Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 13, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'MENDOCINO BREWING CO INC | ' |
Entity Central Index Key | '0000919134 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity's Reporting Status Current | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 12,611,133 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current Assets | ' | ' |
Cash | $40,700 | $198,500 |
Accounts receivable, net | 4,393,600 | 5,421,600 |
Inventories | 2,144,200 | 1,910,500 |
Prepaid expenses | 611,100 | 514,900 |
Total Current Assets | 7,189,600 | 8,045,500 |
Property and Equipment, net | 11,834,000 | 11,937,200 |
Deposits and other assets | 325,700 | 268,800 |
Total Assets | 19,349,300 | 20,251,500 |
Current Liabilities | ' | ' |
Secured lines of credit | 3,099,900 | 3,159,700 |
Accounts payable | 5,101,800 | 5,693,600 |
Accrued liabilities | 1,600,900 | 1,652,100 |
Current maturities of long-term debt | 4,581,600 | 450,000 |
Current maturities of obligations under capital leases | ' | 3,100 |
Total Current Liabilities | 14,384,200 | 10,958,500 |
Long-Term Liabilities | ' | ' |
Notes to related parties | 3,475,000 | 3,407,000 |
Long term debts, less current maturities | ' | 3,982,400 |
Total Long-Term Liabilities | 3,475,000 | 7,389,400 |
Total Liabilities | 17,859,200 | 18,347,900 |
Stockholders' Equity | ' | ' |
Preferred stock, Series A, no par value, with liquidation preference of $1 per share; 10,000,000 shares authorized, 227,600 shares issued and outstanding | 227,600 | 227,600 |
Common stock, no par value 30,000,000 shares authorized, 12,611,133 shares issued and outstanding | 15,100,300 | 15,100,300 |
Accumulated comprehensive income | 435,900 | 406,400 |
Accumulated deficit | -14,273,700 | -13,830,700 |
Total Stockholders' Equity | 1,490,100 | 1,903,600 |
Total Liabilities and Stockholders' Equity | $19,349,300 | $20,251,500 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock, Series A, liquidation preference per share | $1 | $1 |
Preferred stock, no par value | ' | ' |
Preferred stock, Series A, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, Series A, shares issued | 227,600 | 227,600 |
Preferred stock, Series A, shares outstanding | 227,600 | 227,600 |
Common stock, no par value | ' | ' |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 12,611,133 | 12,611,133 |
Common stock, shares outstanding | 12,611,133 | 12,611,133 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Sales | $9,415,500 | $10,277,700 | $27,528,700 | $30,495,500 |
Excise taxes | 224,500 | 236,100 | 591,300 | 753,800 |
Net sales | 9,191,000 | 10,041,600 | 26,937,400 | 29,741,700 |
Cost of goods sold | 6,595,700 | 7,315,200 | 19,517,800 | 21,459,800 |
Gross profit | 2,595,300 | 2,726,400 | 7,419,600 | 8,281,900 |
Operating expenses | ' | ' | ' | ' |
Marketing | 1,409,400 | 1,425,200 | 4,060,700 | 4,267,600 |
General and administrative | 1,076,500 | 1,088,200 | 3,448,400 | 3,156,300 |
Total operating expenses | 2,485,900 | 2,513,400 | 7,509,100 | 7,423,900 |
Income from operations | 109,400 | 213,000 | -89,500 | 858,000 |
Other income (expense): | ' | ' | ' | ' |
Other income | 6,400 | 3,900 | 18,300 | 14,000 |
Profit on sale of asset | ' | ' | ' | 9,400 |
Interest expense | -135,500 | -112,200 | -366,800 | -337,300 |
Total other expenses | -129,100 | -108,300 | -348,500 | -313,900 |
Income (loss) before income taxes | -19,700 | 104,700 | -438,000 | 544,100 |
Provision for income taxes | ' | 900 | 5,000 | 1,700 |
Net income (loss) | -19,700 | 103,800 | -443,000 | 542,400 |
Foreign currency translation income (loss) | -118,900 | -74,100 | 29,500 | -107,700 |
Comprehensive income (loss) | ($138,600) | $29,700 | ($413,500) | $434,700 |
Net income (loss) per common share - | ' | ' | ' | ' |
Basic and Diluted | $0 | $0.01 | ($0.04) | $0.04 |
Weighted average common shares outstanding - | ' | ' | ' | ' |
Basic | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 |
Diluted | 12,611,133 | 14,883,814 | 12,611,133 | 14,883,814 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net income (loss) | ($443,000) | $542,400 |
Adjustments to reconcile net income (loss) to net cash from operating activities: | ' | ' |
Depreciation and amortization | 797,700 | 771,200 |
Provision for doubtful accounts | -48,800 | -32,200 |
Interest accrued on related party debt | 68,000 | 68,300 |
(Profit) on sale of assets | ' | -9,400 |
Changes in: | ' | ' |
Accounts receivable | 1,033,700 | 330,400 |
Inventories | -233,000 | 104,900 |
Prepaid expenses | -98,500 | -155,600 |
Deposits and other assets | -89,700 | -296,600 |
Accounts payable | -531,800 | -977,000 |
Accrued liabilities | -37,400 | -72,100 |
Net cash used in operating activities | 417,200 | 274,300 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchases of property and equipment | -665,100 | -546,200 |
Proceeds from sale of fixed assets | ' | 12,200 |
Net cash used in investing activities | -665,100 | -534,000 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Net borrowing on line of credit | -56,200 | 415,900 |
Borrowing on long-term debt | 539,700 | 184,700 |
Repayment on long-term debt | -390,500 | -439,000 |
Payments on obligations under long term leases | -3,100 | -53,800 |
Net cash provided by financing activities | 89,900 | 107,800 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 200 | -21,300 |
NET CHANGE IN CASH | -157,800 | -173,200 |
CASH, beginning of period | 198,500 | 312,200 |
CASH, end of period | 40,700 | 139,000 |
Cash paid during the period for: | ' | ' |
Income taxes | 5,000 | 1,700 |
Interest | $298,800 | $269,000 |
Description_of_Operations_and_
Description of Operations and Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Description of Operations and Summary of Significant Accounting Policies | ' | ||||||||||||||
1. Description of Operations and Summary of Significant Accounting Policies | |||||||||||||||
Description of Operations | |||||||||||||||
Mendocino Brewing Company, Inc. was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (“Releta”), and United Breweries International (UK) Limited (“UBIUK”). The terms “we”, “us”, “our”, and the “Company” and its variants are generally used to refer to Mendocino Brewing Company, Inc. together with its subsidiaries, while the term “MBC” is used to refer to Mendocino Brewing Company, Inc. standing alone. In the United States (the “US”), MBC and Releta operate two breweries that produce beer and malt beverages for the specialty “craft” segment of the beer market. The breweries are located in Ukiah, California and Saratoga Springs, New York. The majority of sales for MBC in the US are in California. We brew several brands, of which Red Tail Ale is the flagship brand. In addition, we perform contract brewing for several other brands. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. | |||||||||||||||
MBC’s United Kingdom (the “UK”) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (“KBEL”). KBEL is a distributor of alcoholic beverages, mainly Kingfisher Lager Beer, in the UK and Europe. The distributorship is located in Maidstone, Kent in the UK. In addition, during the period covered by this report, through UBIUK, the Company had production and distribution rights to Kingfisher Premium Lager in Canada and the United States. The Company has the right to use the Kingfisher mark and the name “Kingfisher Brewing Company” in connection with the brewing and distribution of the assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally sales are made through distributors. | |||||||||||||||
Subsequent Events | |||||||||||||||
We evaluate events that occur subsequent to the balance sheet date of periodic reports, but before financial statements are issued for periods ending on such balance sheet dates, for possible adjustment to such financial statements or other disclosure. This evaluation generally occurs through the date on which our financial statements are electronically prepared for filing with the Securities and Exchange Commission (“SEC”). | |||||||||||||||
Principles of Consolidation | |||||||||||||||
The consolidated financial statements present the accounts of MBC and its wholly-owned subsidiaries, Releta and UBIUK. All material intracompany and inter-company balances, profits and transactions have been eliminated. | |||||||||||||||
Basis of Presentation and Organization | |||||||||||||||
The accompanying unaudited condensed consolidated financial statements for the nine months ended September 30, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the US. These condensed financial statements should be read in conjunction with the audited consolidated financial statements included in our most recent Annual Report on Form 10-K, as filed with the SEC, which contains additional financial and operating information and information concerning significant accounting policies followed by the Company. The financial statements and notes are representations of our management (“Management”) and board of directors (the “Board of Directors”), who are responsible for their integrity and objectivity. | |||||||||||||||
Operating results from the nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any future period. | |||||||||||||||
Reclassifications | |||||||||||||||
Certain items in the financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. | |||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||
There have been no significant changes in our significant accounting policies during the nine months ended September 30, 2013 compared to what was previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. | |||||||||||||||
Cash and Cash Equivalents, Short and Long-Term Investments | |||||||||||||||
For purposes of cash flows, we consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. | |||||||||||||||
Revenue Recognition | |||||||||||||||
We recognize revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. We recognize revenue from product sales, net of discounts. | |||||||||||||||
We recognize revenue only when all of the following criteria have been met: | |||||||||||||||
● | Persuasive evidence of an arrangement exists; | ||||||||||||||
● | Delivery has occurred or services have been rendered; | ||||||||||||||
● | The fee for the arrangement is fixed or determinable; and | ||||||||||||||
● | Collectability is reasonably assured | ||||||||||||||
. | |||||||||||||||
