Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 13, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | MENDOCINO BREWING CO INC | |
Entity Central Index Key | 919,134 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 12,611,133 | |
Trading Symbol | MENB | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $ 92,300 | $ 145,100 |
Accounts receivable, net | 3,614,700 | 4,384,500 |
Inventories | 1,798,800 | 2,117,900 |
Prepaid expenses | 623,000 | 632,900 |
Total Current Assets | 6,128,800 | 7,280,400 |
Property and Equipment, net | 10,696,400 | 11,087,800 |
Deposits and other assets | 265,400 | 310,400 |
Total Assets | 17,090,600 | 18,678,600 |
Current Liabilities | ||
Secured lines of credit | 1,131,600 | 2,156,900 |
Accounts payable | 4,410,300 | 4,860,800 |
Accrued liabilities | 2,013,700 | 1,768,600 |
Notes payable to related party | 2,095,400 | $ 1,038,700 |
Subordinated convertible notes to related party | 3,657,000 | |
Current maturities of secured notes payable | 3,512,300 | $ 3,913,300 |
Current maturity of long-term debt to related party | 503,900 | 519,300 |
Current maturity of obligations under capital lease | 21,500 | $ 5,600 |
Current maturity of severance payable | 114,000 | |
Total Current Liabilities | $ 17,459,700 | $ 14,263,200 |
Long-Term Liabilities | ||
Subordinated convertible notes to related party | 3,588,900 | |
Long term debt to related party, less current maturity | $ 126,000 | 519,300 |
Long term lease, less current maturity | 78,800 | 12,100 |
Severance payable, less current maturity | 646,100 | 760,100 |
Total Long-Term Liabilities | 850,900 | 4,880,400 |
Total Liabilities | $ 18,310,600 | $ 19,143,600 |
Commitments and contingencies | ||
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 | 449,300 | 454,200 |
Accumulated deficit | (16,997,200) | (16,247,100) |
Total Stockholders' Deficit | (1,220,000) | (465,000) |
Total Liabilities and Stockholders' Deficit | $ 17,090,600 | $ 18,678,600 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, no par value | ||
Preferred stock, Series A, liquidation preference per share | $ 1 | $ 1 |
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 Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Sales | $ 8,539,300 | $ 9,339,900 | $ 23,611,400 | $ 26,405,800 |
Excise taxes | 140,100 | 179,800 | 379,500 | 483,000 |
Net sales | 8,399,200 | 9,160,100 | 23,231,900 | 25,922,800 |
Cost of goods sold | 5,620,700 | 6,240,300 | 15,868,400 | 17,883,900 |
Gross profit | 2,778,500 | 2,919,800 | 7,363,500 | 8,038,900 |
Operating expenses | ||||
Marketing | 1,511,500 | 1,479,300 | 4,371,500 | 4,614,500 |
General and administrative | 1,111,600 | 1,202,200 | 3,327,000 | 3,467,600 |
Total operating expenses | 2,623,100 | 2,681,500 | 7,698,500 | 8,082,100 |
Income (loss) from operations | 155,400 | 238,300 | (335,000) | (43,200) |
Other income (expense) | ||||
Other income | $ 7,400 | 21,400 | $ 51,000 | 32,100 |
Profit on sale of asset | 600 | 16,900 | ||
Interest expense | $ (153,200) | (177,500) | $ (462,300) | (528,600) |
Total other expenses | (145,800) | (155,500) | (411,300) | (479,600) |
Income (loss) before income taxes | $ 9,600 | $ 82,800 | (746,300) | $ (522,800) |
Provision for income taxes | 3,800 | |||
Net income (loss) | $ 9,600 | $ 82,800 | (750,100) | $ (522,800) |
Foreign currency translation income (loss) | (2,000) | 54,400 | (4,900) | 14,100 |
Comprehensive income (loss) | $ 7,600 | $ 137,200 | $ (755,000) | $ (508,700) |
Net income (loss) per common share - Basic | $ 0 | $ 0.01 | $ (0.06) | $ (0.04) |
Net income (loss) per common share - Diluted | $ 0 | $ 0.01 | $ (0.06) | $ (0.04) |
Weighted average common shares outstanding - Basic | 12,611,133 | 12,611,133 | 12,611,133 | 12,611,133 |
Weighted average common shares outstanding - Diluted | 15,067,357 | 15,006,176 | 12,611,133 | 12,611,133 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (750,100) | $ (522,800) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 889,200 | 845,000 |
Provision for doubtful accounts | 13,000 | (38,300) |
Interest accrued on related party debt | $ 124,800 | 94,800 |
Profit on sale of assets | (17,000) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | $ 716,000 | (532,400) |
Inventories | 316,600 | 310,200 |
Prepaid expenses | (2,900) | (147,800) |
Deposits and other assets | (30,900) | (3,700) |
Accounts payable | (389,800) | (225,900) |
Accrued liabilities | 269,300 | 613,000 |
Net cash provided by operating activities | 1,155,200 | 375,100 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | $ (403,800) | (642,700) |
Proceeds from sale of fixed assets | 17,000 | |
Net cash used in investing activities | $ (403,800) | (625,700) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net repayment on lines of credit | (998,400) | (216,200) |
Borrowing on note payable | 1,000,000 | 1,000,000 |
Repayment on long-term debt | (784,100) | (818,300) |
Payments on obligations under long term leases | (12,200) | (3,700) |
Net cash (used in) financing activities | (794,700) | (38,200) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (9,500) | 11,200 |
NET CHANGE IN CASH | (52,800) | (277,600) |
CASH, beginning of period | 145,100 | 324,800 |
CASH, end of period | 92,300 | $ 47,200 |
Cash paid during the period for: | ||
Income taxes | 3,800 | |
Interest | 337,500 | $ 433,800 |
NON CASH INVESTING AND FINANCING ACTIVITIES | ||
Seller financed asset | $ 96,000 |
Description of Operations and S
Description of Operations and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
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. (the Company or MBC) was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (Releta), and United Breweries International (UK) Limited (UBIUK). 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. The Company brews several brands, of which Red Tail Ale is the flagship brand. In addition, the Company performs 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. MBCs 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 offices of KBEL are located in Maidstone, Kent in the UK. In addition, during the period covered by this quarterly report (the Quarterly 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 assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally, sales are made through distributors. All of the Companys beers sold in Europe (except for beers sold in Germany) are procured under a contract with Heineken UK Limited (HUK). This contract expires in October 2018. KBEL is the distributor of Kingfisher Premium Lager to specialty restaurant trade distributors, liquor and convenience stores in the United Kingdom, Ireland, and continental Europe, but does not physically distribute the Companys products to customers. KBEL relies on HUK for distribution of the product in Europe in exchange for a fee paid to HUK, except for in Germany where beers are manufactured and distributed pursuant to a separate contract with a different entity. In addition, HUK has the exclusive right to sell Kingfisher Premium Lager, for a royalty fee payable to KBEL, to certain large retail customers, including, but not limited to, Sainsburys, Asda, and Tesco. Subsequent Events The Company evaluates 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 the Companys 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, 2015 and 2014 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 the Companys 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 the Companys management (Management) and its board of directors (the Board of Directors), who are responsible for their integrity and objectivity. Operating results from the nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 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 the Companys significant accounting policies during the nine months ended September 30, 2015 compared to what was previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2014. Cash and Cash Equivalents, Short and Long-Term Investments For purposes of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Revenue Recognition The Company recognizes revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. The Company recognizes revenue from product sales, net of discounts. The Company recognizes 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 The Company documents 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 The Company delivers the products prior to recognizing revenue or performs services as per contractual terms. Product is considered delivered upon delivery to a customers designated location and services are considered performed upon completion of the Companys 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 The Company determines that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. The Company does 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. The Company records certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. The Company reports these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the Companys brewpub and gift store are recognized when sales have been completed. Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its 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 the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has 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). The Company regularly reviews its 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 for the nine months ended September 30, 2015 and 2014. Concentration of Credit Risks Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of the Companys 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. The Company has approximately $800 in cash deposits and $2,444,500 of accounts receivable due from customers located in the UK as of September 30, 2015. Income Taxes The Company accounts 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. The Company periodically assesses uncertain tax positions that the Company has taken or expects to take on a tax return, including a decision whether to file or not to file a return in a particular jurisdiction. The Company evaluated its tax positions and determined that there were no uncertain tax benefits as of September 30, 2015 and December 31, 2014. 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 Companys 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 convertible notes (see Subordinated Convertible Notes Payable below) has been excluded from the Companys 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 9/30/2015 9/30/2014 9/30/2015 9/30/2014 Net income ( loss) $ 9,600 82,800 $ (750,100 ) (522,800 ) 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 $ (0.06 ) (0.04 ) Interest expense on convertible notes $ 22,900 22,900 $ - - Income (loss) for computing diluted net income per share $ 32,500 105,700 $ (750,100 ) (522,800 ) Incremental shares from assumed exercise of dilutive securities 2,456,224 2,395,043 - - Dilutive potential common shares 15,067,357 15,006,176 12,611,133 12,611,133 Diluted net income (loss) per share $ 0.00 0.01 $ (0.06 ) (0.04 ) Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, the UK Pound Sterling, is the functional currency. 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 are translated at the average exchange rates for the nine 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 the Company 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 the Companys net income (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 The Company manages its operations 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). The Company evaluates performance based on net operating profit. Where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the Companys transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Companys 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, 2015 | |
Liquidity And Management Plans | |
Liquidity and Management Plans | 2. Liquidity and Management Plans On June 23, 2011, MBC and Releta entered into a Credit and Security Agreement (as amended, the Credit and Security Agreement) with Cole Taylor Bank, an Illinois banking corporation (Cole Taylor). Cole Taylor merged into MB Financial Bank, an Illinois banking corporation (MB Financial) on August 18, 2014. As used in this Quarterly Report, Lender shall refer to Cole Taylor prior to August 18, 2014 and to MB Financial, as successor in interest to Cole Taylor, on or after August 18, 2014. The Credit and Security Agreement provided 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 (the Revolver), 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. Convertible promissory notes issued to United Breweries of America, Inc. (UBA), one of the Companys principal shareholders, are subordinated to the Lenders credit facility. The Credit and Security 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. On March 29, 2013, MBC, Releta, and Lender entered into a First Amendment to the Credit and Security Agreement to clarify the method by which the fixed charge coverage ratio is calculated, with retrospective application. The required fixed charge coverage ratio for the trailing twelve month periods ended March 31, 2013 onwards fell short of the required ratio. The tangible net worth fell short of the required amount for the period beginning June 1, 2013 onwards. On September 18, 2013, MBC and Releta received a notice (the Default Notice) from Lender regarding its intention to exercise certain rights with respect to events of default of the Company pursuant to the Credit and Security Agreement. The Credit and Security Agreement provides that the failure of MBC and Releta to observe any covenant will constitute an event of default under the Credit and Security Agreement. Under the Credit and Security Agreement, upon the occurrence of an event of default, all of MBCs and Reletas obligations under the Credit and Security Agreement may, at the option of the Lender, 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 the Lender. The Default Notice states that Lender has elected, effective September 1, 2013, to charge a default interest rate equal to two percent (2%) per annum in excess of the interest rate otherwise payable under the Credit and Security Agreement. The Company estimates that the increased rate currently results in approximately $120,000 additional annual interest expense. On April 18, 2014, MBC and Releta received a second notice (the Second Default Notice) from Lender regarding its intention to exercise certain rights with respect to events of default of the Company pursuant to the Credit and Security Agreement. The Second Default Notice required MBC and Releta to engage a consultant to perform a viability analysis and prepare a revised projection for 2014. Effective August 20, 2014, pursuant to a notice to MBC and Releta dated August 18, 2014 (the Third Default Notice) which referred to MBCs and Reletas continued failure to meet the required fixed charge coverage ratio and the tangible net worth requirement, Lender notified MBC and Releta that it would reduce the advance rate for (i) eligible finished goods and raw material inventory and (ii) eligible work-in progress inventory by 2% each month. The advance rates are used in the calculation of the borrowing base of each of MBC and Releta, which is used in the determination of the amount available to each of MBC and Releta pursuant to the revolving facility. Under the terms of the Credit and Security Agreement, if such availability is less than $0, or if certain components of the borrowing base of each of MBC and Releta fall below certain limits in relation to outstanding revolving loans, such difference shall be immediately due and payable. On January 21, 2015, MBC, Releta, and Lender entered into a Second Amendment (the Second Amendment) to the Credit and Security Agreement. The Second Amendment reduced the maximum amount of the Revolver from $4,119,000 to $2,500,000. The Second Amendment also changed the definition of borrowing base (including by lowering certain advance rates) such that the calculation of the borrowing base will result in a lower number than it would have if calculated prior to the effectiveness of the Second Amendment. The borrowing base is used in the determination of the amount available to each borrower (a Borrower) pursuant to the Revolver. Pursuant to the Credit and Security Agreement, if such availability is less than $0, or if certain components of the borrowing base fall below certain limits in relation to outstanding revolving loans, such difference shall be immediately due and payable. The Second Amendment reduced the advance rate for (i) eligible finished goods and raw material inventory and (ii) eligible work-in progress inventory by two percent (2%) and continues to reduce each by an additional two percent (2%) on the 20th day of each month thereafter. The advance rates are used in the calculation of the borrowing base of each Borrower, which is used in the determination of the amount available to each Borrower pursuant to the Revolver. As stated above, if such availability is less than $0, or if certain components of the borrowing base fall below certain limits in relation to outstanding revolving loans, such difference shall be immediately due and payable. Lender has not waived the events of default described in the Default Notice, the Second Default Notice or the Third Default Notice and has reserved the right to all other available rights and remedies under the Credit and Security Agreement, certain other related documents and applicable law. Lender could declare the full amount owed under the Credit and Security Agreement due and payable at any time for any reason or no reason. Since receiving the Second Amendment, the Company has not received any notice or other communication from Lender that it intends to exercise any other remedies available to it under the Credit and Security Agreement in connection with the events of default. Lender continues to charge a