SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K
                                  ------------

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1996    Commission file number:  0-22614


                        ATLANTIC BEVERAGE COMPANY, INC.
             (Exact name of registrant as specified in its charter)
                                  ------------

               Delaware                                      36-3761400
    (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                     Identification Number)

             650 Dundee Road, Suite 370 Northbrook, Illinois 60062
                    (Address of principal executive offices)

       Registrant's telephone number including area code: (847) 480-4000
                                  ------------

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

                 None                                 None
           (Title of class)       (Name of each exchange on which registered:)

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

                          Common Stock, $.01 par value
                                (Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the last 90 days. |X|Yes |_|No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  Registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.|_|

     The  aggregate  market  value of Common  Stock  held by  non-affiliates  of
Registrant is $17,128,383  (based upon the last sale price of  the  Common Stock
as reported on the Nasdaq  Market on March  26,  1997).  The number of shares of
Common Stock outstanding as of March  31, 1997 was 6,396,413.

                      DOCUMENTS INCORPORATED BY REFERENCE

         Certain  portions of the Company's  proxy  statement  are  incorporated
herein by reference.


<PAGE>


                                     PART I

ITEM 1.  BUSINESS.

         Atlantic Beverage Company, Inc. (the "Company"), through its operations
in Texas, Louisiana and Kentucky, manufactures,  markets and distributes branded
and unbranded  food products for customers in a ten state region,  and,  through
its operations in Maryland,  distributes specialty,  non-alcoholic  beverages to
customers in the Baltimore and Washington, D.C. metropolitan areas.

         Through its Prefco subsidiary,  the Company is engaged in the marketing
and wholesale  distribution of branded and unbranded meats to the retail grocery
trade.  The Company  markets and  distributes  its own branded,  processed  meat
products under the brand name Bum's  Favorite Blue  Ribbon(R).  These  products,
which include  smoked  sausages,  bacon and  packaged,  sliced  luncheon  meats,
account  for  approximately  15% of the sales of the Prefco  subsidiary  and are
manufactured  by the  Company's  Carlton  subsidiary  as well as by third  party
contract  manufacturing  companies.  Blue Ribbon is  currently  the best selling
brand of bacon and is among the best  selling  brands of sausage in the  Houston
market. In addition to marketing its own branded products, the company is also a
leading regional  distributor of unbranded  products including boxed beef, pork,
chicken and related items.

         Through its Carlton subsidiary,  the Company  manufactures a variety of
smoked sausage products. Approximately 45% of total volume manufactured reflects
product sold through the Prefco  subsidiary under the Blue Ribbon brand name. Of
the  balance,   approximately   25%  of  total  volume  reflects  private  label
manufacturing  for other regional sausage brands and selected chain  supermarket
house  brands,  and  approximately  30% of total  volume is sold by the  Carlton
subsidiary under the brand names Carlton and Country Boy. These branded products
are marketed on a regional basis, principally in south and west Texas.

         Through its Richards subsidiary, the Company manufactures,  markets and
distributes  Cajun-style,  cooked, pork sausage products and specialty foods for
customers in Louisiana, under the brand name Richard's.

         Through its Grogan's subsidiary, the Company manufactures,  markets and
distributes  fresh pork sausage  products for  customers in a six state  region.
These products are sold under the brand names Grogan's Farm and Partin's Country
Sausage.

         In  addition  to  its  food  businesses,   the  Company  is  a  leading
independent  wholesale distributor of specialty  non-alcoholic  beverages to the
retail trade in the greater Baltimore and Washington, D.C. metropolitan area and
surrounding counties. Under agreements that provide exclusive rights to selected
territories,  the Company  distributes juice drinks,  sodas,  bottled waters and
ready-to-drink  teas.  Brand name products  distributed  by the Company  include
Mistic(R) and AriZona(TM). Sales of Mistic products  accounted for approximately
58% of the Company's total beverage case sales in 1996.

         The Company  distributes its specialty  beverage products to over 6,000
customers,  including  independent  retail outlets such as  independent  grocery
stores,  delicatessens and restaurants, as well as large grocery and convenience
store chains and their independent  franchisees.  All of the Company's  beverage
customers  are located  within 75 miles of the Company's  warehouse  facility in
Jessup, Maryland.

                               CORPORATE HISTORY

         In April 1991, MB Acquisition Corp. ("MB  Acquisition"),  a corporation
formed by a group of individuals  including the Company's  Chairman of the Board
and certain of the Company's  directors and stockholders,  acquired the business
of  the  Company  from  a  company  now  known  as  S&B   Ventures,   Inc.  (the
"Predecessor")  for a  purchase  price of  $1,158,000  (the  "Acquisition").  In
connection with the Acquisition, MB Acquisition also assumed certain obligations
to pay the  owners  of the  Predecessor  $2,000,000  pursuant  to a  non-compete
agreement  and  $829,000  pursuant  to  consulting  agreements.  MB  Acquisition
financed the  Acquisition  through a bridge loan provided by nine of its current
stockholders,  including an officer and certain  directors.  In September  1991,
Maryland  Beverage,  L.P.  (the  "Partnership")  was formed with the Company and
Strategic Investment Corporation ("Strategic"),  a wholly owned subsidiary of T.
Rowe  Price  Strategic  Partners  Fund,  L.P.,  as  its  sole  partners,  and MB
Acquisition was merged with and into the Company, and its assets and liabilities
were  contributed  to  the  Partnership.  In  September

<PAGE>

1993  the  Company  was reincorporated  in Delaware  and adopted the name
"Atlantic  Beverage  Company, Inc." In  November  1993,  in  connection  with
the  Company's  initial  public offering,  Strategic  (whose  only  asset was
its  partnership  interest  in the Partnership) merged with and into the
Company. Subsequently, the Partnership was dissolved and the Company succeeded
to the Partnership's assets and liabilities.

         On  April  27,  1994,  the  Company  entered  into and  consummated  an
agreement  to acquire  certain  assets and  marketing  rights from Flying  Fruit
Fantasy,  USA,  Inc.  ("FFF")  for total  consideration  of  approximately  $1.2
million.  Under the terms of this  agreement,  the  Company  obtained  worldwide
marketing and distribution  rights to a frozen beverage served through automated
dispensing machines. In December 1995, the Company adopted a plan to discontinue
this division of business. As a result, the Company recognized a one-time charge
of approximately  $2.4 million in the fourth quarter of 1995 which reflected the
write-off of $1.1 million in equipment  and $0.9 million in  intangible  assets,
and costs of  approximately  $0.4  million  associated  with  discontinuing  the
operation.

         In the first quarter of 1996, a newly formed,  wholly-owned  subsidiary
of the Company acquired the outstanding common stock of Prefco, Inc. ("Prefco").
Prefco,  based in Houston,  Texas,  markets and distributes its own branded meat
products  as well as  unbranded  meat  products to the retail  grocery  trade in
Texas.  Also in the first quarter of 1996,  Carlton Foods,  Inc.("Carlton")  was
merged into  another  newly  formed,  wholly-owned  subsidiary  of the  Company.
Carlton, based in New Braunfels, Texas, is a manufacturer of branded and private
label  meat  products.  The  combined  purchase  price  for these  entities  was
approximately $11 million,  which included approximately $3.0 million in Carlton
refinanced and assumed debt.

         In August  of 1996,  a newly  formed,  wholly-owned  subsidiary  of the
Company  acquired  certain  of  the  assets  of  Richard's  Cajun  Country  Food
Processors ("Richards").  Richards, based in Church Point, Louisiana, is engaged
in the manufacturing,  marketing and distribution of Cajun-style  processed meat
and specialty food products. The consideration for these assets was $2.5 million
cash and a  subordinated  promissory  note in the amount of $0.875  million (the
"Richards Note".)

         In October of 1996,  Grogan's  Merger Corp.  ("GMC"),  a newly  formed,
wholly-owned   subsidiary   of  the  Company,   acquired  and  merged  with  the
distribution and manufacturing  business of Grogan's Sausage,  Inc. and Grogan's
Farm, Inc. respectively (collectively "Grogan's"),  based in Arlington, Kentucky
for total  consideration  of  approximately  $3.8  million,  consisting  of $1.9
million cash,  $0.2 million in a note (the  "Grogan's  Note") and 573,810 shares
(approximately $1.7 million) of common stock of the Company.

         In  November  of 1996,  GMC  acquired  the assets of  Partin's  Sausage
("Partin's") in  consideration  for $0.4 million cash,  $0.225 million in a note
(the  "Partin's  Note"),  and  78,310  shares  of common  stock of the  Company.
Partin's,  based in  Cunningham,  Kentucky,  is  engaged  in the  manufacturing,
marketing and distribution of pork sausage products.

                                    INDUSTRY

Food Industry

         Through its Carlton,  Prefco,  Richards and Grogan's subsidiaries,  the
Company participates in three general segments of the food industry: processing,
distribution, and branded product marketing.

         The meat processing  segment which includes cooking,  slicing,  mixing,
grinding and similar  functions is generally  capital  intensive.  Unbranded raw
material typically comes from packing companies. In some instances,  packing and
processing are vertically  integrated.  In other instances,  as is the case with
the Company,  processing and marketing are vertically integrated.  The Company's
Carlton  subsidiary  manufactures  the Company's own branded products as well as
those of other branded meat companies and supermarkets on a private label basis.
Because  of the cost of  transportation  and shelf life of  product,  processing
facilities tend to serve a regional clientele.  Large,  integrated national meat
companies   therefore  tend  to  establish   strategically   located  processing
facilities in different geographic regions.

         The meat distribution segment which serves several different classes of
trade including retail,  restaurant and institutional customers is generally not
capital  intensive but features very low gross margins and is subject to

                                      -2-

<PAGE>

intense price  competition.   Product  is  invoiced  and  priced  according  to
weight. Successful   distributors  typically  distinguish  themselves  through
customer service and low cost position. Price, product selection,  reliability,
in-stock rate, promptness of delivery and weekend delivery options are among the
benefits which are most highly valued.  It is not uncommon for a grocery
retailer to have one  primary  supplier  in addition  to one or more  secondary
suppliers.  Meat distribution companies typically serve a local or regional
clientele.

         The branded meat product  business is generally not capital  intensive.
Strong  retail  brands can exist as local,  regional or national  phenomena  and
include bacon, hot dogs, cooked and uncooked sausage,  cooked hams,  chicken and
turkey  products.  Advertising  and  promotion  is  generally  critical  to  the
maintenance  of brand equity.  Companies  which market branded meat products can
exist on a stand-alone  basis as well as vertically  integrated  with processing
and / or distribution.  The Company reflects, to a limited extent, both forms of
vertical integration.

Beverage Industry

         The  beverage  distribution  industry  is  divided  generally  into two
different   types  of   distributors:   bottler/distributors   and   independent
distributors.  The largest soft drink manufacturers  generally have a network of
companies  (which include both  independent and  company-owned  businesses) that
serve as  bottler/distributors  for their products.  Smaller beverage companies,
however,  typically engage contract bottlers to produce their products, and rely
on independent  companies  that function  solely as  distributors  to distribute
their products to consumers.

         The Company offers  suppliers the ability to distribute  their products
to  over  6,000  actively  serviced  customers.  Both  bottler/distributors  and
distributors  maintain  inventory in their own  warehouses,  sell products using
their own sales force and  deliver  products  using  their own trucks.  However,
subject  to  restrictions  contained  in  distribution  contracts,   independent
distributors  like the Company have the  flexibility to select a mix of products
to carry without being primarily dedicated to the large,  traditional soft drink
brands that bottler/distributors must support.

         Specialty  beverage  products and branded  bottled water  products have
been well  received not only by the consumer  but also by the retail  trade.  In
general, these products sell at a premium to traditional soft drinks, generating
higher  gross  profits  per  transaction  for the  retail  trade.  By  contrast,
traditional  soft drinks  compete  largely on the basis of pricing and promotion
and generate relatively lower unit profits.

         Although the domestic beverage  distribution  industry is characterized
by the relative  absence of  technological  risk and  relatively  minor  initial
capital  investment  requirements,  there  exist  significant  barriers to entry
primarily  due  to  geographic   exclusivity   agreements   with  suppliers  and
established relationships with customers. In addition, because of the relatively
substantial weight of bottled beverages and resulting expense of transportation,
competition at the distribution level occurs primarily on a regional basis.

                                    STRATEGY

Food Strategy

         Operating  Strategy.  The Company's  operating strategy with respect to
its newly acquired food businesses, will be to grow these businesses profitably,
while  identifying  and  exploiting  synergy  among them.  Key  elements of this
operating  strategy include increasing sales to existing  customers,  adding new
customers, and identifying opportunities to add new products.

         Corporate  Growth  Strategy.   The  Company  has  identified  potential
strategies that will use the combination of its food  subsidiaries as a platform
for  additional   corporate  growth.  These  potential  strategies  may  include
acquisitions opportunities that compliment the subsidiaries' businesses.

Beverage Strategy

         The Company's  success in the beverage  distribution  business has been
based  in  large  part on its  ability  to  serve  independent  grocery  stores,
delicatessens  and  restaurants,  as  well  as  institutional  buyers,  such  as
cafeterias  and  universities,  which  traditionally  sell  cold,  single-serve,
bottled beverages to consumers. These customers represented approximately 60% of
the  Company's  total  beverage  sales in 1996.  The  significant  exposure that
results

                                      -3-

<PAGE>

from so many smaller customers  carrying the Company's line of beverages helps
to create the  broad-based  demand  necessary for larger retail outlets to
consider stocking those beverages.

         Operating  Strategy.  The Company's  operating  strategy in its current
territory  is  to  continue  to  focus  on  the  distribution  of  non-alcoholic
beverages,  with primary emphasis on specialty beverages, and to maximize market
penetration for the products it carries. Key elements of the Company's operating
strategy include: (i) increasing distribution to existing customers, in both the
variety  of  brands  carried  and the  number of cases  sold;  (ii)  adding  new
customers  each  year  within  the  Company's  geographic  territory;  and (iii)
identifying  and  acquiring  exclusive   distribution  rights  to  products  not
currently distributed by the Company.

                                    PRODUCTS

         Through its Prefco subsidiary,  the Company  distributes a wide variety
of unbranded,  boxed meat products.  The Company  maintains an inventory of over
200  different  stock keeping  units of unbranded  product,  which include beef,
turkey,  pork and chicken.  Product is stored in the Company's two  refrigerated
warehouses in Houston and delivered on refrigerated  vehicles to several hundred
customers  including chain and independent  supermarkets and discount clubs. The
Company purchases product from  approximately one dozen meat packing  companies.
Purchases  of the same product may be spread among  several  suppliers  over the
course of a year,  and purchasing  decisions are frequently  driven by price and
availability,  both of which are likely to vary.  Three suppliers  accounted for
approximately 20%, 13% and 10% of the Company's boxed meat purchases during 1996
and 18%, 17% and 13% of such purchases during 1995. No other supplier  accounted
for more than 10% of such purchases during either year.

