-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EcNL3d7KkwMGb+lWSuNg5ucP+ZhYueaAxGnwJ7269TEqEL3acsgC5WXA/OMP1p+z xO3w3aOyGyaOed/efwbp5Q== 0000950005-98-000475.txt : 19980518 0000950005-98-000475.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950005-98-000475 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENDOCINO BREWING CO INC CENTRAL INDEX KEY: 0000919134 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 680318293 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13636 FILM NUMBER: 98622151 BUSINESS ADDRESS: STREET 1: 13351 S HWY 101 CITY: HOPLAND STATE: CA ZIP: 95449 BUSINESS PHONE: 7077441015 MAIL ADDRESS: STREET 1: 13351 S HWY 101 CITY: HOPLAND STATE: CA ZIP: 95449 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________________ to _____________________ Commission file number 1-13636 Mendocino Brewing Company, Inc. (Exact name of small business issuer as specified in its charter)
California 68-0318293 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
13351 South Highway 101, Hopland, California 95449 (Address of principal executive offices) (707) 744-1015 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares of the issuer's common stock outstanding as of March 31, 1998 is 4,463,385. PART I Item 1. Financial Statements. MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET March 31, 1998 (Unaudited)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 102,000 Accounts receivable 463,100 Other receivables 20,100 Inventories 521,900 Prepaid expenses 187,000 Refundable income taxes 106,300 Deferred income taxes 898,100 ------------ Total Current Assets: 2,298,500 ------------ PROPERTY AND EQUIPMENT 15,555,500 ------------ OTHER ASSETS Prepaid points and other assets 41,300 ------------ Total Other Assets: 41,300 ------------ Total Assets: $ 17,895,300 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Line of credit $ 600,000 Accounts payable 742,300 Accounts payable -UBA 80,200 Accrued wages and related expense 133,600 Accrued construction costs 700 Other accruals 303,000 Current maturities of obligations under capital lease 183,300 Current maturities of obligation under long-term debt 24,500 ------------ Total Current Liabilities: 2,067,600 LONG TERM DEBT, less current maturities 3,074,300 OBLIGATION UNDER CAPITAL LEASE, less current maturities 1,523,500 ------------ Total Liabilities: 6,665,400 ------------ STOCKHOLDERS' EQUITY Common stock, no par value: 20,000,000 shares authorized, 4,463,385 shares issued and outstanding 12,367,200 Preferred stock, Series A, no par value, with aggregate liquidation preference of $227,600: 227,600 shares authorized, issued and outstanding 227,600 Retained earnings (deficit) (1,364,900) ------------ Total Stockholders' Equity 11,229,900 ------------ Total Liabilities and Stockholders' Equity: $ 17,895,300 ============ The accompanying notes are an integral part of these financial statements.
-1- MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
--------------------------------------- THREE MONTHS ENDED March 31, --------------------------------------- 1998 1997 ---- ---- SALES $ 1,310,000 $ 1,051,500 LESS EXCISE TAXES 68,600 46,900 ----------- ----------- NET SALES 1,241,400 1,004,600 COST OF GOODS SOLD 1,122,500 576,300 ----------- ----------- GROSS PROFIT 118,900 428,300 OPERATING EXPENSES Retail operating 111,800 165,900 Marketing 168,000 203,200 General and administrative 428,800 188,900 ----------- ----------- 708,600 558,000 ----------- ----------- LOSS FROM OPERATIONS (589,700) (129,700) OTHER INCOME (EXPENSE) Interest income 1,800 2,100 Other income (expense) (3,700) 5,300 Interest expense (121,900) (100) ----------- ----------- (123,800) 7,300 ----------- ----------- LOSS BEFORE INCOME TAXES (713,500) (122,400) PROVISION FOR INCOME TAXES 285,200 (800) ----------- ----------- NET LOSS $ (428,300) $ (123,200) =========== =========== LOSS PER SHARE $ (0.10) $ (0.05) =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,463,385 2,329,783 =========== =========== The accompanying notes are an integral part of these financial statements.