default interest rate equal to two percent (2%) per annum in excess of the interest rate otherwise payable under the Credit and Security Agreement. The exercise of additional remedies by Lender may have a material adverse effect on the Companys financial condition and the Companys 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. Pursuant to a letter from UBHL dated November 11, 2013, UBHL indicated a willingness to invest up to $2,000,000 in the Company. On January 22, 2014, Catamaran Services, Inc., (Catamaran), a related party (see Notes Payable to Related Party, below), provided a note loan of $500,000 repayable upon receipt of an equity investment by the Companys majority shareholder. On April 24, 2014, another note loan of $500,000 was received from Catamaran on terms similar to the previous note. On February 5, 2015, another note loan of $500,000 was received from Catamaran on terms similar to the previous notes. On July 6, 2015, the proceeds of another note loan of $500,000 was received from Catamaran on terms similar to the previous notes. On each date on or prior to which Catamaran provided a note loan, the Company received a letter from Lender permitting the Company to obtain loans subject to certain conditions, including that no portion of such loans would be payable until either (a) certain obligations of the Company to Lender pursuant to the Agreement were satisfied in full, or (b) such payment was made from an equity investment by the Companys majority shareholder. In response to the losses incurred in connection with the Companys operations, UBHL, the Companys indirect majority shareholder, issued a letter of comfort on March 5, 2015 (the Letter of Comfort), to confirm that UBHL had agreed to provide funding on an as needed basis to ensure that the Company is able to meet its financial obligations as and when they fall due. The Letter of Comfort does not specify either the terms of UBHLs support, or a maximum dollar limit and is not a legally binding agreement. However, to date UBHL through its affiliated company, Catamaran, has provided funds for working capital needs. UBHLs financial support is contingent upon compliance with any applicable exchange control requirements, other applicable laws, and regulations relating to the transfer of funds from India. The Letter of Comfort does not specify any time limit for extending support. If it becomes necessary to seek UBHLs financial assistance under the Letter of Comfort and UBHL is either unable or unwilling to provide such financial assistance to MBC, it may result in a material adverse effect on the Companys financial position and on its ability to continue operations. UBHL controls the Companys two largest shareholders, United Breweries of America, Inc. (UBA) and Inversiones, and as such, is the Companys indirect majority shareholder. The Companys Chairman of the Board, Dr. Vijay Mallya, is also the Chairman of the board of directors of UBHL. As of September 30, 2015, the fixed charge coverage ratio was required to be 1.15 to 1. The Company calculated that the fixed charge coverage ratio as of September 30, 2015 was -1.2 to 1. The Company calculated that the required tangible net worth of MBC and Releta was $6,181,400 as of September 30, 2015 and the actual tangible net worth on such date was $4,079,800. 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. At September 30, 2015, the Company had cash and cash equivalents of $92,300, an accumulated deficit of $16,997,200, and a working capital deficit of $11,330,900 due to losses incurred, reclassification of debts owing to MB Financial as a result of the default under the Credit and Security Agreement described above and reclassification of subordinated notes payable to UBA maturing in June 2016. In addition, the book value of the Companys assets was lower than the book value of its liabilities at September 30, 2015. Management has taken several actions to reduce the Companys working capital needs through September 30, 2016, including reducing discretionary expenditures, reducing manpower, securing additional brewing contracts in an effort to utilize a portion of excess production capacity, and pursuing export opportunities. The current revenue from operations are insufficient to meet the working capital needs of the Company over the next 12 months. The Company has requested UBHL to make a capital infusion. If UBHL is unwilling or unable to infuse additional capital, the Company will seek capital from other sources, including outside investors. If sufficient capital for working capital needs is not obtained, the Company may sell some of its operating assets. If the Company is unable to find any source of funds, it may result in a material adverse effect on the Companys ability to continue operations. If it becomes necessary to seek UBHLs financial assistance under the Letter of Comfort and UBHL does not provide such financial assistance to MBC, it may result in a material adverse effect on the Companys financial position and on its ability to continue operations. In addition, the Companys lenders may seek to satisfy any outstanding obligations through recourse against the applicable pledged collateral which may include the Companys real property and fixed and current assets. The loss of any material pledged asset would have a material adverse effect on the Companys financial position and results of operations. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | 3. Inventories Inventories are stated at the lower of average cost or market and consist of the following: September 30, 2015 December 31, 2014 Raw Materials $ 579,900 $ 740,300 Beer-in-process 384,500 259,400 Finished Goods 773,300 1,034,200 Merchandise 61,100 84,000 TOTAL $ 1,798,800 $ 2,117,900 |
Secured Lines of Credit
Secured Lines of Credit | 9 Months Ended |
Sep. 30, 2015 | |
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 for the period expiring in June 2016. The borrowings are collateralized, with recourse, by MBCs and Reletas trade receivables and inventory located in the US. This facility currently carries interest (including default interest) at a rate of prime plus 3% 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, 2015 was approximately $317,700. Included in the Companys balance sheet as of September 30, 2015 are account balances totaling $1,170,200 of accounts receivable and $1,700,300 of inventory collateralized to MB Financial, as successor in interest to Cole Taylor, under this facility. On April 26, 2005, Royal Bank of Scotland Commercial Services Limited (RBS) provided an invoice discounting facility to KBEL based on 80% prepayment against qualified accounts receivable related to KBELs 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, 2015 was approximately $813,900. Included in the Companys balance sheet at September 30, 2015 are account balances totaling $2,444,500 of accounts receivable collateralized to RBS under this facility. |
Notes Payable to Related Party
Notes Payable to Related Party | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable to Related Party | 5. Notes Payable to Related Party Notes payable to related party consist of notes payable to Catamaran dated January 22, 2014, April 24, 2014 February 5, 2015 and June 30, 2015, for a total value of $2,095,400 including interest of $95,400. The Catamaran Holding, Ltd. (Holding), the sole shareholder of Catamaran, has directors in common with Inversiones, one of the major shareholders of MBC. The indirect beneficial owner of Inversiones is UBHL. Dr. Vijay Mallya, the Chairman of the Board of Directors of the Company is also the Chairman of the Board of Directors of UBHL. The Company has asked Catamaran whether any relationships exist between the shareholders of Holdings and any affiliates of the Company, and has not received a response to such inquiries. The notes are payable within six months following the date of the notes, subject to the receipt by the Company of an equity investment by the Companys majority shareholder in an amount sufficient either (a) to pay the notes from an equity investment by the Companys majority shareholder, or (b) to pay the notes and certain existing obligations of the Company to Lender. If the Company is not able to satisfy its obligations on the notes within the six month period following the date of the notes, the notes are automatically extended for additional six month terms until they are paid. |
Subordinated Convertible Notes
Subordinated Convertible Notes Payable To Related Party | 9 Months Ended |
Sep. 30, 2015 | |
Subordinated Convertible Notes Payable To Related Party | |
