UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the quarter ended     September 30, 1997Commission File Number  
 33-53748C

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

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

            800 Sheffield Avenue
            Brooklyn, New York                                 11207
            (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:         (718) 485-9222
                                                        ----------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the  Securities  and  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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of November 18, 1997 was 4,202,125


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


Part I: Financial Information

Item 1: Financial Statements

  Consolidated Balance Sheet as of September 30, 1997 [Unaudited]     1......  2

  Consolidated Statements of Operations for the three and nine months
  ended September 30, 1997 and 1996 [Unaudited].................      3......

  Consolidated Statement of Stockholders' Equity for the nine months
  ended September 30, 1997 [Unaudited]..........................      4......

  Consolidated Statements of Cash Flows for the nine months ended
  September 30, 1997 and 1996 [Unaudited].......................      5......  7

  Notes to Consolidated Financial Statements [Unaudited]........      8...... 21

Item 2: Management's Discussion and Analysis of Financial
        Condition And Results of Operations.....................     22...... 27

Signature.......................................................     28......



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



<PAGE>



Part I:Financial Information

Item 1:Financial Statements

BEV-TYME, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------




Assets:
Current Assets:
  Cash                                                              $       981
  Accounts Receivable - Net                                             499,810
  Inventory                                                             360,105
  Prepaid Expenses                                                       64,185
  Other Current Assets                                                   13,000
                                                                    -----------

  Total Current Assets                                                  938,081

Property and Equipment - Net                                            737,916

Other Assets:
  Security Deposits                                                       6,498
                                                                    -----------
  Total Assets                                                      $ 1,682,495
                                                                    ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.

                                         1

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------





Liabilities and Stockholders' [Deficit]:
Current Liabilities:
  Accounts Payable                                                  $ 2,320,817
  Accrued Expenses                                                      517,251
  Notes Payable [Net of Discount of $12,132]                             45,060
                                                                    -----------

  Total Current Liabilities                                           2,883,128
                                                                    -----------
Long-Term Liabilities:
  Notes Payable                                                         142,959
  Accrued Legal Settlement [14]                                         390,000
                                                                    -----------
  Total Long-Term Liabilities                                           532,959

Commitments and Contingencies                                                --
                                                                    -----------
Stockholders' [Deficit]:
  Series C Convertible Preferred Stock - Authorized 5,800,000
   Shares, Par Value of $.0001, 2,682,225 Shares Issued and
   Outstanding                                                              268

  Common Stock - Authorized 75,000,000 Shares, Par Value of
   $.0001, 4,202,125 Shares, Issued and Outstanding                         420

  Additional Paid-in Capital                                         22,471,663

  Accumulated [Deficit]                                             (23,471,443)
                                                                    -----------
  Total                                                                (999,092)
  Less:Deferred Compensation                                           (734,500)
                                                                    -----------
  Total Stockholders' [Deficit]                                      (1,733,592)
                                                                    -----------
  Total Liabilities and Stockholders' [Deficit]                     $ 1,682,495
                                                                    ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.

                                         2

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                   Three months ended         Nine months ended
                                      September 30,              September 30,
                                      -------------              -------------
                                   1 9 9 7      1 9 9 6     1 9 9 7        1 9 9 6
                                   -------      -------     -------        -------

<S>                                        <C>          <C>           <C>          <C>        
Sales - Net                                $ 2,126,661  $ 5,774,192   $7,508,153   $13,195,897

Cost of Goods Sold                           1,705,045    5,012,435    6,089,480    10,877,481
                                           -----------  -----------   ----------   -----------

  Gross Profit                                 421,616      761,757    1,418,673     2,318,416
                                           -----------  -----------   ----------   -----------

Selling, General and Administrative
  Expenses:
  Selling, Advertising and Promotiona1         167,732      432,133      590,396     1,000,435
  General and Administrative Expenses          485,520    1,014,814    1,808,393     2,271,220
  Amortization of Deferred
   Compensation                                666,000      590,000    2,249,250     1,287,187
  Amortization of Financing Costs               36,395           --      109,185            --
  Amortization of Goodwill and
   Intangibles                                      --      112,659       99,007       321,577
  Compensation Settlement [14]                 565,000           --      565,000            --
                                           -----------  -----------   ----------   -----------

  Total Selling, General and
   Administrative Expenses                   1,920,647    2,149,606    5,421,231     4,880,419
                                           -----------  -----------   ----------   -----------

  [Loss] from Operations                    (1,499,031)  (1,387,849)  (4,002,558)   (2,562,003)
                                           -----------  -----------   ----------   -----------

Minority Interest in Net Loss of
  Subsidiary                                        --           --      325,232            --
                                           -----------  -----------   ----------   -----------

Other [Income] Expense:
  Interest Expense                              27,500        8,119       76,454        36,227
  Interest Income                                   --           --      (19,802)         (125)
                                           -----------  -----------   ----------   -----------

  Other Expense - Net                           27,500        8,119       56,652        36,102
                                           -----------  -----------   ----------   -----------

  [Loss] Before Provision for
   Income Taxes                             (1,526,531)  (1,395,968)  (3,733,978)   (2,598,105)

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

  Net [Loss]                               $(1,526,531) $ (1395,968)  $(3,733,978) $(2,598,105)
                                           ===========  ===========   ===========  ===========

  Net [Loss] Per Share                     $     (0.36) $     (1.51)  $    (0.89)  $     (3.22)
                                           ===========  ===========   ==========   ===========

  Weighted Average Number
   of Shares                                 4,202,125      924,221    4,202,125       807,823
                                           ===========  ===========   ==========   ===========
</TABLE>



The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.


                                         3

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
[UNAUDITED]
------------------------------------------------------------------------------

<TABLE>




                                                                                            Preferred                   Total
                                                    Series C Conv Additional              Stock of Parent           Stockholders'
                                      Common Stock Preferred Stock Paid-in    Accumulated    Held by      Deferred     Equity
                                     Shares  Amount Shares Amount  Capital     [Deficit]    Subsidiary  Compensation  [Deficit]

<S>                                <C>       <C>  <C>       <C>  <C>         <C>           <C>          <C>         <C>     
  Balance - January 1, 1997          924,221 $ 92 2,502,225 $250 $22,652,924 $(17,591,726) $(2,000,000) $(2,645,000)   $416,540

Common Stock Dividend to Holders
  of Series C Preferred Stock -
  January 1997 [9L]                3,277,904  328        --   --   1,433,757   (1,434,085)          --           --          --

Exercise of Series C Preferred 
  Stock Options                           --   --   180,000   18     179,982           --           --           --     180,000

Divestment of Perry's [2F]                --   --        --   --  (2,000,000)    (711,654)   2,000,000           --    (711,654)

Issuance of 400,000 Series C 
 Preferred Stock Options - 
 Consulting Costs - September 1997        --   --        --   --      55,000           --           --      (55,000)        --

Issuance of  650,000 Series C 
 Preferred Stock Options - 
 September 1997                           --   --        --   --     150,000           --           --           --     150,000

Amortization of Deferred 
 Compensation Costs - Nine Months 
 Ended September 30, 1997                 --   --        --   --          --           --           --    1,965,500   1,965,500

Net [Loss] for the nine months 
 ended September 30, 1997                 --   --        --   --          --   (3,733,978)          --           --  (3,733,978)
                                     ------- ----  -------- ----    --------   ----------       ------    ---------  -----------

  Balance - September 30, 1997     4,202,125 $420 2,682,225 $268 $22,471,663 $(23,471,443)          --    $(734,500)$(1,733,592)
                                   ========= ==== ========= ==== =========== =============      ======    ========= =============



The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
</TABLE>



                                           4

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                                               Nine months ended
                                                                 September 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------

<S>                                                        <C>          <C>         
  Net Cash - Operating Activities                          $ (532,830)  $(1,952,103)
                                                           ----------   -----------