-2- MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
---------------------------------- THREE MONTHS ENDED March 31, ---------------------------------- 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (428,300) $ (123,200) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 165,400 15,400 Deferred income taxes (285,200) -- Changes in: Accounts receivable (133,400) 9,300 Inventories 22,300 119,100 Prepaid expenses and taxes (164,600) (26,600) Accounts payable 14,000 160,500 Accrued wages and related expenses (36,000) 8,000 Accrued liabilities 54,800 13,700 ----------- ----------- Net cash provided (used) by operating activities: (791,000) 176,200 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, equipment, and leasehold improvements (77,700) (1,413,400) ----------- ----------- Net cash used by investing activities: (77,700) (1,413,400) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from short-term borrowing -- 561,400 Principal payments on long-term debt (1,900) -- Borrowings on long-term debt 305,000 -- Proceeds from obligation under capital lease -- 182,700 Payments on obligation under long-term lease (38,700) (36,200) Accrued construction costs -- 304,400 Proceeds from sale of common stock -- 136,000 Deferred stock offering costs -- (115,300) ----------- ----------- Net cash provided by financing activities: 264,400 1,033,000 ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS (604,300) (204,200) CASH AND CASH EQUIVALENTS, beginning of period 706,300 494,700 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 102,000 $ 290,500 ----------- ----------- Supplemental cash flow information includes the following: Cash paid during the period for interest $ 121,900 $ 133,300 =========== =========== The accompanying notes are an integral part of these financial statements.
-3- MENDOCINO BREWING COMPANY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 -- Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1997. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. Note 2 -- Short-Term Borrowing The Company has available a $600,000 term line of credit with variable interest at the bank's index rate plus 1.5%, maturing May 31, 1998. The note is secured by the Company's accounts receivable and inventory. Note 3 -- Notes Payable In March 1998, the Company refinanced its short-term construction note that matured on January 1, 1998, to a $2,700,000 note, with interest at Treasury Constant Maturity Index for five year treasuries plus 4.17%, currently 9.86%. The note requires monthly payments of principal and interest of $24,400. The note matures in December 2012 with a balloon payment of $1,940,000 and is secured by real property located in Ukiah, California. The Company has a note payable outstanding to United Breweries of America, Inc., a related party, in the amount of $305,000 as of March 31, 1998. The note bears interest at the prime rate plus 1.5% and is due 18 months from the date of the note or in September 1999. The note is secured by real property located in Saratoga Springs, New York. The Company has a note payable outstanding to an individual in the amount of $93,700, with interest accruing at 9%, due December 31, 1998, secured by real property and subordinated to bank debt. Note 4 -- Income Taxes As of March 31, 1998, the Company had available net operating loss carryovers of approximately $2,215,000 and $1,635,000 of federal and California net operating losses, respectively. The federal and California operating losses expire through 2013 and 2003, respectively. The benefit from these loss carryforwards has been recorded, resulting in a deferred tax asset. A valuation allowance is not provided since the Company believes it is more likely than not that the loss carryforwards will be fully utilized. -4- Item 2. Management Discussion and Analysis. The following discussion and analysis should be read in conjunction with the financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-QSB. The discussion of results and trends does not necessarily imply that these results and trends will continue. Forward-Looking Information The Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-QSB contain forward-looking information. The forward-looking information involves risks and uncertainties that are based on current expectations, estimates and projections about the Company's business, management's beliefs and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking information. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking information due to numerous factors, including, but not limited to, availability of financing for operations, successful performance of internal operations, impact of competition, changes in distributor relationships or performance and other risks detailed below as well as those discussed elsewhere in this Form 10-QSB and from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions. Overview The results of the first three months of 1998 showed a growth in sales volume due primarily to increased marketing efforts. Sales (measured in barrels) increased from 3,892 bbl. during the first quarter of 1997 to 5,591 bbl. during the first quarter of 1998, representing a 44% increase in sales volume as compared to the first quarter of 1997 and a 31% increase in production as compared to the final quarter of 1997. The high costs associated with the new brewery at Ukiah, the fixed costs of the Ten Springs Brewery, and the interest expenses contributed to the net loss of $428,300 for the first quarter of 1998. The loss from operations increased to 47.50% of net sales for the first three months of 1998, as compared to the 12.91% loss from operations for the corresponding period of 1997. In February 1998, Releta Brewing Company LLC, a wholly-owned subsidiary of Mendocino Brewing, placed in operation its Ten Springs Brewery located in Saratoga Springs, New York, with an initial capacity of approximately 60,000 bbl. per year, expandable to 150,000 bbl. per year. United Breweries of America, Inc. ("UBA"), the Company's largest shareholder, has agreed in principle to provide the Company with a credit facility of up to $2,000,000 for working capital purposes. Advances will be secured by a lien against the Ten Springs Brewery, will bear interest at prime plus 1.5% and will be due and payable 18 months after the date of the advance. UBA has advanced $500,000 to the Company under such credit facility as of May 11, 1998. Failure of UBA to fund this credit facility could have a material adverse effect on the Company's business, financial condition and results of operation. -5- Results of Operations Three Months Ending March 31, 1998 Compared to Three Months Ending March 31, 1997. The following discussion sets forth information for the three-month periods ending March 31, 1998 and 1997. This information has been derived from unaudited interim financial statements of the Company contained elsewhere herein and reflects, in Management's opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations for these periods. Results of operations for any interim period are not necessarily indicative of results to be expected for the full fiscal year. The following table sets forth, as a percentage of sales, certain items included in the Company's Statements of Operations, as set forth above under "Financial Statements," for the periods indicated:
--------------------------------------------- Three Months Ended March 31 --------------------------------------------- 1998 1997 Statements of Income Data: Sales 105.52% 104.67% Excise taxes 5.52 4.67 Net Sales 100.00 100.00 Costs of Sales 90.42 57.36 Gross Profit 9.58 42.64 Retail Operating Expense 9.01 16.51 Marketing Expense 13.53 20.23 General and Administrative Expenses 34.54 18.81 Total Operating Expenses 57.08 55.55 Loss from Operations (47.50) (12.91) Other Income (expense) (0.30) 0.52 Interest income (expense) (9.67) 0.20 Loss before income taxes (57.47) (12.19) Provision for income taxes 22.97 (0.08) Net Loss (34.50) (12.27)
-6-
--------------------------------------------- Three Months Ended March 31 --------------------------------------------- 1998 1997 Balance Sheet Data: Cash and Cash Equivalents $102,000 $290,500 Working Capital 230,900 (4,641,600) Property and Equipment 15,555,500 10,674,100 Deposits and Other Assets 41,300 623,400 Total Assets 17,895,300 12,351,700 Long-term Debt 3,074,300 -- Obligation under Capital Lease 1,523,500 1,988,000 Total Liabilities 6,665,400 8,038,700 Shareholder's equity 11,229,900 4,312,900
Net Sales. Net sales for the first three months of 1998 were $1,241,400, compared to $1,004,600 for the first three months of 1997, representing an increase of 23.58%. The sales volume increased to 5,591 barrels during the first quarter of 1998, from 3,892 barrels during the first quarter of 1997, representing an increase of 44%. Management attributes the increased sales to improved marketing strategies, including new point of sale materials. The increase in overall net sales during the first quarter of 1998 was achieved solely by higher wholesale shipments during the first quarter of 1998, which represented an increase of $280,100 over the wholesale shipments during the first quarter of 1997. In view of management's focus on wholesale beer sale, retail sales for the first quarter of 1998 were $43,300 less than retail sales during the first quarter of 1997. Cost of Goods Sold. Cost of goods sold as a percentage of net sales during the first quarter of 1998 was 90.42%, as compared to 57.36% during the first quarter of 1997, representing an increase of 33.06%. During the first quarter of 1998, labor costs increased