Subordinated Convertible Notes Payable To Related Party | 6. Subordinated Convertible Notes Payable to Related Party Subordinated convertible notes to a related party included notes payable to UBA (the UBA Notes) for a total value of $3,657,000 as of September 30, 2015, including interest at the prime rate plus 1.5% per year, 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 2016 and have automatic renewals after such maturity date for successive one year terms, provided that either the Company 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. UBA has agreed to subordinate the UBA Notes to the Companys long-term debt agreements with MB Financial, as successor-in-interest to Cole Taylor, which mature in June 2016. Therefore, the Company will not require the use of working capital to repay any of the UBA Notes until the Lenders facility is repaid. The UBA Notes include $1,741,600 and $1,673,500 of accrued interest at September 30, 2015 and December 31, 2014, respectively. |
Secured Notes Payable
Secured Notes Payable | 9 Months Ended |
Sep. 30, 2015 | |
Long-term Debt, Unclassified [Abstract] | |
Secured Notes Payable | 7. Secured Notes Payable Maturities of secured notes payable for succeeding years are as follows: September 30, 2015 December 31, 2014 Loan from Cole Taylor, payable in monthly installments of $12,300, plus interest (including default interest) at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. $ 2,313,100 $ 2,423,600 Loans from Cole Taylor, payable in monthly installments of $32,300 plus interest (including default interest) at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. 1,199,200 1,489,700 3,512,300 3,913,300 Less current maturities 3,512,300 3,913,300 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party | 9 Months Ended |
Sep. 30, 2015 | |
Long-term Debt - Related Party | |
Long-Term Debt - Related Party | 8. Long-Term Debt Related Party September 30, 2015 December 31, 2014 Loan from Heineken UK Limited, payable in quarterly installments of $126,000, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to a Sub-License Agreement. $ 629,900 $ 1,038,600 Less current maturities 503,900 519,300 Non-current loan payable $ 126,000 $ 519,300 Maturities of debt for succeeding years are as follows: Three months ending December 31, 2015 $ 126,000 Year ending December 31, 2016 $ 503,900 On April 18, 2013, KBEL entered into a Loan Agreement (the HUK Loan Agreement) with HUK pursuant to which HUK provided KBEL with a secured term loan of £1,000,000 on October 9, 2013 to be repaid in twelve quarterly installment of £83,333.33 each, commencing from January 9, 2014 along with interest at the rate of 5% above the Bank of England base rate. Prepayment is permitted. Upon an Event of Default, as defined in the HUK Loan Agreement, if HUK and KBEL fail to agree on a payment plan acceptable to HUK, HUK may, among other remedies, declare the loan immediately due and repayable or exercise its right to an exclusive license pursuant to the Sub-License Agreement as described and defined in the HUK Loan Agreement. |
Capital Lease Obligations
Capital Lease Obligations | 9 Months Ended |
Sep. 30, 2015 | |
Capital Lease Obligations [Abstract] | |
Capital Lease Obligations | 9. Capital Lease Obligations The Company leases certain assets under an agreement that is classified as a capital lease. The future minimum lease payments required under the capital lease and the present values of net minimum lease payments as of September 30, 2015 are as follows: Three months Ending December 31, 2015 $ 6,600 Year Ending December 31, 2016 26,200 Year Ending December 31, 2017 26,200 Year Ending December 31, 2018 19,800 Year Ending December 31, 2019 19,800 Year Ending December 31, 2020 20,100 118,700 Less amounts representing interest (18,400 ) Present value of minimum lease payments 100,300 Less current maturities (21,500 ) Non-current leases payable $ 78,800 |
Severance Payable
Severance Payable | 9 Months Ended |
Sep. 30, 2015 | |
Severance Payable | |
Severance Payable | 10. Severance Payable The Company is a party to a Separation and Severance Agreement (the Separation Agreement) with Mr. Yashpal Singh, its President and Chief Executive Officer. Pursuant to the terms of the Separation Agreement, upon Mr. Singhs (i) termination of employment for Good Reason (as defined in the Separation Agreement), (ii) termination of employment at the end of the employment term, (iii) death, (iv) disability or (v) termination by the Company without Cause (as defined in the Separation Agreement), he shall be entitled to certain severance benefits and payments. The severance payment shall equal the product of 2.5 times his average monthly base salary (calculated over the twelve (12) month period preceding the termination event), multiplied by the number of years (on a pro-rated basis) he had been employed by the Company at the Termination Date (as defined in the Separation Agreement); provided, however, that the severance payment may not exceed thirty (30) months of Mr. Singhs average monthly base salary (calculated over the twelve (12) months preceding his termination date). Payments due to Mr. Singh under the Separation Agreement shall be paid in equal monthly installments by the Company over a 20 month period. Mr. Singhs current employment contract ends on June 30, 2016.The receipt of payments is contingent on Mr. Singh executing a release of claims for the benefit of the Company. As of September 30, 2015, the Company estimated this obligation to be $760,100. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 11. Commitments and Contingencies Purchase of raw materials Production of the Companys beverages requires quantities of various processed agricultural products, including malt and hops for beer. The Company fulfills its commodities requirements through purchases from various sources, some through contractual arrangements and others on the open market. Legal The Company is periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. Management and the Companys legal counsel assess such contingent liabilities, and such assessment inherently involves the exercise of judgment. On September 26, 2014, The New Buffalo Brewing Co., Inc. (NBB) initiated an action against Releta in the Supreme Court of the State of New York for the County of Erie to recover damages for alleged breaches of a Brewing Production Agreement between NBB and Releta dated September 6, 2013 (the Brewing Production Agreement), as well as for a declaration rescinding and nullifying the Brewing Production Agreement, and, in case of Reletas failure to answer or appear, damages resulting from the alleged breaches, rescission of the Brewing Production Agreement, attorneys fees and any other relief deemed proper by the court. In a demand letter to Releta dated October 16, 2014, NBB demanded payment of the sum of $500,000. The Company has engaged a law firm in New York to respond. On June 3, 2015, IAE International Aero Engines AG (IAE) served the Company with a complaint (the Complaint), filed in Marin County Superior Court, California (the Court), which requests, among other things, (i) that the Court recognize and enforce a foreign judgment against an Indian corporate entity (which is an affiliate of the Company), the alleged judgment debtor, and (ii) that such judgment be made enforceable against any assets of the Company (and of the other defendants) that are located in California, on the alleged ground that the Company (along with the other defendants) is an alter ego of the alleged judgment debtor. Along with the Complaint, IAE also served the Company with an ex parte application for a right to attach order and a writ of attachment, and, in the alternative, a temporary protective order (collectively, the ex parte application) to, among other things, stop the Company from making certain transfers to related parties other than in the ordinary of business. The ex parte application came up for hearing before the Court on June 5, 2015. At the conclusion of that hearing, the Court: (i) issued a temporary protective order of limited scope, providing that to the extent the Company had possession, custody or control of any stock belonging to the alleged judgment debtor (which the Company does not), it should not transfer said stock out of Marin County, California until 5:00 PM (Pacific Time), June 9, 2015; and (ii) continued the hearing on the ex parte application to 3:00 PM on June 9, 2015. At the conclusion of the continued hearing on June 9, 2015, the Court denied the ex parte application for a writ of attachment and dissolved the limited temporary protective order. The Company believes that the allegations in the Complaint are without merit and will continue to vigorously defend against the lawsuit. As discussed in more detail in the Companys Current Report on Form 8-K filed on June 9, 2015, the Company has discussed with the Lender the allegations set forth in the Complaint and the ex parte application and, as of the date of this Quarterly Report, the Company has not received any notice or other communication from the Lender that the Lender intends to exercise any of the remedies available to it under the Credit and Security Agreement in connection therewith. The Company is not currently aware of any legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Companys financial position or results of operations. Operating Leases The Company leases some of its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates between 2015 and 2020 and provide for renewal options ranging from month-to-month to five years. In the normal course of business, it is expected 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 the Company to pay certain costs, including real estate taxes, insurance and repairs. MBC and its subsidiaries have various lease agreements for the brewpub and gift store in Ukiah, California, the brewery at Reletas 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. |