Investing Activities:
  Disposal of Equipment                                        19,977            --
  Equipment Acquisitions                                     (139,547)     (143,681)
  Purchase of Subsidiaries - Net of Assets Acquired           (93,082)     (250,000)
  Old Marlborough Acquisition                                              (160,513)
  Development of Label Design                                 (65,000)           --
  Restricted Cash                                               9,700            --
  Divestment of Perry's                                    (1,011,748)           --
                                                           ----------   -----------

  Net Cash - Investing Activities                          (1,279,700)     (554,194)
                                                           ----------   -----------

Financing Activities:
  Proceeds from Bridge Loan                                        --       150,000
  Proceeds from Loan Payable                                       --       138,750
  Payments of Note and Loan Obligations                      (269,715)     (323,613)
  Payment of Bridge Loan Obligation                                        (150,000)
  Proceeds from Sale of Common Stock                                         50,000
  Exercise of Options and Proceeds from Stock Subscription    180,000     2,350,000
  Repayment of Shareholder - Loan Payable                          --      (259,000)
  Proceeds of Public Offering - Net of Offering Costs              --     2,475,086
                                                           ----------   -----------

  Net Cash - Financing Activities                             (89,715)    4,431,223
                                                           ----------   -----------

  Net [Decrease] Increase in Cash                          (1,902,245)    1,924,926

Cash - Beginning of Periods                                 1,903,226       153,714
                                                           ----------   -----------

  Cash - End of Periods                                    $      981   $ 2,078,640
                                                           ==========   ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for the periods for:
   Interest                                                $    7,749   $    36,227
   Income Taxes                                            $       --   $    12,104
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:
  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.

  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 shares of the
Company's common stock.



                                         5

<PAGE>



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



Supplemental Schedule of Non-Cash Investing and Financing Activities 
[Continued]:
  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  to  assist  the  Company  in  connection  with  acquisitions,
divestitures,  joint ventures,  and other strategic  business  initiatives.  The
Company  recorded a deferred  consulting  cost of $765,000.  These  options were
exercised for $600,000 in 1996.

  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.  ["Perry's"]  [valued at $2,000,000] in exchange
for  400,000  shares of the  Company's  Series C Preferred  Stock and  $150,000.
However,  in October of 1996,  the Company  sold the  500,000  shares of Perry's
convertible  Class A Preferred  Stock for  $250,000  and reduced its  investment
accordingly.  Each share of Class B Preferred Stock has attached to it the right
to vote on all matters  submitted to the Company.  Perry's filed a  registration
statement  for 583,335  shares of common stock at $6.00 per share.  The proceeds
from this offering were approximately $2,500,000.

  Also on March 29,  1996,  Perry's  entered into an agreement to acquire all of
the stock of Riverosa  Company,  Inc. for $250,000 of which $150,000 in cash was
put into escrow as of March 31, 1996 and a note payable was issued for $100,000.
The  note was  payable  with  interest  of 8% was paid in  August  of 1996  with
proceeds from the Company's initial public offering.

  On March 29, 1996, in conjunction with the acquisition agreement with Perry's,
the  Company  entered  into a two year  consulting  agreement  with  the  former
principal of Perry's to assist in developing and enhancing the  distribution  of
other beers and ales. As a part of the consulting agreement he was issued 35,000
shares of the Company's common stock on April 11, 1996. A deferred  compensation
cost of $33,000 was  recorded in April of 1996 for the  estimated  fair value of
these shares.

  On April 5,  1996,  the  Company  entered  into a two  year  agreement  with a
consultant  to assist the  expansion  of the  distribution  of its  products  to
restaurants and the food service  industry by issuing 40,000 shares of Company's
common stock. A deferred  compensation  cost of $25,000 was recorded in April of
1996 for the estimated fair value of these shares.

  On April 23, 1996,  the Company  received a $150,000  loan from an  individual
whereby the Company issued 40,000 shares of the Company's common stock. The loan
was repaid in May of 1996. A deferred financing cost of $25,000 was recorded and
expensed for the estimated fair value of these shares in 1996.

  In August 1996, the Company issued to certain  officers and directors  options
to purchase an  aggregate  of 630,000  shares of Series C Preferred  Stock at an
exercise  price of $1.00  per  share and  700,000  shares of common  stock at an
exercise  price of $.25 per share  for  services  to be  rendered  in 1997.  The
Company recorded deferred  compensation cost of $2,187,500 in August of 1996 for
the excess of the estimated  fair value of these options over the exercise price
and will  record  the  expense  over one year.  During  the three  months  ended
September 30, 1997,  options to purchase 90,000 shares of Series C Preferred and
100,000 shares of common stock were surrendered.

   In January of 1997, the Board of Directors declared a dividend of 1.31 common
shares of stock for each share of Series C  Preferred  Stock  outstanding  as of
December 27, 1996.





The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.

                                         6

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------



Supplemental Schedule of Non-Cash Investing and Financing Activities 
[Continued]:
  During the first quarter of 1997,  Perry's issued a total of 400,000 shares of
Perry's  common  stock to two  officers as  consideration  for  extending  their
employment  agreements for five years.  Deferred  compensation of $2,000,000 was
recorded  and will be  amortized  over five years as  compensation  expense.  In
addition, an additional 200,000 shares of Perry's common stock were issued for a
three year  consulting  agreement for services  valued at $450,000.  The Company
recorded $37,500 for the amortization of the deferred  consulting services under
this agreement.

  During the first quarter of 1997,  Perry's also issued 25,000 shares of common
stock  valued at  approximately  $214,000 as  additional  consideration  for the
purchase of Old Marlborough Brewing Co., Inc.'s Post Road brand.

  On June 13, 1997, the Company  exchanged a promissory  note payable to Perry's
for $100,000,  in consideration  for Bev-Tyme  returning the 7,000,000 shares of
Perry's  Series B  Preferred  Stock  held by the  Company.  As a result  of this
transaction,  Perry's is no longer a subsidiary of Bev-Tyme. This transaction is
effective July 1, 1997 for purposes of the statement of operations.  See Note 2F
for information on divestment in Perry's.

  In September 1997, the Company issued to certain officers, consultants, former
employees and employees  options to purchase an aggregate of 2,050,000 shares of
convertible Series C Preferred stock at an exercise price of $.25 per share. The
Company recorded compensation expense of $150,000 for past services performed by
former  employees in connection  with options for 650,000  shares of Convertible
Series  C  Preferred   Stock.   The  $150,000  is   classified  as  general  and
administrative  expenses.  In  addition,  additional  deferred  compensation  of
$38,750 was  recorded  to reflect  the fair market  value of options for 400,000
shares  of  Convertible   Series  C  Preferred  Stock  issued  under  consulting
agreements.  As of September 30, 1997, the Company amortized $16,250 of deferred
compensation  relating to these  agreements.  There were  options for  1,000,000
shares of  Convertible  Series C Preferred  Stock  issued to  employees  at fair
value, therefore, no compensation expense was recorded.




The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

                                         7

<PAGE>



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



[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  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.

Basis of Reporting - The accompanying  unaudited financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  such statements include all
adjustments  which  are  considered  necessary  in  order  to make  the  interim
financial statements not misleading.

Principles of Consolidation - The consolidated  financial statements include the
accounts  of  Bev-Tyme  and  each  of  its   wholly-owned   and   majority-owned
subsidiaries [the "Company"].  Material  intercompany  transactions and balances
have been eliminated in consolidation.  See Note 2 entitled  "Acquisitions"  for
further  information.  The minority  interest  represents  the  separate  public
ownership of Perry's Majestic Beer, Inc.

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 September 30, 1997, there were no cash equivalents.

Inventories - Inventories are stated at the lower of cost or market. Cost, which
includes purchases,  freight, raw materials,  direct labor and factory overhead,
is determined on the first-in, first-out 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.

