ITEM 1. BUSINESS
General
Capital Beverage Corporation (“Capital” and the “Company”) was incorporated under the laws of the State of Delaware on December 5, 1995. The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate. The Company is not currently engaged in any business activities that provide cash flow.
In January 1996, the Company acquired from Consolidated Beverage Corporation, the right to become the exclusive distributor (“Pabst Distribution Rights”) for certain beer and malt liquor products (“Pabst Products”) manufactured by Pabst Brewing Company (“Pabst”). The consideration paid by the Company for the Pabst Distribution Rights was One Million Six Hundred Thousand Dollars ($1,600,000), payable Eight Hundred Thousand Dollars ($800,000) in cash and the balance by delivery of a series of 120 promissory notes, each in the amount of Ten Thousand Dollars ($10,000) (collectively, the “Consolidated Notes”). The Consolidated Notes bear interest at 9% per annum, which interest was included in the monthly $10,000 payments.
On April 30, 1999 Miller Brewing Company acquired certain brands of alcoholic beverage from the Pabst Brewing Company resulting in a new distribution agreement for certain brands held by Capital Beverage. The brands of Olde English and Hamm’s are the two brands which Capital Beverage now contracts to purchase from the Miller Brewing Company on an exclusive basis.
On December 31, 2001 Capital sold its Miller products at the request of the Miller Brewing Company in compliance with their national consolidation plan. Phoenix Beverage paid Capital Beverage Two Million Six Hundred Fifty Thousand Dollars $2,650,000 for that acquisition.
On July 18, 1998 and July 30, 1998 Capital Beverage signed two distributor agreements with Pittsburgh Brewing Company (“Pittsburgh”) to distribute on an exclusive basis in the entire state of New York, the following brands:
Brigade, Brigade Light, Brigade Ice, Brigade N/A, Prime
Time Lager, Prime Time Malt Liquor, Iron City, Iron City
Light, Light Twist Acapulco Lime, Iron City Twist, Rio
Cherry, Old German, Augustiner, Evil Eye Ale, Evil Eye
Black Jack, Evil Eye Amber Lager, Evil Eye Honey Brown
On June 29, 2001, pursuant to the Purchase Agreement, the Company purchased all of the assets of Prospect’s business which related to Prospect’s business of distributing beverages, including among other things, beer distribution rights, properties, rights, leases, interests, goods and customer lists of Prospect. The purchase price of the assets consisted of the assumption by the Company of certain liabilities of Prospect and the issuance of an aggregate of five hundred thousand (500,000) shares of the common stock of the Company to the shareholders of Prospect. Inclusive with the acquisition came the following national brands: Colt 45, Old Milwaukee, Schaefer, Schlitz, Champale, Schmidts, Stroh, Piels, McSorleys and also an extensive list of various imports.
As of September 15, 2005, the Company, entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Oak Beverages, Inc., a New York corporation (“Oak”), pursuant to which the Company agreed to sell, and Oak agreed to purchase (the “Asset Sale”), the Company’s exclusive distribution rights for the Pabst brands, Pittsburgh brands and Ballantine brands (the “Assets”). The Asset Purchase Agreement contained customary representations and warranties, conditions to closing (including shareholder and brewer approval and the distribution by the Company of an Information Statement on Schedule 14C (the “Information Statement”) to its stockholders), and termination and indemnification provisions.
Immediately following the execution of the Agreement, certain stockholders (the “Approving Stockholders”) of the Company holding an aggregate of 1,900,000 shares of the Company’s common stock, representing 50.1% of the shares outstanding, signed a written consent of stockholders approving the Asset Purchase Agreement and the exhibits and schedules thereto as well as the transactions contemplated thereby. The Approving Stockholders were Carmine N. Stella, the Company’s President, Chief Executive Officer and Chairman of the Board, Anthony Stella, the Company’s then Vice President of Sales and Marketing (and the brother of Carmine Stella), Michael Matrisciani, a director of the Company, Daniel Matrisciani, the Company’s then Vice President of Operations and a director, Alex Matrisciani and Monty Matrisciani (each of whom are the brothers of Michael and Daniel Matrisciani).
