Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 15, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | MENDOCINO BREWING CO INC | ||
Entity Central Index Key | 919,134 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 555,700 | ||
Entity Common Stock, Shares Outstanding | 12,611,133 | ||
Trading Symbol | MENB | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $ 129,600 | $ 145,100 |
Accounts receivable, net | 3,835,500 | 4,384,500 |
Inventories | 1,547,000 | 2,117,900 |
Prepaid expenses | 759,900 | 632,900 |
Total Current Assets | 6,272,000 | 7,280,400 |
Property and Equipment, net | 10,588,200 | 11,087,800 |
Deposits and other assets | 175,800 | 310,400 |
Total Assets | 17,036,000 | 18,678,600 |
Current Liabilities | ||
Secured lines of credit | 1,663,400 | 2,156,900 |
Accounts payable | 4,489,000 | 4,860,800 |
Accrued liabilities | 1,908,700 | 1,768,600 |
Notes payable to related party | 2,119,600 | $ 1,038,700 |
Subordinated convertible notes to related party | 3,680,100 | |
Current maturities of secured notes payable | 3,378,600 | $ 3,913,300 |
Current maturities of long-term debt to related party | 491,500 | 519,300 |
Current maturities of obligations under capital leases | 23,100 | $ 5,600 |
Current maturities of severance payable | 119,700 | |
Total Current Liabilities | $ 17,873,700 | $ 14,263,200 |
Long-Term Liabilities | ||
Long term debt to related party, less current maturity | 519,300 | |
Capital lease obligations, less current maturities | $ 79,200 | 12,100 |
Severance payable | $ 678,400 | 760,100 |
Subordinated convertible notes to related party | 3,588,900 | |
Total Long-Term Liabilities | $ 757,600 | 4,880,400 |
Total Liabilities | $ 18,631,300 | $ 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 | 472,400 | 454,200 |
Accumulated deficit | (17,395,600) | (16,247,100) |
Total Stockholders’ Equity | (1,595,300) | (465,000) |
Total Liabilities and Stockholders’ Equity | $ 17,036,000 | $ 18,678,600 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 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 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Sales | $ 31,691,900 | $ 34,654,900 |
Less excise tax | 508,200 | 615,700 |
Net Sales | 31,183,700 | 34,039,200 |
Cost of Goods Sold | 21,407,500 | 23,435,100 |
Gross Profit | 9,776,200 | 10,604,100 |
Operating Expenses | ||
Marketing | 5,888,600 | 5,887,200 |
General and administrative | 4,540,200 | 5,636,100 |
Total Operating Expenses | 10,428,800 | 11,523,300 |
Loss from Operations | (652,600) | (919,200) |
Other Income (Expense) | ||
Miscellaneous income | $ 112,900 | 46,800 |
Gain (loss) on disposal of assets | 19,600 | |
Interest expense | $ (605,000) | (686,700) |
Total Other Expense, net | (492,100) | (620,300) |
Income (Loss) before Income Taxes | (1,144,700) | $ (1,539,500) |
Provision for Income Taxes | 3,800 | |
Net Loss | (1,148,500) | $ (1,539,500) |
Other Comprehensive Income - Foreign currency translation adjustment | 18,200 | 40,500 |
Comprehensive Loss | $ (1,130,300) | $ (1,499,000) |
Net income (loss) per share Basic and diluted | $ (0.09) | $ (0.12) |
Weighted average common shares outstanding – Basic | 12,611,133 | 12,611,133 |
Weighted average common shares outstanding – Diluted | 12,611,133 | 12,611,133 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders’ Equity - USD ($) | Series A Preferred Stock [Member] | Common Stock [Member] | Accumulated Other Comprehensive Income [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2013 | $ 227,600 | $ 15,100,300 | $ 413,700 | $ (14,707,600) | $ 1,034,000 |
Balance, shares at Dec. 31, 2013 | 227,600 | 12,611,133 | |||
Net loss | $ (1,539,500) | (1,539,500) | |||
Currency translation adjustment | $ 40,500 | 40,500 | |||
Balance at Dec. 31, 2014 | $ 227,600 | $ 15,100,300 | $ 454,200 | $ (16,247,100) | (465,000) |
Balance, shares at Dec. 31, 2014 | 227,600 | 12,611,133 | |||
Net loss | $ (1,148,500) | (1,148,500) | |||
Currency translation adjustment | $ 18,200 | 18,200 | |||
Balance at Dec. 31, 2015 | $ 227,600 | $ 15,100,300 | $ 472,400 | $ (17,395,600) | $ (1,595,300) |
Balance, shares at Dec. 31, 2015 | 227,600 | 12,611,133 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income loss | $ (1,148,500) | $ (1,539,500) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 1,226,200 | 1,382,400 |
Provision for doubtful accounts | $ (2,500) | (11,300) |
(Gain) loss on the disposal of assets | (19,600) | |
Changes in operating assets and liabilities: | ||
Increase in interest accrued on related party notes | $ 172,100 | 129,700 |
Increase in accrued severance payable | 38,000 | 760,100 |
(Increase) decrease in accounts receivable | 430,800 | (329,000) |
Decrease in inventories | 567,500 | 119,900 |
Increase in prepaid expenses | (156,100) | (70,400) |
(Increase) decrease in deposits and other assets | 54,100 | (85,200) |
Increase (decrease) in accounts payable | (262,100) | 110,200 |
Increase in accrued liabilities | 186,400 | 346,100 |
Net cash provided by operating activities | 1,105,900 | 793,400 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property, equipment and leasehold improvements | $ (642,400) | (895,700) |
Proceeds from sale of fixed assets | 19,600 | |
Net cash used in investing activities: | $ (642,400) | (876,100) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net repayment on lines of credit | (431,200) | (28,100) |
Borrowing on notes payable | 1,000,000 | 1,000,000 |
Repayment on long-term debts | (534,700) | (534,700) |
Repayment on related party debt | (509,500) | (549,500) |
Payments on obligations under capital leases | (18,100) | (5,300) |
Net cash used infinancing activities: | (493,500) | (117,600) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 14,500 | 20,600 |
Net Change in Cash | (15,500) | (179,700) |
Cash at beginning of period | 145,100 | 324,800 |
Cash at end of period | 129,600 | 145,100 |
Cash paid during the period for: | ||
Interest | 432,900 | $ 557,000 |
Income taxes | 3,800 | |
Non-cash investing and financing activities: | ||
Seller financed assets | $ 105,600 |
Description of Operations and S
Description of Operations and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 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., 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 (US), MBC and its subsidiary, Releta, operate two breweries that produce beer 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 Mendocino Brewing Company 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, and MBC holds the license to distribute Kingfisher Premium Lager Beer in the US and Canada. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. In these notes, the term the Company and its variants and the terms we, us, and our and their variants are generally used to refer to Mendocino Brewing Company, Inc. together with its subsidiaries, while the term MBC is used to refer to Mendocino Brewing Company, Inc. as an individual entity. The Companys United Kingdom (UK) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (KBEL). KBEL is a distributor of Kingfisher Premium Lager Beer, in the United Kingdom and Europe. The distributorship is located in Maidstone, Kent in the UK. 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 at 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 Mendocino Brewing Company, Inc., 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 financial statements for the years ended December 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States. The financial statements and notes are representations of the management and the Board of Directors, who are responsible for their integrity and objectivity. 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 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. Foreign Operations Approximately 27% of the Companys assets are located in the UK. Although this country is considered economically stable and the Company has experienced no notable burden from foreign exchange transactions, export duties, or government regulations, it is always possible that unanticipated events in foreign countries could disrupt the Companys operations. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are stated at the invoiced amount and are the amount the Company expects to collect. Sales are made to approved customers on an open account basis, subject to established credit limits, and generally no collateral is required. The allowance for doubtful accounts is the Companys best estimate of the amount of probable credit losses in the Companys existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. 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. Past due balances over 90 days 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. The Company had allowances of $69,100 and $56,700 for doubtful accounts receivable as of December 31, 2015 and 2014, respectively. 