Related-Party Transactions
Related-Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | 12. Related-Party Transactions The Company conducts business with United Breweries of America, Inc. (UBA), which owns approximately 25% of the Companys common stock. Until October 2013, KBEL had significant transactions with Shepherd Neame, Ltd., which is a related party with respect to a former Board member. KBEL also had significant transactions with HUK, a related party with respect to one of MBCs Board members, beginning in October 2013. The following table reflects the value of such transactions during the nine months ended September 30, 2015 and 2014 and the balances outstanding as of September 30, 2015 and December 31, 2014. September 30, 2015 September 30, 2014 TRANSACTIONS Purchases from HUK $ 8,239,200 $ 9,886,800 Expense reimbursement including interest to HUK $ 715,200 $ 853,600 Interest expense related to UBA convertible notes $ 68,100 $ 68,100 Interest expenses related to Catamaran notes $ 56,700 $ 26,700 Borrowing from Catamaran $ 1,000,000 $ 1,000,000 September 30, 2015 December 31, 2014 ACCOUNT BALANCES Accounts payable and accrued liability to HUK $ 1,581,500 $ 1,802,300 Notes payable to Catamaran $ 2,095,400 $ 1,038,700 Notes payable to UBA $ 3,657,000 $ 3,588,900 |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segment Information | 13. Segment Information The Companys business presently consists of two segments the North American Territory and the Foreign Territory. The Companys operations in the North American Territory consist primarily of brewing and marketing proprietary craft beers. For distribution in the North American Territory, the Company brews its brands in its own facilities, which are located in Ukiah, California and Saratoga Springs, New York. The Companys operations in the Foreign Territory, which are conducted through its wholly-owned subsidiary UBIUK and UBIUKs wholly-owned subsidiary 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, 2015 North American Territory Foreign Territory Total Net Sales $ 8,787,700 $ 14,444,200 $ 23,231,900 Operating Income (Loss) $ (629,000 ) $ 294,000 $ (335,000 ) Identifiable Assets $ 12,969,300 $ 4,121,300 $ 17,090,600 Depreciation & Amortization $ 505,200 $ 384,000 $ 889,200 Capital Expenditures $ 70,400 $ 429,400 $ 499,800 Nine months ended September 30, 2014 North American Territory Foreign Territory Total Net Sales $ 9,564,000 $ 16,358,800 $ 25,922,800 Operating Income (loss) $ (781,500 ) $ 738,300 $ (43,200 ) Identifiable Assets $ 14,409,100 $ 4,683,800 $ 19,092,900 Depreciation & Amortization $ 509,500 $ 335,500 $ 845,000 Capital Expenditures $ 105,300 $ 537,400 $ 642,700 |
Unrestricted Net Assets
Unrestricted Net Assets | 9 Months Ended |
Sep. 30, 2015 | |
Unrestricted Net Assets | |
Unrestricted Net Assets | 14. Unrestricted Net Assets The Companys wholly-owned subsidiary, UBIUK, had undistributed losses of $508,100 as of September 30, 2015. Under KBELs line of credit agreement with RBS, distributions and other payments to MBC from KBEL are not permitted if retained earnings drop below $1,511,600. Condensed financial information of MBC, together with its other subsidiary, Releta, is as follows: Balance Sheets September 30, 2015 December 31, 2014 (unaudited) Assets Cash and cash equivalents $ 91,500 $ 61,500 Accounts receivable, net 1,170,200 1,365,000 Inventories 1,700,300 2,047,700 Other current assets 238,400 173,600 Total current assets 3,200,400 3,647,800 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,503,500 9,904,500 Intercompany receivable 338,600 421,900 Other assets 265,400 310,400 Total assets $ 14,532,900 $ 15,509,600 Liabilities Line of credit $ 317,700 $ 1,192,900 Accounts payable 2,650,300 2,620,000 Accrued liabilities 1,131,700 1,031,300 Note payable related party 2,095,400 1,038,700 Subordinated convertible notes payable 3,657,000 - Current maturities of debt, leases and severance 3,631,900 3,918,900 Total current liabilities 13,484,000 9,801,800 Long-term capital leases 8,000 12,100 Subordinated convertible notes payable - 3,588,900 Severance payable 646,100 760,100 Total liabilities 14,138,100 14,162,900 Stockholders equity Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (14,933,100 ) (13,981,200 ) Total stockholders equity 394,800 1,346,700 Total liabilities and stockholders equity $ 14,532,900 $ 15,509,600 Statements of Operations Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (unaudited) (unaudited) (unaudited) (unaudited) Net sales $ 3,247,500 $ 3,584,500 $ 8,787,700 $ 9,564,000 Cost of goods sold (2,547,100 ) (2,879,200 ) (7,141,000 ) (7,937,500 ) Sales, marketing, and retail expenses (317,800 ) (365,500 ) (993,500 ) (1,071,900 ) General and administrative expenses (426,600 ) (412,900 ) (1,287,300 ) (1,341,100 ) Loss from operations (44,000 ) (73,100 ) (634,100 ) (786,500 ) Other income 7,400 22,100 51,000 32,800 Interest expense (117,500 ) (131,600 ) (365,000 ) (388,200 ) Provision for taxes - (3,800 ) Net loss $ (154,100 ) $ (182,600 ) $ (951,900 ) $ (1,141,900 ) Statements of Cash Flows Nine months ended September 30 2015 2014 (unaudited) (unaudited) Cash flows from operating activities $ 297,400 $ (518,900 ) Purchase of property and equipment (70,400 ) (105,300 ) Proceeds from sale of asset - 700 Net repayment on line of credit (875,200 ) (205,900 ) Borrowing on note payable 1,000,000 1,000,000 Repayment on long term debt (401,000 ) (401,000 ) Payment on obligation under capital lease (4,100 ) (3,700 ) Net change in payable to UBIUK 83,300 165,600 Increase (decrease) in cash 30,000 (68,500 ) Cash, beginning of period 61,500 113,700 Cash, end of period $ 91,500 $ 45,200 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 15. Income Taxes In the Nine months ended September 30, 2015 and 2014, the Company 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. The Company has established a full valuation allowance against the Companys 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, 2015 and 2014, the Companys effective tax rates were de minimis The Companys 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 2011 through 2014. 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 and21
Description of Operations and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Description of Operations | Description of Operations Mendocino Brewing Company, Inc. (the Company or MBC) was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC (Releta), and United Breweries International (UK) Limited (UBIUK). 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. The Company brews several brands, of which Red Tail Ale is the flagship brand. In addition, the Company performs 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. MBCs 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 offices of KBEL are located in Maidstone, Kent in the UK. In addition, during the period covered by this quarterly report (the Quarterly 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 assorted beers in the United States pursuant to an agreement with Kingfisher America, Inc. Generally, sales are made through distributors. All of the Companys beers sold in Europe (except for beers sold in Germany) are procured under a contract with Heineken UK Limited (HUK). This contract expires in October 2018. KBEL is the distributor of Kingfisher Premium Lager to specialty restaurant trade distributors, liquor and convenience stores in the United Kingdom, Ireland, and continental Europe, but does not physically distribute the Companys products to customers. KBEL relies on HUK for distribution of the product in Europe in exchange for a fee paid to HUK, except for in Germany where beers are manufactured and distributed pursuant to a separate contract with a different entity. In addition, HUK has the exclusive right to sell Kingfisher Premium Lager, for a royalty fee payable to KBEL, to certain large retail customers, including, but not limited to, Sainsburys, Asda, and Tesco. |