The Company and Oak also entered into a Sub-Distribution Agreement dated as of September 15, 2005 (the “Sub-Distribution Agreement”), pursuant to which Oak became a Company sub-distributor of certain Pabst beers and malt beverages (the “Products”). The Sub-Distribution Agreement became effective when the Company filed an Information Statement on Schedule 14C with the Securities and Exchange Commission. Under the terms of the Sub-Distribution Agreement, Oak had the right to distribute the Products to customers located in Brooklyn, Queens, Staten Island, Manhattan and the Bronx (the “Territory”), and in exchange for such rights, Oak was required to pay Pabst directly for its Product purchases and, during the first 45 days following the effective date of the Agreement (the “45- Day Period”), Oak was required to pay to Capital the following amounts for Products received by Oak: (x) $.50 for each case of Products and (y) $2.00 for each barrel of Products. The purchase price paid by Oak to Capital in connection with the closing of the transactions contemplated by the Asset Purchase Agreement was reduced by an amount equal to the sum of: (i) $.25 for each case of Products purchased by Oak and sold by Oak to customers in the Territory, plus (ii) $.50 for each case of Products purchased by Oak but not sold to such customers, plus (iii) $1.00 for each barrel of Products purchased by Oak and sold by Oak to customers in the Territory, plus (iv) $2.00 for each barrel of Products purchased by Oak but not sold to such customers, all determined during the 45-Day Period.
Prior to the closing of the transaction, the Asset Purchase Agreement and sale of Assets to Oak were approved unanimously by the Company’s Board of Directors and the terms of the transaction were submitted for stockholder approval. As permitted by Delaware law and the Company’s Certificate of Incorporation, the Company received a written consent from the majority Approving Stockholders of the Company approving the Asset Purchase Agreement and the related Asset Sale. An Information Statement was furnished for the purposes of informing stockholders, in the manner required under the Securities Exchange Act of 1934, as amended, of the Asset Sale before it was consummated.
As of December 16, 2005, the Company closed the sale of the Assets to Oak, pursuant to the terms and conditions of the Asset Purchase Agreement. The purchase price paid by Oak for the Assets was Nine Million Three Hundred Thousand Dollars ($9,300,000.00), of which One Million Five Hundred Thousand Dollars ($1,500,000.00), was deposited with an escrow agent, pursuant to the terms of an escrow agreement, dated December 16, 2005 (the “Escrow Agreement”), for at least 18 months for post closing indemnification claims which may be asserted by Oak (the “Escrow”). A substantial amount of the proceeds from the transaction were used by the Company to repay outstanding indebtedness and for working capital purposes.
As of April 13, 2018, the Company does not have any ongoing operations and is not currently engaged in any business activities that provide cash flow. The Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations. The Company will continue to incur claims, liabilities and expenses.
Strategy
The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate. The Company is not currently engaged in any business activities that provide cash flow.
Structure of the Company
The Company does not have any ongoing operations for the payment of its liabilities. As of the date hereof, the Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations.
We will continue to incur claims, liabilities and expenses, which will reduce the realizable value of our remaining assets and the amount potentially available for distribution to stockholders. Claims, liabilities and expenses from operations (such as salaries, directors’ and officers’ insurance, payroll and taxes, legal, accounting and consulting fees and miscellaneous office expenses) will continue to be incurred subsequent to the Asset Sale. These expenses will have to be satisfied from our remaining assets and, therefore, will reduce the net realizable value of those assets.
The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements. We have an obligation to continue to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, even though compliance with such reporting requirements is economically burdensome.
Employees
As of December 31, 2010, the only remaining employee was Carmine Stella, the Company’s Chief Executive Officer.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide risk factors. However, the following important factors should be carefully considered in evaluating the Company and its business because such factors currently have a significant impact on the Company’s business, prospects, financial condition and results of operations.