“Persuasive Evidence of an Arrangement” – We document all terms of an arrangement in a written contract or purchase order signed by the customer prior to recognizing revenue. | |||||||||||||||
“Delivery Has Occurred or Services Have Been Performed” – We deliver the products prior to recognizing revenue and we perform services as per contractual terms. Product is considered delivered upon delivery to a customer’s designated location, and services are considered performed upon completion of our contractual obligations. | |||||||||||||||
“The Fee for the Arrangement is Fixed or Determinable” – Prior to recognizing revenue, an amount is either fixed or determinable under the terms of the written contract. The price is negotiated at the outset of the arrangement and is not subject to refund or adjustment during the initial term of the arrangement. | |||||||||||||||
“Collectability is Reasonably Assured” – We determine that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. We do not enter into arrangements unless collectability is reasonably assured at the outset. Existing customers are subject to ongoing credit evaluations based on payment history and other factors. If it is determined during the arrangement that collectability is not reasonably assured, revenue is recognized on a cash basis. | |||||||||||||||
We record certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. We report these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. | |||||||||||||||
Revenues from our brewpub and gift store are recognized when sales have been completed. | |||||||||||||||
Allowance for Doubtful Accounts | |||||||||||||||
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. Balances over 90 days past due and other higher risk amounts are reviewed individually for collectability. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Management’s assessment, we provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. | |||||||||||||||
Inventories | |||||||||||||||
Inventories are stated at the lower of average cost, which approximates the first-in, first-out method, or market (net realizable value). We regularly review our inventories for the presence of obsolete product attributed to age, seasonality and quality. Inventories that are considered obsolete are written off or adjusted to carrying value. | |||||||||||||||
Deferred Financing Costs | |||||||||||||||
Costs relating to obtaining financing are capitalized and amortized over the term of the related debt. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. Deferred financing costs related to a borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $33,800 and $11,300 for the nine and three months ended September 30, 2013 and 2012 respectively. | |||||||||||||||
Concentration of Credit Risks | |||||||||||||||
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of our cash and cash equivalents are deposited with commercial banks in the US and the UK that have minimal credit risk. Accounts receivable are generally unsecured and customers are subject to an initial credit review and ongoing monitoring. Wholesale distributors account for substantially all accounts receivable; therefore, this risk concentration is limited due to the number of distributors and the laws regulating the financial affairs of distributors of alcoholic beverages. As of September 30, 2013, we have approximately $2,260,200 of accounts receivable due from UK customers. | |||||||||||||||
Labor disputes, work stoppages or other disruptions in production could adversely affect us. As of September 30, 2013, union members represented approximately 18% of our US-based workforce. MBC has approximately fourteen employees at its Ukiah, California facility who were working under a collective bargaining agreement that expired on July 31, 2013. The union and management are currently negotiating a new agreement. | |||||||||||||||
Income Taxes | |||||||||||||||
We account for income taxes in accordance with ASC 750 which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. We periodically assess uncertain tax positions that we have taken or expect to take on tax returns, including decisions whether to file returns in any particular jurisdiction. We have evaluated our tax positions and have determined that there were no uncertain tax benefits as of September 30, 2013 and December 31, 2012. | |||||||||||||||
Basic and Diluted Earnings (Loss) per Share | |||||||||||||||
The basic earnings (loss) per share is computed by dividing the earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net earnings (loss) per share exclude the dilutive effect of stock options or warrants and convertible notes. If the Company’s operations result in net loss for any period, diluted net loss per share would be the same as basic net loss per share, since the effect of any potentially dilutive securities would be anti-dilutive. Therefore, the conversion of the related party notes has been excluded from the Company’s calculation of net loss per share. The computations of basic and dilutive net loss per share are as follows: | |||||||||||||||
Three months ended | Nine months ended | ||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 9/30/12 | ||||||||||||
Net income (loss) | $ | (19,700 | ) | 103,800 | $ | (443,000 | ) | 542,400 | |||||||
Weighted average common shares outstanding | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 | |||||||||||
Basic net income (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 | |||||||
Interest expense on convertible notes | $ | - | 22,900 | $ | - | 68,300 | |||||||||
Income (loss) for computing diluted net income per share | $ | (19,700 | ) | 126,700 | $ | (443,000 | ) | 610,700 | |||||||
Incremental shares from assumed exercise of dilutive securities | - | 2,272,681 | - | 2,272,681 | |||||||||||
Dilutive potential common shares | 12,611,133 | 14,883,814 | 12,611,133 | 14,883,814 | |||||||||||
Diluted net earnings (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 | |||||||
Foreign Currency Translation | |||||||||||||||
The local currency in the UK, the UK Pound Sterling, is the functional currency for our UK subsidiaries. Financial statements of these subsidiaries are translated into US dollars using period-end exchange rates for assets and liabilities and average exchange rates during the period for revenues and expenses. Cumulative translation adjustments associated with net assets or liabilities are reported in non-owner changes in equity. Any exchange rate gains or losses related to foreign currency transactions are recognized in the income statement as incurred, in the same financial statement caption as the underlying transaction, and are not material for any year shown. Cash flows were translated at the average exchange rates for the three months then ended. Changes in cash resulting from the translations are presented as a separate item in the statements of cash flows. | |||||||||||||||
Use of Estimates | |||||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the US includes having us make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The amounts estimated could differ from actual results. Significant estimates include the allowance for bad debts, depreciation and amortization periods, and the future utilization of deferred tax assets. | |||||||||||||||
Comprehensive Income (Loss) | |||||||||||||||
Comprehensive income (loss) is composed of our net loss and changes in equity from non-stockholder sources. The accumulated balances of these non-stockholder sources are reflected as a separate item in the equity section of the balance sheet. | |||||||||||||||
Reportable Segments | |||||||||||||||
Our operations are managed through two business segments: (i) brewing operations and tasting room operations in the US, and distributor operations in Canada (the “North American Territory”); and (ii) distributor operations in Europe, including the UK (the “Foreign Territory”). We evaluate performance based on net operating profit. Where applicable, portions of our administrative expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. If any materials and/or services are provided to one operating segment by the other, the transaction is valued according to our transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. |
Liquidity_and_Management_Plans
Liquidity and Management Plans | 9 Months Ended |
Sep. 30, 2013 | |
Liquidity And Management Plans | ' |
Liquidity and Management Plans | ' |
2. Liquidity and Management Plans | |
Cole Taylor Facility. On June 23, 2011, MBC and Releta entered into a Credit and Security Agreement (the “Agreement”) with Cole Taylor Bank, an Illinois banking corporation (“Cole Taylor”). The Agreement provides a credit facility with a maturity date of June 23, 2016 of up to $10,000,000 consisting of a $4,119,000 revolving facility, a $1,934,000 machinery and equipment term loan, a $2,947,000 real estate term loan and a $1,000,000 capital expenditure line of credit. A significant portion of the proceeds received under the Agreement were used to repay credit facilities provided by Marquette Business Credit, Inc. and Grand Pacific Financing Corporation. Convertible promissory notes issued to United Breweries of America, Inc. (“UBA”), one of the Company’s principal shareholders, are subordinated to the Cole Taylor facility. | |
On March 29, 2013, MBC, Releta, and Cole Taylor entered into a First Amendment (the “Amendment”) to the Agreement to clarify the method by which the fixed charge coverage ratio is calculated. The Amendment also provided that to the extent MBC and Releta may have been in breach of the covenants related to the fixed charge coverage ratio for certain periods before December 31, 2012, such breach was waived and no event of default occurred by reason of such breach. | |
The Agreement requires MBC and Releta to maintain certain minimum fixed charge coverage ratios for trailing twelve month periods and minimum tangible net worth. The minimum tangible net worth MBC and Releta are required to maintain is subject to increase based on the net income of MBC and Releta. As previously disclosed in the Company’s current report on Form 8-K filed on May 3, 2013, quarterly report on Form 10-Q filed on August 14, 2013 and current report on Form 8-K filed on September 24, 2013, the Company has been in default of the fixed charge coverage ratio. | |
On September 18, 2013, MBC and Releta received a notice (the “Default Notice”) from Cole Taylor regarding its intention to exercise certain rights with respect to events of default of the Company pursuant to the Agreement. The Default Notice lists the following defaults: | |