Subsequent Events | Subsequent Events The Company evaluates 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 the Companys 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, 2015 and 2014 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 the Companys 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 the Companys management (Management) and its board of directors (the Board of Directors), who are responsible for their integrity and objectivity. Operating results from the nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 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, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from the brewing and distribution operations in accordance with Accounting Standards Codification 605 of the Financial Accounting Standards Board. The Company recognizes revenue from product sales, net of discounts. The Company recognizes 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 The Company documents 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 The Company delivers the products prior to recognizing revenue or performs services as per contractual terms. Product is considered delivered upon delivery to a customers designated location and services are considered performed upon completion of the Companys 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 The Company determines that collectability is reasonably assured prior to recognizing revenue. Collectability is assessed on a customer-by-customer basis based on criteria outlined by Management. The Company does 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. The Company records certain consideration paid to customers for services or placement fees as a reduction in revenue rather than as an expense. The Company reports these items on the income statement as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the Companys brewpub and gift store are recognized when sales have been completed. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its 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 the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on Managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has 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). The Company regularly reviews its 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 for the nine months ended September 30, 2015 and 2014. |
Concentration of Credit Risks | Concentration of Credit Risks Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Substantially all of the Companys 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. The Company has approximately $800 in cash deposits and $2,444,500 of accounts receivable due from customers located in the UK as of September 30, 2015. |
Income Taxes | Income Taxes The Company accounts 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. The Company periodically assesses uncertain tax positions that the Company has taken or expects to take on a tax return, including a decision whether to file or not to file a return in a particular jurisdiction. The Company evaluated its tax positions and determined that there were no uncertain tax benefits as of September 30, 2015 and December 31, 2014. |
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 Companys 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 convertible notes (see Subordinated Convertible Notes Payable below) has been excluded from the Companys 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 9/30/2015 9/30/2014 9/30/2015 9/30/2014 Net income ( loss) $ 9,600 82,800 $ (750,100 ) (522,800 ) 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 $ (0.06 ) (0.04 ) Interest expense on convertible notes $ 22,900 22,900 $ - - Income (loss) for computing diluted net income per share $ 32,500 105,700 $ (750,100 ) (522,800 ) Incremental shares from assumed exercise of dilutive securities 2,456,224 2,395,043 - - Dilutive potential common shares 15,067,357 15,006,176 12,611,133 12,611,133 Diluted net income (loss) per share $ 0.00 0.01 $ (0.06 ) (0.04 ) |
Foreign Currency Translation | Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, the UK Pound Sterling, is the functional currency. 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 are translated at the average exchange rates for the nine 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 the Company 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 the Companys net income (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 The Company manages its operations 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). The Company evaluates performance based on net operating profit. Where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the Companys transfer policy, which approximates market price. The costs of operating the manufacturing plants are captured discretely within each segment. The Companys property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. |
Description of Operations and22
Description of Operations and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
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 9/30/2015 9/30/2014 9/30/2015 9/30/2014 Net income ( loss) $ 9,600 82,800 $ (750,100 ) (522,800 ) 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 $ (0.06 ) (0.04 ) Interest expense on convertible notes $ 22,900 22,900 $ - - Income (loss) for computing diluted net income per share $ 32,500 105,700 $ (750,100 ) (522,800 ) Incremental shares from assumed exercise of dilutive securities 2,456,224 2,395,043 - - Dilutive potential common shares 15,067,357 15,006,176 12,611,133 12,611,133 Diluted net income (loss) per share $ 0.00 0.01 $ (0.06 ) (0.04 ) |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories are stated at the lower of average cost or market and consist of the following: September 30, 2015 December 31, 2014 Raw Materials $ 579,900 $ 740,300 Beer-in-process 384,500 259,400 Finished Goods 773,300 1,034,200 Merchandise 61,100 84,000 TOTAL $ 1,798,800 $ 2,117,900 |
Secured Notes Payable (Tables)
Secured Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Long-term Debt, Unclassified [Abstract] | |
Summary of Long-term Debt | Maturities of secured notes payable for succeeding years are as follows: September 30, 2015 December 31, 2014 Loan from Cole Taylor, payable in monthly installments of $12,300, plus interest (including default interest) at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by substantially all assets of Releta and MBC. $ 2,313,100 $ 2,423,600 Loans from Cole Taylor, payable in monthly installments of $32,300 plus interest (including default interest) at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by substantially all assets of Releta and MBC. 1,199,200 1,489,700 3,512,300 3,913,300 Less current maturities 3,512,300 3,913,300 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Long-term Debt - Related Party | |
Schedule of Related Party Debt | September 30, 2015 December 31, 2014 Loan from Heineken UK Limited, payable in quarterly installments of $126,000, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to a Sub-License Agreement. $ 629,900 $ 1,038,600 Less current maturities 503,900 519,300 Non-current loan payable $ 126,000 $ 519,300 |
Schedule of Maturities of Long Term Debt | Maturities of debt for succeeding years are as follows: Three months ending December 31, 2015 $ 126,000 Year ending December 31, 2016 $ 503,900 |
Capital Lease Obligations (Tabl
Capital Lease Obligations (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Capital Lease Obligations [Abstract] | |
Schedule of Future Minimum Lease Payments for Capital Lease Payments | The future minimum lease payments required under the capital lease and the present values of net minimum lease payments as of September 30, 2015 are as follows: Three months Ending December 31, 2015 $ 6,600 Year Ending December 31, 2016 26,200 Year Ending December 31, 2017 26,200 Year Ending December 31, 2018 19,800 Year Ending December 31, 2019 19,800 Year Ending December 31, 2020 20,100 118,700 Less amounts representing interest (18,400 ) Present value of minimum lease payments 100,300 Less current maturities (21,500 ) Non-current leases payable $ 78,800 |
Related-Party Transactions (Tab
Related-Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Schedule of Related-Party Transactions | The following table reflects the value of such transactions during the nine months ended September 30, 2015 and 2014 and the balances outstanding as of September 30, 2015 and December 31, 2014. September 30, 2015 September 30, 2014 TRANSACTIONS Purchases from HUK $ 8,239,200 $ 9,886,800 Expense reimbursement including interest to HUK $ 715,200 $ 853,600 Interest expense related to UBA convertible notes $ 68,100 $ 68,100 Interest expenses related to Catamaran notes $ 56,700 $ 26,700 Borrowing from Catamaran $ 1,000,000 $ 1,000,000 September 30, 2015 December 31, 2014 ACCOUNT BALANCES Accounts payable and accrued liability to HUK $ 1,581,500 $ 1,802,300 Notes payable to Catamaran $ 2,095,400 $ 1,038,700 Notes payable to UBA $ 3,657,000 $ 3,588,900 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | A summary of each segment is as follows: Nine months ended September 30, 2015 North American Territory Foreign Territory Total Net Sales $ 8,787,700 $ 14,444,200 $ 23,231,900 Operating Income (Loss) $ (629,000 ) $ 294,000 $ (335,000 ) Identifiable Assets $ 12,969,300 $ 4,121,300 $ 17,090,600 Depreciation & Amortization $ 505,200 $ 384,000 $ 889,200 Capital Expenditures $ 70,400 $ 429,400 $ 499,800 Nine months ended September 30, 2014 North American Territory Foreign Territory Total Net Sales $ 9,564,000 $ 16,358,800 $ 25,922,800 Operating Income (loss) $ (781,500 ) $ 738,300 $ (43,200 ) Identifiable Assets $ 14,409,100 $ 4,683,800 $ 19,092,900 Depreciation & Amortization $ 509,500 $ 335,500 $ 845,000 Capital Expenditures $ 105,300 $ 537,400 $ 642,700 |