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. Prepaid Expenses and Other Assets Prepaid expenses and other assets generally consist of deposits, other receivables, and prepayments for future services. Prepayments are expensed when the services are received. Property and Equipment Property and equipment are stated at cost and depreciated or amortized using the straight-line method over the assets estimated useful lives. Leasehold improvements are amortized over the shorter of the life of the improvement or the life of the related lease. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. Costs of maintenance and repairs are charged to expense as incurred; significant renewals and betterments are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the assets carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in the statement of operations. Estimated useful lives of property and equipment are as follows: Building 40 years Machinery and equipment 3 - 40 years Vehicles 3 - 5 years Furniture and fixtures 5 - 10 years Assets Held under Capital Leases Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. Impairment of Long-Lived Assets The Company assesses the impairment of its long-lived assets periodically in accordance with the provisions of Accounting Standards Codification (ASC) 360, (Accounting for the Impairment and Disposal of Long-Lived Assets). The Company reviews the carrying value of property and equipment and any other long-lived assets for impairment annually or whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors. Long-lived assets that management commits to sell or abandon are reported at the lower of carrying amount or fair value less cost to sell. 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 borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $45,000 for the years ended December 31, 2015 and 2014. 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. A valuation allowance is established to reduce the deferred tax asset if it is more likely than not that the related tax benefits will not be realized. 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 for the years ending December 31, 2015 and 2014. Revenue Recognition The Company recognizes revenue from brewing and distribution operations in accordance with ASC 605. 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 Delivery Has Occurred or Services Have Been Performed The Fee for the Arrangement is Fixed or Determinable Collectability is Reasonably Assured 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 statement of operations as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the brewpub and gift store are recognized when sales have been completed. Excise Taxes The federal government levies excise taxes on the sale of alcoholic beverages, including beer. For brewers producing less than 2.0 million barrels of beer per calendar year, the federal excise tax is $7 per barrel on the first 60,000 barrels of beer removed for consumption or sale during a calendar year, and $18 per barrel for each barrel in excess of 60,000. Individual states also impose excise taxes on alcoholic beverages in varying amounts, which have also been subject to change. Sales as presented in the Companys statements of operations reflect the amount invoiced to the Companys wholesalers and other customers. Excise taxes due to federal and state agencies are not collected from the Companys customers, but rather are the responsibility of the Company. Net sales, as presented in the Companys statements of operations, are reduced by applicable federal and state excise taxes. In the UK, excise taxes are paid by the manufacturer and not by the Company. Discounts To further promote retail sales of its products and in response to local competitive conditions, the Company regularly offers price discounts to distributors and retailers in most of its markets. Sales for the years 2015 and 2014, as presented in the Companys statements of operations, are reduced by $1,204,400 and $1,140,800 respectively, related to such discounts. Chargebacks and Sales Reserves The Company has estimated reserves for chargebacks for promotional expenses by distributors. The Company estimates its reserves by utilizing historical information and current contracts. In estimating chargeback reserves, the Company analyzes actual chargeback amounts and applies historical chargeback rates to estimate potential chargeback. The Company routinely assesses its experience with distributors and adjusts the reserves accordingly. If actual chargebacks and other rebates are greater than the Companys estimates, additional reserves may be required. Revisions to estimates are charged to income in the period in which the facts that give rise to the revision become known. Seasonality Sales of the Companys products are somewhat seasonal, with the first and fourth quarters historically being the slowest and the rest of the year generating stronger sales. The volume of sales may also be affected by weather conditions. Because of the seasonality of the Companys business, results for any one quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Taxes Collected From Customers Taxes collected from customers and remitted to tax authorities are sales tax collected from our retail customers. State and federal excise taxes on beer shipments are the responsibility of the Company and included in our selling price. Excise taxes on shipments are shown in a separate line item in the consolidated statement of operations as reduction of gross sales. Sales taxes collected from customers are recognized as a liability, with the liability subsequently reduced when the taxes are remitted to the tax authority. Total sales taxes collected from customers and remitted to tax authorities were not material in 2015 and 2014. Delivery Costs In accordance with ASC 605, (Shipping and Handling Fees and Costs) the company reports pass-through freight costs on beer shipped to independent beer wholesalers in cost of sales. Reimbursements of these costs by wholesalers are reported in sales. Non-pass-through costs incurred by the Company to deliver beer to wholesalers are included in marketing, distribution and administrative expenses. These costs are considered marketing related because in addition to product delivery, wholesalers provide marketing and other customer service functions to customers including product display, shelf space management, distribution of promotional materials, and product rotation. Shipping costs included in marketing expense totaled $968,200 and $1,051,300, for the years ended December 31, 2015 and 2014, respectively. Basic and Diluted Income per Share The basic earnings per share is computed by dividing the earnings attributable to common stockholders by the weighted average number of common shares outstanding during the period. In 2015, the effect of any potentially dilutive securities would have been anti-dilutive. Therefore, the conversion of the related party notes has been excluded from the calculation of net earnings per share for the year ended December 31, 2015. Basic net earnings per share exclude the dilutive effect of stock options or warrants and convertible notes. The computations of basic and dilutive net earnings per share are as follows: Year Ended December 31 2015 2014 Net loss $ (1,148,500 ) (1,539,500 ) Weighted average common shares outstanding 12,611,133 12,611,133 Basic net income (loss) per share $ (0.09 ) (0.12 ) Interest expense on convertible notes $ Income (loss) for purpose of computing diluted net income per share $ (1,148,500 ) (1,539,500 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential common shares 12,611,133 12,611,133 Diluted net earnings (loss) per share $ (0.09 ) (0.12 ) Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, UK Pound Sterling, is the functional currency. Financial statements of these subsidiaries are translated into U.S. 