The required fixed charge coverage ratio for the trailing twelve month periods ending March 31, April 30, May 31, June 30 and July 31, 2013 fell short of the required ratio. | |
The tangible net worth fell short of the required amount for the period beginning June 1, 2013 through July 31, 2013. | |
MBC and Releta failed to deliver to the Lender the financial projections required by the Agreement for fiscal year 2013. | |
As of July 31, 2013, the fixed charge coverage ratio was required to be 1.10 to 1. The Company calculated that the fixed charge coverage ratio as of July 31, 2013 was 0.20 to 1 and as of September 30, 2013 to be 0.15 to 1. The Company calculated that the required tangible net worth of MBC and Releta was $6,181,400 as of July 31, 2013 and the actual tangible net worth on such date was $5,877,300. As of September 30, 2013, the Company calculated the required tangible net worth to be $6,181,400 and the actual tangible net worth to be $5,737,600. The Company does not anticipate that it will regain compliance with the required fixed charge coverage ratio or the minimum tangible net worth in the immediate future. | |
The Agreement provides that the failure of MBC and Releta to observe any covenant will constitute an event of default under the Agreement. Under the Agreement, upon the occurrence of an event of default, all of MBC’s and Releta’s obligations under the Agreement may, at the option of Cole Taylor, be declared, and immediately shall become, due and payable, without notice of any kind. The event of default shall be deemed continuing until waived in writing by Cole Taylor. The Default Notice states that Cole Taylor has elected to charge a default interest rate equal to two percent (2%) per annum in excess of the interest rate otherwise payable under the Agreement effective September 1, 2013. The Company estimates that the increased interest rate will result in the payment by the Company to Cole Taylor of an additional amount of approximately $120,000 for the first year. Cole Taylor has not waived the events of default described in the Default Notice and has reserved all other available rights and remedies under the Agreement, certain other related documents and applicable law. Cole Taylor could declare the full amount owed under the Agreement due and payable at any time for any reason or no reason. The Company has not received any notice or other communication from Cole Taylor that it intends to exercise any of the remedies available to it under the Agreement in connection with the events of default. The exercise of additional remedies by Cole Taylor may have a material adverse effect on the Company’s financial condition and the Company’s ability to continue to operate. If it becomes necessary for MBC and Releta to seek additional financing, there is no guarantee that MBC and Releta will be able to obtain such financing on terms favorable to the Company or on any terms. | |
Royal Bank of Scotland Facility. On April 26, 2005, Royal Bank of Scotland Commercial Services Limited (“RBS”) provided KBEL with an approximately $2.8 million (£1,750,000) maximum revolving line of credit with an advance rate based on 80% of KBEL’s qualified accounts receivable. This facility has a minimum maturity of twelve months, but is automatically extended unless terminated by either party upon six months’ written notice. | |
Heineken Facility. KBEL entered into a Loan Agreement pursuant to which Heineken UK Limited (“Heineken”) agreed to provide KBEL with a secured term loan facility of £1,000,000 to be made available, subject to the fulfillment of certain conditions precedent, on October 9, 2013 and to be repaid in full by October 9, 2016. KBEL availed itself of the loan on October 9, 2013. The Loan Agreement with Heineken is described under the section captioned “Description Of Our Indebtedness” below. | |
Additional Debt. We have several loans, lines of credit, other credit facilities and lease agreements which are currently outstanding (collectively, “Indebtedness”). We currently make timely payments of principal and interest relating to the Indebtedness as they fall due and anticipate that we will continue to make such timely payments in the immediate future. However, if we fail to maintain any of the financial covenants under the various agreements governing Indebtedness (such as the default under the Agreement described above), fail to make timely payments of amounts due under the Indebtedness, or commit any other breach resulting in an event of default under the agreements governing Indebtedness, such events of default (including cross-defaults) could have a material adverse effect on our financial condition. If our existing debt were accelerated and terminated, we would need to obtain replacement financing, the lack of which would have a material adverse effect on our financial condition and ability to continue operations. In addition, actions taken by secured parties against the Company’s assets which have been pledged as collateral could have a material adverse effect on our financial condition and operations. | |
At September 30, 2013, we had cash and cash equivalents of $40,700, an accumulated deficit of $14,273,700, and a working capital deficit of $7,194,600 due to losses incurred and reclassification of debts owing to Cole Taylor as a result of the event of default under the Agreement described above. | |
UBHL Support. On March 22, 2013, United Breweries (Holdings) Limited (“UBHL”), MBC’s indirect majority shareholder, issued a letter of financial support on behalf of KBEL (the “KBEL Letter of Support”) to KBEL’s accountants, to confirm that UBHL had agreed to provide funding on an as needed basis to ensure that KBEL is able to meet its financial obligations as and when they fall due. On November 8, 2013, UBHL issued a letter of financial support on behalf of MBC (the “MBC Letter of Support”, and, together with the KBEL Letter of Support, the “Letters of Support”) to MBC’s accountants to confirm that UBHL had agreed to provide funding on an as needed basis to ensure that MBC is able to meet its financial obligations when they fall due. The Letters of Support do not specify either the terms of UBHL’s support, or a maximum dollar limit. UBHL’s financial support is contingent upon compliance with any applicable exchange control requirements and other applicable laws and regulations relating to the transfer of funds from India. The KBEL Letter of Support was issued for a twelve month minimum period and the MBC Letter of Support was issued for a period through December 31, 2014, but, if necessary, Management intends to seek UBHL’s consent to extend the stated support. UBHL controls the Company’s two largest shareholders, UBA and Inversiones Mirabel S.A., and as such, UBHL is the Company’s indirect majority shareholder. The Chairman of the Company’s Board of Directors, Dr. Vijay Mallya, is also the chairman of the board of directors of UBHL. | |
Summary. Management has taken several actions to enable us to meet our working capital needs through September 30, 2014, including reducing discretionary expenditures, expanding business in new territories, and securing additional brewing contracts in an effort to utilize a portion of excess production capacity. | |
If it becomes necessary to seek UBHL’s financial assistance under the Letters of Support and UBHL does not fulfill its commitment to KBEL or MBC, as applicable, it may result in a material adverse effect on our financial position and on our ability to continue operations. In addition, our lenders may seek to satisfy any outstanding obligations through recourse against the applicable pledged collateral which may include our real property and fixed and current assets. The loss of any material pledged asset would likely have a material adverse effect on our financial position and results of operations. |
Inventories
Inventories | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
3. Inventories | |||||||||
Inventory is stated at the lower of cost or market using the average-cost method. Cost includes the acquisition cost of raw materials and components, direct labor, and manufacturing overhead. | |||||||||
Inventories consist of the following: | |||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Raw Materials | $ | 896,800 | $ | 807,000 | |||||
Beer-in-process | 365,600 | 323,600 | |||||||
Finished Goods | 780,800 | 732,300 | |||||||
Merchandise | 101,000 | 47,600 | |||||||
TOTAL | $ | 2,144,200 | $ | 1,910,500 |
Secured_Lines_of_Credit
Secured Lines of Credit | 9 Months Ended |
Sep. 30, 2013 | |
Line of Credit Facility [Abstract] | ' |
Secured Lines of Credit | ' |
4. Secured Lines of Credit | |
In June 2011, Cole Taylor provided a line of credit, from which may be drawn up to 85% of eligible receivables and 60% of eligible inventory during the period ending June 2016. The borrowings are collateralized, with recourse, by MBC’s and Releta’s trade receivables and inventory located in the US. This facility carries interest at a rate of prime plus 1% and is secured by substantially all of the assets of Releta and MBC. The amount outstanding on this line of credit as of September 30, 2013 was $1,771,200. We have included as accounts receivable on our September 30, 2013 balance sheet, $2,133,400 of accounts receivables and $2,128,700 of inventory collateralized to Cole Taylor under this facility. | |
On April 26, 2005, RBS provided an invoice discounting facility to KBEL for a maximum amount of £1,750,000 based on 80% prepayment against qualified accounts receivable related to KBEL’s UK customers. The initial term of the facility was one year, after which time the facility could be terminated by either party upon six months’ notice. The facility carries an interest rate of 1.38% above the RBS base rate and a service charge of 0.10% of each invoice discounted. The amount outstanding on this line of credit as of September 30, 2013 was $1,328,700. Account balances totaling $2,260,200 of accounts receivables collateralized to RBS under this facility are included in our balance sheet as accounts receivable at September 30, 2013. |
LongTerm_Debt
Long-Term Debt | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Long-term Debt, Unclassified [Abstract] | ' | ||||||||
Long-Term Debt | ' | ||||||||
5. Long-Term Debt | |||||||||