         Also through its Prefco subsidiary, the Company markets and distributes
its own branded  sausage,  bacon and  packaged,  sliced  luncheon  meats.  These
products are stored in the Company's  two  refrigerated  warehouses.  Product is
delivered on the Company's  refrigerated trucks, and customers typically include
the same retail  establishments  that  purchase  the  Company's  unbranded  meat
products.  The majority of Blue Ribbon sausage  product is  manufactured  by the
Company's Carlton and Grogan's subsidiaries.  The balance of the sausage product
as well as the bacon and luncheon  meats are purchased  from four other contract
food processing companies.

         In addition to  manufacturing  product for the Prefco  subsidiary,  the
Company's  Carlton  subsidiary  manufactures  and markets its own branded smoked
sausage  products  for  the  retail  grocery  trade.   The  Carlton   subsidiary
manufactures  similar  products  on a  private  label  for  other  branded  food
companies.

         Through its Richards subsidiary the Company  manufactures,  markets and
distributes Cajun-style,  cooked, pork sausage products and specialty foods, for
customers in the state of Louisiana, under the brand name Richards.

         Through its Grogan's subsidiary, the Company manufactures,  markets and
distributes  fresh pork sausage  products for  customers in a six state  region.
These products are sold under the brand names Grogan's and Partin's.

         The  Company  distributes  a  wide  variety  of  beverages,   including
ready-to-drink  teas, natural sodas,  sparkling waters with juice, fruit juices,
juice drinks,  still and sparkling waters and sports drinks. Brand name products
distributed by the Company include Mistic(R), AriZona(TM),  Clearly Canadian(R),
Hires(R),  Crush(R),  Vernor's(R),  Elliott's  Amazing(TM),  Crystal  Geyser(R),
Stewart's(R),  Jolt Cola(R), and Sunlike Juices. The Company reviews hundreds of
products  each  year,  and  continuously   evaluates  the  mix  of  products  it
distributes.  The  Company  actively  seeks to acquire  distribution  rights for
products  it  believes  show  strong  growth  potential.   For  1995  and  1996,
approximately  60% and 58%,  respectively,  of the Company's total beverage case
sales represented Mistic(R) products, and 11% and 7%, respectively,  represented
Elliott's(TM) products. None of the Company's other suppliers accounted for more
than 10% of the Company's total beverage case sales during such periods.

                               SUPPLIER CONTRACTS

         The Company  does not  currently  have  contracts  with any of its food
suppliers. Many of the Company's major beverage brands, however, are distributed
on  an  exclusive  basis  under  distribution  contracts  within  the  Company's
territory.  The  terms  of the  contracts,  including  their  lengths,  vary  by
supplier. The Company has approximately 15 beverage suppliers.

                                      -4-

<PAGE>


         The Company's  contract with Mistic Brands,  Inc. ("MBI"),  supplier of
Mistic(R),  expires on December  31,  2000.  The Company has been the  exclusive
distributor  of  Mistic(R)  in  the  greater  Baltimore  and  Washington,   D.C.
metropolitan  area since the product was first  introduced in this  territory in
1990.  Under the terms of the  Mistic(R)  contract,  the Company is obligated to
distribute  Mistic(R) products to 80% of the retail accounts that would carry on
a  regular  basis  cold,  single-serve,  bottled  specialty  beverage  products,
excluding the  restaurant and bar trade.  Unless such  percentage is obtained by
the Company to MBI's  satisfaction,  MBI has the right to suspend  shipments  or
cancel the  contract.  MBI also  retains  the right to sell to certain  national
buying chains that require  servicing by one national vendor.  The contract also
provides  that,  unless MBI agrees in writing to the sale of a product  that MBI
considers,  in its sole discretion,  to be a direct  competitor of its products,
the Company cannot,  without MBI's consent,  sell to anyone within its territory
any product that would, in the sole discretion of MBI, compete with Mistic(R) or
be likely to cause  confusion  in the  minds of the  public as to the  Mistic(R)
products. The Company specifically cannot sell Snapple(R).  The Company believes
that  it is in  compliance  in all  material  respects  with  the  terms  of the
Mistic(R) contract.

         Other beverage  distribution  contracts place similar  restrictions and
requirements  on the  Company.  The  Company  believes  that  the  terms  of its
distribution contracts are similar to those employed throughout the industry. In
addition,  the  Company  has oral  distribution  agreements  for other  beverage
products.

                       SALES, MARKETING AND DISTRIBUTION

         The Company's Prefco subsidiary distributes unbranded boxed beef, pork,
and poultry to chain and independent retail grocery customers,  most of whom are
located in the Houston  metropolitan area, and all of whom are within a 400-mile
radius of the Company's  distribution  facilities.  The Company  serves  several
hundred such customers as either their primary or secondary fresh meat supplier.
Prefco's direct sales force contacts its customers on a daily basis. The Company
delivers  product using 16 refrigerated  trucks,  generally  within one to three
days of receiving an order.

         The Company's  Prefco  subsidiary  also markets and distributes its own
Blue Ribbon  bacon,  sausage  and sliced  luncheon  meats to the retail  grocery
trade.  Orders are  received  on a  pre-sell  basis by the  direct  sales  force
mentioned  above as well as on a route-sales  basis by a separate group of sales
people, each of whom is responsible for a route sales vehicle.  The business has
historically  engaged in  significant  radio and  television  advertising in the
Houston market.

         The Company's Carlton subsidiary  solicits and receives customer orders
for  branded  product  through  two  direct  sales  people  as well  as  through
third-party  food  brokers and by  telephone  and  facsimile  transmission.  The
Company engages in a limited amount of advertising for such products,  primarily
through  weekly chain  supermarket  flyers.  Relationships  with  private  label
customers are generally  established at the senior  management  level,  although
recurring orders from such customers are normally received over the telephone or
facsimile  machine by  clerical  staff.  Branded and  private  label  orders are
generally filled within one to seven days and are either delivered on one of the
Carlton  Subsidiary's three refrigerated  vehicles or by common carrier,  or are
picked up by customers.

         The Company's  Richards  subsidiary employs a route delivery sale force
of four people. Orders are taken by the route salespeople and filled immediately
from stock on the route sales  trucks.  The  subsidiary  engages in  promotions,
including in-store sampling, as well as in print advertising.  All customers are
located within the state of Louisiana.

         The  Company's  Grogans  subsidiary  employs a route  sale  force of 12
people.  Orders are taken by the route  salespeople and filled  immediately from
stock  onboard  the  route  sales  trucks.  In  addition  the  subsidiary  sells
approximately  30% of its  product  to third  party  distributors.  The  Company
engages in promotions,  including in-store sampling,  as well as in print, radio
and  television  advertising.  Customers  are  located  in  Kentucky,  Illinois,
Indiana, Mississippi, Tennessee, and Arkansas.

         One food distribution  customer  accounted for approximately 40% of the
Company's  total  food  sales  during  both  1995 and  1996.  No other  customer
accounted for more than 10% of total food sales during either year.

                                      -5-

<PAGE>


         The Company has a beverage distribution sales force of approximately 30
persons who service  existing  customers and pursue new  customers.  The Company
periodically sets sales quotas for its salespersons, and promotes fulfillment of
these quotas through sales contests and specific monetary incentives. Demand for
the  Company's  beverage  products  tends to be greater  during  warmer  months.
Accordingly,  sales are  generally  highest  in the  second  and third  calendar
quarters.

         Most  beverage  distribution  customers  are  visited  on a  weekly  or
biweekly  basis by a  salesperson  from the  Company.  When a customer  orders a
product,  the  salesperson  enters all  information  into a  hand-held  computer
terminal.  At the end of the day the salesperson is responsible for transmitting
this  information  by telephone to the  Company's  computer  system.  Invoicing,
loading  and  routing  are then  handled by the  warehouse  in  preparation  for
delivery the following day. The Company's computer system generates invoices and
assists in managing  the loading and routing  functions.  The majority of orders
are filled from the Company's  warehouse within 24 hours. The Company  generally
delivers products directly to the retail outlets,  where Company drivers usually
stock displays and collect payments.  Deliveries are made by the Company's fleet
of leased vehicles, which includes approximately 30 beverage delivery trucks and
vans.

         A variety of methods are used by the  Company's  beverage  suppliers to
promote their products directly to the consumer,  including advertising based on
product features such as ingredients,  quality and taste as well as a variety of
themes including health,  lifestyle,  convenience,  and physical fitness.  Price
promotions, taste tests and event sponsorship are also common. The cost of these
promotional activities is typically shared with the Company's suppliers. In some
instances,  under promotional arrangements with suppliers, the Company may place
refrigerated  coolers  with retail  customers to display the  Company's  product
lines.

         Two beverage  customers  accounted for  approximately  6.6% and 5.7% of
total beverage case sales during 1995 and  approximately  6.9% and 6.7% in 1996.
No other  customer  accounted for more than 5% of the Company's  beverage  sales
during either year.

                                ASSET MANAGEMENT

         Accounts  Receivable.  Food sales are made almost  exclusively  on
account,  and food accounts  receivable typically average 15 to 20 days.

         Approximately  40% of the Company's  beverage  sales are made on a cash
basis.  Beverage accounts  receivable  typically average  approximately 20 to 25
days of total sales or 30 to 40 days of sales made on account.

         Inventory.   The  Company   maintains   its  food   inventory   at  the
manufacturing  facilities  operated by its Carlton  subsidiary in New Braunfels,
Texas, by its Richards  subsidiary in Church Point,  Louisiana,  by its Grogan's
facility in Arlington,  Kentucky, and at two distribution facilities operated by
its Prefco  subsidiary in Houston,  Texas.  The Company  generally  maintains an
average  of  eight  to ten  days  of  food  inventory  on  hand  which  reflects
approximately  six to eight  days of  inventory  at its  Prefco  subsidiary  and
approximately  30  days of  inventory  at its  Carlton,  Richards  and  Grogan's
subsidiaries.  The Company  typically places purchase orders to its suppliers by
telephone  and by  facsimile  on a daily  basis.  Orders are  placed  both on an
as-needed  basis and on a  scheduled  basis in  anticipation  of future  demand.
Orders are usually filled within one to ten days,  and products are  transported
to the Company's warehouse by common carrier.

         The Company  maintains  all of its beverage  inventory at the Company's
warehouse in Jessup,  Maryland.  The Company  generally  maintains an average of
approximately  20 days of beverage  inventory  on hand.  The Company  performs a
physical  count of its beverage  inventory  twice a month.  On an annual  basis,
cumulative  adjustments  to such  inventory  have  been  less  than 1% of  total
purchases  during each of the last three years.  The Company  turns its beverage
inventory approximately 18 times per year. The Company typically places purchase
orders to its  suppliers  by telephone  and by facsimile on a daily basis.  Once
placed,  these  orders are  usually  filled  within  three to five days for most
brands,  and the products are  transported to the Company's  warehouse by common
carrier.

                                      -6-

<PAGE>


                                  COMPETITION

Competition in the Food Business

         Boxed Meat  Distribution.  Through its Prefco  subsidiary,  the Company
believes that it is the second largest of four major boxed meat  distributors in
the Houston  market.  Although  this  segment of the food  industry is extremely
competitive,  the Company  has  generally  succeeded  in  distinguishing  itself
through a high level of customer service.

         Branded  Meat  Products.  Through its  Prefco,  Carlton,  Richards  and
Grogan's  subsidiaries,  the  Company  competes  with  dozens  of  branded  meat
companies,  and its brands  compete  with a wide  variety of both  regional  and
national  trademarks.  Among  the  competitive  brands  are  Decker,  J. Bar B.,
Hilshire Farms,  Hormel and Bryan. The Company's  Carlton and Country Boy brands
of smoked  sausage are sold  principally  in the Dallas,  San Antonio and Austin
markets and currently have limited market share. The Company's Blue Ribbon brand
currently  represents the best selling brand of bacon and sausage in the Houston
market  and a top ten  brand  for both  categories  in the San  Antonio / Austin
market. The Company's packaged,  sliced luncheon meats, also sold under the Blue
Ribbon trademark, were introduced to the Houston market in 1995 and have limited
market  share.  The  Company's  Richards,  Grogan's and Partin's  brands enjoy a
strong regional share within their respective markets.

         Private  Label  Manufacturing.  Through  its  Carlton  subsidiary,  the
Company  manufactures  smoked sausage and meat products on a private label basis
for other branded food companies and, on a limited basis,  for  supermarkets and
restaurants.  The  Company  believes  that it  enjoys  a strong  reputation  for
innovation and  responsiveness  in creating original recipes for such customers.
The Company  competes  with a wide  variety of  manufacturers,  many of whom are
significantly larger and may have greater manufacturing capacity and capital.

Competition in the Beverage Industry

         In the  greater  Baltimore  and  Washington,  D.C.  metropolitan  area,
beverage  suppliers  have  limited  choices in  securing  distribution  of their
products  in the  entire  territory  by a single  distributor.  The two  largest
bottler/distributors,  Mid Atlantic  Coca-Cola Bottling Co., Inc. and Pepsi-Cola
Company,   are  affiliated   with  The  Coca-Cola   Company  and  PepsiCo  Inc.,
respectively,  and the Company  believes  that they do not carry  products  from
other  sources.  The  other  major  bottler/distributor,  Canada  Dry -  Potomac
Corporation,  distributes  a variety of specialty  beverage  brands and competes
directly with the Company. Mid Atlantic Coca-Cola, Pepsi-Cola and Canada Dry are
larger and have greater financial  resources than the Company.  The Company also
competes with specialty  grocery  distributors,  beer and wine  distributors and
other independent beverage  distributors.  In general, the major bottlers in the
Company's territory are focused on distributing their own brands, while beer and
wine distributors are fragmented and service fewer non-alcoholic customers.

         The  Company  believes  that it is the  largest  distributor  to  focus
primarily on specialty  beverage  products and branded  bottled water within its
territory.  A principal component of the Company's success is its willingness to
service smaller retailers as well as large customers, which the Company believes
helps develop a broad-based  consumer  interest in the products it carries.  The
Company  competes  primarily on the basis of its product  line and service.  The
product line includes highly visible,  exclusive,  niche products. The principal
methods of competition in the premium beverage  industry include product quality
and taste, packaging, brand advertising, trade and consumer promotions, pricing,
and the  development  of new products,  while  traditional  soft-drink  products
compete on the basis of all of the foregoing factors but with a greater emphasis
on pricing and advertising.

         Competitors  may  have a  significant  competitive  advantage  over the
Company if consumer choice favors  products not distributed by the Company,  and
the Company is unable to secure distribution  rights to the favored products.  A
significant  shift in consumer  demand  away from  specialty  beverage  products
generally  would  have a  material  adverse  effect  on the  Company's  beverage
business.  There can be no  assurance  that the Company  will be able to compete
successfully  with  other  distributors  to  obtain  new  product   distribution
agreements or that the Company's current distribution agreements will be renewed
on terms acceptable to the Company.

                                      -7-

<PAGE>

                             GOVERNMENT REGULATION

         The Company is subject to various  federal,  state and local  statutes,
including  federal,  Maryland,  and Texas  occupational  safety and health laws.
Furthermore,  the Company and its  suppliers may be subject to various rules and
regulations including those of the United States Department of Agriculture,  the
United  States Food and Drug  Administration  and similar  state  agencies  that
relate to  manufacturing,  nutritional  disclosure,  labeling  requirements  and
product names.