RISKS RELATED TO OUR BUSINESS
Our Business Is Difficult To Evaluate Because We Have No Ongoing Operations and Minimal Assets. As the Company currently has no ongoing operations and only minimal assets, there is a risk that we will be unable to continue as a going concern and consummate a business combination. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
We Will Continue To Incur Claims, Liabilities And Expenses. We will continue to incur claims, liabilities and expenses, which will reduce the realizable value of our remaining assets and the amount potentially available for distribution to stockholders. Claims, liabilities and expenses from operations (such as salaries, directors’ and officers’ insurance, payroll and taxes, legal, accounting and consulting fees and miscellaneous office expenses) will continue to be incurred. These expenses will have to be satisfied from our remaining assets and, therefore, will reduce the net realizable value of those assets.
Our Business Will Have No Revenues Unless And Until We Merge With Or Acquire An Operating Business. As of the date hereof, the Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations. We currently have no revenues from operations. We may not realize any revenues unless and until we successfully merge with or acquire an operating business.
Future Success Is Highly Dependent On The Ability Of Management To Locate And Attract A Suitable Acquisition. The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm, and numerous other factors beyond our control.
The Company Has No Existing Agreement For A Business Combination Or Other Transaction. We have no agreement with respect to engaging in a merger or joint venture with, or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. We cannot guarantee we will be able to negotiate a business combination on favorable terms.
Our Financial Statements Include A Going Concern Opinion From Our Independent Auditors. The Company received a going concern opinion on its financial statements. Our auditors have stated that due to our lack of profitability and our negative working capital, there is “substantial doubt” about our ability to continue as a going concern. The going concern opinion from our auditors may limit our ability to access certain types of financing, or may prevent us from obtaining financing on acceptable terms.
Loss Of Key Personnel Could Adversely Affect Our Business. Our future success depends to a significant degree on the skills, experience and efforts of Carmine Stella, our President and Chief Executive Officer. The loss of the services of Mr. Stella could have a material adverse effect on our business, results of operations and financial condition.
We May Not Be Able To Comply In A Timely Manner With All Of The Recently Enacted Or Proposed Corporate Governance Provisions. Beginning with the enactment of the Sarbanes-Oxley Act of 2002 in July 2002, a significant number of new corporate governance requirements have been adopted or proposed. We believe that we currently comply with all of the requirements that have become effective thus far, and with many of the requirements that will become effective in the future. Although we currently expect to comply with all current and future requirements, we may not be successful in complying with these requirements at all times in the future. In addition, certain of these requirements will require us to make changes to our corporate governance practices. For example, one recent Nasdaq rule approved by the Commission requires that a majority of our Board of Directors be composed of independent directors by our 2006 Annual Meeting of Stockholders. Currently, two (2) of the members of our Board of Directors are considered to be independent. We may not be able to attract a sufficient number of directors in the future to satisfy this requirement. Additionally, the Commission recently passed a final rule that requires companies to disclose whether a member of their Audit Committee satisfies certain criteria as a “financial expert.” We currently do not have an Audit Committee member that satisfies this requirement and, we may not be able to satisfy this, or other, corporate governance requirements at all times in the future, and our failure to do so could cause the Commission or Nasdaq to take disciplinary actions against us, including an action to delist our stock from the OTC Bulletin Board or any other exchange or electronic trading system where our shares of common stock trade.
RISKS RELATED TO OUR COMMON STOCK
Future Sales By Existing Security Holders Could Depress The Market Price Of Our Common Stock. If our existing stockholders sell a large number of shares of our Common Stock, the market price of the Common Stock could decline significantly. Further, even the perception in the public market that our existing stockholders might sell shares of Common Stock could depress the market price of the Common Stock.
There Are Risks Associated With Our Stock Trading On www.OTCMarkets.com Rather Than A National Exchange. There are significant consequences associated with our stock trading on the NASD OTC Bulletin Board rather than a national exchange. The effects of not being able to list our securities on a national exchange include:
●Limited release of the market prices of our securities;
●Limited news coverage of us;
●Limited interest by investors in our securities;
●Volatility of our stock price due to low trading volume;
●Increased difficulty in selling our securities in certain states due to “blue sky” restrictions; and
●Limited ability to issue additional securities or to secure additional financing.
There is No Assurance That An Active Public Trading Market Will Develop. There has been an extremely limited public trading market for the Company’s Common Stock. There can be no assurances that a public trading market for the Common Stock will develop or that a public trading market, if developed, will be sustained. If for any reason a public trading market does not develop, purchasers of the shares of Common Stock may have difficulty in selling their securities should they desire to do so.