Maturities of long-term debt for succeeding years are as follows: | |||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Loan from Cole Taylor, payable in monthly installments of $12,300, plus interest at prime plus 2% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. | $ | 2,607,700 | $ | 2,718,300 | |||||
Loans from Cole Taylor, payable in monthly installments of $32,300 plus interest at prime plus 1.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. | 1,973,900 | 1,714,100 | |||||||
4,581,600 | 4,432,400 | ||||||||
Less current maturities | 4,581,600 | 450,000 | |||||||
$ | - | $ | 3,982,400 |
Notes_to_Related_Parties
Notes to Related Parties | 9 Months Ended |
Sep. 30, 2013 | |
Notes To Related Parties | ' |
Notes to Related Party | ' |
6. Notes to Related Parties | |
Subordinated Convertible Notes Payable | |
Notes payable to related parties includes unsecured convertible notes to UBA (the “UBA Notes”) for a total value of $3,475,000 as of September 30, 2013, including annual interest at the prime rate plus 1.5%, but not to exceed 10%. Thirteen of the UBA Notes are convertible into common stock at a rate of $1.50 per share and one UBA Note is convertible at a rate of $1.44 per share. The UBA Notes have been extended until June 2014 and have automatic renewals after such maturity date for successive one year terms, provided that either we or UBA may elect not to extend the term upon written notice given to the other party no more than 60 days and no fewer than 30 days prior to the expiration of the applicable term. Under the terms of the UBA Notes, UBA may demand payment within 60 days following the end of the extension period, but UBA has agreed to subordinate the UBA Notes to our long-term debt agreements with Cole Taylor, which mature in June 2016. Therefore, we will not require the use of working capital to repay any of the UBA Notes until the Cole Taylor facilities are repaid. The UBA Notes include $1,559,600 and $1,491,600 of accrued interest at September 30, 2013 and December 31, 2012, respectively. |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
7. Commitments and Contingencies | |
Purchase of raw materials | |
Production of our beverages requires quantities of various processed agricultural products, including malt and hops for beer. We fulfill our commodities requirements through purchases from various sources, some through contractual arrangements and others on the open market. | |
Legal | |
We are periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. Management, together with our legal counsel, assesses the resulting contingent liabilities, and such assessment inherently involves the exercise of judgment. | |
We are not currently aware of any legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our financial position or results of operations. | |
Operating Leases | |
We lease some operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases begin expiring in 2014 and provide for renewal options ranging from month-to-month to five years. In the normal course of business, we expect that these leases will be renewed or replaced by leases on similar properties. The leases provide for increases in future minimum annual rental payments based on defined increases which are generally meant to correlate with the Consumer Price Index, subject to certain minimum increases. Also, the agreements generally require us to pay certain costs, including real estate taxes, insurance and repairs. | |
We have various lease agreements for the brewpub and gift store in Ukiah, California, the brewery at Releta’s Saratoga Springs, New York facility, a building in the UK, and certain equipment. The New York lease includes a renewal option for three additional five-year periods, which Releta intends to exercise, and some leases are adjusted annually for changes in the Consumer Price Index. The leases begin expiring in 2014. | |
Keg Management Agreement | |
MicroStar Keg Management LLC (“MicroStar”), provides all of our kegs, for which we pay a service fee which varies depending on the applicable territory. We are required to purchase four times the average monthly keg usage for the preceding six-months upon the termination of our agreement with MicroStar. Although our agreement currently terminates in September, 2014, we plan to negotiate with MicroStar to continue this relationship. There is, however, no assurance that we will be able to successfully negotiate the continuation of such relationship. |
RelatedParty_Transactions
Related-Party Transactions | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Related-Party Transactions | ' | ||||||||
8. Related-Party Transactions | |||||||||
We have entered into several agreements with affiliated and related entities, including, but not limited to, a Market Development Agreement, a Distribution Agreement, and a Brewing License Agreement between MBC and KBEL; a Distribution Agreement between UBIUK and KBEL; a Trademark Licensing Agreement between MBC and Kingfisher of America, Inc.; and a License Agreement between UBIUK and UBHL. During the period covered by this report, KBEL was a party to a brewing agreement and a loan agreement with Shepherd Neame Limited (“Shepherd Neame”). | |||||||||
As previously reported, on March 11, 2013, UBIUK entered into an amendment (the “UBIUK License Amendment”) of that certain License Agreement between UBIUK and United Breweries Limited, an Indian corporation (“UB”), dated as of October 8, 1998, as amended (the “UBIUK License”). The UBIUK License grants UBIUK the exclusive license to use certain trademarks and do all things necessary to manufacture, package, market, distribute and sell Kingfisher beer in a defined territory. Also as previously reported, on March 11, 2013, UBIUK entered into an amendment (the “KBEL Amendment”) of that certain Distribution Agreement between UBIUK and KBEL dated October 9, 1998, as amended (the “KBEL License”). The KBEL License grants KBEL exclusive distribution rights with respect to Kingfisher beer, and sub-licenses to KBEL rights granted to UBIUK pursuant to the UBIUK License, in each case, within a defined territory. The KBEL Amendment, together with the UBIUK License Amendment, are referred to in this report as the “Subsidiary Amendments”. Also, as previously disclosed, the Chairman of the Company’s board of directors, Dr. Vijay Mallya, is also the Chairman of UB. | |||||||||
Both Subsidiary Amendments became effective October 9, 2013. The Subsidiary Amendments (i) acknowledge that the brewing agreement among UBIUK, KBEL and Shepherd Neame are replaced with a new contract brewing agreement between KBEL and Heineken; (ii) authorize KBEL to enter into loan and sub-license agreements with Heineken; (iii) expand the territory covered by the UBIUK License and the KBEL License to cover Canada, additional countries in eastern Europe, and the Caribbean Islands; (iv) delete the United States from the list of territories covered by the UBIUK License and the KBEL License; and (v) extend the term of the UBIUK License and the KBEL License until October 9, 2018. | |||||||||
Also as previously reported, on March 11, 2013, KBEL entered into an amendment (the “Company Amendment”) of that certain Brewing License Agreement between KBEL and the Company dated October 26, 2001 as amended (the “Company License”). The Company License currently grants us rights to distribute Kingfisher beer in the United States. Effective October 9, 2013, the Company Amendment changes the territory covered by the Company License from the United States to Canada and the Caribbean Islands. The Company has the right to use the Kingfisher mark and the name “Kingfisher Brewing Company” in connection with the brewing and distribution of the assorted beers in the US pursuant to an agreement with Kingfisher America, Inc. | |||||||||
The following tables reflect the value of transactions with Shepherd Neame and UBA during the nine months ended September 30, 2013 and 2012 and the balances outstanding as of September 30, 2013 and December 31, 2012. | |||||||||
TRANSACTIONS | 30-Sep-13 | 30-Sep-12 | |||||||
Sales to Shepherd Neame | $ | 2,286,700 | $ | 2,846,100 | |||||
Purchases from Shepherd Neame | $ | 10,827,700 | $ | 11,953,000 | |||||
Expense reimbursement to Shepherd Neame | $ | 788,000 | $ | 797,500 | |||||
Interest expense related to UBA convertible notes | $ | 68,000 | $ | 68,300 | |||||
ACCOUNT BALANCES | 30-Sep-13 | 31-Dec-12 | |||||||
Accounts payable to Shepherd Neame | $ | 2,704,800 | $ | 3,894,900 | |||||
Accounts receivable from Shepherd Neame | $ | 158,500 | $ | 356,300 |
Segment_Information
Segment Information | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Segment Information | ' | ||||||||||||||||
9. Segment Information | |||||||||||||||||
Our business presently consists of two segments – the North American Territory and the Foreign Territory. The Company’s operations in the North American Territory consist primarily of brewing and marketing proprietary craft beers. For distribution in the North American Territory, we brew our brands in our own facilities, which are located in Ukiah, California and Saratoga Springs, New York. Our operations in the Foreign Territory, which are conducted through UBIUK and KBEL, consist primarily of the marketing and distribution of Kingfisher Premium Lager in the Foreign Territory. | |||||||||||||||||
A summary of each segment is as follows: | |||||||||||||||||
Nine months ended September 30, 2013 | |||||||||||||||||
North | Foreign | Corporate & | Total | ||||||||||||||
American | Territory | Others | |||||||||||||||
Territory | |||||||||||||||||
Net Sales | $ | 11,057,400 | $ | 15,880,000 | $ | - | $ | 26,937,400 | |||||||||
Operating Income (loss) | $ | (321,100 | ) | $ | 231,600 | $ | - | $ | (89,500 | ) | |||||||
Identifiable Assets | $ | 12,872,000 | $ | 3,764,000 | $ | 2,713,300 | $ | 19,349,300 | |||||||||
Depreciation & Amortization | $ | 488,500 | $ | 309,200 | $ | - | $ | 797,700 | |||||||||
Capital Expenditures | $ | 333,400 | $ | 331,700 | $ | - | $ | 665,100 | |||||||||
Nine months ended September 30, 2012 | |||||||||||||||||
North | Foreign | Corporate & | Total | ||||||||||||||
American | Territory | Others | |||||||||||||||
Territory | |||||||||||||||||
Net Sales | $ | 12,816,800 | $ | 16,924,900 | $ | - | $ | 29,741,700 | |||||||||
Operating Income | $ | 486,600 | $ | 371,400 | $ | - | $ | 858,000 | |||||||||
Identifiable Assets | $ | 11,843,700 | $ | 3,984,400 | $ | 3,692,700 | $ | 19,520,800 | |||||||||
