0- $ 18,905
============ ============
7. CONTINGENCIES
On or about February 28, 2005, the Company was named as a defendant in an
action which commenced in the United States District Court for the Central
District of California. The complaint alleges federal trademark
infringement and dilution, unfair competition and false advertising, and
civil conspiracy. The plaintiffs are seeking a permanent injunction to
enjoin the defendants from using certain Blue Ox marks and related actions
as well as damages and reasonable attorneys' fees. The parties are
negotiating a settlement of this action and will set a date with the
District Court for the hearing on the settlement. The Company believes,
after consultation with counsel, that some of its defense costs and certain
attorneys fees in connection with this action will be subject to coverage
by the Company's insurance.
On or about April 12, 2005, the Company and an officer of the Company were
named as defendants in a breach of contract action. The plaintiffs allege,
that the Company defaulted on its payment under a promissory note. The
complaint seeks monetary damages of approximately $180,000 and reasonable
attorney fees. The parties have agreed to meet to discuss a possible
settlement of this action. The Company has been making payments on this
note and was late on several payments in the first quarter of 2004. This
note is recorded on the Company's balance sheet.
8. SUBSEQUENT EVENTS
On April 15, 2005, the Company entered into a letter of intent with Oak
Beverages Inc. ("Oak"), pursuant to which the Company agreed to sell to Oak
its exclusive distribution rights and saleable inventory. The proposed
purchase price for the exclusive distribution rights is $10,500,000 payable
as follows: (i) $7,500,000 to be paid at closing in immediately available
funds, and (ii) $3,000,000 to paid in 24 equal quarterly installments of
$125,000 commencing 90 days following the date of the closing, inclusive of
interest. In addition, Oak will pay to the Company for the saleable
inventory an amount equal to the price paid by the Company for the
inventory. According to the terms of the letter of intent, Oak will not
assume any liabilities or obligations of the Company. The proposed
transaction is subject to and conditioned upon the completion of Oak's due
diligence review of the Company, the negotiation and execution of a
definitive purchase agreement, and the satisfaction of certain conditions,
including the approval of the Company's stockholders and certain suppliers
of the Company's products. The Company believes that the definitive
agreement will be executed during the next few weeks and that the
transaction will close during the summer of 2005.
F-8
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose
any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. These statements involve
unknown risks, uncertainties and other factors, which may cause our actual
results to differ materially from those implied by the forward looking
statements. Among the important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements
include those risks identified in "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other risks identified in
our Form 10-K for the year ended December 31, 2004 and presented elsewhere by
management from time to time. Such forward-looking statements represent
management's current expectations and are inherently uncertain. Investors are
warned that actual results may differ from management's expectations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the three months ended March 31, 2005 were $5,084,278, reflecting
a decrease of $2,665,576 or 34.4% from the $7,749,854 of net sales for the three
months ended March 31, 2004. This decrease in the three months ended March 31,
2005 resulted primarily from the following events: poor weather conditions in
the first quarter as well as the effect of the price increase in last year's
second quarter which created a substantial buy in by our account base in the
month of March last year.
Cost of sales was $3,738,602 or 73.5% of net sales for the three months ended
March 31, 2005, as compared to $5,845,680 or 75.4% of net sales for the three
months ended March 31, 2004. The cost of sales as a percentage of net sales was
some what better than last year for the same period due to the discounting and
quantity purchases offered to drive sales prior to our price increase on April
1, 2004.
Selling, general and administrative expenses for the three months ended March
31, 2005 were $1,655,717 as compared to $1,731,769 for the respective 2004
period, reflecting a 4% decrease in overall expenses. The decrease in the three
months ended March 31, 2005 was due primarily to the substantial decrease in our
sales volume.
Non-cash compensation of $91,724 for the three months ended March 31, 2004 is
the amortization of deferred compensation for warrants issued in the fourth
quarter of 2003. This amount was fully amortized in 2004.
Interest expense for the three month period ended March 31, 2005 was $202,499
compared to $188,276 for the respective 2004 period. The increase in the three
month period ended March 31, 2005 was due primarily to the higher cost of
borrowing associated with Capital's exceeding their negotiated line of credit at
various times during the first quarter to meet its obligations.
Liquidity and Capital Resources
Cash provided by operations for the three months ended March 31, 2005 was
$33,302. This was primarily due to an increase in accounts payable in the first
quarter offset primarily by our net loss, increase in our inventories and
prepaid expenses.
- 10 -
Cash provided by financing activities resulted primarily from additional
borrowings in the amount of $350,531 and a cash overdraft of $106,847 offset
primarily by payments of our revolving loans of $394,428
Working capital deficiency increased from ($4,915,762) at December 31, 2004 to
($5,412,325) at March 31, 2005 due to the net loss incurred for the three
months.
At March 31, 2005 the Company's primary sources of liquidity were $170,380 in
cash, $614,760 in accounts receivable and $2,285,561 in inventories.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Not applicable.
Item 4. Controls and Procedures
As of March 31, 2005, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Treasurer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934. Based upon that evaluation, our Chief
Executive Officer and Treasurer concluded that our disclosure controls and
procedures were effective in enabling us to record, process, summarize and
report information required to be included in our periodic SEC filings within
the required time period.
There have been no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
- 11 -
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
On or about February 28, 2005, the Company was named as a defendant in an action
which commenced in the United States District Court for the Central District of
California, captioned Red Bull GmbH, and Red Bull North America, Inc. v. Vancol
Industries Inc., et al. (Case No. LACV 03-6731-DDP). The complaint alleges
federal trademark infringement and dilution, unfair competition and false
advertising, and civil conspiracy. The plaintiffs are seeking a permanent
injunction to enjoin the defendants from using certain Blue Ox marks and related
actions as well as damages and reasonable attorneys' fees. The parties are
negotiating a settlement of this action and will set a date with the District
Court for the hearing on the settlement. The Company believes, after
consultation with counsel, that some of its defense costs and certain attorneys
fees in connection with this action will be subject to coverage by the Company's
insurance.
On or about April 12, 2005, the Company and Carmine Stella were named as
defendants in a breach of contract action which commenced in the Supreme Court
of the State of New York, captioned Albert Thompson, et al. v. Carmine Stella,
et. al. (Index No. 11020/2005). The plaintiffs, Albert Thompson and Consolidated
Beverage Corporation allege that the Company defaulted on its payment under a
promissory note. The complaint seeks monetary damages of approximately $180,000
and reasonable attorney fees. The parties have agreed to meet to discuss a
possible settlement of this action. A Stipulation of Adjournment extending the
time for the Company to answer or otherwise move with regard to the complaint to
June 6, 2005 was filed with the District Court. The Company believes that this
action will not have a material effect on the Company's financial position.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes Oxley Act of 2002
31.2 Certification of Treasurer pursuant to Section 302 of the Sarbanes
Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Treasurer pursuant to
Section 906 of the Sarbanes Oxley Act of 2002
(b) Reports on Form 8-K
During the first quarter of 2005, we did not file any reports on Form 8-K
with the Securities and Exchange Commission.
- 12 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 23, 2005 CAPITAL BEVERAGE CORPORATION
----------------------------
(Registrant)
By: /s/ Carmine N. Stella
-----------------------------------------
Carmine N. Stella
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Carol Russell
-----------------------------------------
Carol Russell
Secretary and Treasurer (Principal
Financial Officer and Accounting Officer)
- 13 -