“Penny Stock” Regulations May Impose Certain Restrictions On The Marketability of Our Securities. The Securities and Exchange Commission (the “Commission”) has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share, subject to certain exceptions. Our Common Stock is presently subject to these regulations which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a “penny stock”, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the “penny stock” market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks”. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our securities and may negatively affect the ability of purchasers of our shares of Common Stock to sell such securities.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
Currently, the Company neither rents nor owns any properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In January 2009, the Company settled a claim made by the Pabst Brewing Company (Pabst Claim) for $27,869.50 which represents one half of the Pabst Claim. At January 30, 2009 the total amount held in escrow was $55,875.50 including accrued interest of $136.50. On January 30, 2009, the escrow agent issued the Company a check for $22,006 which represents the balance remaining in escrow after payment of the Pabst Claim settlement and $6,000 in fees owed to the escrow agent.
In March 2009, a plaintiff that originally commenced an action against the Company in September 2003 filed a Request for Judicial Intervention. Thereafter, a preliminary conference was held on May 4, 2009. During the conference, the Court heard argument regarding whether this case should be dismissed because of failure by the Plaintiff to prosecute the action. The Court denied that request and directed that discovery proceed. The plaintiff was deposed on October 22, 2009. On December 4, 2009, Plaintiff served a Note of Issue to place this action on the trial calendar. Thereafter, on February 2, 2010, the Company filed a motion for Summary Judgment. That Motion has now been fully briefed and argued before the Judge on Friday April 9, 2010. In July 2010, the judge granted the Company a summary judgment dismissing the plaintiff’s complaint.
In July 2010, the judge granted the Company a summary judgment dismissing the plaintiff’s complaint which was initially filed in September 2003.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s Common Stock commenced trading on The Nasdaq SmallCap Market on the effectiveness of the Company’s Initial Public Offering on July 17, 1997 under the symbol “CBEV”. The Common Stock is regularly quoted and traded on the OTC Bulletin Board. The Company’s securities were delisted by The NASDAQ Stock Market on June 19, 2001.
The following table indicates the high and low closing prices for the Company’s, Common Stock for the period from January 1 2009 to December 31, 2010 based upon information supplied by the OTC Bulletin Board. Prices represent quotations between dealers without adjustments for retail markups, markdowns or commissions, and may not represent actual transactions.
On April 13, 2018, the closing price of the Common Stock as reported on the OTC Bulletin Board was $0.03. As of April 13, 2018, there were 169 holders of record of Common Stock.
Recent Sales of Unregistered Securities
We did not sell any unregistered securities during the fourth quarter of the fiscal year covered in this report.
Dividends
We have not paid any cash dividends on our Common Stock to date and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, future-financing arrangements, if any, may preclude or otherwise restrict the payment of dividends.
Repurchases by the Company
During the fourth quarter of 2009, we did not repurchase any shares of our Common Stock on our behalf or for any affiliated purchase.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s results of operations and financial operations and financial conditions. This discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements. We have an obligation to continue to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, even though compliance with such reporting requirements is economically burdensome.
Results of Operations - Comparison of the Years Ended December 31, 2010 and 2009
The Company had no revenue from operations for the years ended December 31, 2010 and 2009.
General and administrative expenses for the years ended December 31, 2010 and 2009 was $248,376 and $333,172 respectively, which consisted mostly of legal fees, accounting and auditing fees and the salary and expenses to our only remaining employee. The decrease was primarily due to limited operations in 2010.
Other income for the years ended December 31, 2010 and 2009 was $73,353 and $0, respectively. Other income in 2010 consisted of forgiveness of aged payables.
Liquidity and Capital Resources
The following table summarizes our cash flows for each of the periods presented:
During the year ended December 31, 2017, operating activities used $4,295 of cash, primarily resulting from our net loss of $175,023 as well as non-cash gains of $73,353, partially offset by an increase in accounts payable and accrued expenses of $244,081.
During the year ended December 31, 2016, operating activities used $75,633 of cash, primarily resulting from our net loss of $333,172, partially offset by an increase in accounts payable and accrued expenses of $255,220.