         While the Company  presently  does not sell  products in any state that
requires  deposits on  containers,  federal and state  proposals  for  container
deposit laws could  significantly  affect the Company's  operating  costs if any
such proposal were to be implemented. Although the Company would seek to pass on
any  additional  costs to its  customers,  there  can be no  assurance  that the
Company would be able to do so.

                        PRODUCT LIABILITY AND INSURANCE

         The Company has purchased product liability  insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate.  The Company also has
a $10,000,000  umbrella policy.  The Company believes that its present insurance
coverage is sufficient  for its current level of business  operations,  although
there is no assurance  that the present  level of coverage  will be available in
the future or at a reasonable cost. Further, there can be no assurance that such
insurance will be available in the future as the Company expands its operations,
that  insurance,  if  available,  will be  sufficient to cover one or more large
claims,  or that  the  applicable  insurer  will be  solvent  at the time of any
covered loss.

                                   EMPLOYEES

         The Company  currently has  approximately 90 full time employees in its
beverage  distribution  business,  approximately  65 full time  employees in its
Prefco  subsidiary,   approximately  60  full  time  employees  in  its  Carlton
subsidiary,  approximately 35 full time employees in its Richards subsidiary and
approximately  50 full time  employees in its Grogan's  subsidiary.  The Company
uses temporary employees from time to time.

         The Company  believes that its relations  with  employees are good. The
Company has never suffered a material work stoppage or slow down.


ITEM 2.  PROPERTIES.

         Beverage Operations.  The Company operates from a 70,000 square foot
leased facility in Jessup,  Maryland. The Company's lease expires in April,
2002.

         Prefco  Subsidiary.  The Company leases two refrigerated  warehouses in
Houston.  One  warehouse  facility,  which  includes  offices  and serves as the
subsidiary's headquarters, has a total of 20,000 square feet. The lease for this
facility expires in 2003. The second facility has a total of 25,000 square feet.
The lease for this facility  expires in 1998. In addition to the foregoing,  the
subsidiary also leases two small offices,  with a total of  approximately  2,500
square feet of space.

         Carlton   Subsidiary.   The  Company   leases  a  20,000   square  foot
manufacturing facility and a 2,000 square foot office facility in New Braunfels,
Texas.  The lease on the  manufacturing  facility  expires in September 1, 2000,
with two five-year renewal options, and the lease on the office facility expires
in October 1, 1997 with a two-year renewal option.

         Richards  Subsidiary.  The Company  owns a 12,500  square  foot
manufacturing  facility in Church  Point, Louisiana.

         Grogans Subsidiary. The Company owns an 11,000 square foot
manufacturing facility in Arlington, Kentucky.

                                      -8-

<PAGE>


ITEM 3.  LEGAL PROCEEDINGS.

         The Company is a defendant in a lawsuit  filed by a former  supplier to
its  discontinued  frozen beverage  division.  The Company  believes that it has
substantial  defenses and intends to vigorously defend such claims. In addition,
the Company believes that the resolution of such claims will not have a material
adverse  impact on the  financial  position  or  results  of  operations  of the
Company.  The Comany is not party to any material legal  proceedings  other than
ordinary routine litigation incidental to its business.

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

         None.


                                      -9-
<PAGE>


                                    PART II

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

         Atlantic Beverage Company, Inc.'s Common Stock is principally traded on
the NASDAQ  Small Cap Market  under the symbol ABEV.  The  following  table sets
forth, for the periods indicated,  the high and low sale prices of the Company's
Common Stock as reported by NASDAQ.

                        STOCK PRICES                            STOCK PRICES
                      High        Low                         High         Low
1995                                        1996
1st Quarter           3 5/8      2 3/4      1st Quarter      2           1 1/8
2nd Quarter           3 1/4      2 3/8      2nd Quarter      4 1/8       1 5/8
3rd Quarter           2 3/4      1 1/16     3rd Quarter      4           3
4th Quarter           1 7/8      1 1/4      4th Quarter      3 1/2       2 7/8


         As of March 19, 1997,  there were  approximately  110  shareholders  of
record  of the  Company's  Common  Stock.  The  Company  has not  paid  any cash
dividends  since its  initial  public  offering.  The Company  anticipates  that
earnings,  if  any,  will  be  retained  for use in the  business  or for  other
corporate  purposes,  and it is not  anticipated  that any cash dividends on the
common stock will be paid in the foreseeable future.

         During fiscal 1996, the Company sold  4,073,187  shares of Common Stock
and  issued  options  to  purchase  479,200  shares  of  Common  Stock. All such
issuances were made in reliance on Section 4(2) of  the  Securities Act of 1933,
as amended.

ITEM 6.  SELECTED FINANCIAL DATA.

         The following  selected financial data for the Company are based on the
consolidated  financial  statements  of the  Company.  The  amounts  provided as
statement of operations data and balance sheet data for the periods prior to the
merger on November 29, 1993 of Strategic Investment Corporation into the Company
(the   "Reorganization")   have  not  been   adjusted  to  give  effect  to  the
Reorganization.  The Company's financial  statements as of December 31, 1995 and
1996 and for each of the three  years in the period  ended  December  31,  1996,
including  the notes  thereto and the  related  report of Arthur  Andersen  LLP,
independent public accounts, are included elsewhere herein.

                                      -10-

<PAGE>


         The  information  set forth below  should be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and the  financial  statements of the Company  contained  elsewhere
herein.

<TABLE>
<CAPTION>
                                                           (In thousands, except per share information)
                                                                      Years ended December 31,
                                      --------------------------------------------------------------------------------------
                                            1992              1993             1994              1995             1996
============================================================================================================================
<S> <C>
Statement of Operations
Net Sales                                    $  22,807         $  26,296        $  24,152         $  20,596        $ 153,280
Gross profit, exclusive of                       6,027             6,782            6,365             5,853           17,128
depreciation
Income (Loss) from operations                      384             1,216              278              (138)           1,638
Interest expense                                   721               765                8                25            1,197
Other income (expense), net                       (533)           (1,305)             (20)               12              476
Income (Loss) before minority
interest, income tax (provision)                  (870)             (853)             249              (152)             918
benefit
Minority interest in income (loss)
before income tax (provision)                     (217)              108                -                 -                -
benefit
Income (Loss) before income tax
(provision) benefit                               (653)             (961)             249              (152)             918
Income tax (provision) benefit                       -               350               15                 -              (22)
Net income (loss) from continuing
operations                                        (653)             (611)             264              (152)             896
Loss from discontinued operations                    -                 -             (302)             (528)               -
Loss on disposal of discontinued                     -                 -                -            (2,410)
operations                                                                                                                 -
Net income (loss)                            $    (653)        $    (611)       $     (38)        $  (3,091)       $     896
Net income (loss) per share                      (1.18)             (.48)            (.02)            (1.22)             .17
============================================================================================================================
Balance Sheet Data
Cash                                         $      38         $   1,065        $     142         $       -        $   1,249
Working capital (deficit)                         (576)            2,590              963              (758)          (4,185)
Total assets                                     4,410             4,940            5,175             2,921           34,653
Long-term debt                                   2,630                15                -                 -            7,779
Deferred compensation                              553                 -                -                 -                -
Other liabilities                                  932                 -                -                 -                -
Minority interest                                  115                 -                -                 -                -
Accumulated earnings (deficit)                  (1,017)             (934)            (979)           (4,079)          (3,183)
Total stockholders' equity (deficit)         $  (1,927)        $   3,886        $   4,073         $     562        $   6,604
============================================================================================================================
</TABLE>

                                      -11-

<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

General

         In 1996 the Company  implemented a new corporate strategy that resulted
in the acquisition of five food businesses.  Each of these businesses represents
a dominant local or regional branded  processed meat company.  Collectively they
added  approximately  $133  million in net sales for 1996 while  increasing  the
Company's  assets from $3 million to $35 million.  In addition to increasing the
size of the  Company,  the  newly  acquired  businesses  have  created a broader
platform for future growth.

         In order to acquire and operate its food businesses, the Company formed
four new subsidiaries during 1996: Prefco Corp.,  Carlton Foods Corp.,  Richards
Cajun Foods Corp.,  and Grogan's Farm,  Inc. In connection with its food company
acquisitions,  the Company issued  approximately  four million new shares of its
common stock and borrowed approximately $13 million from LaSalle National Bank.

         The Company  continues  to operate as a  distributor  of  non-alcoholic
beverages in the Baltimore and Washington D.C. metropolitan areas. This business
represents  the  Company's  Beverage  Division,   while  the  four  newly-formed
subsidiaries collectively represent the Company's Food Division.

The Acquisitions

         In the first quarter of 1996, a newly formed,  wholly-owned  subsidiary
of the Company acquired the outstanding common stock of Prefco, Inc. ("Prefco").
Prefco,  based in Houston,  Texas,  markets and distributes its own branded meat
products  as well as  unbranded  meat  products to the retail  grocery  trade in
Texas. Also in the first quarter of 1996,  Carlton Foods,  Inc.  ("Carlton") was
merged into  another  newly  formed,  wholly-owned  subsidiary  of the  Company.
Carlton, based in New Braunfels, Texas, is a manufacturer of branded and private
label  meat  products.  The  combined  purchase  price  for these  entities  was
approximately $11 million,  which included approximately $3.0 million in Carlton
refinanced  and assumed  debt.  In connection  with these  transactions  and the
financing thereof,  the Company incurred transaction costs of approximately $0.9
million,  which were  recorded as additional  goodwill on the Company's  balance
sheet.

         In  connection   with  such   transactions,   the  Company  (i)  issued
approximately  650,000  shares of common  stock to the  former  stockholders  of
Prefco and Carlton,  (ii) issued,  at a price of $1.05 per share,  approximately
2.7 million shares of common stock in a private placement to a limited number of
purchasers,  (iii) entered into a loan agreement with LaSalle National Bank (the
"LaSalle Facility") which provided a $4.5 million term loan at a variable annual
interest rate of LIBOR + 3.5%, which term loan is due March 15, 2001, and a $6.5
million  revolving  line of credit at a  variable  annual  interest  rate  which
reflects  a  combination  of  LIBOR  + 3% and  Prime  +1%,  and  (iv)  issued  a
subordinated  promissory note to the former shareholders of Prefco in the amount
of $1.4 million (the "Prefco  Note").  The Prefco Note bears  interest at 9% per
annum and is payable in quarterly  installments  of interest only, with a single
principal payment due March 15, 2001. The Company incurred  transaction costs of
approximately $0.1 million in connection with the private placement. These costs
were reflected as a reduction in the equity proceeds of the private placement.

         In August  of 1996,  a newly  formed,  wholly-owned  subsidiary  of the
Company  acquired  certain  of  the  assets  of  Richard's  Cajun  Country  Food
Processors  ("Richard's").  Richard's,  based in  Church  Point,  Louisiana,  is
engaged  in  the  manufacturing,   marketing  and  distribution  of  Cajun-style
processed meat and specialty food products.  The  consideration for these assets
was $2.5 million cash and a subordinated promissory note in the amount of $0.875
million  (the  "Richard's  Note.) The  Richard's  Note is  subject to  quarterly
payments of interest only at the annual rate of 6.35%,  with a single  principal
payment  due on July 31,  2001.  In funding  the cash  portion of the  Richard's

                                      -12-

<PAGE>

transaction,  the Company  used  approximately  $0.8  million of  existing  cash
balances and approximately  $0.3 million of additional line of credit borrowings
under the LaSalle Facility (the line of credit portion of which was increased by
$0.5 million) and obtained  additional  term debt from LaSalle  National Bank in
the amount of $1.4 million,  which bears  interest at a variable rate of Prime
+1.5% and is subject to monthly  payments of interest and quarterly  payments of
principal  with a final payment of interest and principal due March 15, 2001. In
connection  with these  transactions  and the  financing  thereof,  the  Company
incurred transaction costs of approximately $0.3 million, which were recorded as
additional goodwill on the Company's balance sheet.

         In  October of 1996,  Grogan's  Farm,  Inc.  ("GFC"),  a newly  formed,
wholly-owned   subsidiary   of  the  Company,   acquired  and  merged  with  the
distribution and manufacturing  business of Grogan's Sausage,  Inc. and Grogan's
Farm, Inc. respectively (collectively "Grogan's"),  based in Arlington, Kentucky
for total  consideration  of  approximately  $3.3  million,  consisting  of $1.9
million cash,  $0.2 million in a note (the  "Grogan's  Note") and 573,810 shares
(approximately $1.2 million) of common stock of the Company. GFC completed three
transactions:  (i) GFC acquired  certain  assets of Grogan's  Sausage,  Inc. for
$509,000 cash;  (ii) GFC acquired  certain real estate from Mr. and Mrs.  Grogan
for $1,000,000  cash; and (iii) Grogan's Farm, Inc. was merged with and into GFC
in  consideration  for $391,000  cash,  the Grogan's Note, and 573,810 shares of
common stock of the Company.  The  Grogan's  Note will bear no interest  through
September  30,  1998,  and,  commencing  October  1,  1998,  will be  subject to
quarterly  payments  of  interest  only at the annual  rate of 8%, with a single
principal  payment due on September  30, 2001.  In funding the $1.9 million cash
portion  of the  Grogan's  transactions,  the  Company  used  $0.35  million  in
additional  line of credit  borrowings  under the LaSalle  Facility (the line of
credit  portion of which was increased by $0.5 million) and obtained  additional
term debt from LaSalle National Bank in the amount of $1.55 million, which bears
interest at a variable  rate of Prime + 1.5% and is subject to monthly  payments
of interest and quarterly payments of principal with a final payment of interest
and principal due March 15, 2001. In connection with these  transactions and the
financing thereof,  the Company incurred transaction costs of approximately $0.3
million, which will be reflected as additional goodwill on the Company's balance
sheet.

         In  November  of 1996,  GFC  acquired  the assets of  Partin's  Sausage
("Partin's") in  consideration  for $0.4 million cash,  $0.225 million in a note
(the  "Partin's  Note"),  and  78,310  shares  of common  stock of the  Company.
Partin's,  based in  Cunningham,  Kentucky,  is  engaged  in the  manufacturing,
marketing  and  distribution  of pork sausage  products.  The  Partin's  Note is
subject to quarterly  payments of interest  only at the annual rate of 8% with a
single  principal  payment due on December 31, 2003. In funding the cash portion
of the purchase price,  the Company used  additional  line of credit  borrowings
under the  LaSalle  Facility.  Following  the  acquisition,  the  operations  of
Partin's were  consolidated with those of Grogan's at its facility in Arlington,
Kentucky.

         In 1994,  the Company  entered  into and  consummated  an  agreement to
acquire certain assets and marketing rights from Flying Fruit Fantasy, USA, Inc.
for total  consideration  of approximately  $1.2 million.  In December 1995, the
Company adopted a plan to discontinue this division.  As a result, in the fourth
quarter of 1995, the Company  recognized a one-time charge of approximately $2.4
million  which  reflected  the  write-off of $1.1 million in equipment  and $0.9
million in intangible assets, and costs of approximately $0.4 million associated
with discontinuing the operation.