Depreciation & Amortization | $ | 457,500 | $ | 313,700 | $ | - | $ | 771,200 | |||||||||
Capital Expenditures | $ | 223,700 | $ | 322,500 | $ | - | $ | 546,200 |
Unrestricted_Net_Assets
Unrestricted Net Assets | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Unrestricted Net Assets | ' | ||||||||||||||||
Unrestricted Net Assets | ' | ||||||||||||||||
10. Unrestricted Net Assets | |||||||||||||||||
Our wholly-owned subsidiary, UBIUK, has undistributed losses of $2,128,200 as of September 30, 2013. Under KBEL’s line of credit agreement with RBS, distributions and other payments to MBC from KBEL are not permitted if retained earnings drop below $1,617,900 (£1,000,000). Condensed financial information of MBC together with its other subsidiary, Releta is as follows: | |||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||
(unaudited) | |||||||||||||||||
Assets | |||||||||||||||||
Cash | $ | 40,400 | $ | 123,200 | |||||||||||||
Accounts receivable, net | 2,133,400 | 2,531,700 | |||||||||||||||
Inventories | 2,128,700 | 1,910,500 | |||||||||||||||
Prepaid expenses | 213,800 | 111,900 | |||||||||||||||
Total current assets | 4,516,300 | 4,677,300 | |||||||||||||||
Investment in UBIUK | 1,225,000 | 1,225,000 | |||||||||||||||
Property and equipment | 10,743,300 | 10,864,600 | |||||||||||||||
Intercompany receivable | 655,900 | 471,400 | |||||||||||||||
Other assets | 325,700 | 268,800 | |||||||||||||||
Total assets | $ | 17,466,200 | $ | 17,507,100 | |||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||
Line of credit | $ | 1,771,200 | $ | 1,887,700 | |||||||||||||
Accounts payable | 1,895,700 | 1,584,300 | |||||||||||||||
Accrued liabilities | 1,059,700 | 884,300 | |||||||||||||||
Current maturities of debts and lease | 4,581,600 | 453,100 | |||||||||||||||
Total current liabilities | 9,308,200 | 4,809,400 | |||||||||||||||
Long-term debts and capital lease | - | 3,982,400 | |||||||||||||||
Notes to related parties | 3,475,000 | 3,407,000 | |||||||||||||||
Total liabilities | $ | 12,783,200 | $ | 12,198,800 | |||||||||||||
Stockholders’ equity | |||||||||||||||||
Preferred stock | 227,600 | 227,600 | |||||||||||||||
Common stock | 15,100,300 | 15,100,300 | |||||||||||||||
Accumulated deficit | (10,644,900 | ) | (10,019,600 | ) | |||||||||||||
Total stockholders’ equity | 4,683,000 | 5,308,300 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 17,466,200 | $ | 17,507,100 | |||||||||||||
Statements of Operations | Three months ended | Nine months ended | |||||||||||||||
30-Sep | 30-Sep | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Net sales | $ | 3,682,700 | $ | 4,247,700 | $ | 11,057,400 | $ | 12,816,800 | |||||||||
Cost of goods sold | (2,849,800 | ) | (3,252,000 | ) | (8,694,200 | ) | (9,609,700 | ) | |||||||||
Sales, marketing, and retail expenses | (464,100 | ) | (433,400 | ) | (1,278,700 | ) | (1,305,500 | ) | |||||||||
General and administrative expenses | (477,500 | ) | (549,300 | ) | (1,501,600 | ) | (1,517,900 | ) | |||||||||
Income (loss) from operations | (108,700 | ) | 13,000 | (417,100 | ) | 383,700 | |||||||||||
Other income | 37,700 | 35,100 | 112,100 | 112,700 | |||||||||||||
Interest expense | (114,900 | ) | (94,700 | ) | (315,300 | ) | (283,800 | ) | |||||||||
Provision for taxes | — | (900 | ) | (5,000 | ) | (1,700 | ) | ||||||||||
Net income (loss) | $ | (185,900 | ) | $ | (47,500 | ) | $ | (625,300 | ) | $ | 210,900 | ||||||
Statements of Cash Flows | Nine months ended September 30 | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
Cash flows from operating activities | $ | 405,500 | $ | 295,000 | |||||||||||||
Purchase of property and equipment | (333,400 | ) | (223,700 | ) | |||||||||||||
Proceed from sale of assets | - | 5,000 | |||||||||||||||
Net borrowing (repayment) on line of credit | (116,500 | ) | 235,700 | ||||||||||||||
Borrowing on long term debt | 539,700 | 184,700 | |||||||||||||||
Repayment on long term debt | (390,500 | ) | (344,300 | ) | |||||||||||||
Payment on obligation under capital lease | (3,100 | ) | (37,800 | ) | |||||||||||||
Net change in payable to UBIUK | (184,500 | ) | (177,700 | ) | |||||||||||||
Decrease in cash | (82,800 | ) | (63,100 | ) | |||||||||||||
Cash, beginning of period | 123,200 | 187,200 | |||||||||||||||
Cash, end of period | $ | 40,400 | $ | 124,100 |
Income_Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2013 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
11. Income Taxes | |
In the nine months ended September 30, 2013 and 2012, we recorded tax expenses related to state franchise taxes only, and did not record income tax expenses due to the availability of deferred tax assets to offset any taxable income in the US (at the federal and state level to the extent applicable) and the UK. We have established a full valuation allowance against our deferred tax assets based on an assessment that the criteria that deferred tax assets will more likely than not be realized has not yet been met. During the nine months ended September 30, 2013 and 2012, our effective tax rates were de minimis. The difference between our effective tax rates, the 35% US federal statutory tax rate, and the UK’s statutory tax rate resulted primarily from a tax benefit related to a reduction in the federal and state deferred tax asset valuation allowance. | |
Our major tax jurisdictions are (i) US (federal), (ii) California (state), (iii) New York (state) and (iv) UK. Tax returns remain open to examination by the applicable governmental authorities for tax years 2009 through 2012. The federal and state taxing authorities may choose to audit tax returns for prior years due to significant tax attribute carryforwards for those prior years. However, such audits will be limited to adjustments to such carryforward tax attributes. The Company is not currently being audited in any tax jurisdiction. |
Description_of_Operations_and_1
Description of Operations and Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Description of Operations | ' | ||||||||||||||
Description of Operations | |||||||||||||||
Mendocino Brewing Company, Inc. was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (“Releta”), and United Breweries International (UK) Limited (“UBIUK”). The terms “we”, “us”, “our”, and the “Company” and its variants are generally used to refer to Mendocino Brewing Company, Inc. together with its subsidiaries, while the term “MBC” is used to refer to Mendocino Brewing Company, Inc. standing alone. In the United States (the “US”), MBC and Releta operate two breweries that produce beer and malt beverages for the specialty “craft” segment of the beer market. The breweries are located in Ukiah, California and Saratoga Springs, New York. The majority of sales for MBC in the US are in California. We brew several brands, of which Red Tail Ale is the flagship brand. In addition, we perform contract brewing for several other brands. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. | |||||||||||||||
MBC’s United Kingdom (the “UK”) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (“KBEL”). KBEL is a distributor of alcoholic beverages, mainly Kingfisher Lager Beer, in the UK and Europe. The distributorship is located in Maidstone, Kent in the UK. In addition, during the period covered by this report, through UBIUK, the Company had production and distribution rights to Kingfisher Premium Lager in Canada and the United States. The Company has the right to use the Kingfisher mark and the name “Kingfisher Brewing Company” in connection with the brewing and distribution of the assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally sales are made through distributors. | |||||||||||||||
Subsequent Events | ' | ||||||||||||||
Subsequent Events | |||||||||||||||
We evaluate events that occur subsequent to the balance sheet date of periodic reports, but before financial statements are issued for periods ending on such balance sheet dates, for possible adjustment to such financial statements or other disclosure. This evaluation generally occurs through the date on which our financial statements are electronically prepared for filing with the Securities and Exchange Commission (“SEC”). | |||||||||||||||
Principles of Consolidation | ' | ||||||||||||||
Principles of Consolidation | |||||||||||||||
The consolidated financial statements present the accounts of MBC and its wholly-owned subsidiaries, Releta and UBIUK. All material intracompany and inter-company balances, profits and transactions have been eliminated. | |||||||||||||||
Basis of Presentation and Organization | ' | ||||||||||||||
Basis of Presentation and Organization | |||||||||||||||
The accompanying unaudited condensed consolidated financial statements for the nine months ended September 30, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the US. These condensed financial statements should be read in conjunction with the audited consolidated financial statements included in our most recent Annual Report on Form 10-K, as filed with the SEC, which contains additional financial and operating information and information concerning significant accounting policies followed by the Company. The financial statements and notes are representations of our management (“Management”) and board of directors (the “Board of Directors”), who are responsible for their integrity and objectivity. | |||||||||||||||
Operating results from the nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any future period. | |||||||||||||||
Reclassifications | ' | ||||||||||||||
Reclassifications | |||||||||||||||
Certain items in the financial statements for the prior year have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity. | |||||||||||||||
Cash and Cash Equivalents, Short and Long-Term Investments | ' | ||||||||||||||
Cash and Cash Equivalents, Short and Long-Term Investments | |||||||||||||||
For purposes of cash flows, we consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. | |||||||||||||||
Revenue Recognition | ' | ||||||||||||||
Revenue Recognition | |||||||||||||||
We recognize revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. We recognize revenue from product sales, net of discounts. | |||||||||||||||
We recognize revenue only when all of the following criteria have been met: | |||||||||||||||
● | Persuasive evidence of an arrangement exists; | ||||||||||||||
● | Delivery has occurred or services have been rendered; | ||||||||||||||
● | The fee for the arrangement is fixed or determinable; and | ||||||||||||||