by $132,800, depreciation increased by $145,300, utilities increased by $56,900, rentals increased by $34,900, property taxes increased by $27,000, contract service charges increased by $24,700, insurance costs increased by $20,700, waste-water treatment costs increased by $16,700, and indirect materials increased by $31,500, thereby mainly contributing to the increase of 33.06% of the cost of goods sold as a percentage of net sales, as compared to the first quarter of 1997. Management attributes the increase to higher fixed and production costs and to the underutilization of the new brewing facility in Ukiah and the Ten Springs Brewery in Saratoga Springs, New York. Gross Profit. As a result of the high cost of sales as explained above, gross profit for the first quarter of 1998 decreased to $118,900, from $428,300 for the comparable period of 1997, representing a decrease of 72.3%. As a percentage of net sales, the gross profit during the first quarter of 1998 decreased to 9.58% from that of 42.64% for the corresponding period of 1997. Operating Expenses. Operating expenses for the first quarter of 1998 were $708,600, as compared to $558,000 for the first quarter of 1997, representing an increase of 26.98%. Operating expenses consist of retail operating expenses, marketing and distribution expenses, and general and administrative expenses. -7- Retail operating expenses for the first quarter of 1998 were $111,800, representing a decrease of $54,100, or 32.61%, from the first quarter of 1997. As a percentage of net sales, retail operating expenses decreased to 9.01% as compared to 16.51% for the first three months of 1997. The decrease in retail operating expenses consisted of a decrease in labor costs by $25,840, marketing and advertising costs by $18,480, supplies by $7,000 and other expenses by $2,780. Marketing and distribution expenses for the first quarter of 1998 were $168,000, representing a decrease of $35,200, or 17.32%, from the first quarter of 1997. As a percentage of net sales, marketing and distribution expenses represented 13.53% during the first quarter of 1998 as compared to 20.23% during the first quarter of 1998. Compared to the first quarter of 1997, marketing and sales labor decreased by $10,500; freight costs decreased by $24,000; warehouse rental costs decreased by $14,850; sales promotions costs increased by $9,176; and other net expenses increased by $4,974. General and administrative expenses were $428,800, representing an increase of $239,900 from the first quarter of 1997. As a percentage of net sales, the general and administrative expenses were 34.54% for the first quarter of 1998, as compared to 18.81% for the first quarter of 1997. As compared to the first quarter of 1997, labor costs increased by $55,240; professional and legal fees increased by $79,900; travel costs increased by $60,000; auto expenses increased by $12,200; depreciation costs increased by $9,120; and net miscellaneous expenses increased by $23,440. Other Income (Expense). Other expenses for the first three months of 1998 were $123,800, representing an increase of $116,500 when compared to the first quarter of 1997. The increase is primarily due to an increase in interest expense for the first quarter of 1998 of $121,800, as compared to the first quarter of 1997. Provision for Income Taxes. The provision for benefit from income taxes for the first three months of 1998 was $285,200, as compared to an $800 deficit for the first quarter of 1997. The benefit from income taxes is due to the expected future benefit of carrying forward of net operating losses. Net Loss. Net loss for the first three months of 1998 was $428,300, as compared to a net loss of $123,200 for the first three months of 1997. As a percentage of net sales, net loss for the first quarter of 1998 increased to 34.50%, as compared to 12.27% for the first quarter of 1997. Segment Information Mendocino Brewing's business presently consists of two segments. The first is brewing for wholesale to distributors and other retailers. This segment accounted for 88% of the Company's gross sales for the first quarter of 1998. The second segment consists of brewing beer for sale along with food and merchandise at the Company's brewpub and retail merchandise store at the Hopland Brewery. This segment accounted for 12% of the Company's gross sales for the first quarter of 1998. With expanded wholesale beer production in both Ukiah and Saratoga Springs, Management expects that retail sales, as a percentage of total sales, will decrease proportionally to the expected increase in the Company's wholesale sales. -8- Seasonality Beer consumption nationwide has historically increased by approximately 20% during the summer months as compared to other months of the year. It is not clear to what extent seasonality