Financing activities provided cash of $4,155 and $11,700 during the years ended December 31, 2017 and 2016, respectively, due to proceeds from officer loans.
Critical Accounting Policies and Estimates
Our significant accounting policies are fully described in Note 2 to our financial statements for the fiscal year ended December 31, 2010 contained herein.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
Index to the Financial Statements
CAPITAL BEVERAGE CORPORATION
UNAUDITED BALANCE SHEETS
See notes to the financial statements.
CAPITAL BEVERAGE CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS
See notes to the financial statements.
CAPITAL BEVERAGE CORPORATION
UNAUDITED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
See notes to the financial statements.
CAPITAL BEVERAGE CORPORATION
UNAUDITED STATEMENTS OF CASH FLOWS
CAPITAL BEVERAGE CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Capital Beverage Corporation was incorporated under the laws of the State of Delaware on December 5, 1995.
The Company does not have any ongoing operations and is not currently engaged in any business activities that provide cash flow. As of the date hereof, the Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations. The Company will continue to incur claims, liabilities and expenses.
The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate. The Company is not currently engaged in any business activities that provide cash flow.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from the Company’s estimates.
Fair Value Measurements
Certain assets of the Company are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
●Level 1-Quoted prices in active markets for identical assets or liabilities.
●Level 2-Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
●Level 3-Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company does not have any assets or liabilities that are measured at fair value determined according to the fair value hierarchy described above. The carrying values of the Company’s accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities held as available for sale. For years ended December 31, 2010 and 2009, there was no difference between net loss and comprehensive loss.
CAPITAL BEVERAGE CORPORATION
NOTES TO NOTES TO UNAUDITED FINANCIAL STATEMENTS
Income Taxes
The Company follows the liability method of accounting for income taxes, as set forth in ASC 740, Accounting for Income Taxes (“ASC 740”). ASC 740 provides for the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company follows the provisions of the accounting guidance on 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 determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized.
ASC 740-10, Accounting for Uncertainty in Income Taxes (“ASC 740-10”), provides detailed guidance for financial statement recognition, measurement, and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. In accordance with ASC 740-10, income tax positions must meet a more likely than not recognition threshold at the effective date to be recognized upon the adoption of the standard and in subsequent periods. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense over the next twelve months. The Company has no liabilities recorded as of September 30, 2017 under ASC 740-10.
Net Income (Loss) per Share
The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.
Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. During the nine months ended September 30, 2017, the Company did not have any securities that are considered potential dilutive common shares.
Recently Issued Accounting Pronouncements
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendments of ASU 2016-15 were issued to address eight specific cash flow issues for which stakeholders have indicated to the FASB that a diversity in practice existed in how entities were presenting and classifying these items in the statement of cash flows. The issues addressed by ASU 2016-15 include but are not limited to the classification of debt prepayment and debt extinguishment costs, payments made for contingent consideration for a business combination, proceeds from the settlement of insurance proceeds, distributions received from equity method investees and separately identifiable cash flows and the application of the predominance principle. The amendments of ASU 2016-15 are effective for public entities for fiscal years beginning after December 15, 2017 and interim periods in those fiscal years. Early adoption is permitted. The adoption of ASU 2016-15 is required to be applied retrospectively. The Company is currently evaluating the impact that the adoption of ASU 2016-15 will have on its financial statements.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 requires deferred tax liabilities and assets to be classified as non-current in the balance sheet. ASU 2015-17 is required to be adopted for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. The amendment may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently evaluating the impact that the adoption of ASU 2015-17 will have on its financial statements.
CAPITAL BEVERAGE CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following is a summary of accounts payable and accrued expenses:
NOTE 4 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 2010 and 2009, an officer of the Company advanced monies to the Company in order to cover various operating expenses. The amount due to the officer at December 31, 2010 and 2009 is $15,855 and $11,700, respectively. This loan is non-interest bearing and is payable on demand.
NOTE 5 - LITIGATION
In January 2009, the Company settled a claim made by the Pabst Brewing Company (Pabst Claim) for $27,869.50 which represents one half of the Pabst Claim. At January 30, 2009 the total amount held in escrow was $55,875.50 including accrued interest of $136.50. On January 30, 2009, the escrow agent issued the Company a check for $22,006 which represents the balance remaining in escrow after payment of the Pabst Claim settlement and $6,000 in fees owed to the escrow agent.