● | Collectability is reasonably assured | ||||||||||||||
. | |||||||||||||||
“Persuasive Evidence of an Arrangement” – We document all terms of an arrangement in a written contract or purchase order signed by the customer prior to recognizing revenue. | |||||||||||||||
“Delivery Has Occurred or Services Have Been Performed” – We deliver the products prior to recognizing revenue and we perform services as per contractual terms. Product is considered delivered upon delivery to a customer’s designated location, and services are considered performed upon completion of our contractual obligations. | |||||||||||||||
“The Fee for the Arrangement is Fixed or Determinable” – Prior to recognizing revenue, an amount is either fixed or determinable under the terms of the written contract. The price is negotiated at the outset of the arrangement and is not subject to refund or adjustment during the initial term of the arrangement. | |||||||||||||||
“Collectability is Reasonably Assured” – We determine that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. We do not enter into arrangements unless collectability is reasonably assured at the outset. Existing customers are subject to ongoing credit evaluations based on payment history and other factors. If it is determined during the arrangement that collectability is not reasonably assured, revenue is recognized on a cash basis. | |||||||||||||||
We record certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. We report these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. | |||||||||||||||
Revenues from our brewpub and gift store are recognized when sales have been completed. | |||||||||||||||
Allowance for Doubtful Accounts | ' | ||||||||||||||
Allowance for Doubtful Accounts | |||||||||||||||
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. Balances over 90 days past due and other higher risk amounts are reviewed individually for collectability. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Management’s assessment, we provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. | |||||||||||||||
Inventories | ' | ||||||||||||||
Inventories | |||||||||||||||
Inventories are stated at the lower of average cost, which approximates the first-in, first-out method, or market (net realizable value). We regularly review our inventories for the presence of obsolete product attributed to age, seasonality and quality. Inventories that are considered obsolete are written off or adjusted to carrying value. | |||||||||||||||
Deferred Financing Costs | ' | ||||||||||||||
Deferred Financing Costs | |||||||||||||||
Costs relating to obtaining financing are capitalized and amortized over the term of the related debt. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. Deferred financing costs related to a borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $33,800 and $11,300 for the nine and three months ended September 30, 2013 and 2012 respectively. | |||||||||||||||
Concentration of Credit Risks | ' | ||||||||||||||
Concentration of Credit Risks | |||||||||||||||
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of our cash and cash equivalents are deposited with commercial banks in the US and the UK that have minimal credit risk. Accounts receivable are generally unsecured and customers are subject to an initial credit review and ongoing monitoring. Wholesale distributors account for substantially all accounts receivable; therefore, this risk concentration is limited due to the number of distributors and the laws regulating the financial affairs of distributors of alcoholic beverages. As of September 30, 2013, we have approximately $2,260,200 of accounts receivable due from UK customers. | |||||||||||||||
Labor disputes, work stoppages or other disruptions in production could adversely affect us. As of September 30, 2013, union members represented approximately 18% of our US-based workforce. MBC has approximately fourteen employees at its Ukiah, California facility who were working under a collective bargaining agreement that expired on July 31, 2013. The union and management are currently negotiating a new agreement. | |||||||||||||||
Income Taxes | ' | ||||||||||||||
Income Taxes | |||||||||||||||
We account for income taxes in accordance with ASC 750 which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. We periodically assess uncertain tax positions that we have taken or expect to take on tax returns, including decisions whether to file returns in any particular jurisdiction. We have evaluated our tax positions and have determined that there were no uncertain tax benefits as of September 30, 2013 and December 31, 2012. | |||||||||||||||
Basic and Diluted Earnings (Loss) per Share | ' | ||||||||||||||
Basic and Diluted Earnings (Loss) per Share | |||||||||||||||
The basic earnings (loss) per share is computed by dividing the earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net earnings (loss) per share exclude the dilutive effect of stock options or warrants and convertible notes. If the Company’s operations result in net loss for any period, diluted net loss per share would be the same as basic net loss per share, since the effect of any potentially dilutive securities would be anti-dilutive. Therefore, the conversion of the related party notes has been excluded from the Company’s calculation of net loss per share. The computations of basic and dilutive net loss per share are as follows: | |||||||||||||||
Three months ended | Nine months ended | ||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 9/30/12 | ||||||||||||
Net income (loss) | $ | (19,700 | ) | 103,800 | $ | (443,000 | ) | 542,400 | |||||||
Weighted average common shares outstanding | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 | |||||||||||
Basic net income (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 | |||||||
Interest expense on convertible notes | $ | - | 22,900 | $ | - | 68,300 | |||||||||
Income (loss) for computing diluted net income per share | $ | (19,700 | ) | 126,700 | $ | (443,000 | ) | 610,700 | |||||||
Incremental shares from assumed exercise of dilutive securities | - | 2,272,681 | - | 2,272,681 | |||||||||||
Dilutive potential common shares | 12,611,133 | 14,883,814 | 12,611,133 | 14,883,814 | |||||||||||
Diluted net earnings (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 | |||||||
Foreign Currency Translation | ' | ||||||||||||||
Foreign Currency Translation | |||||||||||||||
The local currency in the UK, the UK Pound Sterling, is the functional currency for our UK subsidiaries. Financial statements of these subsidiaries are translated into US dollars using period-end exchange rates for assets and liabilities and average exchange rates during the period for revenues and expenses. Cumulative translation adjustments associated with net assets or liabilities are reported in non-owner changes in equity. Any exchange rate gains or losses related to foreign currency transactions are recognized in the income statement as incurred, in the same financial statement caption as the underlying transaction, and are not material for any year shown. Cash flows were translated at the average exchange rates for the three months then ended. Changes in cash resulting from the translations are presented as a separate item in the statements of cash flows. | |||||||||||||||
Use of Estimates | ' | ||||||||||||||
Use of Estimates | |||||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the US includes having us make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The amounts estimated could differ from actual results. Significant estimates include the allowance for bad debts, depreciation and amortization periods, and the future utilization of deferred tax assets. | |||||||||||||||
Comprehensive Income (Loss) | ' | ||||||||||||||
Comprehensive Income (Loss) | |||||||||||||||
Comprehensive income (loss) is composed of our net loss and changes in equity from non-stockholder sources. The accumulated balances of these non-stockholder sources are reflected as a separate item in the equity section of the balance sheet. | |||||||||||||||
Reportable Segments | ' | ||||||||||||||
Reportable Segments | |||||||||||||||
Our operations are managed through two business segments: (i) brewing operations and tasting room operations in the US, and distributor operations in Canada (the “North American Territory”); and (ii) distributor operations in Europe, including the UK (the “Foreign Territory”). We evaluate performance based on net operating profit. Where applicable, portions of our administrative expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. If any materials and/or services are provided to one operating segment by the other, the transaction is valued according to our transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. |
Description_of_Operations_and_2
Description of Operations and Summary of Significant Accounting Policies (Tables) | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Schedule of Basic and Dilutive Net Loss Per Share | ' | ||||||||||||||
The computations of basic and dilutive net loss per share are as follows: | |||||||||||||||
Three months ended | Nine months ended | ||||||||||||||
9/30/13 | 9/30/12 | 9/30/13 | 9/30/12 | ||||||||||||
Net income (loss) | $ | (19,700 | ) | 103,800 | $ | (443,000 | ) | 542,400 | |||||||
Weighted average common shares outstanding | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 | |||||||||||
Basic net income (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 | |||||||
Interest expense on convertible notes | $ | - | 22,900 | $ | - | 68,300 | |||||||||
Income (loss) for computing diluted net income per share | $ | (19,700 | ) | 126,700 | $ | (443,000 | ) | 610,700 | |||||||
Incremental shares from assumed exercise of dilutive securities | - | 2,272,681 | - | 2,272,681 | |||||||||||
Dilutive potential common shares | 12,611,133 | 14,883,814 | 12,611,133 | 14,883,814 | |||||||||||
Diluted net earnings (loss) per share | $ | (0.00 | ) | 0.01 | $ | (0.04 | ) | 0.04 |
Inventories_Tables
Inventories (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Schedule of Inventories | ' | ||||||||
Inventories consist of the following: | |||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Raw Materials | $ | 896,800 | $ | 807,000 | |||||
Beer-in-process | 365,600 | 323,600 | |||||||
Finished Goods | 780,800 | 732,300 | |||||||
Merchandise | 101,000 | 47,600 | |||||||