Results of Operations

         All of the acquisitions  completed during 1996 were recorded  utilizing
the purchase method of accounting.  Therefore results of the acquired businesses
prior  to the  effective  date of such  acquisitions  are  not  included  in the
Company's Results of Operations.

         During  the  year  ended  December  31,  1996,  the  Company's  Carlton
subsidiary  and the  Company's  Grogan's  subsidiary  both sold  product  to the
Company's Prefco subsidiary.  The Company's financial  statements do not reflect
this activity in net sales, as it is eliminated on a consolidated basis.

                                      -13-

<PAGE>


Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

         Net Sales. Net sales increased by approximately  $132.7 million or 644%
from  approximately  $20.6  million  for the year  ended  December  31,  1995 to
approximately $153.3 million for the year ended December 31, 1996. This increase
reflects the acquisition of Carlton, Prefco, Richard's, Grogan's and Partin's.

         Gross Profit.  Gross profit increased by approximately $11.2 million or
193% from  approximately  $5.9  million for the year ended  December 31, 1995 to
approximately  $17.1 million for the year ended December 31, 1996. This increase
reflects the acquisition of Carlton, Prefco,  Richard's,  Grogan's and Partin's.
Gross  profit  as a  percentage  of net  sales  decreased  from  28.4%  to 11.2%
reflecting  the lower gross profit margin  associated  with the  Company's  food
operations.  Gross profit from beverage sales did increase,  however, from 28.4%
of sales to 30.2% of sales  reflecting  lower product  costs and higher  selling
prices.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  approximately  $9.5  million  or 159%  from
approximately $6.0 million for the year ended December 31, 1995 to approximately
$15.5 million for the year ended December 31, 1996.  This increase  reflects the
acquisition  of  Carlton,  Prefco,  Richard's,   Grogan's  and  Partin's.  As  a
percentage of net sales, selling,  general and administrative expenses decreased
from  29.1% to  10.1%.  This  decrease  reflects  the fact  that  expenses  as a
percentage of sales are  significantly  lower in the Company's  food  operations
than in its  beverage  operations,  in  addition to the fact that the Company is
realizing  economies  through  spreading  certain  administrative  expenses over
several business units.

         Income from Operations.  Income from operations increased approximately
$1.7  million  from a loss of  approximately  $0.1  million  for the year  ended
December 31, 1995 to approximately  $1.6 million for the year ended December 31,
1996.  This increase is attributable to income from the Company's newly acquired
food  businesses as well as to the  improvement in gross margin in the Company's
beverage business.

         Interest Expense. Interest expense increased approximately $1.2 million
from approximately $25,000 for the year ended December 31, 1995 to approximately
$1.2  million  for  the  year  ended  December  31,  1996.   This  increase  was
attributable to debt that the Company incurred (and the related  amortization of
deferred financing costs and note discounts) in connection with the acquisitions
of Carlton, Prefco, Richard's,  Grogan's and Partin's, including bank term debt,
borrowings under the Company's line of credit, and amounts owed to former owners
of the acquired businesses.

         Other Income.  Other income increased  approximately  $0.5 million from
zero for the year ended December 31, 1995 to approximately  $0.5 million for the
year ended  December  31, 1996.  This  increase  was  primarily  the result of a
one-time  settlement  payment of $0.25 million that the Company  received from a
former beverage  supplier.  Other amounts include  approximately $0.1 million of
income generated by the Prefco subsidiary from product sold at special events.

         Net Income  from  Continuing  Operations.  Net income  from  continuing
operations  increased  approximately  $1.0 million from a loss of  approximately
$0.1 million for the year ended December 31, 1995 to approximately  $0.9 million
for the year ended December 31, 1996. This increase  reflects factors  discussed
above in income from operations, interest expense, and other income.

         Loss from Discontinued  Operations.  Loss from discontinued  operations
decreased  approximately  $0.5 million from  approximately  $0.5 million for the
year ended  December 31, 1995 to zero for the year ended  December 31, 1996. The
loss in  1995  represents  the  results  of the  Company's  discontinued  frozen
beverage division.

                                      -14-

<PAGE>

         Net Income  (Loss).  Net income  (loss)  increased  approximately  $4.0
million from a loss of  approximately  $3.1 million for the year ended  December
31, 1995 to income of approximately $0.9 million for the year ended December 31,
1996.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

         Net Sales. Net sales decreased by  approximately  $3.6 million or 14.7%
from  approximately  $24.2  million  for the year  ended  December  31,  1994 to
approximately  $20.6 million for the year ended December 31, 1995. This decrease
reflects a decrease in case sales  resulting from increased  competition  during
the year.

         Gross Profit.  Gross profit decreased by approximately  $0.5 million or
8.0% from  approximately  $6.4  million for the year ended  December 31, 1994 to
approximately  $5.9 million for the year ended  December  31,  1995,  reflecting
lower net sales.  Gross profit as a percentage of net sales increased from 26.4%
to 28.4%. This increase was primarily the result of a shift toward higher margin
products and selected price increases.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  decreased  approximately  $0.1  million  or 1.6%  from
approximately $6.1 million for the year ended December 31, 1994 to approximately
$6.0 million for the year ended December 31, 1995. As a percentage of net sales,
selling, general and administrative expenses increased from 25.2% to 29.1%. This
increase was primarily the result of the decline in net sales.

         Income (Loss) from Operations.  Income (loss) from operations decreased
approximately  $0.4  million from income of  approximately  $0.3 million for the
year ended  December  31, 1994 to a loss of  approximately  $0.1 million for the
year ended December 31, 1995.  This decrease was primarily due to the decline in
net sales.

         Net Income (Loss) from  Continuing  Operations.  Net income (loss) from
continuing  operations  decreased  approximately  $0.4  million  from  income of
approximately  $0.3  million for the year ended  December  31, 1994 to a loss of
approximately  $0.1 million for the year ended December 31, 1995.  This decrease
was primarily due to the decline in net sales.

         Loss from Discontinued  Operations.  Loss from discontinued  operations
increased  approximately  $0.2 million from  approximately  $0.3 million for the
year ended  December 31, 1994 to  approximately  $0.5 million for the year ended
December  31,  1995.  These  losses  represent  the  results  of  the  Company's
discontinued  frozen beverage  division.  The Company  operated the division for
approximately eight months in 1994 and for 12 months in 1995.

         Loss on Disposal of Discontinued  Operations.  On December 31, 1995 the
Company recognized a charge of approximately $2.4 million in connection with its
decision to discontinue its frozen beverage division as described above.

         Net  Loss.   Net  loss  increased   approximately   $3.1  million  from
approximately $38,000 for the year ended December 31, 1994 to approximately $3.1
million for the year ended December 31, 1995. This increase  reflects the impact
of the decline in Net Sales as well as the  increase  in loss from  discontinued
operations and the loss on disposal of discontinued operations.

Liquidity and Capital Resources

         Cash used in operating  activities for the year ended December 31, 1996
was  approximately  $1.6 million.  This amount was  principally  affected by net
income,  the  add-back of  depreciation,  amortization  and  non-cash  interest,
reduction  in net  liabilities  of  discontinued  operations,  and  increases in
accounts receivable, inventory, prepaid expenses and accrued expenses. Cash used
in investing  activities for the year ended December 31, 1996 was  approximately
$10.0  million and  primarily  reflected  the  acquisition  of Carlton,  Prefco,
Richard's,  Grogan's and  Partin's.  Cash provided

                                      -15-

<PAGE>

by financing  activities  was approximately  $12.9 million and was  principally
affected by debt incurred and equity raised in connection with the acquisition
of Carlton, Prefco,  Richard's, Grogan's and  Partin's.  Net cash increase
during the period was  approximately $1.25 million.

         As of December 31, 1996, the Company had outstanding  under the LaSalle
Facility   approximately   $7.3  million  in   line-of-credit   borrowings   and
approximately  $6.6 million in term debt.  These  amounts are subject to monthly
payments of interest and quarterly  payments of term debt principal with a final
payment of interest and principal due March 15, 2001.  Interest  rates under the
LaSalle  Facility  are  variable,  and  for the  most  recent  quarter  averaged
approximately 8.8% on the line of credit and 9.3% on the term debt.

         In the fourth  quarter of 1996,  the  Company  obtained  an  additional
$450,000  short-term  loan (the "Bridge  Debt") from LaSalle  National Bank. The
Bridge Debt is subject to monthly interest  payments at the annual rate of Prime
+ 1.5% and is due in the second quarter of 1997.

         As of December 31, 1996 the Company had outstanding  approximately $3.0
million  of  subordinated  debt  owed  to  former  owners  of  Prefco,  Carlton,
Richard's,  Grogan's and Partin's.  Principal of $0.3 million is due during 1997
with the remaining approximately $2.7 million of principal due in 2001. Interest
rates currently average approximately 7.7%.

         The Company  believes  that cash  generated  from  operations  and bank
borrowings  will be  sufficient  to  fund  its  debt  service,  working  capital
requirements  and capital  expenditures as currently  contemplated  for the next
year. This is a forward-looking  statement and is inherently  uncertain.  Actual
results may differ materially. The Company's ability to fund its working capital
requirements and capital expenditures will depend in large part on the Company's
compliance  with  covenants in the LaSalle  Facility.  No assurance can be given
that the Company will remain in compliance  with such  covenants  throughout the
term of the LaSalle Facility.

         The  Company's  balance  sheet as of December 31, 1996  reflected a net
deferred tax asset of approximately $0.1 million.  A valuation  allowance exists
as of  this  date  because  based  on  the  weight  of all  available  evidence,
management  believes that it is more likely than not that the remaining deferred
tax asset will be fully realized.

         The Company,  from time to time,  reviews the possible  acquisition  of
other  products or  businesses.  The  Company's  ability to expand  successfully
through   acquisition   depends  on  many  factors,   including  the  successful
identification  and  acquisition  of products or  businesses  and the  Company's
ability  to  integrate   and  operate  the  acquired   products  or   businesses
successfully.  There can be no assurance  that the Company will be successful in
acquiring or integrating any such products or businesses.

Seasonality

         Consumer demand for beverage products  distributed by the Company tends
to be greater during warmer months.  Accordingly,  the Company's  beverage sales
and profits are  generally  highest in the second and third  calendar  quarters.
Management  believes  that this effect will be  mitigated  by the results of its
food operations which are less dependent on seasonal factors.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Company's 1996  Financial  Statements and the Report of Independent
Auditors thereon are set forth on pages F-1 through F-18 of this Form 10-K.

         Supplementary data regarding  quarterly results of operations have been
omitted since it is not applicable.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

                                      -16-

<PAGE>


None.




                                      -17-

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Incorporated  by reference from the Company's  proxy  statement for its
1997 annual meeting of stockholders.

ITEM 11.  EXECUTIVE COMPENSATION.

         Incorporated  by reference from the Company's  proxy  statement for its
1997 annual meeting of stockholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Incorporated  by reference from the Company's  proxy  statement for its
1997 annual meeting of stockholders.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Incorporated  by reference from the Company's  proxy  statement for its
1997 annual meeting of stockholders.

                                      -18-

<PAGE>


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)  Financial Statements

         Atlantic  Beverage  Company,  Inc. has set forth on pages F-1 through
F-18 of this Form 10-K the following financial statements of the Company:

ATLANTIC BEVERAGE COMPANY, INC.:                       Page(s)

Report of Independent Public Accountants                  F-1

Consolidated Balance Sheets as of December 31,            F-2
1995 and 1996

Consolidated Statements of Operations For the             F-3
Years Ended December 31, 1994, 1995 and 1996

Consolidated Statements of Stockholders'                  F-4
(Deficit) Equity For the Years Ended December
31, 1994, 1995 and 1996

Consolidated Statements of Cash Flows For The             F-5
Years Ended December 31, 1994, 1995 and 1996

Notes to Consolidated Financial Statements                F-8

                                      -19-

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
Atlantic Beverage Company, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Atlantic
Beverage Company, Inc. (a Delaware corporation), and subsidiaries as of December
31,  1995 and 1996,  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1996. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Atlantic Beverage Company, Inc.
and  subsidiaries  as of December  31,  1995 and 1996,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.






Baltimore, Maryland,
    February 21, 1997

                                     -F-1-

<PAGE>


                        ATLANTIC BEVERAGE COMPANY, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                  --------------------------------
                                                                                        1995             1996
                                                                                  ---------------   --------------
<S> <C>
                                     ASSETS

CURRENT ASSETS:
    Cash (Note 2)                                                                 $           -     $    1,248,963
    Accounts receivable, net of allowance for doubtful accounts
       of $35,000 and $118,000, respectively                                             798,385        10,160,891
    Inventory (Notes 2 and 3)                                                            630,968         3,629,647
    Prepaid expenses and other                                                           171,467           404,438
    Deferred tax asset (Note 8)                                                               -            390,500
                                                                                  --------------    --------------

          Total current assets                                                         1,600,820        15,834,439

PROPERTY, PLANT AND EQUIPMENT, net (Note 2 and 4)                                        706,518         4,820,900
DEFERRED TAX ASSET, (Note 8)                                                             365,000                -

GOODWILL, net (Notes 2 and 5)                                                             30,666        13,175,918
OTHER ASSETS, net (Notes 2 and 6)                                                        218,143           821,834
                                                                                  --------------    --------------

          Total Assets                                                            $    2,921,147    $   34,653,091
                                                                                  ==============    ==============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Bank overdraft                                                                $      297,458    $    2,672,630
    Line of credit (Note 9)                                                              440,000         7,255,984
    Current portion of long-term debt (Note 10)                                              788         2,324,267
    Accounts payable                                                                     855,846         6,120,435
    Accrued expenses                                                                      42,528         1,083,884
    Net current liabilities of discontinued operations (Note 18)                         722,173           562,283
                                                                                  --------------    --------------

          Total current liabilities                                                    2,358,793        20,019,483

LONG-TERM DEBT, net of current portion (Note 10)                                              -          7,778,934

DEFERRED TAX LIABILITY                                                                        -            250,900
                                                                                  --------------    --------------

          Total liabilities                                                            2,358,793        28,049,317
                                                                                  --------------    --------------

COMMITMENTS AND CONTINGENCIES (Notes 9, 13 and 20)
STOCKHOLDERS' EQUITY:
    Preferred stock, $.01 par value, 5,000,000 shares authorized;
       none issued                                                                            -                 -
    Common stock, $.01 par value; 30,000,000 shares authorized;
       2,727,955 and 6,804,451 shares issued in 1995 and 1996,
       respectively                                                                       27,280            68,045
    Additional paid-in capital                                                         5,041,252        10,146,148
    Accumulated deficit                                                               (4,079,108)       (3,183,349)
    Less: Treasury stock, at cost, 408,038 shares (Note 14)                             (427,070)         (427,070)
                                                                                  --------------    --------------

          Total Stockholders' Equity                                                     562,354         6,603,774
                                                                                  --------------    --------------

          Total Liabilities and Stockholders' Equity                              $    2,921,147    $   34,653,091
                                                                                  ==============    ==============
</TABLE>