will affect the Company as it expands its capacity and its geographic markets. Capital Demands The Company has yet to complete the build-out of its administrative space or the exterior landscaping of the Ukiah brewery. The Ukiah brewery is presently operating under a temporary certificate of occupancy from the City of Ukiah. Completion of construction is a condition to the issuance of a final certificate of occupancy. Failure to complete construction and obtain a final certificate of occupancy could have a material adverse effect on the Company's business, financial condition and results of operation. Both breweries have placed demands upon the Company's assets, liabilities, commitments for capital expenditures and liquidity. Failure to adequately meet those demands may have a material adverse affect on the Company's business, financial condition and results of operations. Liquidity and Capital Resources Long Term Debt. Mendocino Brewing has obtained a $2,700,000 term loan from the Savings Bank of Mendocino County. The loan is payable in monthly installments of $24,443, including interest at the Treasury Constant Maturity Index plus 4.17%, currently 9.86%, maturing December 2012 with a balloon payment in the amount of $1,940,000, secured by substantially all the assets of the Company (other than the Ten Springs Brewery), including without limitation, a first priority deed of trust on the Ukiah land and improvements. Shareholder Commitment. United Breweries of America, Inc. ("UBA"), the Company's largest shareholder, has agreed in principle to provide the Company with a credit facility of up to $2,000,000, to be funded in installments of up to $300,000 each. The advances are to be secured by a first priority deed of trust on the Ten Springs Brewery. The advances bear interest at prime plus 1.5% and are due and payable 18 months after the date of the advance. It is anticipated that the advances will have a conversion feature into unregistered shares of the Company's common stock. The final structure of the conversion feature is currently being reviewed by management to ensure a final structure that will be most financially beneficial for the Company. The arrangement was approved by a committee consisting of director Michael Laybourn (the President of the Company) and independent directors Kent Price and Sury Rao Palamond on February 19, 1998. Although formal documentation of the arrangement is pending determination of an acceptable final structure, UBA has advanced a total of $500,000 as of May 11, 1998. Equipment Lease. The Company has leased from FINOVA Capital Corporation new brewing equipment at a total cost of approximately $1,780,000 to the Company for a term of 7 years (commencing December 1996) with monthly rental payments of approximately $27,100 each. At expiration of the initial term of the lease, the Company may purchase the equipment at its then current fair market value but not less than 25% nor more than 30% of the original cost of the equipment, or at the Company's option, may extend the term of the lease for an additional year at monthly rental payments of approximately $39,000 with an option to purchase the equipment at the end of the year at then current fair market value. The lease is not pre-payable. -9- Seller Financing of Ukiah Real Estate. The seller of the Ukiah land holds a promissory note, secured by a third priority deed of trust on the Ukiah property, with a remaining principal balance as of March 31, 1998 of $93,700 at 9% annual interest due on December 31, 1998 per a verbal agreement with the spokesman for the lending group. Revolving Credit Facility. WestAmerica Bank of Santa Rosa, California has provided a $600,000 maximum revolving line of credit with an advance rate of 80% of the qualified accounts receivable and 25% of the inventory at an interest rate of the bank's index rate plus 1.5% payable monthly, maturing May 31, 1998. To the extent that the loan is not extended or refinanced, the Company will be required to repay the loan. Failure to find a lender to refinance the loan could have a material adverse effect on the Company's business, financial condition and results of operations. Keg Management Arrangement. The Company has entered into a keg management agreement with MicroStar Keg Management LLC. Under this arrangement, MicroStar provides the Company with half-barrel kegs for which the Company pays a filing fee. Distributors return the kegs to MicroStar instead of the Company. MicroStar then supplies the Company with additional kegs. If the agreement terminates, the Company is required to purchase a certain number of kegs from MicroStar. The Company would probably finance the purchase through debt or lease financing, if available. The Company's ratio of current assets to current liabilities on March 31, 1998 was 