TOTAL | $ | 2,144,200 | $ | 1,910,500 |
LongTerm_Debt_Tables
Long-Term Debt (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Long-term Debt, Unclassified [Abstract] | ' | ||||||||
Summary of Long-term Debt | ' | ||||||||
Maturities of long-term debt for succeeding years are as follows: | |||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Loan from Cole Taylor, payable in monthly installments of $12,300, plus interest at prime plus 2% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. | $ | 2,607,700 | $ | 2,718,300 | |||||
Loans from Cole Taylor, payable in monthly installments of $32,300 plus interest at prime plus 1.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. | 1,973,900 | 1,714,100 | |||||||
4,581,600 | 4,432,400 | ||||||||
Less current maturities | 4,581,600 | 450,000 | |||||||
$ | - | $ | 3,982,400 |
RelatedParty_Transactions_Tabl
Related-Party Transactions (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Schedule of Related-Party Transactions | ' | ||||||||
The following tables reflect the value of transactions with Shepherd Neame and UBA during the nine months ended September 30, 2013 and 2012 and the balances outstanding as of September 30, 2013 and December 31, 2012. | |||||||||
TRANSACTIONS | 30-Sep-13 | 30-Sep-12 | |||||||
Sales to Shepherd Neame | $ | 2,286,700 | $ | 2,846,100 | |||||
Purchases from Shepherd Neame | $ | 10,827,700 | $ | 11,953,000 | |||||
Expense reimbursement to Shepherd Neame | $ | 788,000 | $ | 797,500 | |||||
Interest expense related to UBA convertible notes | $ | 68,000 | $ | 68,300 | |||||
ACCOUNT BALANCES | 30-Sep-13 | 31-Dec-12 | |||||||
Accounts payable to Shepherd Neame | $ | 2,704,800 | $ | 3,894,900 | |||||
Accounts receivable from Shepherd Neame | $ | 158,500 | $ | 356,300 |
Segment_Information_Tables
Segment Information (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Schedule of Segment Information | ' | ||||||||||||||||
A summary of each segment is as follows: | |||||||||||||||||
Nine months ended September 30, 2013 | |||||||||||||||||
North | Foreign | Corporate & | Total | ||||||||||||||
American | Territory | Others | |||||||||||||||
Territory | |||||||||||||||||
Net Sales | $ | 11,057,400 | $ | 15,880,000 | $ | - | $ | 26,937,400 | |||||||||
Operating Income (loss) | $ | (321,100 | ) | $ | 231,600 | $ | - | $ | (89,500 | ) | |||||||
Identifiable Assets | $ | 12,872,000 | $ | 3,764,000 | $ | 2,713,300 | $ | 19,349,300 | |||||||||
Depreciation & Amortization | $ | 488,500 | $ | 309,200 | $ | - | $ | 797,700 | |||||||||
Capital Expenditures | $ | 333,400 | $ | 331,700 | $ | - | $ | 665,100 | |||||||||
Nine months ended September 30, 2012 | |||||||||||||||||
North | Foreign | Corporate & | Total | ||||||||||||||
American | Territory | Others | |||||||||||||||
Territory | |||||||||||||||||
Net Sales | $ | 12,816,800 | $ | 16,924,900 | $ | - | $ | 29,741,700 | |||||||||
Operating Income | $ | 486,600 | $ | 371,400 | $ | - | $ | 858,000 | |||||||||
Identifiable Assets | $ | 11,843,700 | $ | 3,984,400 | $ | 3,692,700 | $ | 19,520,800 | |||||||||
Depreciation & Amortization | $ | 457,500 | $ | 313,700 | $ | - | $ | 771,200 | |||||||||
Capital Expenditures | $ | 223,700 | $ | 322,500 | $ | - | $ | 546,200 |
Unrestricted_Net_Assets_Tables
Unrestricted Net Assets (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Unrestricted Net Assets | ' | ||||||||||||||||
Condensed Balance Sheets | ' | ||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||
(unaudited) | |||||||||||||||||
Assets | |||||||||||||||||
Cash | $ | 40,400 | $ | 123,200 | |||||||||||||
Accounts receivable, net | 2,133,400 | 2,531,700 | |||||||||||||||
Inventories | 2,128,700 | 1,910,500 | |||||||||||||||
Prepaid expenses | 213,800 | 111,900 | |||||||||||||||
Total current assets | 4,516,300 | 4,677,300 | |||||||||||||||
Investment in UBIUK | 1,225,000 | 1,225,000 | |||||||||||||||
Property and equipment | 10,743,300 | 10,864,600 | |||||||||||||||
Intercompany receivable | 655,900 | 471,400 | |||||||||||||||
Other assets | 325,700 | 268,800 | |||||||||||||||
Total assets | $ | 17,466,200 | $ | 17,507,100 | |||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||
Line of credit | $ | 1,771,200 | $ | 1,887,700 | |||||||||||||
Accounts payable | 1,895,700 | 1,584,300 | |||||||||||||||
Accrued liabilities | 1,059,700 | 884,300 | |||||||||||||||
Current maturities of debts and lease | 4,581,600 | 453,100 | |||||||||||||||
Total current liabilities | 9,308,200 | 4,809,400 | |||||||||||||||
Long-term debts and capital lease | - | 3,982,400 | |||||||||||||||
Notes to related parties | 3,475,000 | 3,407,000 | |||||||||||||||
Total liabilities | $ | 12,783,200 | $ | 12,198,800 | |||||||||||||
Stockholders’ equity | |||||||||||||||||
Preferred stock | 227,600 | 227,600 | |||||||||||||||
Common stock | 15,100,300 | 15,100,300 | |||||||||||||||
Accumulated deficit | (10,644,900 | ) | (10,019,600 | ) | |||||||||||||
Total stockholders’ equity | 4,683,000 | 5,308,300 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 17,466,200 | $ | 17,507,100 | |||||||||||||
Condensed Statement of Operations | ' | ||||||||||||||||
Statements of Operations | Three months ended | Nine months ended | |||||||||||||||
30-Sep | 30-Sep | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Net sales | $ | 3,682,700 | $ | 4,247,700 | $ | 11,057,400 | $ | 12,816,800 | |||||||||
Cost of goods sold | (2,849,800 | ) | (3,252,000 | ) | (8,694,200 | ) | (9,609,700 | ) | |||||||||
Sales, marketing, and retail expenses | (464,100 | ) | (433,400 | ) | (1,278,700 | ) | (1,305,500 | ) | |||||||||
General and administrative expenses | (477,500 | ) | (549,300 | ) | (1,501,600 | ) | (1,517,900 | ) | |||||||||
Income (loss) from operations | (108,700 | ) | 13,000 | (417,100 | ) | 383,700 | |||||||||||
Other income | 37,700 | 35,100 | 112,100 | 112,700 | |||||||||||||
Interest expense | (114,900 | ) | (94,700 | ) | (315,300 | ) | (283,800 | ) | |||||||||
Provision for taxes | — | (900 | ) | (5,000 | ) | (1,700 | ) | ||||||||||
Net income (loss) | $ | (185,900 | ) | $ | (47,500 | ) | $ | (625,300 | ) | $ | 210,900 | ||||||
Condensed Statement of Cash Flows | ' | ||||||||||||||||
Statements of Cash Flows | Nine months ended September 30 | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
Cash flows from operating activities | $ | 405,500 | $ | 295,000 | |||||||||||||
Purchase of property and equipment | (333,400 | ) | (223,700 | ) | |||||||||||||
Proceed from sale of assets | - | 5,000 | |||||||||||||||
Net borrowing (repayment) on line of credit | (116,500 | ) | 235,700 | ||||||||||||||
Borrowing on long term debt | 539,700 | 184,700 | |||||||||||||||
Repayment on long term debt | (390,500 | ) | (344,300 | ) | |||||||||||||
Payment on obligation under capital lease | (3,100 | ) | (37,800 | ) | |||||||||||||
Net change in payable to UBIUK | (184,500 | ) | (177,700 | ) | |||||||||||||
Decrease in cash | (82,800 | ) | (63,100 | ) | |||||||||||||
Cash, beginning of period | 123,200 | 187,200 | |||||||||||||||
Cash, end of period | $ | 40,400 | $ | 124,100 |
Description_of_Operations_and_3
Description of Operations and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Jun. 30, 2011 | |
Deferred financing cost | ' | ' | ' | ' | ' | $225,000 |
Amortization of deferred financing costs charged to operations | 33,800 | 11,300 | 33,800 | 11,300 | ' | ' |
Accounts receivable | 4,393,600 | ' | 4,393,600 | ' | 5,421,600 | ' |
Collective bargaining agreement expires date | ' | ' | 31-Jul-13 | ' | ' | ' |
Uncertain tax benefits | 0 | ' | 0 | ' | 0 | ' |
Ukiah [Member] | ' | ' | ' | ' | ' | ' |
Union members as a percentage of US-based workforce | 18.00% | ' | 18.00% | ' | ' | ' |
Number of employees in California working under collective bargaining agreement | 14 | ' | 14 | ' | ' | ' |
UK [Member] | ' | ' | ' | ' | ' | ' |
Accounts receivable | $2,260,200 | ' | $2,260,200 | ' | ' | ' |
Description_of_Operations_and_4
Description of Operations and Summary of Significant Accounting Policies - Schedule of Basic and Dilutive Net Loss Per Share (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Accounting Policies [Abstract] | ' | ' | ' | ' |
Net income (loss) | ($19,700) | $103,800 | ($443,000) | $542,400 |
Weighted average common shares outstanding | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 |
Basic net income (loss) per share | $0 | $0.01 | ($0.04) | $0.04 |
Interest expense on convertible notes | ' | 22,900 | ' | 68,300 |
Income (loss) for computing diluted net income per share | ($19,700) | $126,700 | ($443,300) | $610,700 |
Incremental shares from assumed exercise of dilutive securities | ' | 2,272,681 | ' | 2,272,681 |
Dilutive potential common shares | 12,611,133 | 14,883,814 | 12,611,133 | 14,883,814 |
Diluted net earnings (loss) per share | $0 | $0.01 | ($0.04) | $0.04 |
Liquidity_and_Management_Plans1
Liquidity and Management Plans (Details Narrative) | 0 Months Ended | ||||||||||||||||
Sep. 01, 2013 | Jun. 23, 2011 | Apr. 26, 2005 | Sep. 30, 2013 | Jul. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 | Sep. 30, 2013 | Apr. 26, 2005 | Sep. 30, 2013 | Jul. 31, 2013 | Jul. 31, 2013 | Jun. 23, 2011 | Jun. 23, 2011 | Jun. 23, 2011 | Jun. 23, 2011 | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | UK [Member] | UK [Member] | Fixed Charges Coverage Required Trailing 12 Months [Member] | Fixed Charges Coverage Required Trailing 12 Months [Member] | Fixed Charges Coverage Actual Trailing 12 Months [Member] | Revolving Credit Facility [Member] | Machinery And Equipment Term Loan [Member] | Real Estate Term Loan [Member] | Capital Expenditure Line Of Credit [Member] | |
GBP [Member] | GBP [Member] | Number | Number | Number | USD ($) | USD ($) | USD ($) | USD ($) | |||||||||
GBP (£) | GBP (£) | ||||||||||||||||
Credit facility, maturity date | ' | 23-Jun-16 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Credit facility, agreement amount | ' | $10,000,000 | $2,800,000 | ' | ' | ' | ' | ' | ' | £ 1,750,000 | ' | ' | ' | $4,119,000 | $1,934,000 | $2,947,000 | $1,000,000 |
Fixed charge coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.05 | 1.1 | 0.9 | ' | ' | ' | ' |