In March 2009, a plaintiff that originally commenced an action against the Company in September 2003 filed a Request for Judicial Intervention. Thereafter, a preliminary conference was held on May 4, 2009. During the conference, the Court heard argument regarding whether this case should be dismissed because of failure by the Plaintiff to prosecute the action. The Court denied that request and directed that discovery proceed. The plaintiff was deposed on October 22, 2009. On December 4, 2009, Plaintiff served a Note of Issue to place this action on the trial calendar. Thereafter, on February 2, 2010, the Company filed a motion for Summary Judgment. That Motion has now been fully briefed and argued before the Judge on Friday April 9, 2010. In July 2010, the judge granted the Company a summary judgment dismissing the plaintiff’s complaint.
In July 2010, the judge granted the Company a summary judgment dismissing the plaintiff’s complaint which was initially filed in September 2003.
CAPITAL BEVERAGE CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
At December 31, 2010 the Company had a net operating loss carryover of $2,253,000 available as offsets against future taxable income, if any, which expire at various dates through 2030. The Company has a deferred tax asset of $901,200 arising from net operating loss deductions and an alternative minimum tax credit and has recorded a valuation allowance for the full amount of such deferred tax asset.
The following is a reconciliation between the expected income tax expense (benefit), assuming a statutory Federal tax rate of 35%, and the actual income tax expense (benefit):
The following is a schedule of the Company’s net deferred tax assets as of:
NOTE 7 - SUBSEQUENT EVENTS
On December 13, 2011, the Board approved a 20-to-1 reverse stock split of the Company’s issued and outstanding common shares. The reverse split has Board and stockholder approval, however as not been filed with the state as of April 13, 2018.
During December 2011, the Company converted outstanding accounts payable and accrued expense balances into common shares at a conversion price of $0.20 per share. The Company issued 7,042,635 common shares in exchange for $1,410,531. An additional $74,090 of amounts due to the CEO were contributed to additional paid-in-capital as forgiveness of officer debt.
In December 2011, the Company entered into a share exchange agreement with Paramount Consulting (“Paramount”) whereby the Company agreed to issue 100 preferred shares and 9,000,000 common shares to the majority shareholder of Paramount. The preferred shares were converted into 201,000,000 shares of common stock and a total of 210,000,000 common shares were issued in June 2014 to Benjamin Cohen.
In April 2012, the Board changed its name to Clean & Green Holdings, Inc. and in April 2018, the name was changed to Capital Beverage Corporation.
As of April 13, 2018, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 1,000,000 shares of preferred stock and 250,000,000 shares of common stock.
As of April 13, 2018, there were no preferred shares issued and outstanding and 220,834,680 common shares issued and outstanding.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our senior management, including our chief executive and financial officer, Carmine N. Stella, we conducted an evaluation 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, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”). The disclosure controls and procedures are intended to insure that the information relating to us are required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework.
Based upon our assessment and the COSO criteria, management concluded that our internal control over financial reporting was not effective as of December 31, 2010 due to a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
More specifically, the material weakness relates to a lack of sufficient personnel with appropriate knowledge, experience and training in U.S. GAAP resulting in a lack of sufficient analysis and documentation of the application of U.S. GAAP to transactions, including but not limited to accounting by producers and distributors of films.
Due to our small size and limited financial resources, our part-time outside accountant has been the only individual involved in our accounting and financial reporting. As a result, there has been no segregation of duties within the accounting function. This lack of segregation of duties represents a material weakness.
In efforts to address this material weakness, we are planning to add additional personnel to the internal accounting operation.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Officer Certifications
Appearing as exhibits to this Annual Report are “Certifications” of our President and Chief Executive Officer and Chief Accounting Officer. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2010 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The names and ages of the directors, executive officers and significant employees, and promoters of the Company are set forth below.
The following sets forth biographical information regarding our executive officers and directors.