Unrestricted Net Assets (Tables
Unrestricted Net Assets (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Unrestricted Net Assets | |
Condensed Balance Sheets | Balance Sheets September 30, 2015 December 31, 2014 (unaudited) Assets Cash and cash equivalents $ 91,500 $ 61,500 Accounts receivable, net 1,170,200 1,365,000 Inventories 1,700,300 2,047,700 Other current assets 238,400 173,600 Total current assets 3,200,400 3,647,800 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,503,500 9,904,500 Intercompany receivable 338,600 421,900 Other assets 265,400 310,400 Total assets $ 14,532,900 $ 15,509,600 Liabilities Line of credit $ 317,700 $ 1,192,900 Accounts payable 2,650,300 2,620,000 Accrued liabilities 1,131,700 1,031,300 Note payable related party 2,095,400 1,038,700 Subordinated convertible notes payable 3,657,000 - Current maturities of debt, leases and severance 3,631,900 3,918,900 Total current liabilities 13,484,000 9,801,800 Long-term capital leases 8,000 12,100 Subordinated convertible notes payable - 3,588,900 Severance payable 646,100 760,100 Total liabilities 14,138,100 14,162,900 Stockholders equity Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (14,933,100 ) (13,981,200 ) Total stockholders equity 394,800 1,346,700 Total liabilities and stockholders equity $ 14,532,900 $ 15,509,600 |
Condensed Statement of Operations | Statements of Operations Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (unaudited) (unaudited) (unaudited) (unaudited) Net sales $ 3,247,500 $ 3,584,500 $ 8,787,700 $ 9,564,000 Cost of goods sold (2,547,100 ) (2,879,200 ) (7,141,000 ) (7,937,500 ) Sales, marketing, and retail expenses (317,800 ) (365,500 ) (993,500 ) (1,071,900 ) General and administrative expenses (426,600 ) (412,900 ) (1,287,300 ) (1,341,100 ) Loss from operations (44,000 ) (73,100 ) (634,100 ) (786,500 ) Other income 7,400 22,100 51,000 32,800 Interest expense (117,500 ) (131,600 ) (365,000 ) (388,200 ) Provision for taxes - (3,800 ) Net loss $ (154,100 ) $ (182,600 ) $ (951,900 ) $ (1,141,900 ) |
Condensed Statement of Cash Flows | Statements of Cash Flows Nine months ended September 30 2015 2014 (unaudited) (unaudited) Cash flows from operating activities $ 297,400 $ (518,900 ) Purchase of property and equipment (70,400 ) (105,300 ) Proceeds from sale of asset - 700 Net repayment on line of credit (875,200 ) (205,900 ) Borrowing on note payable 1,000,000 1,000,000 Repayment on long term debt (401,000 ) (401,000 ) Payment on obligation under capital lease (4,100 ) (3,700 ) Net change in payable to UBIUK 83,300 165,600 Increase (decrease) in cash 30,000 (68,500 ) Cash, beginning of period 61,500 113,700 Cash, end of period $ 91,500 $ 45,200 |
Description of Operations and30
Description of Operations and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Jun. 30, 2011 | |
Deferred financing costs on borrowings | $ 225,000 | |||
Amortization of deferred financing costs charged to operations | $ 33,800 | $ 33,800 | ||
Uncertain tax benefits | ||||
UK [Member] | ||||
Cash deposits | $ 800 | |||
Accounts receivable due from customers | $ 2,444,500 |
Description of Operations and31
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, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Accounting Policies [Abstract] | ||||
Net income ( loss) | $ 9,600 | $ 82,800 | $ (750,100) | $ (522,800) |
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 | $ (0.06) | $ (0.04) |
Interest expense on convertible notes | $ 22,900 | $ 22,900 | ||
Income (loss) for computing diluted net income per share | $ 32,500 | $ 105,700 | $ (750,100) | $ (522,800) |
Incremental shares from assumed exercise of dilutive securities | 2,456,224 | 2,395,043 | ||
Dilutive potential common shares | 15,067,357 | 15,006,176 | 12,611,133 | 12,611,133 |
Diluted net income (loss) per share | $ 0 | $ 0.01 | $ (0.06) | $ (0.04) |
Liquidity and Management Plans
Liquidity and Management Plans (Details Narrative) | Jul. 06, 2015USD ($) | Feb. 05, 2015USD ($) | Jan. 21, 2015USD ($) | Aug. 20, 2014 | Apr. 24, 2014USD ($) | Jan. 22, 2014USD ($) | Nov. 11, 2013USD ($) | Sep. 01, 2013USD ($) | Jun. 23, 2011USD ($) | Sep. 30, 2015USD ($)Number | Dec. 31, 2014USD ($) | Sep. 30, 2014USD ($) | Dec. 31, 2013USD ($) |
Credit facility, maturity date | Jun. 23, 2016 | ||||||||||||
Credit facility, agreement amount, prior to amendment | $ 10,000,000 | ||||||||||||
Default interest per year | $ 120,000 | ||||||||||||
Default interest rate in excess of regular rate | 2.00% | ||||||||||||
Reduction in advance rate against inventory each month | 2.00% | ||||||||||||
Fixed charge coverage ratio - Required | Number | 1.15 | ||||||||||||
Fixed charges coverage ratio - Calculated | Number | (1.2) | ||||||||||||
Tangible net worth Required MBC and related party | $ 6,181,400 | ||||||||||||
Actual tangible net worth | 4,079,800 | ||||||||||||
Cash and cash equivalents | 92,300 | $ 145,100 | $ 47,200 | $ 324,800 | |||||||||
Accumulated deficit | 16,997,200 | $ 16,247,100 | |||||||||||
Working capital deficit | $ 11,330,900 | ||||||||||||
United Breweries Holding Limited [Member] | |||||||||||||
Investments commitment by UBHL | $ 2,000,000 | ||||||||||||
Catamaran Services, Inc. [Member] | |||||||||||||
Proceeds from related party loan | $ 500,000 | $ 500,000 | $ 500,000 | $ 500,000 | |||||||||
Revolving Credit Facility [Member] | |||||||||||||
Revolver facility, agreement amount, prior to amendment | 4,119,000 | ||||||||||||
Revolving Credit Facility [Member] | After Amendment [Member] | |||||||||||||
Revolver facility, agreement amount, as per second amendment | $ 2,500,000 | ||||||||||||
Machinery And Equipment Term Loan [Member] | |||||||||||||
Machinery and equipment, agreement amount | 1,934,000 | ||||||||||||
Real Estate Term Loan [Member] | |||||||||||||
Real estate, agreement amount | 2,947,000 | ||||||||||||
Capital Expenditure Line Of Credit [Member] | |||||||||||||
Capital expenditure, agreement amount | $ 1,000,000 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 579,900 | $ 740,300 |
Beer-in-process | 384,500 | 259,400 |
Finished Goods | 773,300 | 1,034,200 |
Merchandise | 61,100 | 84,000 |
TOTAL | $ 1,798,800 | $ 2,117,900 |
Secured Lines of Credit (Detail
Secured Lines of Credit (Details Narrative) - USD ($) | Apr. 26, 2005 | Jun. 30, 2011 | Sep. 30, 2015 | Dec. 31, 2014 |
Inventories | $ 1,798,800 | $ 2,117,900 | ||
MB Financial Bank [Member] | ||||
Percentage of line of credit drawn on receivables, maximum | 85.00% | |||
Percentage of line of credit drawn on inventory, maximum | 60.00% | |||
Facility expiration date | Jun. 30, 2016 | |||
Facility interest rate above prime lending rate | 3.00% | |||
Line of credit, outstanding amount | $ 317,700 | |||
Account receivables | 1,170,200 | |||
Inventories | 1,700,300 | |||
RBS [Member] | ||||
Facility interest rate above prime lending rate | 1.38% | |||
Line of credit, outstanding amount | 813,900 | |||
Account receivables | $ 2,444,500 | |||
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% |
Notes Payable to Related Party
Notes Payable to Related Party (Details Narrative) - Catamaran Services, Inc. [Member] | Sep. 30, 2015USD ($) |
Note payable to related party | $ 2,095,400 |
Interest accrued | $ 95,400 |
Subordinated Convertible Note36
Subordinated Convertible Notes Payable to Related Party (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Unsecured convertible notes | $ 3,657,000 | |
Accrued interest | $ 1,741,600 | $ 1,673,500 |
One UBA Note [Member] | ||
Debt instruments conversion price per share | $ 1.44 | |
13 UBA Notes [Member] | ||
Debt instruments conversion price per share | $ 1.50 | |
Subordinated Convertible Notes Payable [Member] | ||
Percentage of convertible notes interest, prime rate plus | 1.50% | |
Percentage of convertible notes interest rate, maximum | 10.00% | |
Convertible notes payable maturity date, description | The UBA Notes have been extended until June 2016 and have automatic renewals after such maturity date for successive one year terms, provided that either the Company 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. UBA has agreed to subordinate the UBA Notes to the Companys long-term debt agreements with MB Financial, as successor-in-interest to Cole Taylor, which mature in June 2016. |
Secured Notes Payable - Summary