Financing  Costs - For the nine months ended  September  30, 1997 and 1996,  the
Company  charged to operations  $109,185 and $-0- for  amortization of financing
costs.  The financing  costs are being  amortized over the life of the loans, or
twelve months under the straight-line method [See Note 5].

Advertising and Promotion Expense - Advertising and promotion costs are expensed
as incurred.  For the nine months ended September 30, 1997 and 1996, advertising
and promotion costs were approximately $53,363 and $22,774, respectively.



                                        8

<PAGE>



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



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

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.  The Company  amortizes  its goodwill over a period of up to five
years under the straight-line method.

During the last  quarter of 1996,  the Company  recorded an  impairment  loss of
$2,578,485 from writing down goodwill.  Facts and  circumstances  leading to the
impairment loss in 1996 were operating and cash flow losses that did not justify
the carrying value of the goodwill. The impairment loss recorded is the goodwill
allocated to the Mooch & Muck, Inc. and Sclafani Beer & Soda Distributors,  Inc.
purchase.  Fair value of goodwill  was based on the present  value of  estimated
expected future cash flows from the related assets.

Risk Concentrations - Financial instruments that potentially subject the Company
to  concentrations of credit risk include cash and 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 September 30, 1997, the Company's uninsured cash
balance totaled $-0-.

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 September 30, 1997 of
$109,473.  The Company  believes  any credit  risk  beyond this amount  would be
negligible.

With  respect  to  purchases  of  inventory  for each of the nine  months  ended
September 30, 1997,  the Company  purchased  inventory  from three  suppliers in
1997,  which  comprised  approximately  26%, 19% and 15%,  respectively,  of the
Company's  total cost of sales.  The Company  believes there are other suppliers
available to meet the Company's needs.

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.

Stock Options Issued to Employees - The Company  adopted  Statement of Financial
Accounting Standards ["SFAS"] No. 123, "Accounting for Stock-Based Compensation"
on January 1, 1996 for financial note  disclosure  purposes and will continue to
apply the intrinsic value method of Accounting  Principles Board ["APB"] Opinion
No. 25,  "Accounting  for Stock Issued to  Employees"  for  financial  reporting
purposes.

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



                                        9

<PAGE>



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



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

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.  All share data have been
adjusted to reflect the one-for-ten-reverse stock split in July 1996.

Stock  Transaction  of  Subsidiary  -  Changes  in the  proportionate  share  of
subsidiary  equity are accounted for as equity  transactions and either increase
or decrease the Company's investment in the subsidiary.

Impairment  - Certain  long-term  assets of the  Company  are  reviewed at least
annually as to whether their  carrying  value has become  impaired,  pursuant to
guidance  established  in  Statement of  Financial  Standards  ["SFAS"] No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  Of."  Management  considers  assets to be impaired if the  carrying
value  exceeds  the  future   projected  cash  flows  from  related   operations
[undiscounted and without interest  charges].  If impairment is deemed to exist,
the assets will be written down to fair value or projected discounted cash flows
from  related   operations.   Management  also   re-evaluates   the  periods  of
amortization to determine whether  subsequent  events and circumstances  warrant
revised  estimates of useful  lives.  During  1996,  the Company  determined  an
impairment of goodwill existed [See Notes 2A and 2B].

[2] Acquisitions and Dispositions

[A] Mootch & Muck,  Inc.  ["Mootch"] - In March 1994,  the Company  acquired the
remaining  49% interest in Mootch & Muck,  Inc.,  subject to  obtaining  certain
governmental  approvals,  in exchange for 60,000  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  20,000 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  20,000 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 5,068 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 released the Company from all
of its  obligations to make payments in the future.  Further,  in the event that
the seller received within two years following the effective date aggregate, net
proceeds in excess of $250,000,  the seller would  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 goodwill recorded as a result
of this  transaction.  As of  December  31,  1996,  the  unamortized  balance of
goodwill was written-off [See Note 1].



                                       10

<PAGE>



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



[2] Acquisitions [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,  20,000  shares of the
Company's  common  stock  valued at market  value or  $31,250,  and  options  to
purchase 7,500 shares of the Company's common stock valued at $11,720.  Goodwill
of approximately  $450,000 was recognized for this  acquisition.  As of December
31, 1996, the unamortized balance of goodwill was written-off [See Note 1].

[C] Perry's  Majestic  Beer,  Inc. - 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.
["Perry's"]  [valued  at  $2,000,000]  in  exchange  for  400,000  shares of the
Company's  Series C Preferred Stock and $150,000.  However,  in October of 1996,
the Company sold the 500,000 shares of convertible  Class A Preferred  Stock for
$250,000 and reduced its investment accordingly. Each share of Class A Preferred
Stock was  convertible  by the Company into one [1] share of Common Stock.  Each
share of Class B  Preferred  Stock has  attached  to it the right to vote on all
matters  submitted to the Company.  Perry's filed a  registration  statement for
583,335  shares  of common  stock at $6.00 per  share.  The  proceeds  from this
offering were approximately  $2,500,000.  The bridge lenders waived their rights
to warrants for 3,000,000  shares of common stock as recorded in their  original
agreement with Perry's.

Also on March 29, 1996,  Perry's entered into an agreement to acquire all of the
stock of Riverosa  Company,  Inc. for $250,000 of which $150,000 in cash was put
into escrow as of March 31, 1996 and a note payable was issued for $100,000. The
note was payable  with  interest of 8% was paid in August of 1996 with  proceeds
from the Company's initial public offering. The combination was accounted for by
the purchase  method.  Goodwill of $246,000 was recorded and amortized over five
years under the  straight-line  method.  Amortization of goodwill of $12,300 was
recorded for the six months ended June 30, 1997. As of June 30, 1997, Perry's is
no longer a subsidiary of Bev-Tyme, Inc. and, therefore, no amortization expense
was recorded by Bev-Tyme, Inc. for the three months ended September 30, 1997.

On March 31, 1996,  Perry's  borrowed an  aggregate  of $150,000  from seven [7]
unaffiliated lenders [the "Bridge Lenders"]. In exchange for making loans to the
Company, 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 were paid at the closing of the initial public  offering of the
Company's  securities  in August  of 1996.  As of March 31,  1996,  $90,000  was
received in cash from the bridge loan and  $60,000 was  received  April 4, 1996.
The  principal  balance of $150,000  and  interest for $4,208 was paid August 5,
1996.

In September of 1996, Perry's acquired Old Marlborough  Brewing Co., Inc.'s Post
Road microbeer brand and other assets.  Perry's paid $172,213,  of which $35,513
was for  inventory  and  equipment  and $86,700 was to  repurchase  distribution
rights. In February 1997, Perry's issued 25,000 shares of common stock valued at
approximately  $214,000 as additional  consideration  for the acquisition of Old
Marlborough.  Goodwill of $264,062 was recorded  and  amortized  over five years
under the straight-line method. Amortization of goodwill of $13,203 was recorded
for the six  months  ended June 30,  1997.  As of June 30,  1997,  Perry's is no
longer a subsidiary of Bev-Tyme,  Inc. and, therefore,  no amortization  expense
was recorded by Bev-Tyme, Inc. for the three months ended September 30, 1997.

In April of 1997,  the Company  received  $100,000 from Perry's in the form of a
convertible note. The note was due in one year with 8% annual interest. The loan
could be repaid at the option of Perry's by either the payment of principal  and
accrued   interest  or  by  the  Company   returning  the  7,000,000  shares  of
non-convertible  Class B Preferred Stock of Perry's that were issued in March of
1996. On June 13, 1997,  the option to return the stock was exercised  [See Note
2F].