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                     -F-2-

<PAGE>


                        ATLANTIC BEVERAGE COMPANY, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                --------------------------------------------------
                                                                     1994               1995              1996
                                                                ---------------   ---------------   --------------
<S> <C>
NET SALES                                                       $   24,151,796    $   20,596,436    $  153,279,993
COST OF GOODS SOLD, exclusive of depreciation
    shown below                                                     17,787,253        14,743,435       136,151,779
                                                                --------------    --------------    --------------

          Gross profit                                               6,364,543         5,853,001        17,128,214
                                                                --------------    --------------    --------------
SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES:
    Salaries and benefits                                            3,234,935         3,087,421         7,406,525
    Other operating expenses                                         2,457,601         2,515,439         7,089,913
    Depreciation and amortization (Notes 2, 4 and 6)                   394,261           388,321           993,513
                                                                --------------    --------------    --------------
          Total selling, general and administrative
              expenses                                               6,086,797         5,991,181        15,489,951
                                                                --------------    --------------    --------------

          Income (loss) from operations                                277,746          (138,180)        1,638,263

INTEREST EXPENSE (Notes 6, 9 and 10)                                     8,350            25,394         1,196,888

OTHER (EXPENSE) INCOME, net (Note 16)                                  (19,928)           11,654           476,384
                                                                ---------------   --------------    --------------
          Income (loss) before income tax benefit
              (provision)                                              249,468          (151,920)          917,759

INCOME TAX BENEFIT (PROVISION) (Note 8)                                 15,000                -            (22,000)
                                                                --------------    --------------    ---------------

          Net income (loss) from continuing operations                 264,468          (151,920)          895,759
LOSS FROM DISCONTINUED OPERATIONS
    (Note 18)                                                         (302,203)         (528,466)               -
LOSS ON DISPOSAL OF DISCONTINUED
    OPERATIONS (Note 18)                                                    -         (2,410,200)               -
                                                                --------------    --------------    -------------

NET (LOSS) INCOME                                               $      (37,735)   $   (3,090,586)   $      895,759
                                                                ==============    ==============    ==============

INCOME (LOSS) PER COMMON SHARE DATA:
    NET INCOME (LOSS) FROM CONTINUING
       OPERATIONS AFTER ACCRETION OF
       PREFERRED STOCK                                          $          .09    $         (.06)   $          .17
    LOSS FROM DISCONTINUED OPERATIONS,
       INCLUDING LOSS ON DISPOSAL                                         (.11)            (1.16)               -
                                                                --------------    --------------    -------------
    NET (LOSS) INCOME                                           $         (.02)   $        (1.22)   $          .17
                                                                ==============    ==============    ==============
    WEIGHTED AVERAGE SHARES OUTSTANDING                              2,710,950         2,528,532         5,349,539
                                                                ==============    ==============    ==============
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                     -F-3-

<PAGE>


                        ATLANTIC BEVERAGE COMPANY, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                   Series A Nonvoting
                                      Convertible
                                    Preferred Stock            Common Stock       Additional
                                ----------------------     ------------------       Paid-in    Accumulated
                                   Shares     Amount       Shares      Amount       Capital       Deficit
                                   ------     ------       ------      ------      ---------  ------------
<S> <C>
BALANCE, December 31, 1993             --    $      --    2,674,878    $26,749   $ 4,793,601  $  (933,878)
    Issuance of common stock           --           --       23,077        231       103,623           --
    Issuance of preferred stock         1      133,091           --         --            --           --
    Accretion of preferred stock       --        7,266           --         --            --       (7,266)
    Purchase of treasury stock         --           --           --         --            --           --
    Other                              --           --           --         --        (5,672)          --
    Net loss                           --           --           --         --            --      (37,735)
                                   ------    ---------    ---------    -------   -----------  -----------
BALANCE, December 31, 1994              1      140,357    2,697,955     26,980     4,891,552     (978,879)
    Purchase of treasury stock         --           --           --         --            --           --
    Accretion of preferred stock       --        9,643           --         --            --       (9,643)
    Conversion of preferred stock
       to common stock                 (1)    (150,000)      30,000        300       149,700           --
    Net loss                           --           --           --         --            --   (3,090,586)
                                   ------    ---------    ---------    -------   -----------  -----------
BALANCE, December 31, 1995             --           --    2,727,955     27,280     5,041,252   (4,079,108)
    Issuance of common stock
       through private placement,
       net                             --           --    2,765,549     27,656     2,754,727           --
    Issuance of common stock in
       connection with business
       combinations                    --           --    1,105,430     11,054     2,043,949           --
    Issuance of common stock to
       former noteholders              --           --      205,517      2,055       306,220           --
    Net income                         --           --           --         --            --      895,759
                                   ------    ---------    ---------    -------   -----------  -----------
BALANCE, December 31, 1996             --  $        --    6,804,451    $68,045   $10,146,148  $(3,183,349)
                                   ------    ---------    =========    =======   ===========  ===========
</TABLE>



<TABLE>
<CAPTION>


                                                     Treasury Stock              Total
                                                 -------------------------   Stockholders'
                                                   Shares         Amount         Equity
                                                   ------        --------    -------------
<S> <C>
BALANCE, December 31, 1993                              --     $      --      $3,886,472
    Issuance of common stock                            --            --         103,854
    Issuance of preferred stock                         --            --         133,091
    Accretion of preferred stock                        --            --              --
    Purchase of treasury stock                       2,500        (7,500)         (7,500)
    Other                                               --            --          (5,672)
    Net loss                                            --            --              --
                                                   -------     ---------      ----------
BALANCE, December 31, 1994                           2,500        (7,500)      4,072,510
    Purchase of treasury stock                     405,538      (419,570)       (419,570)
    Accretion of preferred stock                        --            --              --
    Conversion of preferred stock
       to common stock                                  --            --              --
    Net loss                                            --            --      (3,090,586)
                                                   -------     ---------      ----------
BALANCE, December 31, 1995                         408,038      (427,070)        562,354
    Issuance of common stock
       through private placement,
       net                                              --            --       2,782,383
    Issuance of common stock in
       connection with business
       combinations                                     --            --       2,055,003
    Issuance of common stock to
       former noteholders                               --            --         308,275
    Net income                                          --            --         895,759
                                                   -------     ---------      ----------
BALANCE, December 31, 1996                         408,038     $(427,070)     $6,603,774
                                                   =======     =========      ==========

 The accompanying notes are an integral part of these consolidated statements.

                                     -F-4-

<PAGE>


                        ATLANTIC BEVERAGE COMPANY, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


</TABLE>
<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                  ----------------------------------------------------
                                                                        1994              1995             1996
                                                                  ---------------   ---------------  -----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net (loss) income                                             $      (37,735)   $   (3,090,586)  $      895,759
    Adjustments to reconcile net (loss) income to net
       cash flows provided by operating activities, net
       of assets and liabilities acquired through
       business combinations-
          Loss on disposal of discontinued operations                         -          2,410,200               -
          Loss from discontinued operations                              302,203           528,466               -
          Depreciation and amortization                                  394,261           388,321          993,513
          Amortization of debt discount and deferred
              financing cost                                               3,562            10,120          102,217
          Deferred income tax benefit                                    (15,000)               -           (60,000)
          Write-off of consulting agreement                               39,800                -                -
          Decrease (increase) in accounts receivable, net                325,906           201,944       (3,337,143)
          Decrease (increase) in inventory                               440,226            62,001         (296,724)
          (Increase) decrease in prepaid expenses and
              other assets                                              (124,252)           57,784         (109,899)
          (Decrease) increase in accounts payable                       (260,579)          197,707          (30,436)
          (Decrease) increase in accrued expenses                        (18,598)          (41,184)         414,587
                                                                  --------------    --------------   --------------
    Net cash flows provided by (used in)
       operating activities of-
          Continuing operations                                        1,049,794           724,773       (1,428,126)
          Discontinued operations                                       (178,157)         (597,626)        (159,890)
                                                                  --------------    --------------   --------------

              Net cash flows provided by (used in)
                 operating activities                                    871,637           127,147       (1,588,016)
                                                                  --------------    --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of property, plant and equipment                        (853,131)         (493,272)        (584,869)
    Cash paid in connection with business
       combinations, including acquisition fees                         (795,969)          (88,014)      (9,417,351)
    Purchase of distribution rights                                      (50,000)               -           (50,000)
                                                                  --------------    --------------   --------------

              Net cash flows used in investing
                 activities                                           (1,699,100)         (581,286)     (10,052,220)
                                                                  --------------    --------------   --------------
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                     -F-6-
<PAGE>


                        ATLANTIC BEVERAGE COMPANY, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                  --------------------------------------------------
                                                                        1994             1995             1996
                                                                  ---------------  ---------------  ----------------
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
    Increase (decrease) in bank overdraft                         $           -    $      297,458   $     (708,527)
    Net borrowings under line of credit                                       -           440,000        6,815,984
    Borrowing under term debt                                                 -                -         7,900,000
    Repayments of notes payable                                          (60,671)          (6,144)      (3,194,221)
    Payments of deferred financing costs                                 (21,374)              -          (706,420)
    Issuance of common stock through private
       placement, net                                                         -                -         2,782,383
    Purchase of treasury stock                                            (7,500)        (419,570)              -
    Other                                                                 (5,665)              -                -
                                                                  --------------   --------------   -------------

              Net cash flows provided by (used in)
                 financing activities                                    (95,210)         311,744       12,889,199
                                                                  --------------   --------------   --------------

NET (DECREASE) INCREASE IN CASH                                         (922,673)        (142,395)       1,248,963

CASH, beginning of period                                              1,065,068          142,395               -
                                                                  --------------   --------------   -------------

CASH, end of period                                               $      142,395   $           -    $    1,248,963
                                                                  ==============   ==============   ==============
</TABLE>


 The accompanying notes are an integral part of these consolidated statements.

                                     -F-7-

<PAGE>

                        ATLANTIC BEVERAGE COMPANY, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY:

         The accompanying consolidated financial statements present the accounts
of Atlantic  Beverage  Company,  Inc.  and  subsidiaries  (the  "Company").  All
significant intercompany transactions have been eliminated in consolidation.

         The Company is engaged in the  distribution  of specialty  nonalcoholic
beverages to the retail trade in the Baltimore and Washington, D.C. metropolitan
areas and, as a result of business  combinations  consummated  during  1996,  is
engaged in the  manufacturing,  marketing and  distribution  of meat products in
Texas, Louisiana, Kentucky and surrounding states.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

         The Company  records sales when product is delivered to the  customers.
Discounts provided, principally volume, are accrued at the time of the sale.

Cash

         Cash consists of cash held in various deposit accounts with financial
institutions.  As of December 31,  1996, $175,000 was restricted to meet minimum
balance funding requirements.

Inventory

         Inventory  is stated at the lower of cost or market and is comprised of
raw materials,  finished goods and packaging supplies.  Cost is determined using
the first-in, first-out method.

Property, Plant and Equipment

         Property,  plant and  equipment  are stated at cost,  net of applicable
depreciation.  Depreciation is provided using the straight-line  method over the
following useful lives.

                   Buildings and building improvements                5-30 years
                   Machinery, equipment and furniture                 5-10 years
                   Leasehold improvements                             2- 5 years
                   Vehicles                                           5-10 years

Reclassifications

         Certain amounts in the prior years' consolidated  financial  statements
have been reclassified to conform to the current year's presentation.

Other Assets

         Other assets consist of noncompete agreements, distribution and license
agreements and deferred financing costs. Distribution and license agreements are
being  amortized  over 2-3  years  using  the  straight-line  method,  while the
deferred financing costs are being amortized over 5 years, representing the term
of the related debt, using the effective interest method.

                                     -F-8-

<PAGE>


Goodwill

         Goodwill  recorded in connection  with business  combinations  is being
amortized  using  the  straight-line  method  over 5 to 40  years.  Amortization
expense  for  each of the  years  ended  December  31,  1994,  1995 and 1996 was
$115,699,  $115,699 and $290,807,  respectively.  Accumulated amortization as of
December 31, 1995 and 1996 was $547,829 and $260,141, respectively.

Income Taxes

         Statement of Financial  Accounting  Standards No. 109,  "Accounting for
Income Taxes," requires deferred income taxes to be recorded under the liability
method  and  restricts  the  conditions  under  which a  deferred  asset  may be
recorded.

Accounting Pronouncements

         In  February  1997,  the FASB  issued  Statement  No.  128 (SFAS  128),
"Earnings  Per  Share,"  which  establishes  new  standards  for  computing  and
presenting  earnings per share.  SFAS 128 is effective for financial  statements
issued for periods ending after December 15, 1997,  including  interim  periods.
Management has not yet determined  whether the  implementation  of SFAS 128 will
have any impact on the Company's earnings per share amounts.

         In  March  1995,  the  FASB  issued   Statement  No.  121  (SFAS  121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which requires  impairment  losses to be recorded on long-lived
assets used in operations  when  indicators  of  impairment  are present and the
undiscounted  cash flows estimated to be generated by those assets are less than
the  assets'  carrying  amount.  SFAS  121 also  addresses  the  accounting  for
long-lived  assets that are expected to be disposed of. As of December 31, 1996,
management  believes there were no  indications of impairment  that would effect
the carrying values of assets.

         In  November  1995,  the FASB  issued  Statement  No.  123 (SFAS  123),
"Accounting for Stock-Based Compensation." Companies have the option of adopting
the new accounting  provisions or may elect to provide pro forma  disclosures of
net  income  and  earnings  per  share as if the  accounting  had been  adopted.
Management has elected to continue to account for its  stock-based  compensation
in  accordance  with APB Opinion No. 25 and has provided  pro forma  disclosures
(see Note 12).

Supplemental Cash Flow Information

                                                Cash Paid         Cash Paid
                                                for Taxes        for Interest
                                                ---------        ------------
        Year ended December 31, 1994
            Related parties                     $       -        $     5,090
            Other                                  29,500              4,788
        Year ended December 31, 1995
            Related parties                             -              4,026
            Other                                       -             15,274
        Year ended December 31, 1996
            Related parties                             -                  -
            Other                                       -          1,115,949

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 as of the date of the financial
statements  and the

                                     -F-9-

<PAGE>

reported  amounts  of  revenues  and  expenses  during  the reporting period.
Actual results could differ from those estimates.

3.     INVENTORY:

         Inventory consisted of the following as of December 31:

                                              1995              1996
                                        ---------------   --------------
          Raw materials                 $           -     $      100,619
          Finished goods                       630,968         3,077,431
          Packaging supplies                        -            451,597
                                        --------------    --------------
                 Total                  $      630,968    $    3,629,647
                                        ==============    ==============

4.     PROPERTY, PLANT AND EQUIPMENT:

         Property, plant and equipment as of December 31, 1995 and 1996 are
summarized as follows:

                                                        1995              1996
                                                        ----              ----
          Land                                     $         -     $     85,000
          Buildings and building improvements                -        1,567,368
          Machinery, equipment and furniture          1,292,589       3,534,307
          Leasehold improvements                             -          498,218
          Vehicles                                       76,421         448,977
                                                   ------------    ------------
          Property, plant and equipment, gross        1,369,010       6,133,870
          Less - Accumulated depreciation              (662,492)     (1,312,970)
                                                   ------------    ------------
          Property, plant and equipment, net       $    706,518    $  4,820,900
                                                   ============    ============

         Depreciation  expense for the years ended  December 31, 1994,  1995 and
1996 was $170,869, $224,930 and $655,014, respectively.