Secured Notes Payable - Summary of Long-Term Debt (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Long term debt, total | $ 3,512,300 | $ 3,913,300 |
Less current maturities | $ 3,512,300 | $ 3,913,300 |
Long-term debt non-current | ||
MBFinancialBankNotes With 4% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 2,313,100 | $ 2,423,600 |
MBFinancialBankNotes With 3.5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 1,199,200 | $ 1,489,700 |
Secured Notes Payable - Summa38
Secured Notes Payable - Summary of Long-Term Debt (Details) (Parenthetical) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
MBFinancialBankNotes With 4% Prime Plus Interest Rate [Member] | ||
Loans payable in monthly installments | $ 12,300 | $ 12,300 |
Loans payable, interest rate above prime rate | 4.00% | 4.00% |
Balloon payment of loans | $ 2,202,500 | $ 2,202,500 |
Debt instrument maturity date | Jun. 30, 2016 | Jun. 30, 2016 |
MBFinancialBankNotes With 3.5% Prime Plus Interest Rate [Member] | ||
Loans payable in monthly installments | $ 32,300 | $ 32,300 |
Loans payable, interest rate above prime rate | 3.50% | 3.50% |
Balloon payment of loans | $ 908,700 | $ 908,700 |
Debt instrument maturity date | Jun. 30, 2016 | Jun. 30, 2016 |
Long-Term Debt - Related Part39
Long-Term Debt - Related Party (Details Narrative) - HUK [Member] - GBP [Member] | Oct. 09, 2013GBP (£) |
Secured debt | £ 1,000,000 |
Repayment of secured loan by twelve equal quarterly installments | £ 83,333 |
Interest rate above Prime Rate | 5.00% |
Long-Term Debt - Related Part40
Long-Term Debt - Related Party - Schedule of Related Party Debt (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Less current maturities | $ 503,900 | $ 519,300 |
Non-current loan payable | 126,000 | 519,300 |
Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | 629,900 | 1,038,600 |
Less current maturities | 503,900 | 519,300 |
Non-current loan payable | $ 126,000 | $ 519,300 |
Long-Term Debt - Related Part41
Long-Term Debt - Related Party - Schedule of Related Party Debt (Details) (Parenthetical) - Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Loans payable in quarterly installments | $ 126,000 | $ 126,000 |
Interest rate above Prime Rate | 5.00% | 5.00% |
Debt instrument maturity date | Oct. 9, 2016 | Oct. 9, 2016 |
Long-Term Debt - Related Part42
Long-Term Debt - Related Party - Summary of Maturities of Long-Term Debt for Succeeding Years (Details) - Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] | Sep. 30, 2015USD ($) |
Payable during six months ending December 31, 2015 | $ 126,000 |
Payable during year ending December 31, 2016 | $ 503,900 |
Capital Lease Obligations - Sch
Capital Lease Obligations - Schedule of Future Minimum Lease Payments for Capital Lease Payments (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Capital Lease Obligations [Abstract] | ||
Three months Ending December 31, 2015 | $ 6,600 | |
Year Ending December 31, 2016 | 26,200 | |
Year Ending December 31, 2017 | 26,200 | |
Year Ending December 31, 2018 | 19,800 | |
Year Ending December 31, 2019 | 19,800 | |
Year Ending December 31, 2020 | 20,100 | |
Capital lease future minimum payment due, total | 118,700 | |
Less amounts representing interest | (18,400) | |
Present value of minimum lease payments | 100,300 | |
Less current maturities | (21,500) | $ (5,600) |
Non-current leases payable | $ 78,800 | $ 12,100 |
Severance Payable (Details Narr
Severance Payable (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($)NumberSegment | |
Number of times on average monthly base salary | 2.5 |
Number of monthly installments | Segment | 20 |
Current employment contract end date | Jun. 30, 2016 |
Severance Payable Long Term [Member] | |
Severance payable | $ | $ 760,100 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Demanded payment in legal dispute | $ 500,000 |
Related-Party Transactions (Det
Related-Party Transactions (Details Narrative) | Sep. 30, 2015 |
United Breweries of America [Member] | |
Percentage of ownership interest | 25.00% |
Related-Party Transactions - Sc
Related-Party Transactions - Schedule of Related-Party Transactions (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
HUK [Member] | |||
Purchases from related party | $ 8,239,200 | $ 9,886,800 | |
Expenses reimbursement to related party | 715,200 | 853,600 | |
Accounts payable and accrued liability | 1,581,500 | $ 1,802,300 | |
UBA Convertible Notes [Member] | |||
Interest expenses associated with related party notes | 68,100 | 68,100 | |
Notes payable including accrued interest | 3,657,000 | 3,588,900 | |
Catamaran Notes [Member] | |||
Interest expenses associated with related party notes | 56,700 | 26,700 | |
Notes payable including accrued interest | 2,095,400 | $ 1,038,700 | |
Borrowing From Catamaran [Member] | |||
Borrowing from Catamaran | $ 1,000,000 | $ 1,000,000 |
Segment Information - Schedule
Segment Information - Schedule of Segment Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Net Sales | $ 23,231,900 | $ 25,922,800 |
Operating Income (Loss) | (335,000) | (43,200) |
Identifiable Assets | 17,090,600 | 19,092,900 |
Depreciation & Amortization | 889,200 | 845,000 |
Capital Expenditures | 499,800 | 642,700 |
North American Territory [Member] | ||
Net Sales | 8,787,700 | 9,564,000 |
Operating Income (Loss) | (629,000) | (781,500) |
Identifiable Assets | 12,969,300 | 14,409,100 |
Depreciation & Amortization | 505,200 | 509,500 |
Capital Expenditures | 70,400 | 105,300 |
Foreign Territory [Member] | ||
Net Sales | 14,444,200 | 16,358,800 |
Operating Income (Loss) | 294,000 | 738,300 |
Identifiable Assets | 4,121,300 | 4,683,800 |
Depreciation & Amortization | 384,000 | 335,500 |
Capital Expenditures | $ 429,400 | $ 537,400 |
Unrestricted Net Assets (Detail
Unrestricted Net Assets (Details Narrative) - UBIUK [Member] | Sep. 30, 2015USD ($) |
Undistributed losses of UBIUK | $ 508,100 |
Minimum Retained Earning required for distributions and other payments to MBC from KBEL | $ 1,511,600 |
Unrestricted Net Assets - Conde
Unrestricted Net Assets - Condensed Balance Sheets of US Operations (Details) - MBC and Releta [Member] - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Cash and cash equivalents | $ 91,500 | $ 61,500 |
Accounts receivable, net | 1,170,200 | 1,365,000 |
Inventories | 1,700,300 | 2,047,700 |
Other current assets | 238,400 | 173,600 |
Total current assets | 3,200,400 | 3,647,800 |
Investment in subsidiary | 1,225,000 | 1,225,000 |
Property and equipment | 9,503,500 | 9,904,500 |
Intercompany receivable | 338,600 | 421,900 |
Other assets | 265,400 | 310,400 |
Total assets | 14,532,900 | 15,509,600 |
Line of credit | 317,700 | 1,192,900 |
Accounts payable | 2,650,300 | 2,620,000 |
Accrued liabilities | 1,131,700 | 1,031,300 |
Note payable related party | 2,095,400 | $ 1,038,700 |
Subordinated convertible notes to related party | 3,657,000 | |
Current maturities of debt, leases and severance | 3,631,900 | $ 3,918,900 |
Total current liabilities | 13,484,000 | 9,801,800 |
Long-term capital leases | $ 8,000 | 12,100 |
Subordinated convertible notes payable | 3,588,900 | |
Severance payable | $ 646,100 | 760,100 |
Total liabilities | 14,138,100 | 14,162,900 |
Common stock | 15,100,300 | 15,100,300 |
Preferred stock | 227,600 | 227,600 |
Accumulated deficit | (14,933,100) | (13,981,200) |
Total stockholders' equity | 394,800 | 1,346,700 |
Total liabilities and stockholders' equity | $ 14,532,900 | $ 15,509,600 |
Unrestricted Net Assets - Con51
Unrestricted Net Assets - Condensed Statement of Operations of US Operations (Details) - MBC and Releta [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Net sales | $ 3,247,500 | $ 3,584,500 | $ 8,787,700 | $ 9,564,000 |
Cost of goods sold | (2,547,100) | (2,879,200) | (7,141,000) | (7,937,500) |
Selling, marketing, and retail expenses | (317,800) | (365,500) | (993,500) | (1,071,900) |
General and administrative expenses | (426,600) | (412,900) | (1,287,300) | (1,341,100) |
Loss from operations | (44,000) | (73,100) | (634,100) | (786,500) |
Other income | 7,400 | 22,100 | 51,000 | 32,800 |
Interest expense | $ (117,500) | $ (131,600) | (365,000) | $ (388,200) |
Provision for taxes | (3,800) | |||
Net loss | $ (154,100) | $ (182,600) | $ (951,900) | $ (1,141,900) |
Unrestricted Net Assets - Con52
Unrestricted Net Assets - Condensed Statement of Cash Flows of US Operations (Details) - MBC and Releta [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | $ 297,400 | $ (518,900) |
Purchase of property and equipment | $ (70,400) | (105,300) |
Proceeds from sale of asset | 700 | |
Net repayment on line of credit | $ (875,200) | (205,900) |
Borrowing on note payable | 1,000,000 | 1,000,000 |
Repayment on long term debt | (401,000) | (401,000) |
Payment on obligation under capital lease | (4,100) | (3,700) |
Net change in payable to UBIUK | 83,300 | 165,600 |
Increase (decrease) in cash | 30,000 | (68,500) |
Cash, beginning of period | 61,500 | 113,700 |
Cash, end of period | $ 91,500 | $ 45,200 |