                                       11

<PAGE>



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



[2] Acquisitions [Continued]

[D] Asset Acquisition - On April 29, 1996, the Company entered into an agreement
to acquire certain assets,  including twenty-two trucks, and assume five related
truck leases.  Simultaneously with this transaction, the Company entered into an
agreement  with a company to be an exclusive  distributor  of Citiclub soda. The
Company issued 30,000 shares of the Company's  common stock at an estimated fair
value of $18,300 and paid cash of $200,000 for this agreement.  The Company also
entered into two employment  agreements and one consulting agreement whereby the
three  individuals  were issued a total of 50,000 shares of the Company's common
stock and options for 300,000 Series C Preferred Stock, subject to an increasing
number of shares under certain circumstances,  exercisable at $1.50 per share. A
total of $850,000 was recorded as a deferred  compensation cost in April of 1996
for the fair value of the 80,000 shares of common stock and the 300,000 Series C
Preferred  Stock  Options.  In October,  the Company  discontinued  distributing
CitiClub sodas due to a dispute regarding a breach of the distribution agreement
and sold the  acquired  trucks.  As a result,  the Company has  written-off  the
entire  balance of  distribution  rights of $180,000 and the related  balance of
deferred compensation of $566,667 for the year ended December 31, 1996 [See Note
14].

[E] 1997  Acquisition  - In March 1997,  Perry's  entered  into an  agreement to
acquire all of the stock of Orchard  Annie,  Inc.,  an all  natural  apple sauce
company  from an  officer  of the  Company  for  approximately  $67,000 in cash.
Additionally,  Perry's agreed to issue 50,000 shares of common stock to the same
officer in connection  with the sale.  These shares will be issued in the second
quarter  of 1997  and the  fair  value  of these  shares  will be  allocated  to
intangible  assets.  The combination is accounted for by the purchase method. In
addition,  the Company agreed to pay an officer of the Company, who was also the
sole shareholder of Orchard Annie, Inc., a royalty payment of $0.50 per case for
each of the first 500,000 cases sold and $0.25 per case  thereafter for a period
of fifteen years. For the three months ended June 30, 1997,  royalty expense was
$1,097. No royalty expense was recorded for the three months ended September 30,
1997 since Perry's was no longer a subsidiary of Bev-Tyme at September 30, 1997.

[F]  Disposition  of Perry's  Majestic Beer,  Inc. - On June 13, 1997,  Bev-Tyme
disposed  of the net assets of Perry's  Majestic  Beer,  Inc. as a result of the
conversion,  at the option of Perry's,  of the Note Payable for $100,000 for the
7,000,000 shares of non-convertible Class B Preferred Stock of Perry's that were
issued  to  Bev-Tyme  in March  of 1996  [See  Note  2C].  As a  result  of this
transaction  Perry's is no longer a subsidiary  of Bev-Tyme as of June 30, 1997.
For the statement of operations, the transaction is considered effective July 1,
1997 and the  operations  of Perry's are  included in the  historical  financial
statements of Bev-Tyme through the six month period ending June 30, 1997.

The following unaudited pro forma combined results of operations account for the
disposition  of Perry's as if it had  occurred  at the  beginning  of the period
presented.

                                                       Nine months ended
                                                         September 30,
                                                       1 9 9 7     1 9 9 6
                                                       -------     -------

Total Revenues                                      $ 6,883,193  $12,786,479
                                                    ===========  ===========

Net Loss                                            $(3,225,709) $(2,550,392)
                                                    ===========  ===========

Net Loss Per Common Share                           $     (0.77) $    (3.16)
                                                    ===========  ==========

Weighted Average Number of Common Shares Outstanding  4,202,125     807,823

These pro forma amounts may not be  indicative  of results that  actually  would
have  occurred if the  disposition  had been in effect on the date  indicated or
which may be obtained in the future.

                                       12

<PAGE>



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




[3] Inventories

The Company's inventory consists primarily of finished goods of $360,105.

[4] Plant and Equipment and Depreciation and Amortization

Plant  and  equipment  and  accumulated  depreciation  and  amortization  are as
follows:

                                             September 30,
                                                1 9 9 7

Warehouse Equipment                            $  237,341
Office Equipment                                  279,593
Leasehold Improvements                             40,642
Transportation Equipment                          633,281
                                               ----------

Total - At Cost                                 1,190,857
Less:  Accumulated Depreciation                   452,941

  Net                                          $  737,916
  ---                                          ==========

Depreciation  expense for the nine months ended  September 30, 1997 and 1996 was
$91,152 and $94,500, respectively.

[5] Debt

On April 23,  1996,  the  Company  received a $150,000  loan from an  individual
whereby the Company issued 40,000 shares of the Company's common stock. The loan
was repaid in May of 1996. A deferred financing cost of $25,000 was recorded and
expensed  in the second  quarter of 1996 for the  estimated  fair value of these
shares.

Debt as of September 30, 1997 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 August 1998 through  September
  2000 and are
  collateralized by transportation equipment.                        $ 188,019
Less:  Current Portion                                                  45,060
                                                                     ---------

  Non-Current Portion                                                $ 142,959
  -------------------                                                =========

In October of 1996, the Company  received a $250,000 loan with 10% interest from
an  unaffiliated  party.  This loan was due in one  year.  The  lender  received
warrants  for 100,000  shares of the  Company's  common  stock and  warrants for
100,000  shares  of Series C  Preferred  stock.  A  deferred  financing  cost of
$145,580 was  recorded for the  estimated  fair value of these  warrants.  As of
December 31, 1996 the outstanding balance was $98,000. The assets of the Company
were pledged as collateral. This loan was repaid in April 1997.



                                       13

<PAGE>



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



[5] Debt [Continued]

Maturities of the notes payable as of September 30 1997 are as follows:

September 30,
  1998                                      $  45,060
  1999                                         59,511
  2000                                         76,599
  2001                                          6,849
                                            ---------

  Total                                     $ 188,019
  -----                                     =========

[6] Income Taxes

Income taxes are provided based on the asset and liability  method of accounting
pursuant to  Statement  of  Financial  Accounting  Standards  ["SFAS"]  No. 109,
"Accounting  for  Income  Taxes."  Since  its  inception,  the  Company  has net
operating loss  carryforwards of approximately  $12,350,000 which expire in 2007
through 2011.  SFAS No. 109 requires the  establishment  of a deferred tax asset
for all deductible temporary  differences and operating loss carryforwards.  The
deferred tax asset  attributable  to operating  loss  carryforwards  amounted to
approximately  $4,322,000  at  December  31,  1996.  Because  of  the  Company's
cumulative losses since inception,  however,  any deferred tax asset established
for utilization of the Company's tax loss  carryforwards  world  correspondingly
require a  valuation  allowance  of the same  amount  pursuant  to SFAS No. 109.
Accordingly, no deferred tax asset is reflected in these financial statements.

[7] Stock Option Plans, Stock Options and Warrants

[A] In September  1997,  the Company  issued to certain  officers,  consultants,
former  employees  and  employees  options to purchase an aggregate of 2,050,000
shares of convertible  Series C Preferred stock at an exercise price of $.25 per
share. The Company recorded  compensation  expense of $150,000 for past services
performed by former  employees in connection  with options for 650,000 shares of
Convertible  Series C Preferred Stock. The $150,000 is classified as general and
administrative  expenses.  In  addition,  additional  deferred  compensation  of
$38,750 was  recorded  to reflect  the fair market  value of options for 400,000
shares  of  Convertible   Series  C  Preferred  Stock  issued  under  consulting
agreements.  As of September 30, 1997, the Company amortized $16,250 of deferred
compensation  relating to these  agreements.  There were  options for  1,000,000
shares of  Convertible  Series C Preferred  Stock  issued to  employees  at fair
value, therefore, no compensation expense was recorded.