5.   BUSINESS COMBINATIONS:

         As of January 1, 1996, a newly formed  wholly-owned  subsidiary  of the
Company acquired the outstanding common stock of Prefco, Inc. (Prefco).  Also as
of January 1, 1996,  Carlton Foods, Inc. (Carlton Foods) was merged into another
newly formed,  wholly-owned subsidiary of the Company. In addition, as of August
1, 1996,  the  Company  acquired  the assets of  Richard's  Cajun  Country  Food
Processors  (Richard's).  As of  October  1,  1996,  the  Company  acquired  the
outstanding  common  stock of  Grogan's  Farm,  Inc.  and the assets of Grogan's
Sausage, Inc. (collectively referred to as "Grogan's") and certain real property
previously  held by the sellers.  As of November 15, 1996, the Company  obtained
certain operating assets from Partin's Country Sausage (Partin's). In connection
with these business combinations, the Company entered into a loan agreement with
a commercial  bank which  provided a $7.45  million term loan and a $8.5 million
revolving  line of credit (see Notes 9 and 10). The business  combinations  were
accounted  for using the  purchase  method of  accounting,  whereby the purchase
price is allocated to the assets  acquired and  liabilities  assumed  based upon
fair value. The resulting goodwill was determined as follows:

                                     -F-10-

<PAGE>


        Cash paid                                           $   10,850,728
        Issuance of notes to the Sellers, at fair value          2,472,150
        Issuance of the Company's common stock                   2,055,003
        Debt assumed by the Company                              2,945,180
        Acquisition costs                                        1,121,799
                                                            --------------

               Total purchase price                             19,444,860
                                                            --------------
        Current assets acquired                                 11,364,230
        Noncurrent assets acquired                               4,086,718

        Current liabilities assumed                             (9,060,539)
        Noncurrent liabilities assumed                            (381,608)
                                                            --------------
               Net assets acquired                               6,008,801
                                                            --------------
               Goodwill                                     $   13,436,059
                                                            ==============

Prefco and Carlton Foods

         In  connection  with the Prefco and  Carlton  Foods  transactions,  the
Company  paid  approximately  $3.6  million,   net  of  cash  acquired,   issued
approximately  650,000  shares of common stock to the former  shareholders.  The
Company also issued a subordinated promissory note to the former shareholders of
Prefco with a face amount of $1.4 million  (see Note 10). In addition,  a former
shareholder  of Prefco signed an employment  agreement with the Company for five
years, with an automatic one-year extension. If, at the end of each of the first
four years,  the  shareholder  is still employed by the Company and Prefco meets
predetermined  operating  income growth from the previous year, the Company will
grant to the former  shareholders,  options to acquire  additional shares of the
Company's stock.  The effect of these contingent  options has not been reflected
in the accompanying financial statements.

Richard's

         In connection with the Richard's transaction,  the Company paid cash in
the amount of $2,500,000 and issued a subordinated promissory note to the former
shareholder  with a face amount of  $874,786  (see Note 10).  In  addition,  the
former  shareholder  signed an employment  agreement  with the Company for three
years. If, at the end of three years,  the former  shareholder is still employed
by the Company and Richard's meets certain cumulative  operating income targets,
the  Company  will  deliver a  pre-determined  amount  of  shares to the  former
shareholder. The effect of these contingent shares has not been reflected in the
accompanying financial statements.

Grogan's

         In connection with the Grogan's transaction, the Company issued 573,810
shares  of its  common  stock to the  former  shareholders,  paid  approximately
$1,900,000  in cash and  issued a  subordinated  promissory  note to the  former
shareholders  with a face amount of $200,000  (see Note 10).  In  addition,  the
former shareholder signed an employment agreement with the Company for one year.

Partin's

         In connection with the Partin's transaction,  the Company issued 81,619
shares of its common stock to the former shareholders, paid $419,891 in cash and
issued a subordinated  promissory note to the former  shareholders in the amount
of $224,891 (see Note 10).

                                     -F-11-

<PAGE>


6.     OTHER ASSETS:

         Other assets are comprised of the following as of December 31, 1995 and
1996:

                                                       1995           1996
                                                   -----------    -----------
          Noncompete agreement                     $   200,000    $   200,000
          Distribution agreements                       25,000         50,000
          Deferred financing costs                      21,374        706,420
          Cash surrender value of life insurance            -          64,443
          Other                                         88,014             -
                                                   -----------    -----------

                                                       334,388      1,020,863

          Less - Accumulated amortization             (116,245)      (199,029)
                                                   -----------    -----------

          Other assets, net                        $   218,143    $   821,834
                                                   ===========    ===========

         Amortization expense applicable to distribution, license and consulting
agreements for years ended December 31, 1994, 1995 and 1996, was $36,025, $7,692
and $7,692,  respectively,  and is included within depreciation and amortization
expenses in the accompanying consolidated statements of operations. Amortization
of deferred financing costs of $3,562,  $10,120 and $81,466,  respectively,  has
been  included  within  interest  expense  in  the   accompanying   consolidated
statements of operations for the years ended  December 31, 1994,  1995 and 1996,
respectively.

         The Company, Sterling Group, Inc. (Sterling Group) and Sterling Group's
principals have entered into a noncompete and nondisclosure agreement, effective
November 29, 1993 (the closing date of the Company's  initial public  offering),
containing certain noncompetition and confidentiality  provisions. The agreement
provides that Sterling  Group and its  principals  agree not to compete with the
Company for a period of five years from the closing date,  nor will they solicit
for  employment any director,  stockholder or certain  employees of the Company.
Such agreement  also provides that Sterling  Group and its  principals  will not
disclose any confidential information concerning the Company and its business to
any other  person or entity  except as may be required by law.  The Company paid
Sterling Group a fee of $200,000 at closing in  consideration of such agreement.
Amortization  expense for each of the years ended  December 31,  1994,  1995 and
1996, was $40,000. Accumulated amortization as of December 31, 1995 and 1996 was
$84,000 and $124,000, respectively.

7.     SIGNIFICANT SUPPLIERS AND CUSTOMERS:

         For  the  year  ended  December  31,  1994,   two  suppliers   supplied
approximately  60%  and  11%,  respectively,  of  the  Company's  total  product
purchases. No single customer accounted for more than 10% of the Company's total
sales.

         For  the  year  ended  December  31,  1995,   two  suppliers   supplied
approximately  62%  and  13%,  respectively,  of  the  Company's  total  product
purchases. No single customer accounted for more than 10% of the Company's total
sales.

         For  the  year  ended  December  31,  1996,   two  suppliers   supplied
approximately  17%  and  11%,  respectively,  of  the  Company's  total  product
purchases. In addition, a single customer accounted for approximately 41% of the
Company's total sales.

         During the fourth  quarter of 1996,  the  Company  signed an  exclusive
distribution  agreement with the AriZona  beverage brand ("AriZona"). Management
estimates that AriZona will supply  approximately 20% of its specialty  beverage
distribution business.

                                     -F-12-

<PAGE>


8.     INCOME TAXES:

         The  Company  has  incurred  significant  tax losses and has  generated
timing differences which would give rise to deferred taxes. Based upon available
evidence,  management  believes that, it is more likely than not, that a portion
of these losses and future deductions will be realized in future periods and has
recorded a tax benefit and deferred tax asset,  net of an  applicable  valuation
allowance as required by Statement of  Financial  Accounting  Standards  No. 109
"Accounting  for  Income  Taxes." In  connection  with the loss on  disposal  of
discontinued operations, no benefit for income taxes was recorded.

         The benefit (provision) from income taxes on continuing  operations for
the years ended December 31,  1994, 1995 and 1996, included amounts summarized
as follows:

                                               1994      1995        1996
                                            --------  ----------   ---------
          Current:
              Federal                       $    -    $      -     $ (60,000)
              State                              -           -       (22,000)
          Deferred:
              Federal                        13,000     180,000     (353,000)
              State                           2,000      24,000      (47,000)
                                            -------   ---------    ---------

                                             15,000     204,000     (482,000)

          Valuation allowance                    -     (204,000)     460,000
                                            -------   ---------    ---------

          Total tax benefit (provision)     $15,000   $      -     $ (22,000)
                                            =======   =========    =========

         In connection with certain  business  combinations  consummated  during
1996,  the Company  recorded a deferred tax  liability  of $285,400  through the
allocation  of the  related  purchase  price.  Gross  deferred  tax  assets  and
liabilities are comprised of the following at December 31:

<TABLE>
<CAPTION>
                                                                1995          1996
                                                             ------------  ----------
<S> <C>
          Deferred Tax Assets:
              Net operating loss carryforwards               $   817,800   $  633,800
              Net liabilities of discontinued operations         819,500      442,800
              Inventory                                           15,300       59,800
              Accrued expenses                                     3,400       44,100
              Accounts receivable                                 11,900       39,300
              Other                                               30,600       97,200
                                                             -----------   ----------

                                                               1,698,500    1,317,000

              Valuation allowance                             (1,148,500)    (688,500)
                                                             -----------   ----------

                 Deferred tax assets                             550,000      628,500
                                                             -----------   ----------

          Deferred Tax Liabilities:
              Property, plant and equipment                       60,000      222,200
              Other                                              125,000      266,700
                                                             -----------   ----------

                 Deferred tax liabilities                        185,000      488,900
                                                             -----------   ----------

                                                             $   365,000   $  139,600
                                                             ===========   ==========
</TABLE>

         As of December 31, 1996, the Company has approximately $1.9 million of
net operating loss carryforwards for tax purposes expiring through 2010.

                                     -F-13-

<PAGE>


         The  statutory  federal  income tax rate,  reconciled  to the effective
income tax rate benefit (provision) is as follows:

<TABLE>
<CAPTION>
                                                                        1995          1996
                                                                       -------      -------
<S> <C>
          Statutory federal income tax rate                              34.0%       (34.0)%
          State income taxes, net of federal income tax effect            4.6         (5.0)
          Nondeductible amortization of goodwill                        (75.6)        (9.6)
          Valuation allowance                                            37.0         50.1
          Other                                                           -           (3.9)
                                                                       ------        ------

              Total                                                       -  %        (2.4)%
                                                                       ======        ======
</TABLE>

9.     BORROWINGS UNDER LINE OF CREDIT:

         In March 1996, the Company entered into a new line of credit  agreement
with a bank through March 2001. Under the terms of the agreement, the Company is
permitted  to borrow up to  $8,500,000,  subject  to advance  formulas  based on
accounts  receivable and inventory.  Amounts borrowed are due on demand and bear
interest at either the bank's prime rate plus an additional  rate of 1% or LIBOR
plus an additional 3%. Amounts  borrowed are payable  monthly and are secured by
all assets of the Company.

         Information  related to the line of credit for the years ended December
31, 1994, 1995 and 1996 is as follows:

                                    Weighted Average
                              ---------------------------       Maximum
                               Month-end        Interest         Amount
                                Balance           Rate        Outstanding
                              ----------        --------      -----------
          1994                $   323,544          7.8%       $   750,922
          1995                     88,417          8.75           575,000
          1996                  3,895,000          9.0          7,255,984

         As of December 31, 1996, approximately $1,225,000 of standby letters of
credit were outstanding under the line of credit facility.

                                     -F-14-

<PAGE>


10.    LONG-TERM DEBT:

         Long-term  debt as of  December  31,  1995 and 1996,  consisted  of the
following:

<TABLE>
<CAPTION>
                                                                                    1995              1996
                                                                               --------------    --------------
<S> <C>
         Note payable, bearing interest at either prime plus 1.5% or LIBOR
              plus 3.5%, due in varying amounts monthly through March 2001     $           -     $    7,117,308
         Subordinated promissory note, bearing interest at 9% annually,
              payable throughout 1997                                                      -            300,000
         Subordinated promissory note to former shareholders of Prefco,
              bearing interest at 9% annually, payable in quarterly
              installments of interest, with all outstanding principal and
              interest due March 2001                                                      -          1,400,000
         Subordinated promissory note to former shareholder of Richard's,
              bearing   interest  at  6.35%   annually,   payable  in  quarterly
              installments  of  interest,  with all  outstanding  principal  and
              interest due July 2001, net of unamortized discount of $0 and
              $168,298                                                                     -            874,786
         Subordinated promissory note to former shareholders of Grogan's,
              effective October 1998,  bearing interest at 8% annually,  payable
              in  quarterly  installments  of  interest,  with  all  outstanding
              principal  and interest due  September  2001,  net of  unamortized
              discount of $0 and $38,478
                                                                                           -            200,000
         Subordinated  promissory  note  to  former  shareholders  of  Partin's,
              bearing   interest   at  8%   annually,   payable   in   quarterly
              installments, with all outstanding principal and interest due
              December 2003                                                                -            224,891
         Other                                                                            788           192,992
                                                                               --------------    --------------
                Total                                                                     788        10,309,977
         Less:  Current portion                                                          (788)       (2,324,267)
                Unamortized discount                                                       -           (206,776)
                                                                               --------------    --------------
                Long-term debt, net of current portion and unamortized
                   debt discount                                               $           -     $    7,778,934
                                                                               ==============    ==============
</TABLE>


         The future maturities of the notes payable as of December 31, 1996, are
as follows:

          1997                                              $ 2,324,267
          1998                                                1,595,891
          1999                                                1,708,348
          2000                                                1,738,141
          2001                                                2,718,439
          2002 and thereafter                                   224,891
                                                            -----------

                                                            $10,309,977

         In connection  with the Company's  line of credit (see Note 9) and note
payable,  the Company is required to meet certain  financial and  nonfinancial
covenants.

                                     -F-15-

<PAGE>


11.    FAIR VALUE OF FINANCIAL INSTRUMENTS:

         The carrying amounts  reported in the balance sheet for cash,  accounts
payable  and  accrued  expenses  approximate  fair  value  because  of the short
maturity of those instruments.

         Fair  value  of  the  Company's   long-term  debt  is  estimated  using
discounted  cash  flow  analyses,  based on the  Company's  current  incremental
borrowing rates for similar types of borrowing arrangements.

         The aggregate face amounts and fair values of the Company's  long-term
debt as of December 31,  1996, were $10,309,977 and $10,103,201,  respectively.
The carrying amount of the Company's long-term debt approximated the fair value
as of December 31, 1995.

12.    STOCK OPTIONS:

         The Company has a  non-incentive  stock option plan (the  Non-Incentive
Plan) and a Director's stock option plan (the Directors' Plan),  which authorize
the Company to grant,  to  eligible  individuals,  options  for the  purchase of
shares of the Company's $.01 par value common stock.