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 at UBIUK was translated at exchange rates in effect at December 31, 2015 and 2014, and its cash flows were translated at the average exchange rates for the years 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 United States of America 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, allowance for doubtful accounts, depreciation and amortization periods, and the future utilization of deferred tax assets. Advertising Advertising costs are expensed as incurred and were $903,600 and $987,500for the years ended December 31, 2015 and 2014, respectively. Fair Value of Financial Instruments Fair Value The fair value of the Companys financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). For financial assets and liabilities that are periodically re-measured to fair value, the Company discloses a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels: Level 1 quoted prices in active markets for identical assets and liabilities. Level 2 observable inputs other than quoted prices in active markets for identical assets and liabilities. Level 3 unobservable inputs. At December 31, 2015 and 2014, the Company had no financial assets or liabilities that required periodic re-measurement at fair value. The recorded value of certain financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses, approximate the fair value of the respective assets and liabilities at December 31, 2015 and December 31, 2014 based upon the short-term nature of the assets and liabilities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of short and long term notes payable approximate fair value. Comprehensive Income Comprehensive income is composed of the Companys net income and changes in equity from all other non-stockholder sources. The changes from these non-stockholder sources are reflected as a separate item in the statements of operations and comprehensive income. Reportable Segments The Company manages its operations through two business segments: (i) brewing operations, tavern and tasting room operations in the US and Canada (the North American Territory) and (ii) distributor operations in Europe (including Austria, Belgium, Denmark, Ireland, Italy, the Netherlands, France, Finland, Germany, Greece, Iceland, Liechtenstein, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) (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. Recent Accounting Pronouncements During the fourth quarter of 2014, the Company adopted Accounting Standards Update (ASU) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This ASU was effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption was permitted, but only for disposals (or classifications as held for sale) that had not been reported in the financial statements previously issued or available for issuance. See Notes X for disclosures related to this adoption. During the first quarter of 2015, the company adopted FASBs guidance on reporting discontinued operations and disclosures of disposals of components of an entity. This standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance is effective for annual reporting periods ending after December 15, 2014. Early adoption was permitted but only for disposals that have not been reported in financial statements previously issued. The adoption of this guidance has not had a material impact on its financial position, results of operations or cash flows. In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance. In November 2015, the FASB issued (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes. Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of the year ended December 31, 2015 on a retrospective basis. The adoption of this guidance did not have a material impact on the Companys financial position, results of operations or cash flows, and did not have any effect on prior periods due to the full valuation allowance against the Companys net deferred tax assets. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (LIFO). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this guidance. In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Further, the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The new guidance should be applied on a retrospective basis to all periods presented. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customers Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued guidance related to a customers accounting for fees paid in a cloud computing arrangement. This standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015, and early adoption is permitted. The Company will adopt this guidance on January 1, 2016. The adoption of this guidance is not expected to have a material impact on its financial position, results of operations or cash flows. In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial statements. In January 2015, the FASB issued ASU 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic 225-20), effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. This update eliminates from GAAP the concept of extraordinary items. The adoption of ASU 2014-16 will not have a significant impact on the Companys financial position or results of operations. In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815). Entities commonly raise capital by issuing different classes of shares, including preferred stock, that entitle the holders to certain preferences and rights over the other shareholders. The specific terms of those shares may include conversion rights, redemption rights, voting rights, and liquidation and dividend payment preferences, among other features. One or more of those features may meet the definition of a derivative under GAAP. Shares that include such embedded derivative features are referred to as hybrid financial instruments. The objective of this update is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2014-16 will not have a significant impact on the Companys financial position or results of operations. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. The Company expects to adopt this guidance on January 1, 2017. The Company is currently evaluating the potential impact, if any, the adoption of ASU 2014-15 will have on footnote disclosures, however, the Company does not expect the adoption of this guidance to have any impact on its financial position, results of operations or cash flows. In May 2014, the FASB issued ASU 2014-09, Re |
Liquidity and Management Plans
Liquidity and Management Plans | 12 Months Ended |
Dec. 31, 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 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. On November 24, 2015, KBEL received a notice from Royal Bank of Scotland (RBS) regarding its intention to terminate the credit line and all other banking services it currently provides to KBEL on February 26, 2016. RBS subsequently extended the termination date to May 31, 2016. We have engaged in discussions with a bank which provided an indicative offer to provide a replacement for the RBS line of credit. It would have a material adverse effect on KBEL and the Company if KBEL is unable to find a substitute replacement before termination of the RBS facilities. 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. On December 9, 2015, the Company engaged Gordian Group, LLC (Gordian Group) to serve as the Companys exclusive investment banker to assist the Company in evaluating, exploring and, if deemed appropriate by the Company, pursuing and implementing certain strategic and financial options and transactions that may be available to the Company, including in connection with a possible debt or equity capital financing, merger, consolidation, joint venture or other business combination involving, or sale of substantially all or a material portion of the assets (outside of the ordinary course of business) or outstanding securities of, the Company and/or its subsidiaries, and/or the acquisition of substantially all or a material portion of the assets or outstanding securities of another entity (each, a Financial Transaction). Gordian Group is a New York-based independent investment banking firm. While the Company has commenced evaluating its available options, no conclusion as to any specific option or transaction has been reached, nor has any specific timetable been fixed for this effort, and there can be no assurance that any strategic or financial option or transaction will be presented, implemented or consummated. The Company intends to use proceeds of the Financial Transaction to repay the amount owed to Lender when it becomes due. As of December 31, 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 December 31, 2015 was -0.28 to 1. The Company calculated that the required tangible net worth of MBC and Releta was $6,181,400 as of December 31, 2015 and the actual tangible net worth on such date was $3,738,400. 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 December 31, 2015, the Company had cash and cash equivalents of $129,600, an accumulated deficit of $17,395,600, and a working capital deficit of $11,601,700 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 December 31, 2015. Management has taken several actions to reduce the Companys working capital needs through December 31, 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 | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | 3. Inventories Inventories, consisting of materials, materials overhead, labor, and manufacturing overhead, are stated at the lower of average cost or market (net realizable value) and consist of the following at December 31: 2015 2014 Raw materials $ 628,100 $ 740,300 Work-in-progress 312,200 259,400 Finished goods 541,400 1,034,200 Merchandise 65,300 84,000 $ 1,547,000 $ 2,117,900 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 4. Property and Equipment The following is a summary of property and equipment, at cost less accumulated depreciation, at December 31: 2015 2014 Machinery and equipment $ 13,068,900 $ 12,575,600 Buildings 7,218,900 7,218,900 Equipment under capital lease 138,200 23,000 Land 810,900 810,900 Leasehold improvements 1,397,200 1,397,200 Vehicles 17,500 17,500 Furniture and fixtures 352,500 352,500 Equipment in progress 71,500 121,500 23,075,600 22,517,100 Accumulated depreciation and amortization (12,487,400 ) (11,429,300 ) $ 10,588,200 $ 11,087,800 The total depreciation expense for the years ended December 31, 2015 and 2014 was $1,181,200and $1,337,400, respectively. |