[B] In August 1996, the Company issued to certain officers and directors options
to purchase an  aggregate  of 630,000  shares of Series C Preferred  Stock at an
exercise  price of $1.00  per  share and  700,000  shares of common  stock at an
exercise  price of $.25 per share  for  services  to be  rendered  in 1997.  The
Company recorded deferred  compensation cost of $2,187,500 in August of 1996 for
the excess of the estimated  fair value of these options over the exercise price
pursuant to APB Opinion No. 25 and recorded  $1,640,625 of compensation  expense
for the nine months ended September 30, 1997. During the three months ended June
30, 1997,  options to purchase  180,000 shares of Series C Preferred  Stock were
exercised. During the three months ended September 30, 1997, options to purchase
90,000  shares of Series C  Preferred  and 100,000  shares of common  stock were
surrendered.

[C] As of September  30, 1997,  52,500  common stock options that were issued in
1994 were  outstanding  and have vested to directors,  officers and employees of
the Company at an exercise price of $0.07 per share.  The Company also issued in
1995,  3,000  common stock  options that vested in May of 1996 to directors  and
officers of the Company at an exercise price of $0.20 per share.



                                       14

<PAGE>



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


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

[D] As of September 30, 1997, 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 and 100,000
Series C Warrants were outstanding at a price of $6.00 per share for a period of
five years.

[E] In November 1995, the Company issued an additional  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  represented  the fair  market  value of the  options  and
amortized  the full balance in 1996 as  compensation  expense.  450,000 of these
options were exercised in 1996 for $900,000 and 75,000 options were  surrendered
in September of 1997.

[F] Options to  Underwriter - In June 1993,  for a purchase  price of $500,  the
underwriters  of the public  offering  acquired  an option to  purchase up to an
aggregate  of 5,000 units for a five-year  period  which will expire 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.

[G] 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 7,500  shares.  The  Company  issued  incentive  options to  purchase an
aggregate of 6,000 shares of common stock  exercisable  at $1.00 per share for a
period  of  four  years  commencing  in  August  1994.  The  options  are  fully
exercisable when granted.

Also 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 12,500
shares.   In  August  of  1994,   the  Company  issued  an  aggregate  of  2,500
non-qualified  options that are  exercisable  at $1.00 per share for a period of
four years commencing in August 1994. No additional  non-qualified  options were
issued  through  December  31,  1996.  The  options are fully  exercisable  when
granted.

The Plan is  administered by the Board of Directors or a committee which has the
power to determine  eligibility to receive  options and the terms of any options
granted,  including the exercise or purchase price, the number of shares subject
to the options, the vesting schedule, and the exercise period.

The Plan will  terminate in August 1998,  four years after the date it was first
approved  though  awards made prior to  termination  may expire after that date,
depending on when granted.

[H] A summary of stock option activity under all plans is as follows:
<TABLE>

                            1 9 9 7                             1 9 9 6
                 --------------------------------- --------------------
                                   Weighted Average                Weighted Average
                        Shares      Exercise Price     Shares       Exercise Price
                 Preferred   Common PreferredCommonPreferred Common Preferred
Common
                   Stock      Stock   Stock  Stock  Stock     Stock   Stock  Stock

Outstanding on
<S>                  <C>         <C>     <C>    <C>    <C>       <C>     <C>    <C>  
  January 1,         1,005,000   755,500 $ 1.22 $0.24   525,000   55,500  $2.00  $0.07

Granted              2,050,000        --   0.25    --  1,230,000 700,000   1.36   0.25
Exercised             (180,000)       --   1.00    --   (750,000)     --   2.00     --
Forfeited/Expired      (75,000)       --   2.00    --         --      --     --     --
Forfeited/Expired      (90,000) (100,000)  1.00  0.24         --      --     --     --
                       -------  --------                 ------- -------

  Outstanding and
   Exercisable on
   September 30,
   1997              2,710,000   655,500 $ 0.48 $0.24  1,005,000 755,500  $1.22  $0.24
   ----              =========  ========               ========= =======
</TABLE>

                                       15

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[UNAUDITED]
------------------------------------------------------------------------------



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

[H] [Continued] The following table summarizes  information  about stock options
outstanding  and  exercisable at September 30, 1997. The preferred stock options
with an exercise  price of $0.25 expire in 2002 and may be exercised at anytime.
Other common stock options and preferred  stock options do not expire and may be
exercised at anytime.

                    Common Stock             Preferred Stock
            Exercise Prices     Shares  Exercise Prices  Shares

               $  0.25          600,000   $   1.50      300,000
               $  0.07           52,500   $   1.00      360,000
               $  0.20            3,000   $   0.25    2,050,000
                              ---------               ---------

               Totals           655,500               2,710,000
               ------         =========               =========

[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 bore
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 were 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 100,000 warrants  exercisable for 100,000 shares of common stock. In
February 1995, the bridge lenders converted the convertible bridge notes into an
aggregate of 250,000  preferred  bridge  units.  Each unit was  identical to the
units being offered in the public offering. One bridge lender who loaned $65,000
to the  Company  rescinded  100,000  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 in 1995 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.

                                       16

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
[UNAUDITED]
------------------------------------------------------------------------------



[9] Stockholders' Equity [Continued]

[B] Debt to Equity  Conversions - 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.

[C] 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.

[D]  Consulting  Agreements  - In March  1995,  the Company  entered  into three
one-year consulting agreements with three unaffiliated  individuals and issued a
total of 70,000  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.

[E] 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.

In November  1995,  the Company  issued an  additional  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
amortized  the full  balance as of  December  31,  1996 as  compensation  to the
directors.  450,000 of these  options  were  exercised  in 1996 for  proceeds of
$900,000.

[F]  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  to assist the  Company in  connection
with acquisitions,  divestitures,  joint ventures,  and other strategic business
initiatives.  The Company recorded a deferred consulting cost of $765,000, which
represents the estimated fair value of the preferred  stock at the time of grant
to account for these future services. As of December 31 1996, these options were
exercised with the Company receiving proceeds of $600,000.  The Company recorded
compensation  expense of  $293,000  for the year  ended  December  31,  1996 and
$286,875 for the nine months ended September 30, 1997.

[G] Stock  Dividend - 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
shares of the Company's common stock.

[H] Consulting  Fees - Stock  Issuance - On March 29, 1996, in conjunction  with
the  acquisition  agreement  with Perry's,  the Company  entered into a two year
consulting  agreement  with  the  former  principal  of  Perry's  to  assist  in
developing and enhancing the  distribution of other beers and ales. As a part of
the  consulting  agreement he was issued 35,000  shares of the Company's  common
stock on April 11, 1996. A deferred compensation cost of $33,000 was recorded in
April of 1996 for the estimated fair value of these shares. Compensation expense
of $12,375 was recorded for the year ended December 31, 1996 and $12,375 for the
nine months ended September 30, 1997.

                                       17

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
[UNAUDITED]
------------------------------------------------------------------------------



[9] Stockholders' Equity [Continued]

[I] Consulting Agreement - On April 5, 1996, the Company entered into a two year
agreement with a consultant to assist the expansion of the  distribution  of its
products to restaurants  and the food service  industry by issuing 40,000 shares
of Company's common stock. A deferred  compensation cost of $25,000 was recorded
in April of 1996 for the estimated  fair value of these shares and  compensation
expense of $9,375 was recorded  for the year ended  December 31, 1996 and $9,375
for the nine months ended September 30, 1997.

[J] Reverse Stock Split - On July 16, 1996,  the Company's  common  stockholders
approved a one-for-ten  reverse stock split. The financial  statements have been
adjusted retroactively for the reverse stock split.

[K] Loan - On April 23,  1996,  the  Company  received a  $150,000  loan from an
individual  whereby the Company  issued 40,000  shares of the  Company's  common
stock. The loan was repaid in May of 1996. A deferred  financing cost of $25,000
was recorded and expensed for the estimated fair value of these shares.

[L] Stock  Dividends  - In January of 1997,  the Board of  Directors  declared a
dividend  of 1.31  common  shares of stock for each share of Series C  Preferred
Stock outstanding as of December 27, 1996.