         Under the terms of the Non-Incentive  Plan, the Company may issue up to
1,100,000 options to officers,  advisors, full-time employees and other eligible
individuals. In addition, the Company may issue up to 150,000 options to outside
directors. In general, the option exercise price equals the stock's market price
on the  date of  grant  and  vest up to  three  years.  Under  the  terms of the
Directors' Plan, the Company may issue up to 500,000 options to eligible outside
Directors.  Each  eligible  Director  was granted an initial  option to purchase
10,000 shares of stock.  Each eligible  Director  shall be granted an additional
option to purchase 10,000 shares of stock after each year of service. The option
exercise  price  equals the stock's  market  price on the date of grant and vest
after one year. The issuance of options under the  Non-Incentive  and Directors'
Plans during 1994, 1995 and 1996, had no impact on the accompanying consolidated
financial statements.

         In  connection  with  the  employment  agreement  with  the  new  Chief
Executive  Officer (see Note 13), the Company  issued 250,000 stock options with
an exercise  price of $1.50,  representing  the fair  market  value at March 15,
1996.  The options  vest over a five year  period and  provide  for  accelerated
vesting if certain financial performance  thresholds are met. As of December 31,
1996, 20% of these options had vested.

         The Company has  elected to account  for its  stock-based  compensation
plans in  accordance  with APB No. 25, under which no  compensation  expense has
been recognized.  The Company has computed for pro forma disclosure purposes the
value of all  options  granted  during  1995 and 1996,  using the  Black-Scholes
option pricing model as prescribed by SFAS No. 123 and the following assumptions
used for option grants:

                                                  1995               1996
                                            ----------------   --------------

          Risk-free interest rate (range)        6.91%          5.44% - 6.81%
          Expected dividend yield                0.00%              0.00%
          Expected lives                       6.5 years          5-6 years
          Expected volatility                     36%                36%

                                     -F-16-

<PAGE>

         Adjustments  were made for  options  forfeited  prior to  vesting.  Had
compensation expense for these plans been determined in accordance with SFAS No.
123,  the  Company's  net  income  and  earnings  per  share  reflected  on  the
accompanying  statement of  operations  would have been reduced to the following
"pro forma" amounts:

                                                    1995              1996
                                               --------------    -------------

          Net (Loss) Income:
                            As reported        $   (3,090,586)   $   895,760
                            Pro forma              (3,153,437)       715,067

          Earnings Per Share:
                            As reported                 (1.22)           .17
                            Pro forma                   (1.25)           .13

         Because the FASB  Statement No. 123 method of  accounting  has not been
applied to options  granted  prior to January 1, 1995,  the  resulting pro forma
compensation  expense may not be representative of that to be expected in future
years.

<TABLE>
<CAPTION>
                                              1994                        1995                        1996
                                    -------------------------  --------------------------  ---------------------------
                                                    Weighted                    Weighted                    Weighted
                                                    Average                     Average                     Average
                                                    Exercise                    Exercise                    Exercise
                                       Shares         Price         Shares        Price        Shares        Price
                                       ------       --------        ------      ---------      ------       --------
<S> <C>
Outstanding, beginning of year         152,586    $   6.50          170,036    $   6.31         233,136    $    5.47
Granted                                 21,300        4.63           67,700        2.75         464,200         1.76
Exercised                                   -         -                  -         -                 -          -
Forfeited                               (3,850)       4.63           (4,600)       3.49          (4,100)        3.24
Expired                                     -         -                  -         -                 -          -
Outstanding, end of year               170,036        6.31          233,136        5.47         693,236         3.00
Exercisable, end of year                70,034        6.50          142,552        5.45         410,044         3.51

Weighted average fair value
    of options granted                                                         $   1.40                    $     .81
</TABLE>


         Options  outstanding  as of December 31,  1994,  were deemed to have no
value in accordance with APB No. 25.

13.   COMMITMENTS:

Executive Employment Agreement

         Effective  March  15,  1996,  the  Company  entered  into  a  five-year
employment  agreement  with its new Chief  Executive  Officer which provides for
base compensation and an incentive bonus.

                                     -F-17-

<PAGE>


Operating Leases

         The  Company  leases  warehouses,  office  buildings  and  most  of its
delivery  vehicles under  operating  leases.  These leases have remaining  terms
ranging from one to five years.  Rental expense under these leases for the years
ended December 31, 1994,  1995 and 1996 was $618,543,  $594,010 and  $1,223,271,
respectively.  The delivery vehicle leases include options to cancel up to three
of the leases in the event of an economic  slowdown.  As of December  31,  1996,
future minimum lease payments under these operating leases are as follows:

          1997                                            $   890,678
          1998                                                604,134
          1999                                                240,403
          2000                                                180,729
          2001                                                143,052
          2002 and thereafter                                  93,814
                                                          -----------
                                                          $ 2,152,810
                                                          ===========

         In  January  1997,  the  Company  signed  a lease  for a new  warehouse
facility.  The term of the new lease is five years,  with an option to renew for
an additional five years, and commences in April 1997.

14.    REPURCHASE OF COMMON STOCK:

         Throughout  1995,  the  Company   repurchased  405,538  shares  of  its
outstanding  common  stock at an average  per share cost of $1.03.  The  Company
accounted for these transactions as treasury stock, utilizing the cost method.

15.    RELATED PARTY TRANSACTIONS:

         The accompanying consolidated statements of operations include interest
related to certain notes payable to related parties  (including  amortization of
deferred financing costs) and other liabilities to stockholders of approximately
$5,100 for the year ended December 31, 1994.

         The Company has a  consulting  agreement  (the  Agreement)  with Elfman
Venture  Partners,  Inc. and Sterling  Advisors,  L.P., a  partnership  owned by
stockholders of the Company.  The term of the Agreement is through  December 31,
2001.  The Agreement  provides that the Company shall pay a base fee of $300,000
per year, which shall increase 5% for each year the Agreement remains in effect.
The  Agreement  also   stipulates   adjustments  to  the  base  fee  for  future
acquisitions  or sales.  The  adjusted  base fee as of  December  31,  1996,  is
$350,000.  During  each year the  Agreement  is in effect,  the  Company is also
required to grant options to purchase  25,000  shares of the Company's  $.01 par
value common stock.  Such options vest on each December 31 at an exercise  price
equal to the market price on the preceding  January 1 (see Note 12). The Company
also  utilizes  the  consulting  services  of a  shareholder.  Under the current
consulting  agreement,  the  shareholder  is paid a base monthly fee and is also
granted  options to purchase 1,000 shares of the Company's $.01 par value common
stock per month.

         The  accompanying   consolidated   statements  of  operations   include
approximately  $144,000,  $148,000 and $340,000 for the years ended December 31,
1994, 1995 and 1996,  respectively,  for management and consulting services that
were paid to certain stockholders and to Sterling Advisors.

16.    OTHER (EXPENSE) INCOME:

         During the first  quarter of 1996,  the  Company  and one of its former
suppliers  agreed to  terminate  their  distribution  agreement.  As part of the
settlement,   the  former  supplier  agreed  to  pay  the  Company  $250,000  in
consideration.  The  consideration  received is included in other  income on the
consolidated  statements of

                                     -F-18-

<PAGE>

operations.  During 1995,  approximately  4% of the total cases sold represented
cases supplied by this former supplier.

17.    BUSINESS SEGMENT INFORMATION:

         The  Company's  operations  have been  classified  into three  business
segments:  beverage  distribution,  food processing and food  distribution.  The
beverage distribution segment includes purchasing, marketing and distribution of
nonalcoholic  beverages  to the  retail  trade  in  the  greater  Baltimore  and
Washington, D.C. metropolitan area and surrounding counties. The food processing
segment  includes the  processing  and sales of sausage and related  products to
distributors  and  retailers  in  the  Louisiana,   Texas,  Kentucky  and  other
surrounding  states.  The food  distribution  segment  includes the  purchasing,
marketing  and   distribution   of  packaged  meat  products  to  retailers  and
restaurants, primarily in Texas.

         Summarized financial information, by business segment,  for continuing
operations in 1994, 1995 and 1996 is as follows (corporate overhead not
specifically associated with a segment has been presented separately):

<TABLE>
<CAPTION>
                                                            1994             1995              1996
                                                      ---------------  ---------------   ---------------
<S> <C>
          Net sales:
              Beverage distribution                   $    24,151,796  $    20,596,436   $    19,401,759
              Food processing                                      -                -         12,864,437
              Food distribution                                    -                -        125,610,141
                                                      ---------------  ---------------   ---------------

                                                      $    24,151,796  $    20,596,436   $   157,876,337
                                                      ===============  ===============   ===============
          Operating income (loss):
              Beverage distribution                   $       277,746  $      (138,180)  $       631,108
              Food processing                                      -                -            934,691
              Food distribution                                    -                -          1,075,395
              Corporate                                            -                -           (972,931)
                                                      ---------------  ---------------   ---------------

                                                      $       277,746  $      (138,180)  $     1,668,263
                                                      ===============  ===============   ===============
          Total assets:
              Beverage distribution                   $     3,286,458  $     2,921,147   $     5,700,876
              Food processing                                      -                -         14,170,199
              Food distribution                                    -                -         17,317,461
                                                      ---------------  ---------------   ---------------

                                                      $     3,286,458  $     2,921,147   $    37,188,536
                                                      ===============  ===============   ===============

          Depreciation and amortization:
              Beverage distribution                   $       394,261  $       388,321   $       344,399
              Food processing                                      -                -            447,651
              Food distribution                                    -                -            201,463
                                                      ---------------  ---------------   ---------------

                                                      $       394,261  $       388,321   $       993,513
                                                      ===============  ===============   ===============

          Capital expenditures:
              Beverage distribution                   $       853,131  $       493,805   $       374,235
              Food processing                                      -                -             76,853
              Food distribution                                    -                -            133,781
                                                      ---------------  ---------------   ---------------

                                                      $       853,131  $       493,805   $       584,869
                                                      ===============  ===============   ===============
</TABLE>


         There were no significant  intersegment  sales or transfers during 1994
and 1995.  Intersegment  sales and related  receivables  and payables  among the
segments  during  1996,  for the  purpose  of this  presentation,  have not been
eliminated.  Operating  income,  by business segment  excludes  interest income,
interest expense and net unallocated corporate expenses.

                                     -F-19-

<PAGE>

18.    DISCONTINUATION OF THE FLYING FRUIT FANTASY DIVISION:

         On April 27, 1994, the Company acquired substantially all of the assets
and  assumed  certain  liabilities  of  Flying  Fruit  Fantasy,  USA,  Inc.  for
approximately  $580,000 in cash and 23,077 shares of common stock of the Company
with a market value of approximately  $104,000 at closing, one share of Series A
nonvoting  preferred  stock  convertible  into $150,000 worth of common stock on
October 18, 1995, and $5,000 in cash per month for 24 months after closing.  The
convertible  preferred  stock on April 27, 1994,  was valued at $133,091 and was
accreted  through  the  conversion  date  up to  the  estimated  fair  value  at
conversion.  On October 18, 1995, the preferred  stock was converted into 30,000
shares of common stock.

         In December 1995,  the Company  adopted a plan to dispose of its Flying
Fruit Fantasy division. As a result, the Company recognized a one-time charge of
$2,410,200, which was determined as follows:

          Write-off of equipment                                   $ 1,085,112
          Write-off of goodwill                                        744,310
          Write-off of noncompete agreements and other assets          215,703
          Other costs to discontinue operations                        365,075
                                                                   -----------
                                                                   $ 2,410,200
                                                                   ===========

         This  net  loss has been  reflected  in the  accompanying  consolidated
statements of operations under Loss on Disposal of Discontinued Operations.

         The results of the Flying Fruit  Fantasy  division  have been  reported
separately  as  discontinued   operations  in  the  consolidated  statements  of
operations  for the years ended  December 31, 1994 and 1995.  Revenues  from the
Flying Fruit  Fantasy  division  were  $475,478 for the year ended  December 31,
1994,  and $549,500 for the year ended  December 31, 1995. No benefit for income
taxes has been recorded in connection  with these losses due to the  uncertainty
that the  Company  will be able to offset  the  losses  against  future  taxable
income.

         The  liabilities as of December 31, 1995 and 1996,  have been presented
separately in the accompanying consolidated balance sheets.

19.  UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS:

         The unaudited pro forma summary  consolidated results of operations for
the years ending December 31, 1995 and 1996, assuming the business  combinations
described in Note 5 had been consummated on January 1, 1995, are as follows:

<TABLE>
<CAPTION>
                                                                           (Unaudited)
                                                                -----------------------------------
                                                                      1995                1996
                                                                  -------------      ------------
<S> <C>
          Revenues, net                                            $146,982,019      $160,826,913
          Operating expenses, net of depreciation and
              amortization                                          144,033,919       157,265,608
          Depreciation and amortization                               1,520,835         1,340,464
          Other expenses, net                                         1,228,329           946,275
          Provision for income taxes                                      2,884           261,200
                                                                   ------------      ------------
                 Net income from continuing operations             $    196,052      $  1,013,366
                                                                   ============      ============
</TABLE>


20.    CONTINGENCIES:

         Lawsuits and claims are filed  against the Company from time to time in
the  ordinary  course of  business.  These  actions  are in various  preliminary
stages,  and no judgments or decisions  have been rendered

                                     -F-20-

<PAGE>

by hearing  boards or courts. Management,  after reviewing developments to date
with legal counsel, is of the opinion that the outcome of such matters will not
have a material adverse effect on the Company's financial position or results of
operations.

                                     -F-21-

<PAGE>


(a)(2)  Financial Statement Schedules


                                      -21-

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholders of
Atlantic Beverage Company, Inc.:

We have audited in accordance with generally  accepted auditing  standards,  the
consolidated  financial  statements  of  Atlantic  Beverage  Company,  Inc.  and
subsidiaries  included  in this Form 10-K and have  issued our  reports  thereon
dated  February  21,  1997.  Our audits  were made for the purpose of forming an
opinion on the basic  consolidated  financial  statements taken as a whole. This
schedule is the responsibility of the Company's  management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements.  This schedule has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
consolidated  financial  statements  and, in our opinion,  fairly  states in all
material  respects,  the  financial  data  required  to be set forth  therein in
relation to the basic consolidated financial statements taken as a whole.



Baltimore, Maryland,
    February 21, 1997

                                      -22-

<PAGE>

                                                                      SCHEDULE I


                ATLANTIC BEVERAGE COMPANY, INC. AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                  Additions
                                             -------------------------------------------------
                                                Reserve
                             Balance at       Established         Charged to        Charged                            Balance
                              Beginning      with Business        Costs and         to Other                           at End
      Classifications         of Period      Combinations         Expenses(1)      Accounts(2)    Deductions(3)       of Period
------------------------    -------------    ------------      --------------   --------------    -------------     -------------
<S> <C>
Allowance for doubtful
accounts:

Year ended
    December 31, 1996       $    35,000      $    69,000         $    61,000      $     9,000       $    56,000     $   118,000
Year ended
    December 31, 1995            71,000               -               83,000               -            119,000          35,000
Year ended
    December 31, 1994            10,000               -               77,000               -             16,000          71,000
</TABLE>

(1)  Current year provision for doubtful accounts.
(2)  Includes recoveries on accounts previously written off.
(3)  Accounts written off.