Benjamin Cohen - Since 2010, Mr. Cohen has brought strategic consulting services to emerging growth companies with expertise of providing financial, operational and organizational management and advisory services to private and public companies. He has unique skills in financial reporting and operating management of early stage companies, and has proven knowledge of SEC, FINRA, strategic business planning, Sarbanes Oxley internal controls, financial reporting requirements and financial systems. In December 2011, Mr. Cohen became President and a member of the Board of Directors of Capital Beverage Corporation. Mr. Cohen holds a Bachelor’s Degree in Business Administration from the University of Massachusetts.
As of December 31, 2010, the only remaining executive was Carmine Stella, the Company’s Chief Executive Officer. Mr. Stella served as President, Chief Executive Officer and Chairman of the Board of Directors of the Company since its inception in December 1995. From 1991 to the present, Mr. Stella has been the sole officer, director and shareholder of VSI, a wholesale and retail seller of alcoholic and nonalcoholic beverages with $12,000,000 of sales during fiscal 1994 and $7,000,000 of sales during fiscal 1995. From 1986 to 1990, Mr. Stella served as President and a director of Gotham Wholesale Beer Distributors, a beer and non-alcoholic beverage wholesaler with annual sales in excess of $20,000,000. Mr. Stella served as a President and Director of the Empire State Beer Distributors Association from 1984 to 1988. Mr. Stella received a B.B.A. in Accounting from Bernard M. Baruch College, New York, New York in 1973.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our employees, officers (including our principal executive officer, principal financial officer and controller) and directors. The Code of Business Conduct and Ethics is not currently posted on our website but can be obtained free of charge by sending a request to our Corporate Secretary at our address. Any changes to or waivers under the Code of Business Conduct and Ethics as it relates to our principal executive officer, principal financial officer, controller or persons performing similar functions will be disclosed on our website.
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.
To the Company’s knowledge, based solely on its review of the copies of such reports furnished to the Company during the year ended December 31, 2010, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were satisfied, except as provided below:
None
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
As of April 13, 2018, there was no compensation paid to Benjamin Cohen, the Chief Executive Officer. There were no options granted or exercised during the last fiscal year.
During the years ended December 31, 2010 and 2009, the Company accrued $215,756 to the Company’s former Chief Executive Officer, Carmine Stella.
Employment Agreements
There are no employment agreements in effect as of December 31, 2010 and 2009.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth as of April 13, 2018, certain information with respect to the beneficial ownership of Common 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:
(1)The address of Benjamin Cohen is 8 The Green, STE 7734, Dover, DE 19901. Benjamin Cohen is the beneficial owner of Paramount Consulting.
(2)As of April 13, 2018, there were 220,834,680 shares of our common stock outstanding.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
During the years ended December 31, 2010 and 2009, an officer of the Company advanced monies to the Company in order to cover various operating expenses. The amount due to officer at December 31, 2010 and 2009 is $15,855 and $11,700, respectively. This loan is non-interest bearing and is payable on demand.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed to the Company by Sherb & Co., LLP for the review of our quarterly reports for the year ended December 31, 2010 totaled $28,545.
The aggregate fees billed to the Company by Sherb & Co., LLP for the audit of our annual financial statements for the year ended December 31, 2009 and for the review of our quarterly reports on Form 10-Q for the same year totaled $37,000.
Audit Related Fees
There were no fees paid to Sherb & Co., LLP for services rendered in connection with employee benefit plan audits, SEC registration statements, due diligence, assistance and consultation on financial accounting and reporting standards during the years ended December 31, 2010 and 2009.
Financial Information Systems Design and Implementation Fees
There were no fees paid to Sherb & Co., LLP for financial information systems design or implementation during the years ended December 31, 2010 and 2009.
Tax Fees
There were no fees paid to Sherb & Co., LLP for services rendered in connection with tax audits and appeals, advise on mergers and acquisition and technical assistance during the years ended December 31, 2010 and 2009.
All Other Fees
There were no additional fees paid to Sherb & Co., LLP for professional fees related to all other services during fiscal years ended December 31, 2010 and 2009.
Exhibit Index
* Incorporated by reference to Registrant's Registration Statement on Form SB-2, and amendments thereto, Registration No. 333-9995 declared effective on July 17, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.