[M] Stock for Consulting  Services - In February of 1997, Perry's entered into a
consulting  agreement for future services valued at $450,000 for three years and
issued 200,000 shares of Perry's common stock in payment on this  agreement.  On
June 4, 1997,  this  agreement  was amended  extending the period of service one
additional  year.  Amortization  of $65,000 was  recorded by Perry's for the six
months ended  September  30, 1997.  As of June 30, 1997,  Perry's is no longer a
subsidiary of Bev-Tyme and, therefore,  no amortization  expense was recorded by
Bev-Tyme, Inc. for the three months ended September 30, 1997.

[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, 1996, the Company has four employment  agreements with senior
executives of the Company that expire  between the years 1999 through 2009.  The
annual  commitments  for  compensation  aggregate  between  $200,000 to $400,000
annually  for these years and are subject to certain  adjustments.  In addition,
bonuses of qualified  options for Series C Preferred  Stock and common stock may
be granted.  During the three months ended March 31, 1997, the Company  extended
two of these  agreements  and issued a total of 400,000 shares of Perry's common
stock to two officers.  Deferred compensation expense of $2,000,000 was recorded
for this  transaction  and  $218,750  was  recorded as  compensation  expense by
Perry's through the six months ended June 30, 1997. As of June 30, 1997, Perry's
is no longer a subsidiary of Bev-Tyme and,  therefore,  no compensation  expense
was recorded for the three months ended September 30, 1997.

On July 7, 1997, Robert J. Sipper resigned as President and Chief Financial 
Officer of Bev-Tyme, Inc. as well as resigning as Vice President and Chief 
Operating Officer of Mootch and Muck, Inc.  Subsequently, Mr. Sipper resigned 
from the Bev-Tyme Board of Directors.  On August 1, 1997, William Swedelson was 
elected to the Board of Directors.

                                       18

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
[UNAUDITED]
------------------------------------------------------------------------------




[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 up to five years.
The warehouse lease expired in February of 1996.  Commencing  March of 1996, the
Company revised the nature of this agreement to a month-to-month arrangement for
$20,500 a month. In addition, the Company forfeited its security deposit and has
included this cost as additional  rent expense.  In June 1997, the Company moved
to a warehouse  more  suitable  to its needs.  The lease  agreement  calls for a
minimal rent to be paid while the landlord provides all warehousing services for
the Company.  The Company also leases on a month-to-month  basis office space in
Manhattan for $600 per month.  Rent expense for the office and  warehouse  space
for the nine months ended September 30, 1997 and 1996 was $105,931 and $235,193,
respectively.

In  addition,  the Company has  non-cancelable  operating  leases for office and
warehouse equipment. Obligations under these leases for the periods through 2001
are as follows:

1998                                     $   44,982
1999                                         24,053
2000                                         16,545
2001                                          5,630
                                         ----------

  Total                                  $   91,210
  -----                                  ==========

[B] Brewing Agreement - In November 1996, Perry's  stockholders  entered into an
agreement,  on behalf of  Perry's,  with a brewery to brew and bottle beer under
the  private  label of "Perry's  Majestic."  As part of the  agreement,  Perry's
agrees to  provide  the  brewery,  at Perry's  own  expense,  all the  necessary
packaging materials to allow the brewer to manufacture the product in accordance
with federal and state regulations.

The  agreement  automatically  renews  annually.  Either party may terminate the
agreement by giving four month prior written notice to the other party.

[13] Going Concern

The  accompany  financial  statements  have been  prepared  in  conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company  as a  going  concern  and  realization  of  assets  and  settlement  of
liabilities and commitments in the normal course of business.

As shown in the  accompanying  financial  statements,  the Company  incurred net
losses and utilized cash for  operations  for the years ended  December 31, 1996
and 1995.  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.  In  addition at the end of 1996,  the Company
implemented a cost cutting  program to help improve  operations.  As part of the
cost cutting program,  the Company moved to a smaller warehouse facility in June
1997 and entered into an agreement where all warehousing functions are performed
by an  outside  party  for a per case  charge.  As a  result,  the  Company  cut
warehouse  management and staff to zero. Payroll has been cut from 153 people in
June 1996 to 39 people in September 1997. The Company continues to evaluate it's
manpower needs and will make further cuts as deemed necessary.  The continuation
of the Company as a going concern is dependent upon the success of these plans.


                                       19

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
[UNAUDITED]
------------------------------------------------------------------------------



[13] Going Concern [Continued]

There can be no assurances that  management's  plans to reduce  operating losses
and to obtain  additional  financing to fund operations will be successful.  The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in existence.

[14] Litigation

The Company is a defendant in a lawsuit filed by Premium Beverage Packers,  Inc.
for alleged  breach of a  distribution  agreement  and a default on a promissory
note.  The suit asks for damages in the amount of  approximately  $403,000  plus
costs and expenses.  The Company filed an Answer  denying all these claims and a
Counterclaim in December 1996. The Counterclaim  alleges the plaintiff  breached
both the  distribution  agreement  and the  promissory  note.  The Company  also
alleges damages in the amount of $86,665, plus costs and expenses.

The  Company  believes  that there are  substantial  defenses  to this claim and
intends to  vigorously  defend its  position.  No  settlement  discussions  have
occurred.  The  Company's  counsel  is not able to render an  opinion  as to the
resolution  of this matter.  A material  adverse  decision on this lawsuit could
have a material adverse effect on the Company.

In October 1996, a former  employee  brought a suit against Mootch & Muck,  Inc.
The Complaint  alleged that the Company  breached the employment  agreement with
the plaintiff.  Plaintiff also alleged damages in the amount of $1,500,000, plus
costs and  expenses.  The Company  filed an answer  denying all these  claims in
November 1996. This suit was settled in September 1997 in favor of the plaintiff
and two other former  employees in the amount of $700,000.  $100,000 was paid in
the form of an initial  payment in October of 1997,  and  quarterly  payments of
$25,000 will commence in March 1998 and continue  each June 1,  September 1, and
December  1, until the entire  $600,000  is paid.  The  current  portion of this
liability of $175,000 is included in accrued expenses and the long-term  present
value liability is $390,000 assuming a discount rate of 8-1/2%.

[15] New Authoritative Pronouncement

The Financial Accounting Standards Board ["FASB"] has issued Statement of 
Financial Accounting Standards ["SFAS"] No. 125, "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishment of Liabilities."  SFAS No. 125 
is effective for transfers and servicing of financial assets and extinguishment 
of liabilities occurring after December 31, 1996.  Earlier application is not 
allowed. The provisions of SFAS No. 125 must be applied prospectively; 
retroactive application is prohibited.  Adoption on January 1, 1997 is not 
expected to have a material impact on the Company.  The FASB deferred some 
provisions of SFAS No. 125, which are not expected to be relevant to the 
Company.

The  FASB  issued  SFAS No.  128,  "Earnings  Per  Share,"  and  SFAS  No.  129,
"Disclosure of Information  about Capital  Structure" in February 1997. SFAS No.
128  simplifies  the  earnings  per  share  ["EPS"]  calculations   required  by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

                                       20

<PAGE>




BEV-TYME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14
[UNAUDITED]
------------------------------------------------------------------------------



[15] New Authoritative Pronouncement [Continued]

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income."  SFAS No. 
130 is effective for fiscal years beginning after December 15, 1997.  Earlier 
application is permitted.  Reclassification of financial statements for earlier 
periods provided for comparative purposes is required.  SFAS No. 130 is not 
expected to have a material impact on the Company.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise 
and Related Information."  SFAS No. 131 changes how operating segments are 
reported in annual financial statements and requires the reporting of selected 
information about operating segments in interim financial reports issued to 
shareholders.  SFAS No. 131 is effective for periods beginning after 
December 15, 1997, and comparative information for earlier years is to be 
restated.  SFAS No. 131 need not be applied to interim financial statements in 
the initial year of its application.  SFAS No. 131 is not expected to have a 
material impact on the Company.