Secured Lines of Credit
Secured Lines of Credit | 12 Months Ended |
Dec. 31, 2015 | |
Line of Credit Facility [Abstract] | |
Secured Lines of Credit | 5. Secured Lines of Credit In June 2011, MB Financial provided a line of credit drawable up to 85% of eligible receivables and 60% of eligible inventory for a period up to June 2016. Effective August 20, 2014, pursuant to Third Default Notice,MB Financial notified that it would reduce the advance rate for eligible inventory by 2% each month.The borrowings are collateralized, with recourse, by MBCs and Reletas trade receivables and inventory located in the US. This facility 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 December 31, 2015 was approximately $453,100. Included in the Companys balance sheet as accounts receivable at December 31, 2015, are account balances totaling $1,121,300 of accounts receivables and $1,490,100 of inventory collateralized to MB Financial under this facility. On April 26, 2005, Royal Bank of Scotland Commercial Services Limited (RBS) provided an invoice discounting facility to KBEL for a maximum amount of £1,750,000 based on 80% prepayment against qualified accounts receivable related to KBELs UK customers. The initial term of the facility was for a one year period after which time the facility could be terminated by either party by providing the other party with 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 December 31, 2015 was approximately $1,210,300. On November 24, 2015, KBEL received a notice from RBS regarding its intention to terminate the credit line and all other banking services it currently provides to KBEL on February 26, 2016. RBS subsequently extended the termination date to May 31, 2016. We have engaged in discussions with a bank which provided an indicative offer to provide a replacement for the RBS line of credit. It would have a material adverse effect on KBEL and the Company if KBEL is unable to find a substitute replacement before termination of the RBS facilities. |
Notes Payable to Related Party
Notes Payable to Related Party | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable to Related Party | 6. 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 $2,119,600 including accrued interest of $119,600. 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 through Permitted Payments, as defined below, or (b) to pay the notes and certain existing obligations of the Company to Lender. Permitted Payments on the notes are payments made from the equity investment by the Companys majority shareholder. 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 shall be automatically extended for additional six month terms until they are paid. On March 14, 2016, Catamaran provided the Company a note loan in the principal amount of $325,000 on terms substantially similar to the previous notes, repayable on receipt of a bridge loan from the Companys majority shareholder. On March 30, 2016, Catamaran provided the Company with another note loan in the principal amount of $75,000 on terms similar to the previous note. |
Subordinated Convertible Notes
Subordinated Convertible Notes Payable To Related Party | 12 Months Ended |
Dec. 31, 2015 | |
Subordinated Convertible Notes Payable To Related Party | |
Subordinated Convertible Notes Payable To Related Party | 7. Subordinated Convertible Notes to Related Party Subordinated convertible notes to related parties are unsecured convertible notes payable to UBA for a total value including interest (at the prime rate plus 1.5%, but not to exceed 10% per year) of $3,680,100 and $3,588,900 as of December 31, 2015 and 2014, respectively. Thirteen of the UBA notes are convertible into common stock at $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 but 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 such term. UBA may demand payment within 60 days of the end of the extension period but is precluded from doing so because the notes are subordinated to long-term debt agreements with MB Financial maturing in June 2016. The Company expects the UBA notes to be continued to be subordinated to any new financing facility obtained after maturity of MB Financial facility. The Company will also attempt to induce conversion of UBA notes to equity. Therefore, the Company will not require the use of working capital to repay any of the UBA notes. The UBA notes included $1,764,700 and $1,673,500 of accrued interest at December 31, 2015 and December 31, 2014, respectively. |
Secured Notes Payable
Secured Notes Payable | 12 Months Ended |
Dec. 31, 2015 | |
Long-term Debt, Unclassified [Abstract] | |
Secured Notes Payable | 8. Secured Notes Payable Year ended December 31, 2015 2014 Loan from MB Financial, payable in monthly installments of $12,300, plus interest at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by real property at Ukiah. See disclosures in Note 2. $ 2,276,200 $ 2,423,600 Loan from MB Financial, payable in monthly installments of $32,300 including interest at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by all assets of Releta and MBC, excluding real property at Ukiah. See disclosures in Note 2. 1,102,400 1,489,700 3,378,600 3,913,300 Less current maturities 3,378,600 3,913,300 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party | 12 Months Ended |
Dec. 31, 2015 | |
Long-term Debt - Related Party | |
Long-Term Debt - Related Party | 9. Long-Term Debt Related Party Year ended December 31, 2015 2014 Loan from Heineken UK Limited, payable in quarterly installments of $122,900, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to the Sub-License Agreement. $ 491,500 $ 1,038,600 Less current maturities 491,500 519,300 $ - $ 519,300 On April 18, 2013, KBEL entered into a Loan Agreement (the Loan Agreement) with Heineken UK Limited (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 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 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 Loan Agreement. |
Capital Lease Obligations
Capital Lease Obligations | 12 Months Ended |
Dec. 31, 2015 | |
Capital Lease Obligations [Abstract] | |
Capital Lease Obligations | 10. Capital Lease Obligations The Company leases certain equipment and vehicles under agreements that are classified as capital leases. The future minimum lease payments required under the capital lease and the present value of the net minimum lease payments as of December 31, 2015, are as follows: Year Ending December 31, 2016 $ 28,200 Year Ending December 31, 2017 28,100 Year Ending December 31, 2018 21,800 Year Ending December 31, 2019 21,800 Year Ending December 31, 2020 21,500 121,400 Less amounts representing interest (19,100 ) Present value of minimum lease payments $ 102,300 Less current maturities 23,100 Non-current leases payable $ 79,200 |
Severance Payable
Severance Payable | 12 Months Ended |
Dec. 31, 2015 | |
Severance Payable | |
Severance Payable | 11. 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 December 31, 2015, the Company estimated this obligation to be $798,100. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 12. 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. Future payments under existing contractual arrangements are as follows: Year Ending December 31, 2016 $ 1,062,500 Total $ 1,062,500 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. The Companys management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Companys legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Companys financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. 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 through 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 (real estate taxes, insurance and repairs). The Company and its subsidiaries have various lease agreements for the brewpub and gift store in Ukiah, California; land at its Saratoga Springs, New York, facility; a building in the UK; and certain equipment. The New York lease includes renewal options for two additional five-year periods beginning in 2019, which the Company presently intends to exercise, and some leases are adjusted annually for changes in the consumer price index. Rent expense charged to operations was $310,300 and $341,300 for the years ended December 31, 2015 and 2014, respectively. Future minimum lease payments under these agreements are as follows: Year Ending December 31, 2016 $ 450,900 2017 408,300 2018 338,300 2019 168,700 2020 42,700 $ 1,408,900 |