                                      -23-

<PAGE>


(a)(3)  Exhibits

         The  following  exhibits are filed with this Form 10-K or  incorporated
herein by reference to the document set forth next to the exhibits listed below:

Exhibit
Number                                    Description
-------                                   -----------
    2.01    Agreement and Plan of Merger dated as of September 15, 1993 ("Merger
            Agreement") among the Company, Strategic Investment Corporation and
            T. Rowe Price Strategic Partners Fund, L.P. ("Strategic Fund") (1)
    2.02    Form of Amendment to Merger Agreement (1).
    2.03    Stock Purchase  Agreement dated as of January 23, 1996,  between the
            among the Company,  ABEV Acquisition Corp.,  Franklin Roth and Allen
            Pauly (2)
    2.04    $1.4 Million Subordinated Note made by ABEV Acquisition Corp. in
            favor of Franklin Roth and Allen Pauly (2)
    2.05    Agreement and Plan of Merger Dated as of January 25, 1996 among the
            Company, Carlton Foods Corp., and Carlton Foods, Inc. (2)
    2.06    Loan and Security Agreement dated as of March 15, 1996 among
            Atlantic Beverage Company, Inc., Carlton Foods Corp. and ABEV
            Acquisition Corp., as borrowers, and LaSalle National Bank, as the
            Lender (2)
    2.07    Stock Purchase Agreement dated as of March 15, 1996 among the
            Company and Purchasers under the $2.8 million Private Placement (2)
    3.01    Certificate of  Incorporation of the Company,  including all
            amendments thereto (3)
    3.02    By-Laws of the Company (3)
    3.03    Certificate of Designation of the Series A Non-Voting Convertible
            Preferred Stock of the Company (4)
    4.01    Specimen Stock Certificate (1)
    4.02    Registration Rights Agreement between Strategic Fund and the Company
            (1)
    4.03    Stock Option Plan (1)
   10.01    Distribution Agreement dated as of November 25, 1992 between Joseph
            Victori Wines, Inc. and Maryland Beverage, L.P., as amended.(*)(1)
   10.02    Letter dated March 21, 1994 from the Company to Ginger Group, Ltd.
            (filed as an exhibit to the Company's Annual Report on Form 10-K
            filed with the Securities and Exchange Commission for the year ended
            December 31, 1993.) (1)
   10.03    Distribution Agreement dated April 12, 1991 between Ginger Group,
            Ltd. and Castle Food Products Corporation, as amended.(*)(1)
   10.04    Non-Compete and Non-Disclosure Agreement dated September 24, 1993
            among the Company, Sterling Group, Inc., Eric D. Becker, Steven M.
            Taslitz, Douglas L. Becker and R. Christopher Hoehn-Saric (1)
   10.05    Employment Agreement dated September 24, 1993 between the Company
            and William E. O'Leary (1)
   10.06    Employment Agreement dated September 24, 1993 between the Company
            and John F. Izzo (1)
   10.07    Warehouse Lease dated August 5, 1988 between Hill Management
            Services, Inc. and Maryland Beverage Company, Inc., as amended (1)
   10.08    Consulting Agreement dated September 24, 1993 among the Company,
            Eric D. Becker and Sterling Group, Inc. (1)
   10.08B   Consulting Agreement dated March 15, 1996 by and between the
            Company, Sterling Advisors, L.P. and Elfman Venture Partners, Inc.
            (5)
   10.09    Assignment of Consulting Agreement dated December 31, 1993 among the
            Company, Sterling Group, Inc. and Sterling Advisors, L.P. (6)
   10.10    Form of Tax Indemnification Agreement (1)

                                      -24-

<PAGE>

Exhibit
Number                                         Description
-------                                        -----------
   10.11    Amendment to Employment Agreement dated September 24, 1993 between
            the Company and William E. O'Leary (1)
   10.12    Asset Purchase Agreement, dated April 7, 1994, among the Company,
            Flying Fruit Fantasy, U.S.A., Inc., Groth Industries, Inc. and
            Robert E. Groth and Georgia B. Groth (7)
   10.13    Agreement for License, dated as of April 27, 1994, between Groth
            Industries, Inc. as the Beverage Company (7)
   10.14    Consulting Agreement, dated April 27, 1994, between the Company and
            Robert E. Groth (7)
   10.15    Stock Purchase Agreement dated as of January 23, 1996, between and
            among the Company, ABEV Acquisition Corp., Franklin Roth and Allen
            Pauly (2)
   10.16    Employment Agreement dated March 15, 1996 between ABEV Acquisition
            Corp. and Franklin Roth (2)
   10.17    Agreement and Plan of Merger dated as of January 25, 1996, among the
            Company, Carlton Foods Corp., and Carlton Foods, Inc. (2)
   10.18    $1.4 million Subordinated Note made by ABEV Acquisition Corp. in
            favor of Franklin Roth and Allen Pauly (2)
   10.19    Loan and Security Agreement dated as of March 15, 1996, among
            Atlantic Beverage Company, Inc., Carlton Foods Corp. and ABEV
            Acquisition Corp., as Borrowers, and LaSalle National Bank, as the
            Lender (2)
   10.20    Stock Purchase Agreement dated as of March 15, 1996 among the
            Company and Purchasers under the $2.8 million Private Placement (2)
   10.21    Employment  Agreement  between  the  Company and Alan Sussna (8)
   23.01    Consent of Independent Public Accountants (1)
   27.01    Financial Data Schedule
   99.01    Limited Partnership Agreement of Maryland Beverage L.P. (1)

*        Confidential treatment was afforded for certain portions of these
agreements.

(1)      Filed as an exhibit to the Company's  Annual Report on Form 10-K filed
with the  Securities  and Exchange  Commission  for the year ended December 31,
1995.

(2)      Filed as an exhibit  to the  Company's  Form 8-K filed  with the
Securities  and  Exchange  Commission  on April 1, 1996 and  incorporated
herein by reference.

(3)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 and incorporated herein by reference.

(4)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994 and incorporated herein by reference.

(5)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 and incorporated herein by reference.

                                      -25-

<PAGE>


(6)      Filed as an exhibit to the Company's  Annual Report on Form 10-K filed
with the  Securities  and Exchange  Commission  for the year ended December 31,
1993.

(7)      Filed as an exhibit to the  Company's  Form 8-K filed with the
Securities  and  Exchange  Commission  on  July 11,  1994 and  incorporated
herein by reference.

(8)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 and incorporated herein by reference.

(9)      Filed with the  Company's  Annual  Report on Form 10-K for the  fiscal
year ended December 31, 1995.  Unless otherwise noted, all other Exhibits have
either been  previously  filed  or  incorporated  by  reference  as an  exhibit
to the Company's Registration Statement on Form S-1 (No. 33-68522).

(10)     Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 and incorporated herein by reference.

(b)  Report on Form 8-K

         Atlantic Beverage Company, Inc. Form 8-K filed 05/20/96.
         Atlantic Beverage Company, Inc. Form 8-K filed 08/12/96.
         Atlantic Beverage Company, Inc. Form 8-KA filed 08/13/96.
         Atlantic Beverage Company, Inc. Form 8-K filed 12/31/96.

                                      -26-

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March __, 1997.

                                     ATLANTIC BEVERAGE COMPANY, INC.



                                     By: /s/  John Izzo
                                         ______________________________________
                                         Principal Accounting Officer and Chief
                                         Financial Officer


         Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this report has been signed by the following  persons in the capacities and on
the date indicated.

<TABLE>
<CAPTION>
              Signature                                 Title                      Date
              ---------                                 -----                      ----
<S> <C>

/s/  Eric D. Becker                     Director                               March ___, 1997
-----------------------------
Eric D. Becker

/s/  Anthony Brocato                    Director                               March ___, 1997
-----------------------------
Anthony Brocato

/s/  Merrick Elfman                     Director                               March ___, 1997
-----------------------------
Merrick Elfman

/s/  Bruce Goldman                      Director                               March ___, 1997
-----------------------------
Bruce Goldman

/s/  Rick Inatome                       Director                               March ___, 1997
-----------------------------
Rick Inatome

/s/  G. Cook Jordan, Jr.                Director                               March ___, 1997
-----------------------------
G. Cook Jordan, Jr.

/s/  John A. Miller                     Director                               March ___, 1997
-----------------------------
John A. Miller

/s/  William O'Leary                    President Beverage Division and        March ___, 1997
-----------------------------           Director
William O'Leary


/s/  Alan F. Sussna                     Chief Executive Officer and            March ___, 1997
-----------------------------           Director
Alan F. Sussna

/s/  Steven M. Taslitz                  Director                               March ___, 1997
-----------------------------
Steven M. Taslitz
</TABLE>


                                      -27-

<PAGE>

                                 EXHIBIT INDEX


Exhibit
Number                                         Description
-------                                        -----------
    2.01    Agreement and Plan of Merger dated as of September 15, 1993 ("Merger
            Agreement") among the Company, Strategic Investment Corporation and
            T. Rowe Price Strategic Partners Fund, L.P. ("Strategic Fund") (1)
    2.02    Form of Amendment to Merger Agreement (1).
    2.03    Stock Purchase  Agreement dated as of January 23, 1996,  between the
            among the Company,  ABEV Acquisition Corp.,  Franklin Roth and Allen
            Pauly (2)
    2.04    $1.4 Million Subordinated Note made by ABEV Acquisition Corp. in
            favor of Franklin Roth and Allen Pauly (2)
    2.05    Agreement and Plan of Merger Dated as of January 25, 1996 among the
            Company, Carlton Foods Corp., and Carlton Foods, Inc. (2)
    2.06    Loan and Security Agreement dated as of March 15, 1996 among
            Atlantic Beverage Company, Inc., Carlton Foods Corp. and ABEV
            Acquisition Corp., as borrowers, and LaSalle National Bank, as the
            Lender (2)
    2.07    Stock Purchase Agreement dated as of March 15, 1996 among the
            Company and Purchasers under the $2.8 million Private Placement (2)
    3.01    Certificate of Incorporation of the Company, including all
            amendments thereto (3) 3.02    By-Laws of the Company (3)
    3.03    Certificate of Designation of the Series A Non-Voting Convertible
            Preferred Stock of the Company (4)
    4.01    Specimen Stock Certificate (1)
    4.02    Registration Rights Agreement between Strategic Fund and the Company
            (1)
    4.03    Stock Option Plan (1)
   10.01    Distribution Agreement dated as of November 25, 1992 between Joseph
            Victori Wines, Inc. and Maryland Beverage, L.P., as amended.(*)(1)
   10.02    Letter dated March 21, 1994 from the Company to Ginger Group, Ltd.
            (filed as an exhibit to the Company's Annual Report on Form 10-K
            filed with the Securities and Exchange Commission for the year ended
            December 31, 1993.) (1)
   10.03    Distribution Agreement dated April 12, 1991 between Ginger Group,
            Ltd. and Castle Food Products Corporation, as amended.(*)(1)
   10.04    Non-Compete and Non-Disclosure Agreement dated September 24, 1993
            among the Company, Sterling Group, Inc., Eric D. Becker, Steven M.
            Taslitz, Douglas L. Becker and R. Christopher Hoehn-Saric (1)
   10.05    Employment Agreement dated September 24, 1993 between the Company
            and William E. O'Leary (1)
   10.06    Employment Agreement dated September 24, 1993 between the Company
            and John F. Izzo (1)
   10.07    Warehouse Lease dated August 5, 1988 between Hill Management
            Services, Inc. and Maryland Beverage Company, Inc., as amended (1)
   10.08    Consulting Agreement dated September 24, 1993 among the Company,
            Eric D. Becker and Sterling Group, Inc. (1)
   10.08B   Consulting Agreement dated March 15, 1996 by and between the
            Company, Sterling Advisors, L.P. and Elfman Venture Partners, Inc.
            (5)
   10.09    Assignment of Consulting Agreement dated December 31, 1993 among the
            Company, Sterling Group, Inc. and Sterling Advisors, L.P. (6)
   10.10    Form of Tax Indemnification Agreement (1)
   10.11    Amendment to Employment Agreement dated September 24, 1993 between
            the Company and William E. O'Leary (1)


<PAGE>


Exhibit
Number                                              Description
-------                                             -----------
   10.12    Asset Purchase Agreement, dated April 7, 1994, among the Company,
            Flying Fruit Fantasy, U.S.A., Inc., Groth Industries, Inc. and
            Robert E. Groth and Georgia B. Groth (7)
   10.13    Agreement for License, dated as of April 27, 1994, between Groth
            Industries, Inc. as the Beverage Company (7)
   10.14    Consulting Agreement, dated April 27, 1994, between the Company and
            Robert E. Groth (7)
   10.15    Stock Purchase Agreement dated as of January 23, 1996, between and
            among the Company, ABEV Acquisition Corp., Franklin Roth and Allen
            Pauly (2)
   10.16    Employment Agreement dated March 15, 1996 between ABEV Acquisition
            Corp. and Franklin Roth (2)
   10.17    Agreement and Plan of Merger dated as of January 25, 1996, among the
            Company, Carlton Foods Corp., and Carlton Foods, Inc. (2)
   10.18    $1.4 million Subordinated Note made by ABEV Acquisition Corp. in
            favor of Franklin Roth and Allen Pauly (2)
   10.19    Loan and Security Agreement dated as of March 15, 1996, among
            Atlantic Beverage Company, Inc., Carlton Foods Corp. and ABEV
            Acquisition Corp., as Borrowers, and LaSalle National Bank, as the
            Lender (2)
   10.20    Stock Purchase Agreement dated as of March 15, 1996 among the
            Company and Purchasers under the $2.8 million Private Placement (2)
   10.21    Employment Agreement between the Company and Alan Sussna (8)
   23.01    Consent of Independent Public Accountants (1)
   27.01    Financial Data Schedule
   99.01    Limited Partnership Agreement of Maryland Beverage L.P. (1)

*        Confidential treatment was afforded for certain portions of these
agreements.

(1)      Filed as an exhibit to the Company's  Annual Report on Form 10-K filed
with the  Securities  and Exchange  Commission  for the year ended December 31,
1995.

(2)      Filed as an exhibit  to the  Company's  Form 8-K filed  with the
Securities  and  Exchange  Commission  on April 1, 1996 and  incorporated
herein by reference.

(3)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 and incorporated herein by reference.

(4)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994 and incorporated herein by reference.

(5)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 and incorporated herein by reference.

(6)      Filed as an exhibit to the Company's  Annual Report on Form 10-K filed
with the  Securities  and Exchange  Commission  for the year ended December 31,
1993.

<PAGE>

(7)      Filed as an exhibit to the  Company's  Form 8-K filed with the
Securities  and  Exchange  Commission  on  July 11,  1994 and  incorporated
herein by reference.

(8)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 and incorporated herein by reference.

(9)      Filed with the  Company's  Annual  Report on Form 10-K for the  fiscal
year ended December 31, 1995.  Unless otherwise noted, all other Exhibits have
either been  previously  filed  or  incorporated  by  reference  as an  exhibit
to the Company's Registration Statement on Form S-1 (No. 33-68522).

(10)     Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 and incorporated herein by reference.