[16] Fair Value of Financial Instruments

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 rates at which the Company  could borrow
funds with similar  remaining  maturities.  The fair value of the Company's debt
approximates its carrying value.

[17] Subsequent Events

In October 1997,  options to purchase  1,650,000 shares of Convertible  Series C
Preferred Stock were exercised with proceeds to the Company of $412,500.




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

                                       21

<PAGE>



Item 2:

BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------


For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

The following  discussion of the Company's  financial  condition as of September
30, 1997 and results of operations for the nine months ended  September 30, 1997
and 1996,  includes  Bev-Tyme,  Inc.  and its  subsidiaries  [collectively,  the
"Company"] and should be read in  conjunction  with the  Consolidated  Financial
Statements  and Notes  appearing  elsewhere  in this  10-QSB.  On June 13, 1997,
Bev-Tyme  disposed of the net assets of Perry's  Majestic Beer, Inc. as a result
of the  conversion,  at the option of Perry's,  of the note payable for $100,000
for the 7,000,000 shares of  non-convertible  Class B Preferred Stock of Perry's
that were issued to Bev-Tyme in March of 1996.  As a result of this  transaction
Perry's is no longer a  subsidiary  of  Bev-Tyme  as of June 30,  1997.  For the
statement of operations,  the  transaction is considered  effective July 1, 1997
and  the  operations  of  Perry's  are  included  in  the  historical  financial
statements of Bev-Tyme through the six month period ending June 30, 1997.

Business Structure

Bev-Tyme,  Inc.  ["Bev-Tyme"],  is 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.  Because of increased competition in
the "New Age" beverage  market and  continuing  operating  losses related to the
sale of its SunSprings(TM) beverage products, the Company increased its focus on
its beverage and snack food distribution.

In June 1995,  the Company  purchased the net assets of SB&S,  another  beverage
distributor  to  commence  distribution  of beer and other malt  beverages.  The
Company  acquired the net assets of SB&S for $500,000 in cash,  20,000 shares of
the  Company's  common  stock  valued at $31,250 and  options to purchase  7,500
shares of the Company's common stock.

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.  ["Perry's"]  [valued at $2,000,000] in exchange
for  400,000  shares of the  Company's  Series C Preferred  Stock and  $150,000.
However,  in October of 1996,  the Company sold the Class A Preferred  Stock for
$250,000.  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.
Perry's filed a  registration  statement  for 583,335  shares of common stock at
$6.00 per share. The proceeds from this offering were approximately $2,500,000.

Also on March 29, 1996,  Perry's entered into an agreement to acquire all of the
stock of Riverosa  Company,  Inc. for $250,000 of which $150,000 in cash was put
into escrow as of March 31, 1996 and a note payable was issued for $100,000. The
note was payable  with  interest of 8% was paid in August of 1996 with  proceeds
from Perry's initial public offering.

In August of 1996,  Perry's  entered  into a letter of intent to acquire a Micro
Beer.  In September  1996,  the Company  finalized  its  acquisition  of the Old
Marlborough  Brewing Co.,  Inc. The total  purchase  price was $160,513 of which
$35,513  was  for   inventory  and  equipment  and  $75,000  was  to  repurchase
distribution rights to Post Road Beer in Massachusetts. During the first quarter
of  1997,   Perry's  also  issued  25,000  shares  of  common  stock  valued  at
approximately  $214,000  as  additional  consideration  for the  purchase of Old
Marlborough Brewing Co., Inc.'s Post Road brand.

In March 1997,  Perry's entered into an agreement to acquire all of the stock of
Orchard  Annie,  Inc.,  an all  natural  apple sauce  company for  approximately
$66,000  cash.  Additionally,  Perry's  agreed to issue 50,000 shares of Perry's
common stock in the second  quarter of 1997 and to pay an officer of the Company
who is also the sole  shareholder  of Orchard Annie,  Inc. a royalty  payment of
$0.50  per case for each of the  first  500,000  cases  sold and  $0.25 per case
thereafter.

                                       22

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------



For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

Business Structure [Continued]

In April of 1997,  the Company  received  $100,000 from Perry's in the form of a
convertible note. The note is due in one year with 8% annual interest.  The loan
can be repaid at the option of Perry's by either the  payment of  principal  and
accrued   interest  or  by  the  Company   returning  the  7,000,000  shares  of
non-convertible  Class B Preferred Stock of Perry's that were issued in March of
1996. On June 13, 1997, the option to return the stock was exercised.

In June 1997, the Company moved to a smaller warehouse facility and entered into
an agreement where all  warehousing  functions are performed by an outside party
for a per case charge.  As a result,  the Company cut warehouse  management  and
staff to zero. Payroll has been cut from 153 people in June 1996 to 39 people in
September  1997. The Company  continues to evaluate it's manpower needs and will
make further cuts as deemed necessary.

The Company is a defendant in a lawsuit filed by Premium Beverage Packers,  Inc.
for alleged  breach of a  distribution  agreement  and a default on a promissory
note.  The suit asks for damages in the amount of  approximately  $403,000  plus
costs and expenses.  The Company filed an Answer  denying all these claims and a
Counterclaim in December 1996. The Counterclaim  alleges the plaintiff  breached
both the  distribution  agreement  and the  promissory  note.  The Company  also
alleges damages in the amount of $86,665, plus cost and expenses.

The  Company  believes  that there are  substantial  defenses  to this claim and
intends to  vigorously  defend its  position.  No  settlement  discussions  have
occurred.  The  Company's  counsel  is not able to render an  opinion  as to the
resolution  of this matter.  A material  adverse  decision on this lawsuit could
have a material adverse effect on the Company.

In October 1996, a former  employee  brought a suit against Mootch & Muck,  Inc.
The Complaint  alleged that the Company  breached the employment  agreement with
the plaintiff.  Plaintiff also alleged damages in the amount of $1,500,000, plus
costs and  expenses.  The Company  filed an answer  denying all these  claims in
November 1996. This suit was settled in September 1997 in favor of the plaintiff
and two other former  employees in the amount of $700,000.  $100,000 was paid in
the form of an initial  payment in October of 1997,  and  quarterly  payments of
$25,000 will commence in March 1998 and continue  each June 1,  September 1, and
December  1, until the entire  $600,000  is paid.  The  current  portion of this
liability of $175,000 is included in accrued expenses and the long-term  present
value liability is $390,000 assuming a discount rate of 8-1/2%.

As a result  of the  Company's  recurring  losses  and  utilization  of cash for
operations,  the Company's  auditors  believed there was substantial doubt about
the  Company's  ability to continue as a going  concern at December 31, 1996 and
issued a going concern qualification to their report dated March 26, 1997.

Results of Operations

For the nine  months  ended  September  30,  1997,  the  Company had a loss from
operations of $4,002,558 and a net loss of $3,733,978 as compared to a loss from
operations of $2,562,003  and a net loss of $2,598,105 for the nine months ended
September 30, 1996.  The increase in the loss from  operations of  approximately
$1,440,000  is  primarily  the result of an increase  in  deferred  compensation
expense  recorded from stock options issued in 1996 and 1997, the $565,000 legal
settlement to former employees and the reduced gross profit realized in 1997.



                                       23

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------



For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

Results of Operations [Continued]

For the nine months ended  September 30, 1997 and 1996,  the Company's net sales
were  $7,508,153 and  $13,195,897,  respectively.  This represents a decrease of
approximately  $5,700,000.  The  decrease in sales  results from the loss of one
vendor,  shortages by a supplier  during the peak summer season,  and stock-outs
resulting  from cash  shortages as well as the Company's  decision to distribute
only in Manhattan.