Related-Party Transactions
Related-Party Transactions | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | 13. Related-Party Transactions The Company conducts business with United Breweries of America (UBA) and Catamaran, which are or are related to major stockholders of the Company. KBEL had significant transactions with HUK, a related party with respect to one of MBCs Board members. The following table reflects balances outstanding as of December 31, 2015 and 2014 and the value of the transactions with these related parties for the years ended December 31, 2015 and 2014: 2015 2014 TRANSACTIONS Purchases from HUK $ 11,713,300 $ 12,884,700 Expenses reimbursement including interest expenses to HUK 1,081,200 1,355,000 Interest expenses associated with UBA and Catamaran notes $ 172,100 $ 129,700 Borrowing from Catamaran ACCOUNT BALANCES Accounts payable and accrued liabilities to HUK $ 1,669,400 $ 1,802,300 Notes payable to Catamaran 2,119,600 1,038,700 Notes payable to UBA $ 3,680,100 $ 3,588,900 Independent outside members of the Board of Directors are compensated for their services. Accrued expenses related to this compensation totaled $137,800 and $120,300 for the years ended December 31, 2015 and 2014 respectively and are included in general and administrative expenses. |
Concentrations and Credit Risk
Concentrations and Credit Risk | 12 Months Ended |
Dec. 31, 2015 | |
Risks and Uncertainties [Abstract] | |
Concentrations and Credit Risk | 13. Concentrations and Credit Risk 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 that have minimal credit risk, in the US and the UK. 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 $68,300 in cash deposits and $2,714,200 of accounts receivable due from customers located in the UK as of December 31, 2015. The Company could experience labor disputes, work stoppages or other disruptions in production that could adversely affect it. As of December 31, 2015, a union represented approximately 25% of the Companys US-based workforce. On that date, the Company had approximately fifteen employees at its California (CA) facility who were working under a collective bargaining agreement. The agreement covering the CA facility expires on July 31, 2018. Gross sales to the top five customers totaled $4,854,000and $5,466,700 for the years ended December 31, 2015 and 2014, which represents 15% and 16% of sales for the years ended December 31, 2015 and 2014, respectively. No individual customer accounted for more than 5% of our total sales during 2015 and 2014. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
Stockholders' Equity | 14. Stockholders Equity Preferred Stock Ten million shares of no par preferred stock have been authorized, of which 227,600 shares, designated as Series A,are issued and outstanding. Series A shareholders are entitled to receive cash dividends and/or liquidation proceeds equal, in the aggregate, to $1.00 per share before any cash dividends are paid on the common stock or any other series of preferred stock. When the entire Series A dividend/liquidation proceeds have been paid, the Series A shares are automatically canceled and will cease to be outstanding. Only a complete corporate dissolution will cause a liquidation preference to be paid. Common Stock Thirty million shares of no par common stock have been authorized, of which 12,611,133 shares are issued and outstanding. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 15. Income Taxes The large accumulated losses from past operations have resulted in the Company determining that the deferred tax assets associated with net operating loss carryforwards may expire prior to utilization. Because of the uncertainty of realization of any tax assets, the Company provided a full valuation allowance against its net deferred tax assets at December 31, 2015 and 2014. Consequently, no benefit for deferred tax assets appears on the Companys financial statements. The Companys income tax expense is summarized as follows: 2015 2014 Provision for income taxes US Federal $ - $ - US States 3,800 - Current provision - - Change in deferred income taxes - - Total provision for income taxes $ 3,800 $ - The difference between the actual income tax provision and the tax provision computed by applying the statutory US federal and United Kingdom income tax rates to earnings before taxes is attributable to the following: 2015 2014 US Federal income tax expense (benefit) at 34% $ (516,700 ) $ (828,000 ) US State income tax expense (benefit) (101,200 ) (136,100 ) United Kingdom income tax expense (benefit) at 20% 75,000 179,100 Nondeductible expenses 13,600 13,300 Expiration of net operating loss carryforwards 29,800 293,500 Other 174,400 147,000 Change in valuation allowance 328,900 331,200 Total $ - $ - Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are as follows: 2015 2014 Benefit of net operating loss carryforwards $ 6,159,300 $ 5,601,600 Depreciation and amortization (1,581,400 ) (1,630,400 ) Other 81,000 358,800 Subtotal 4,658,900 4,330,000 Less valuation allowance (4,658,900 ) (4,330,000 ) Total $ - $ - Change in valuation allowance $ 328,900 $ 331,200 The Company has net operating losses available for carry forward. The US Federal net operating losses total approximately $17,021,100 and expire beginning 2018 and ending in 2035. The US state operating losses total approximately $1,547,400 and expire beginning in 2016 and ending in 2035. The Companys UK operating losses total approximately $1,176,900 and do not expire. Tax years that remain open for examination by the Internal Revenue Service and the US states include 2012 through 2015. California and New York may still examine 2011 as well. The Company expects to file its 2015 returns in the summer of 2016. Additional years may be examined in the event of criminal tax fraud, and any year may be subject to examination to the extent that the Company utilizes the net operating losses from those years in its current or future tax returns. |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Segment Information | 16. 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. This segment accounted for approximately 38% and 37% of the Companys gross sales during the years 2015 and 2014, respectively. 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 through Indian restaurants, chain retail grocers, liquor stores, and other retail outlets (such as convenience stores). This segment accounted for approximately 62% and 63% of the Companys gross sales during 2015 and 2014 respectively. A summary of each segment is as follows: Year Ended December 31, 2015 North American Foreign Total Sales $ 11,872,300 $ 19,819,600 $ 31,691,900 Operating income (loss) (1,144,100 ) 491,500 (652,600 ) Identifiable assets 12,426,800 4,609,200 17,036,000 Depreciation and amortization 696,500 529,700 1,226,200 Capital expenditures 125,500 622,500 748,000 Year Ended December 31, 2014 North American Foreign Total Sales $ 12,869,500 $ 21,785,400 $ 34,654,900 Operating income (loss) (1,960,600 ) 1,041,400 (919,200 ) Identifiable assets 13,862,700 4,815,900 18,678,600 Depreciation and amortization 704,700 677,700 1,382,400 Capital expenditures 105,300 790,400 895,700 |
Unrestricted Net Assets
Unrestricted Net Assets | 12 Months Ended |
Dec. 31, 2015 | |
Unrestricted Net Assets | |