Percentage of qualified accounts receivable | ' | ' | 80.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tangible net worth of MBC and Releta | ' | ' | ' | ' | 6,181,400 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tangible net worth Required MBC and Releta | ' | ' | ' | 6,181,400 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Actual tangible net worth | ' | ' | ' | 5,877,300 | 5,877,300 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Secured term loan | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Percenatge of increase interest by Cole Taylor | 20.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payement of interest increase | 120,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Secured loan repayment term | ' | ' | ' | ' | ' | ' | ' | ' | 9-Oct-16 | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | ' | 40,700 | ' | 198,500 | 139,000 | 312,200 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated deficit | ' | ' | ' | 14,273,700 | ' | 13,830,700 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Working capital deficit | ' | ' | ' | $7,194,600 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Inventories_Schedule_of_Invent
Inventories - Schedule of Inventories (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Inventory Disclosure [Abstract] | ' | ' |
Raw Materials | $896,800 | $807,000 |
Beer-in-process | 365,600 | 323,600 |
Finished Goods | 780,800 | 732,300 |
Merchandise | 101,000 | 47,600 |
Inventories, Total | $2,144,200 | $1,910,500 |
Secured_Lines_of_Credit_Detail
Secured Lines of Credit (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Jun. 23, 2011 | Apr. 26, 2005 | Sep. 30, 2011 | Sep. 30, 2013 | Apr. 26, 2005 | Sep. 30, 2013 | Apr. 26, 2005 |
Cole Taylor [Member] | Cole Taylor [Member] | RBS [Member] | RBS [Member] | RBS [Member] | |||||
GBP [Member] | |||||||||
Percentage of line of credit drawn on receivables, maximum | ' | ' | ' | ' | 85.00% | ' | ' | ' | ' |
Percentage of line of credit drawn on inventory, maximum | ' | ' | ' | ' | 60.00% | ' | ' | ' | ' |
Line of credit eligible inventory expiring date | ' | ' | ' | ' | 30-Jun-16 | ' | ' | ' | ' |
Facility interest rate above prime lending rate | ' | ' | ' | ' | 1.00% | ' | 1.38% | ' | ' |
Line of credit, outstanding amount | ' | ' | ' | ' | ' | $1,771,200 | ' | $1,328,700 | ' |
Account receivables | ' | ' | ' | ' | ' | 2,133,400 | 2,260,200 | ' | ' |
Inventory | 2,144,200 | 1,910,500 | ' | ' | ' | 2,128,700 | ' | ' | ' |
Maximum amount of facility | ' | ' | $10,000,000 | $2,800,000 | ' | ' | ' | ' | $1,750,000 |
Initial term of facility | ' | ' | ' | ' | ' | ' | '1 year | ' | ' |
Percentage of prepayment against qualified accounts receivable | ' | ' | ' | ' | ' | ' | 80.00% | ' | ' |
Percentage of service charge on each invoice discounted | ' | ' | ' | ' | ' | ' | 0.10% | ' | ' |
LongTerm_Debt_Summary_of_LongT
Long-Term Debt - Summary of Long-Term Debt (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Long term debt, total | $4,581,600 | $4,432,400 |
Less current maturities | 4,581,600 | 450,000 |
Long-term debt non-current | ' | 3,982,400 |
Cole Taylor Notes With 2% Prime Plus Interest Rate [Member] | ' | ' |
Long term debt, total | 2,607,700 | 2,718,300 |
Cole Taylor Notes With 1.5% Prime Plus Interest Rate [Member] | ' | ' |
Long term debt, total | $1,973,900 | $1,714,100 |
LongTerm_Debt_Summary_of_LongT1
Long-Term Debt - Summary of Long-Term Debt (Details) (Parenthetical) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Cole Taylor Notes With 2% Prime Plus Interest Rate [Member] | ' | ' |
Loans payable in monthly installments | $12,300 | $12,300 |
Balloon payment of loans | 2,202,500 | 2,202,500 |
Loans payable, interest rate above prime rate | 2.00% | 2.00% |
Debt instrument maturity date | 30-Jun-16 | 30-Jun-16 |
Cole Taylor Notes With 1.5% Prime Plus Interest Rate [Member] | ' | ' |
Loans payable in monthly installments | 32,300 | 32,300 |
Balloon payment of loans | $908,700 | $908,700 |
Loans payable, interest rate above prime rate | 1.50% | 1.50% |
Debt instrument maturity date | 30-Jun-16 | 30-Jun-16 |
Notes_to_Related_Parties_Detai
Notes to Related Parties (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 |
Thirteen UBA Notes [Member] | One UBA Note [Member] | Subordinated Convertible Notes Payable [Member] | Cole Taylor [Member] | |||
Unsecured convertible notes | $3,475,000 | ' | ' | ' | ' | ' |
Percentage of convertible notes interest, prime rate plus | ' | ' | ' | ' | 1.50% | ' |
Percentage of convertible notes interest rate, maximum | ' | ' | ' | ' | 10.00% | ' |
Debt instruments conversion price per share | ' | ' | $1.50 | $1.44 | ' | ' |
Convertible notes payable maturity date, description | ' | ' | ' | ' | ' | ' |
The UBA Notes have been extended until June 2014 and have automatic renewals after such maturity date for successive one year terms, provided that either we or UBA may elect not to extend the term upon written notice given to the other party no more than 60 days and no fewer than 30 days prior to the expiration of the applicable term. Under the terms of the UBA Notes, UBA may demand payment within 60 days following the end of the extension period, but UBA has agreed to subordinate the UBA Notes to our long-term debt agreements with Cole Taylor, which mature in June 2016. | ||||||
Accrued interest | $1,559,600 | $1,491,600 | ' | ' | ' | ' |
Debt instrument maturity date | ' | ' | ' | ' | ' | 30-Jun-16 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details Narrative) | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Keg Management Agreement | ' |
agreement currently terminates in September, 2014. |
RelatedParty_Transactions_Sche
Related-Party Transactions - Schedule of Related-Party Transactions (Details) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' | ' |
Sales to Shepherd Neame | $2,286,700 | $2,846,100 | ' |
Purchases from Shepherd Neame | 10,827,700 | 11,953,000 | ' |
Expense reimbursement to Shepherd Neame | 788,000 | 797,500 | ' |
Interest expense related to UBA convertible notes | 68,000 | 68,300 | ' |
Accounts payable to Shepherd Neame | 2,704,800 | ' | 3,894,900 |
Accounts receivable from Shepherd Neame | $158,500 | ' | $356,300 |
Segment_Information_Schedule_o
Segment Information - Schedule of Segment Information (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Net Sales | $26,937,400 | $29,741,700 |
Operating Income (loss) | -89,500 | 858,000 |
Identifiable Assets | 19,349,300 | 19,520,800 |
Depreciation & Amortization | 797,700 | 771,200 |
Capital Expenditures | 665,100 | 546,200 |
North American Territory [Member] | ' | ' |
Net Sales | 11,057,400 | 12,816,800 |
Operating Income (loss) | -321,100 | 486,600 |
Identifiable Assets | 12,872,000 | 11,843,700 |
Depreciation & Amortization | 488,500 | 457,500 |
Capital Expenditures | 333,400 | 223,700 |
Foreign Territory [Member] | ' | ' |
Net Sales | 15,880,000 | 16,924,900 |
Operating Income (loss) | 231,600 | 371,400 |
Identifiable Assets | 3,764,000 | 3,984,400 |
Depreciation & Amortization | 309,200 | 313,700 |
Capital Expenditures | 331,700 | 322,500 |
Corporate And Others [Member] | ' | ' |
Net Sales | ' | ' |
Operating Income (loss) | ' | ' |
Identifiable Assets | 2,713,300 | 3,692,700 |
Depreciation & Amortization | ' | ' |
Capital Expenditures | ' | ' |
Unrestricted_Net_Assets_Detail
Unrestricted Net Assets (Details Narrative) | Sep. 30, 2013 | Sep. 30, 2013 |
GBP [Member] | UBIUK [Member] | |
GBP (£) | USD ($) | |
Undistributed losses | ' | $2,128,200 |
Minimum Retained Earning required for distributions and other payments to MBC from KBEL | £ 1,000,000 | $1,617,900 |
Unrestricted_Net_Assets_Conden
Unrestricted Net Assets - Condensed Balance Sheets (Details) (Mendocino, MBC And Releta Company [Member], USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Mendocino, MBC And Releta Company [Member] | ' | ' |
Cash | $40,400 | $123,200 |
Accounts receivable, net | 2,133,400 | 2,531,700 |
Inventories | 2,128,700 | 1,910,500 |
Prepaid expenses | 213,800 | 111,900 |
Total current assets | 4,516,300 | 4,677,300 |
Investment in UBIUK | 1,225,000 | 1,225,000 |
Property and equipment | 10,743,300 | 10,864,600 |
Intercompany receivable | 655,900 | 471,400 |
Other assets | 325,700 | 268,800 |
Total assets | 17,466,200 | 17,507,100 |
Line of credit | 1,771,200 | 1,887,700 |
Accounts payable | 1,895,700 | 1,584,300 |
Accrued liabilities | 1,059,700 | 884,300 |
Current maturities of debt and lease | 4,581,600 | 453,100 |
Total current liabilities | 9,308,200 | 4,809,400 |
Long-term debt and capital lease | ' | 3,982,400 |
Notes to related parties | 3,475,000 | 3,407,000 |
Total liabilities | 12,783,200 | 12,198,800 |
Preferred stock | 227,600 | 227,600 |
Common stock | 15,100,300 | 15,100,300 |
Accumulated deficit | -10,644,900 | -10,019,600 |
Total stockholders' equity | 4,683,000 | 5,308,300 |
Total liabilities and stockholders' equity | $17,466,200 | $17,507,100 |
Unrestricted_Net_Assets_Conden1
Unrestricted Net Assets - Condensed Statement of Operations (Details) (Mendocino, MBC And Releta Company [Member], USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Mendocino, MBC And Releta Company [Member] | ' | ' | ' | ' |
Net sales | $3,682,700 | $4,247,700 | $11,057,400 | $12,816,800 |
Cost of goods sold | -2,849,800 | -3,252,000 | -8,694,200 | -9,609,700 |
Selling, marketing, and retail expenses | -464,100 | -433,400 | -1,278,700 | -1,305,500 |
General and administrative expenses | -477,500 | -549,300 | -1,501,600 | -1,517,900 |
Income (loss) from operations | -108,700 | 13,000 | -417,100 | 383,700 |
Other income | 37,700 | 35,100 | 112,100 | 112,700 |
Interest expense | -114,900 | -94,700 | -315,300 | -283,800 |
Provision for taxes | ' | -900 | -5,000 | -1,700 |
Net income (loss) | ($185,900) | ($47,500) | ($625,300) | $210,900 |
Unrestricted_Net_Assets_Conden2
Unrestricted Net Assets - Condensed Statement of Cash Flows (Details) (Mendocino, MBC And Releta Company [Member], USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Mendocino, MBC And Releta Company [Member] | ' | ' |
Cash flows from operating activities | $405,500 | $295,000 |
Purchase of property and equipment | -333,400 | -223,700 |
Proceed from sale of assets | ' | 5,000 |
Net borrowings (repayments) on line of credit | -116,500 | 235,700 |
Borrowings on long term debt | 539,700 | 184,700 |
Repayment of long-term debt | -390,500 | -344,300 |
Payment on obligations under capital lease | -3,100 | -37,800 |
Net change in payable to UBIUK | -184,500 | -177,700 |
Decrease in cash | -82,800 | -63,100 |
Cash, beginning of period | 123,200 | 187,200 |
Cash, end of period | $40,400 | $124,100 |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (US Federal [Member]) | 9 Months Ended |
Sep. 30, 2013 | |
US Federal [Member] | ' |
US federal statutory tax rate | 35.00% |