For the nine months ended  September 30, 1997,  the  Company's  gross profit was
$1,418,673 or 19% as compared to $2,318,416 or 18% in 1996.  The increase in the
gross  profit  percentage  for the nine  months  ended  September  1997 over the
comparable nine months ending  September 30, 1996 was  attributable to increased
sales of higher profit margin items.

Selling,  advertising and promotion  expense for the nine months ended September
30,  1997 and 1996  amounted  to  $590,396  and  $1,000,435,  respectively,  and
primarily consisted of salesmen's salaries,  commissions and related expenses of
the companies' distribution sales force.

General and administrative expenses for the nine months ended September 30, 1997
were  $1,808,393  or 24% of net sales as  compared to  $2,271,220  or 17% of net
sales in 1996. The Company incurred  amortization of deferred costs for the nine
months ended September 30, 1997 of $2,249,250. This is the result of the Company
compensating  consultants with stock and options instead of cash payments. As of
September  30, 1997,  the  unamortized  balance  resulting  from all options and
shares  granted  for  services is  $734,500.  This will be  amortized  in future
periods and will reduce the future earnings of the Company.

Liquidity and Capital Resources

For the nine months ended September 30, 1997, the Company utilized  $532,830 for
operating  activities.  This  utilization was primarily  attributable to the net
loss of  approximately  $3,734,000  adjusted by non-cash items of  approximately
$2,457,000.

The Company  utilized  $1,279,700  for investing  activities for the nine months
ended September 30, 1997.  This was primarily  attributable to the divestment of
Perry's net assets which were approximately $1,000,000.

The Company utilized approximately $89,000 for financing activities for the nine
months ended September 30, 1997. This was primarily  attributable to payments on
debt obligations.

At September 30, 1997, the Company had a working capital deficit of $1,945,047 
reflecting primarily the excess accounts payable and accrued expenses over cash,
accounts receivable and inventory.  The Company's cash balance at 
September 30, 1997 was $981.

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.
These  options  were  exercised in 1996,  which  resulted in net proceeds to the
Company of $600,000.





                                       24

<PAGE>



BEV-TYME, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------


For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

Liquidity and Capital Resources [Continued]

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.  ["Perry's"]  [valued at $2,000,000] in exchange
for  400,000  shares of the  Company's  Series C Preferred  Stock and  $150,000.
However,  in October of 1996, the Company sold the 500,000 shares of convertible
Class A Preferred  Stock for  $250,000 and reduced its  investment  accordingly.
Each share of Class B  Preferred  Stock has  attached to it the right to vote on
all  matters  submitted  to the  Company.  In  August of 1996,  Perry's  filed a
registration  statement  on  Form  SB-2  which  was  declared  effective  by the
Securities   and  Exchange   Commission.   Perry's   realized  net  proceeds  of
approximately $2,500,000 in August of 1996.

Also on March 29, 1996,  Perry's entered into an agreement to acquire all of the
stock of Riverosa  Company,  Inc. for $250,000 of which $150,000 in cash was put
into escrow as of March 31, 1996 and a note payable was issued for $100,000. The
note was payable with  interest of 8% and was paid at the closing of the Perry's
initial public offering.

On April 23,  1996,  the  Company  received a $150,000  loan from an  individual
whereby the Company issued 40,000 shares of the Company's common stock. The loan
was repaid in May of 1996. A deferred financing cost of $25,000 was recorded and
expensed for the estimated fair value of these shares.

In August 1996, the Company issued to certain officers,  directors and employees
options to purchase an aggregate of 630,000  shares of Series C Preferred  Stock
at an exercise price of $1.00 per share and 700,000 shares of common stock at an
exercise price of $.25 per share for services to be rendered in 1997. A deferred
compensation  cost for the  excess  of the fair  value  of the  shares  over the
exercise  price of $2,187,500 was recorded for the year ended December 31, 1996.
During the nine months ended  September  30, 1997,  options to purchase  180,000
shares of Series C Preferred Stock were exercised. During the three months ended
September 30, 1997,  options to purchase 90,000 shares of Series C Preferred and
100,000 shares of common stock were surrendered.

In October of 1996,  the Company  received a $250,000 loan with 8% interest from
an  unaffiliated  party.  This loan was due in one  year.  The  lender  received
warrants  for 100,000  shares of the  Company's  common  stock and  warrants for
100,000 shares of Series C Preferred Stock. This loan was repaid in May 1997.

In April of 1997,  the Company  received  $100,000 from Perry's in the form of a
convertible note. The note was due in one year with 8% annual interest. The loan
could be repaid at the option of Perry's by either the payment of principal  and
accrued   interest  or  by  the  Company   returning  the  7,000,000  shares  of
non-convertible  Class B Preferred Stock of Perry's that were issued in March of
1996. On June 13, 1997, the option to return the stock was exercised.

In September 1997, the Company issued to certain officers,  consultants,  former
employees and employees  options to purchase an aggregate of 2,050,000 shares of
convertible Series C Preferred stock at an exercise price of $.25 per share. The
Company recorded compensation expense of $150,000 for past services performed by
former  employees in connection  with options for 650,000  shares of Convertible
Series  C  Preferred   Stock.   The  $150,000  is   classified  as  general  and
administrative  expenses.  In  addition,  additional  deferred  compensation  of
$38,750 was  recorded  to reflect  the fair market  value of options for 400,000
shares  of  Convertible   Series  C  Preferred  Stock  issued  under  consulting
agreements.  As of September 30, 1997, the Company amortized $16,250 of deferred
compensation  relating to these  agreements.  There were  options for  1,000,000
shares of Convertible Series C Preferred Stock issued to employees at fair value
and no compensation expense was recorded.

In October 1997,  options to purchase  1,650,000 shares of Convertible  Series C
Preferred Stock were exercised with proceeds to the Company of $412,500.

                                       25

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------



For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

Liquidity and Capital Resources [Continued]

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. 125, "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishment of Liabilities."  SFAS No. 125 
is effective for transfers and servicing of financial assets and extinguishment 
of liabilities occurring after December 31, 1996.  Earlier application is not 
allowed. The provisions of SFAS No. 125 must be applied prospectively; 
retroactive application is prohibited.  Adoption on January 1, 1997 is not 
expected to have a material impact on the Company.  The FASB deferred some 
provisions of SFAS No. 125, which are not expected to be relevant to the 
Company.

The  FASB  issued  SFAS No.  128,  "Earnings  Per  Share,"  and  SFAS  No.  129,
"Disclosure of Information  about Capital  Structure" in February 1997. SFAS No.
128  simplifies  the  earnings  per  share  ["EPS"]  calculations   required  by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

                                       26

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
AND RESULTS  OF OPERATIONS
------------------------------------------------------------------------------



For the nine months ended September 30, 1997 compared with the nine months ended
September 30, 1996

New Authoritative Accounting Pronouncements [Continued]

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income."  SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997.  
Earlier application is permitted.  Reclassification of financial statements for 
earlier periods provided for comparative purposes is required.  SFAS No. 130 is 
not expected to have a material impact on the Company.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise 
and Related Information."  SFAS No. 131 changes how operating segments are 
reported in annual financial statements and requires the reporting of selected 
information about operating segments in interim financial reports issued to 
shareholders.  SFAS No. 131 is effective for periods beginning after 
December 15, 1997, and comparative information for earlier years is to be 
restated.  SFAS No. 131 need not be applied to interim financial statements in 
the initial year of its application.  SFAS No. 131 is not expected to have a 
material impact on the Company.

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.

                                       27

<PAGE>


SIGNATURE
------------------------------------------------------------------------------




Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-QSB to be signed on its behalf
by the undersigned thereon duly authorized.



                                         BEV-TYME, INC.



November 19, 1997                        By:/s/ Alfred Sipper
                                         Alfred Sipper, Chief Executive Officer

                                       28

<PAGE>