Unrestricted Net Assets | 17. Unrestricted Net Assets The Companys wholly-owned subsidiary, UBIUK, has cumulative losses of approximately $317,600 as of December 31, 2015. Under KBELs line of credit agreement with RBS, distributions and other payments to the Company from its subsidiary are not permitted if the subsidiarys retained earnings drop below $1,528,400. Condensed financial information of the United States operations is as follows: 2015 2014 Balance Sheets Assets Cash and cash equivalents $ 61,300 $ 61,500 Accounts receivable, net 1,121,300 1,365,000 Inventories 1,490,100 2,047,700 Other current assets 199,800 173,600 Total current assets 2,872,500 3,647,800 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,378,500 9,904,500 Intercompany receivable 284,000 421,900 Other assets 175,800 310,400 Total assets $ 13,935,800 $ 15,509,600 Liabilities Line of credit $ 453,100 $ 1,192,900 Accounts payable 2,640,400 2,620,000 Accrued liabilities 1,021,000 1,031,300 Note payable to related party 2,119,600 1,038,700 Subordinated convertible notes to related party 3,680,100 - Current maturities of debt, leases and severance 3,505,900 3,918,900 Total current liabilities 13,420,100 9,801,800 Long-term capital leases 14,000 12,100 Subordinated convertible notes to related party - 3,588,900 Severance payable 678,400 760,100 Total liabilities 14,112,500 14,162,900 Stockholders equity Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (15,504,600 ) (13,981,200 ) Total stockholders equity (176,700 ) 1,346,700 Total liabilities and stockholders equity $ 13,935,800 $ 15,509,600 2015 2014 Statement of Operations Net sales $ 11,364,100 $ 12,253,800 Cost of goods sold 9,422,700 10,249,000 Selling, marketing, and retail expenses 1,320,900 1,433,700 General and administrative expenses 1,771,400 2,538,100 Loss from operations (1,150,900 ) (1,967,000 ) Other income and (expense) Interest expenses (481,600 ) (518,500 ) Profit (Loss) on disposal of assets - 3,500 Other income 112,900 46,800 Provision for taxes (3,800 ) - (372,500 ) (468,200 ) Net loss $ (1,523,400 ) $ (2,435,200 ) 2015 2014 Statements of Cash Flows Cash flows from operating activities $ 258,000 $ (380,900 ) Cash flow from investing activities Purchase of property and equipment (115,600 ) (105,300 ) Proceeds from sale of equipment - 3,500 Net cash flows from investing (115,600 ) (101,800 ) Cash flow from financing activities Net repayments on line of credit (739,800 ) (324,300 ) Borrowing on note payable 1,000,000 1,000,000 Repayment of long-term debt (534,700 ) (534,700 ) Payment on obligations under capital leases (6,000 ) (5,300 ) Net change in intercompany payable 137,900 294,800 Net cash flows from financing activities (142,600 ) 430,500 Cash, beginning of year 61,500 113,700 Cash, end of year $ 61,300 $ 61,500 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | 18. Subsequent Events On March 14, 2016, Catamaran provided the Company a note loan in the principal amount of $325,000 on terms substantially similar to the previous notes, repayable on receipt of a bridge loan from the Companys majority shareholder. On March 30, 2016, Catamaran provided the Company with another note loan in the principal amount of $75,000 on terms similar to the previous note. Pursuant to a resolution adopted on September 10, 2013 by the Companys Board of Directors, Company entered into a Separation and Severance Agreement with Mr. Mahadevan Narayanan, Companys Chief Financial Officer and Secretary on April 12, 2016. Pursuant to the terms of the agreement, upon Mr. Narayanans (i) termination of employment for Good Reason (as defined in the agreement), (ii) death, (iii) disability or (iv) termination by the Company without Cause (as defined in the 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 agreement); provided, however, that the severance payment may not exceed thirty (30) months of Mr. Narayanans average monthly base salary (calculated over the twelve (12) months preceding his termination date). Payments due to Mr. Narayanan under the Separation Agreement shall be paid in equal monthly installments by the Company over a 20 month period. |
Description of Operations and26
Description of Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Description of Operations | Description of Operations Mendocino Brewing Company, Inc., was formed in 1983 in California, and has two operating subsidiaries: Releta Brewing Company, LLC, (Releta), and United Breweries International (UK) Limited (UBIUK). In the United States (US), MBC and its subsidiary, Releta, operate two breweries that produce beer 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 Mendocino Brewing Company 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, and MBC holds the license to distribute Kingfisher Premium Lager Beer in the US and Canada. Generally, product shipments are made directly from the breweries to the wholesalers or distributors in accordance with state and local laws. In these notes, the term the Company and its variants and the terms we, us, and our and their variants are generally used to refer to Mendocino Brewing Company, Inc. together with its subsidiaries, while the term MBC is used to refer to Mendocino Brewing Company, Inc. as an individual entity. The Companys United Kingdom (UK) subsidiary, UBIUK, is a holding company for Kingfisher Beer Europe Limited (KBEL). KBEL is a distributor of Kingfisher Premium Lager Beer, in the United Kingdom and Europe. The distributorship is located in Maidstone, Kent in the UK. |
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 at 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 Mendocino Brewing Company, Inc., 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 financial statements for the years ended December 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States. The financial statements and notes are representations of the management and the Board of Directors, who are responsible for their integrity and objectivity. |
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. |
Foreign Operations | Foreign Operations Approximately 27% of the Companys assets are located in the UK. Although this country is considered economically stable and the Company has experienced no notable burden from foreign exchange transactions, export duties, or government regulations, it is always possible that unanticipated events in foreign countries could disrupt the Companys operations. |
Trade Accounts Receivable and Allowance for Doubtful Accounts | Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are stated at the invoiced amount and are the amount the Company expects to collect. Sales are made to approved customers on an open account basis, subject to established credit limits, and generally no collateral is required. The allowance for doubtful accounts is the Companys best estimate of the amount of probable credit losses in the Companys existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. 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. Past due balances over 90 days 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. The Company had allowances of $69,100 and $56,700 for doubtful accounts receivable as of December 31, 2015 and 2014, respectively. |
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. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets Prepaid expenses and other assets generally consist of deposits, other receivables, and prepayments for future services. Prepayments are expensed when the services are received. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and depreciated or amortized using the straight-line method over the assets estimated useful lives. Leasehold improvements are amortized over the shorter of the life of the improvement or the life of the related lease. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. Costs of maintenance and repairs are charged to expense as incurred; significant renewals and betterments are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the assets carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in the statement of operations. Estimated useful lives of property and equipment are as follows: Building 40 years Machinery and equipment 3 - 40 years Vehicles 3 - 5 years Furniture and fixtures 5 - 10 years Assets Held under Capital Leases Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. Impairment of Long-Lived Assets The Company assesses the impairment of its long-lived assets periodically in accordance with the provisions of Accounting Standards Codification (ASC) 360, (Accounting for the Impairment and Disposal of Long-Lived Assets). The Company reviews the carrying value of property and equipment and any other long-lived assets for impairment annually or whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors. Long-lived assets that management commits to sell or abandon are reported at the lower of carrying amount or fair value less cost to sell. |
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 borrowing made in June 2011 were $225,000. Amortization of deferred financing costs charged to operations was $45,000 for the years ended December 31, 2015 and 2014. |
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. A valuation allowance is established to reduce the deferred tax asset if it is more likely than not that the related tax benefits will not be realized. 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 for the years ending December 31, 2015 and 2014. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from brewing and distribution operations in accordance with ASC 605. 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 Delivery Has Occurred or Services Have Been Performed The Fee for the Arrangement is Fixed or Determinable Collectability is Reasonably Assured 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 statement of operations as a reduction in revenue and as a corresponding reduction in marketing and selling expenses. Revenues from the brewpub and gift store are recognized when sales have been completed. |