1.11 to 1.0 and its ratio of assets to liabilities was 2.68 to 1.0. Impact of Expansion on Cash Flow. Mendocino Brewing must make timely payment of its debt and lease commitments to continue its operations. Increased unused capacity at the Ukiah facility and the Saratoga Springs facility has placed additional demands on the Company's working capital. Working capital for day to day business operations had historically been provided primarily through operations. Beginning approximately with the second quarter of 1997, the time at which the Ukiah brewery commenced operations, proceeds from operations have not been able to provide sufficient working capital for day to day operations. UBA has agreed to provide a loan of up to $2,000,000 for working capital purposes. In addition, UBA has agreed to provide funding for the working capital requirements of the Ten Springs Brewery in an amount not to exceed $1,000,000 until October 24, 1999 or until the brewery's operations are profitable, whichever comes first. PART II Item 5. Other Information. UBA, the Company's largest shareholder, has agreed in principle to provide the Company with a credit facility of up to $2,000,000, to be funded in installments of up to $300,000 each. The advances are to be secured by a first priority deed of trust on the Ten Springs Brewery. The advances bear interest at prime plus 1.5% and are due and payable 18 months after the date of the advance. It is anticipated that the advances will have a conversion feature into unregistered shares of the Company's common stock. The final structure of the conversion feature is currently being reviewed by Management to ensure a final structure that will be most financially beneficial for the Company. The arrangement was approved by a committee consisting of director Michael Laybourn (the President of the Company) and independent directors Kent Price and Sury Rao Palamond on February 19, 1998. Although formal documentation of the arrangement is -10- pending determination of an acceptable final structure, UBA has advanced a total of $500,000 as of May 11, 1998. Failure of UBA to fund this credit facility could have a material adverse effect on the Company's business, financial condition and results of operation. The Company is currently in negotiations with Carmel Brewing Company, Inc., a California corporation ("Carmel Brewing"), to acquire all of the brand-related assets of Carmel Brewing in exchange for unregistered shares of the Company's common stock having an aggregate value of $100,000, based on a per share price of $3.00. The transaction will also involve the acquisition by the Company of certain point of sales and brewing ingredient inventory from Carmel Brewing, and the lease by the Company from Carmel Brewing of certain bottling line equipment and certain kegs on a short term basis. The Company expects to execute the definitive documentation for such transaction and to close such transaction during the second quarter of 1998. In anticipation of the closing of such transaction, Carmel Brewing assigned to the Company in April 1998 all of its trademark rights relating to the Carmel Brewing brands, the Company has obtained all necessary governmental licenses to brew Carmel Brewing brand beers and the Company has commenced brewing and distributing Carmel Brewing brand beers. Item 6. Exhibits and Reports on Form 8-K.
Exhibit Number Description of Document ------ ----------------------- 3.1 (A) Articles of Incorporation, as amended, of the Company. 3.2 (B) Bylaws of the Company 4.1 Articles 5 and 6 of the Articles of Incorporation, as amended, of the Company (Reference is made to Exhibit 3.1). 4.2 Article 10 of the Restated Articles of Incorporation, as amended, of the Company (Reference is made to Exhibit 3.2). 10.1 (A) Mendocino Brewing Company Profit Sharing Plan. 10.2 (A) 1994 Stock Option Plan (previously filed as Exhibit 99.6). 10.3 (M) Employment Agreement with H. Michael Laybourn. 10.4 (A) Wholesale Distribution Agreement between the Company and Bay Area Distributing. 10.5 (A) Wholesale Distribution Agreement between the Company and Golden Gate Distributing. 10.6 (A) Sales Contract between the Company and John I. Hass, Inc. 10.7 (F) Liquid Sediment Removal Services Agreement with Cold Creek Compost, Inc. 10.8 (A) Lease Agreement between the Company and Kohn Properties. 10.9 (C) Commercial Real Estate Purchase Contract and Receipt for Deposit (previously filed as Exhibit 19.2). 10.10 (D) Installment Note between Ukiah Redevelopment Agency and Langley et al. (previously filed as Exhibit 19.5). 