Excise Taxes | Excise Taxes The federal government levies excise taxes on the sale of alcoholic beverages, including beer. For brewers producing less than 2.0 million barrels of beer per calendar year, the federal excise tax is $7 per barrel on the first 60,000 barrels of beer removed for consumption or sale during a calendar year, and $18 per barrel for each barrel in excess of 60,000. Individual states also impose excise taxes on alcoholic beverages in varying amounts, which have also been subject to change. Sales as presented in the Companys statements of operations reflect the amount invoiced to the Companys wholesalers and other customers. Excise taxes due to federal and state agencies are not collected from the Companys customers, but rather are the responsibility of the Company. Net sales, as presented in the Companys statements of operations, are reduced by applicable federal and state excise taxes. In the UK, excise taxes are paid by the manufacturer and not by the Company. |
Discounts | Discounts To further promote retail sales of its products and in response to local competitive conditions, the Company regularly offers price discounts to distributors and retailers in most of its markets. Sales for the years 2015 and 2014, as presented in the Companys statements of operations, are reduced by $1,204,400 and $1,140,800 respectively, related to such discounts. |
Chargebacks and Sales Reserves | Chargebacks and Sales Reserves The Company has estimated reserves for chargebacks for promotional expenses by distributors. The Company estimates its reserves by utilizing historical information and current contracts. In estimating chargeback reserves, the Company analyzes actual chargeback amounts and applies historical chargeback rates to estimate potential chargeback. The Company routinely assesses its experience with distributors and adjusts the reserves accordingly. If actual chargebacks and other rebates are greater than the Companys estimates, additional reserves may be required. Revisions to estimates are charged to income in the period in which the facts that give rise to the revision become known. |
Seasonality | Seasonality Sales of the Companys products are somewhat seasonal, with the first and fourth quarters historically being the slowest and the rest of the year generating stronger sales. The volume of sales may also be affected by weather conditions. Because of the seasonality of the Companys business, results for any one quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. |
Taxes Collected From Customers | Taxes Collected From Customers Taxes collected from customers and remitted to tax authorities are sales tax collected from our retail customers. State and federal excise taxes on beer shipments are the responsibility of the Company and included in our selling price. Excise taxes on shipments are shown in a separate line item in the consolidated statement of operations as reduction of gross sales. Sales taxes collected from customers are recognized as a liability, with the liability subsequently reduced when the taxes are remitted to the tax authority. Total sales taxes collected from customers and remitted to tax authorities were not material in 2015 and 2014. |
Delivery Costs | Delivery Costs In accordance with ASC 605, (Shipping and Handling Fees and Costs) the company reports pass-through freight costs on beer shipped to independent beer wholesalers in cost of sales. Reimbursements of these costs by wholesalers are reported in sales. Non-pass-through costs incurred by the Company to deliver beer to wholesalers are included in marketing, distribution and administrative expenses. These costs are considered marketing related because in addition to product delivery, wholesalers provide marketing and other customer service functions to customers including product display, shelf space management, distribution of promotional materials, and product rotation. Shipping costs included in marketing expense totaled $968,200 and $1,051,300, for the years ended December 31, 2015 and 2014, respectively. |
Basic and Diluted Income per Share | Basic and Diluted Income per Share The basic earnings per share is computed by dividing the earnings attributable to common stockholders by the weighted average number of common shares outstanding during the period. In 2015, the effect of any potentially dilutive securities would have been anti-dilutive. Therefore, the conversion of the related party notes has been excluded from the calculation of net earnings per share for the year ended December 31, 2015. Basic net earnings per share exclude the dilutive effect of stock options or warrants and convertible notes. The computations of basic and dilutive net earnings per share are as follows: Year Ended December 31 2015 2014 Net loss $ (1,148,500 ) (1,539,500 ) Weighted average common shares outstanding 12,611,133 12,611,133 Basic net income (loss) per share $ (0.09 ) (0.12 ) Interest expense on convertible notes $ Income (loss) for purpose of computing diluted net income per share $ (1,148,500 ) (1,539,500 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential common shares 12,611,133 12,611,133 Diluted net earnings (loss) per share $ (0.09 ) (0.12 ) |
Foreign Currency Translation | Foreign Currency Translation The Company has subsidiaries located in the UK, where the local currency, UK Pound Sterling, is the functional currency. Financial statements of these subsidiaries are translated into U.S. 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 at UBIUK was translated at exchange rates in effect at December 31, 2015 and 2014, and its cash flows were translated at the average exchange rates for the years 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 United States of America 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, allowance for doubtful accounts, depreciation and amortization periods, and the future utilization of deferred tax assets. |
Advertising | Advertising Advertising costs are expensed as incurred and were $903,600 and $987,500 for the years ended December 31, 2015 and 2014, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair Value The fair value of the Companys financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). For financial assets and liabilities that are periodically re-measured to fair value, the Company discloses a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels: Level 1 quoted prices in active markets for identical assets and liabilities. Level 2 observable inputs other than quoted prices in active markets for identical assets and liabilities. Level 3 unobservable inputs. At December 31, 2015 and 2014, the Company had no financial assets or liabilities that required periodic re-measurement at fair value. The recorded value of certain financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses, approximate the fair value of the respective assets and liabilities at December 31, 2015 and December 31, 2014 based upon the short-term nature of the assets and liabilities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of short and long term notes payable approximate fair value. |
Comprehensive Income | Comprehensive Income Comprehensive income is composed of the Companys net income and changes in equity from all other non-stockholder sources. The changes from these non-stockholder sources are reflected as a separate item in the statements of operations and comprehensive income. |