10.11 (F) Promissory Note for $76,230 in favor of Langley et al. 10.12 (G) Agreement to modify note and deed of trust dated June 6, 1995 with Langley, et al. 10.13 (G) Agreement to modify note dated June 6, 1995 with Langley, et al. 10.14 (G) Amendment to installment note payable to Langley, et al. 10.15 (N) Commercial Lease between Stewart's Ice Cream Company, Inc. and Releta Brewing Company LLC. 10.16 (M) Agreement between United Breweries of America, Inc. and Releta Brewing Company LLC regarding payment of certain liens. 10.17 (K)+ Keg Management Agreement with MicroStar Keg Management LLC. -11- Exhibit Number Description of Document ------ ----------------------- 10.18 (E) Agreement to Implement Condition of Approval No. 37 of the Site Development Permit 95-19 with the City of Ukiah, California (previously filed as Exhibit 19.6). 10.19 (G) Manufacturing Business Expansion and Relocation Agreement with the City of Ukiah. 10.20 (G) Manufacturing Business Expansion and Relocation Agreement with the Ukiah Redevelopment Agency. 10.21 (O) $2,700,000 Note in favor of the Savings Bank of Mendocino County. 10.22 (O) Hazardous Substances Certificate and Indemnity with the Savings Bank of Mendocino County. 10.23 (O) Business Loan Agreement with WestAmerica Bank. 10.24 (O) $600,000 Note in favor of the WestAmerica Bank. 10.25 (J) Equipment Lease with FINOVA Capital Corporation. 10.26 (J) Tri-Election Rider to Equipment Lease with FINOVA Capital Corporation. 10.27 (J) Master Lease Schedule with FINOVA Capital Corporation. 10.28 (L) Investment Agreement with United Breweries of America, Inc. 10.29 (L) Shareholders' Agreement Among the Company, United Breweries of America, Inc., H. Michael Laybourn, Norman Franks, Michael Lovett, John Scahill, and Don Barkley. 10.30 (L) Registration Rights Agreement Among the Company, United Breweries of America, Inc., H. Michael Laybourn, Norman Franks, Michael Lovett, John Scahill, and Don Barkley. 27 Financial Data Schedule - --------------------- (A) Incorporated by reference from the Company's Registration Statement dated June 15, 1994, as amended, previously filed with the Commission, Registration No. 33-78390-LA. (B) Incorporated by reference from the Company's Report on Form 10-KSB for the annual period ended December 31, 1994, previously filed with the Commission. (C) Incorporated by reference from the Company's Report on Form 10-QSB for the quarterly period ended March 31, 1995, previously filed with the Commission. (D) Incorporated by reference from the Company's Report on Form 10-QSB for the quarterly period ended June 30, 1995, previously filed with the Commission. (E) Incorporated by reference from the Company's Report on Form 10-QSB for the quarterly period ended September 30, 1995, previously filed with the Commission. (F) Incorporated by reference from the Company's Report on Form 10-KSB for the annual period ended December 31, 1995, previously filed with the Commission. (G) Incorporated by reference from the Company's Report on Form 10-QSB for the quarterly period ended June 30, 1996, previously filed with the Commission. (H) Incorporated by reference from the Company's Report on Form 10-QSB/A No. 1 for the quarterly period ended June 30, 1996, previously filed with the Commission. (J) Incorporated by reference from the Company's Registration Statement dated February 6, 1997, as amended, previously filed with the Commission, Registration No. 33-15673. (K) Incorporated by reference from the Company's Report on Form 10-KSB for the annual period ended December 31, 1996, previously filed with the Commission. (L) Incorporated by reference from the Schedule 13D filed with the Commission on November 3, 1997, by United Breweries of America, Inc. and Vijay Mallya. (M) Incorporated by reference from the Company's Report on Form 10-QSB for the quarterly period ended September 30, 1997. (N) Incorporated by reference from the Company's Report on Form 10-QSB/A No. 1 for the quarterly period ended September 30, 1997. (O) Incorporated by reference from the Company's Report on Form 10-KSB for the annual period ended December 31, 1997, previously filed with the Commission. -12- Exhibit Number Description of Document ------ ----------------------- + Portions of this Exhibit were omitted pursuant to an application for an order declaring confidential treatment filed with the Securities and Exchange Commission.
-13- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGISTRANT: MENDOCINO BREWING COMPANY, INC., a California corporation Dated: May 15, 1998 By:___________________________________________ H. Michael Laybourn President Dated: May 15, 1998 By:___________________________________________ Jerome G. Merchant Chief Financial Officer -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 102,000 0 463,100 0 521,900 2,298,500 16,602,200 1,046,700 17,895,300 2,067,600 0 0 227,600 12,367,200 (1,364,900) 17,895,300 1,241,400 1,310,000 1,122,500 1,191,100 3,700 0 121,900 (713,500) 285,200 (428,300) 0 0 0 (428,300) (0.10) 0
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