Reportable Segments | Reportable Segments The Company manages its operations through two business segments: (i) brewing operations, tavern and tasting room operations in the US and Canada (the North American Territory) and (ii) distributor operations in Europe (including Austria, Belgium, Denmark, Ireland, Italy, the Netherlands, France, Finland, Germany, Greece, Iceland, Liechtenstein, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) (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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements During the fourth quarter of 2014, the Company adopted Accounting Standards Update (ASU) 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. This ASU was effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. Early adoption was permitted, but only for disposals (or classifications as held for sale) that had not been reported in the financial statements previously issued or available for issuance. See Notes X for disclosures related to this adoption. During the first quarter of 2015, the company adopted FASBs guidance on reporting discontinued operations and disclosures of disposals of components of an entity. This standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance is effective for annual reporting periods ending after December 15, 2014. Early adoption was permitted but only for disposals that have not been reported in financial statements previously issued. The adoption of this guidance has not had a material impact on its financial position, results of operations or cash flows. In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance. In November 2015, the FASB issued (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes. Currently deferred taxes for each tax jurisdiction are presented as a net current asset or liability and net noncurrent asset or liability on the balance sheet. To simplify the presentation, the new guidance requires that deferred tax liabilities and assets for all jurisdictions along with any related valuation allowances be classified as noncurrent in a classified statement of financial position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this guidance in the fourth quarter of the year ended December 31, 2015 on a retrospective basis. The adoption of this guidance did not have a material impact on the Companys financial position, results of operations or cash flows, and did not have any effect on prior periods due to the full valuation allowance against the Companys net deferred tax assets. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. The Company is currently evaluating the impact of adopting this guidance. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (LIFO). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this guidance. In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Further, the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The new guidance should be applied on a retrospective basis to all periods presented. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customers Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. In April 2015, the FASB issued guidance related to a customers accounting for fees paid in a cloud computing arrangement. This standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015, and early adoption is permitted. The Company will adopt this guidance on January 1, 2016. The adoption of this guidance is not expected to have a material impact on its financial position, results of operations or cash flows. In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial statements. In January 2015, the FASB issued ASU 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic 225-20), effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. This update eliminates from GAAP the concept of extraordinary items. The adoption of ASU 2014-16 will not have a significant impact on the Companys financial position or results of operations. In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815). Entities commonly raise capital by issuing different classes of shares, including preferred stock, that entitle the holders to certain preferences and rights over the other shareholders. The specific terms of those shares may include conversion rights, redemption rights, voting rights, and liquidation and dividend payment preferences, among other features. One or more of those features may meet the definition of a derivative under GAAP. Shares that include such embedded derivative features are referred to as hybrid financial instruments. The objective of this update is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2014-16 will not have a significant impact on the Companys financial position or results of operations. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. The Company expects to adopt this guidance on January 1, 2017. The Company is currently evaluating the potential impact, if any, the adoption of ASU 2014-15 will have on footnote disclosures, however, the Company does not expect the adoption of this guidance to have any impact on its financial position, results of operations or cash flows. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on revenue recognition. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The original effective date of this guidance was for interim and annual reporting periods beginning after December 15, 2016, early adoption is not permitted, and the guidance must be applied retrospectively or modified retrospectively. In July 2015, the FASB approved an optional one-year deferral of the effective date. As a result, we expect to adopt this guidance on January 1, 2018. The Company has not yet determined its approach to adoption or the impact the adoption of this guidance will have on its financial position, results of operations or cash flows, if any. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force (EITF)), the American Institute of Certified Public Accountants (AICPA), and the SEC did not or are not believed by management to have a material impact on the Companys present or future financial statements. |
Description of Operations and27
Description of Operations and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Life of Property and Equipment | Estimated useful lives of property and equipment are as follows: Building 40 years Machinery and equipment 3 - 40 years Vehicles 3 - 5 years Furniture and fixtures 5 - 10 years |
Schedule of Basic and Dilutive Net Loss Per Share | The computations of basic and dilutive net earnings per share are as follows: Year Ended December 31 2015 2014 Net loss $ (1,148,500 ) (1,539,500 ) Weighted average common shares outstanding 12,611,133 12,611,133 Basic net income (loss) per share $ (0.09 ) (0.12 ) Interest expense on convertible notes $ Income (loss) for purpose of computing diluted net income per share $ (1,148,500 ) (1,539,500 ) Incremental shares from assumed exercise of dilutive securities Dilutive potential common shares 12,611,133 12,611,133 Diluted net earnings (loss) per share $ (0.09 ) (0.12 ) |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories, consisting of materials, materials overhead, labor, and manufacturing overhead, are stated at the lower of average cost or market (net realizable value) and consist of the following at December 31: 2015 2014 Raw materials $ 628,100 $ 740,300 Work-in-progress 312,200 259,400 Finished goods 541,400 1,034,200 Merchandise 65,300 84,000 $ 1,547,000 $ 2,117,900 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | The following is a summary of property and equipment, at cost less accumulated depreciation, at December 31: 2015 2014 Machinery and equipment $ 13,068,900 $ 12,575,600 Buildings 7,218,900 7,218,900 Equipment under capital lease 138,200 23,000 Land 810,900 810,900 Leasehold improvements 1,397,200 1,397,200 Vehicles 17,500 17,500 Furniture and fixtures 352,500 352,500 Equipment in progress 71,500 121,500 23,075,600 22,517,100 Accumulated depreciation and amortization (12,487,400 ) (11,429,300 ) $ 10,588,200 $ 11,087,800 |
Secured Notes Payable (Tables)
Secured Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Long-term Debt, Unclassified [Abstract] | |
Summary of Long-term Debt | Year ended December 31, 2015 2014 Loan from MB Financial, payable in monthly installments of $12,300, plus interest at prime plus 4% with a balloon payment of approximately $2,202,500 in June 2016; secured by real property at Ukiah. See disclosures in Note 2. $ 2,276,200 $ 2,423,600 Loan from MB Financial, payable in monthly installments of $32,300 including interest at prime plus 3.5% with a balloon payment of approximately $908,700 in June 2016; secured by all assets of Releta and MBC, excluding real property at Ukiah. See disclosures in Note 2. 1,102,400 1,489,700 3,378,600 3,913,300 Less current maturities 3,378,600 3,913,300 $ - $ - |
Long-Term Debt - Related Party
Long-Term Debt - Related Party (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Long-term Debt - Related Party | |
Schedule of Related Party Debt | Year ended December 31, 2015 2014 Loan from Heineken UK Limited, payable in quarterly installments of $122,900, plus interest at UK prime plus 5% maturing on October 9, 2016, secured by licensing rights pursuant to the Sub-License Agreement. $ 491,500 $ 1,038,600 Less current maturities 491,500 519,300 $ - $ 519,300 |
Capital Lease Obligations (Tabl
Capital Lease Obligations (Tables) | 12 Months Ended |
Dec. 31, 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 value of the net minimum lease payments as of December 31, 2015, are as follows: Year Ending December 31, 2016 $ 28,200 Year Ending December 31, 2017 28,100 Year Ending December 31, 2018 21,800 Year Ending December 31, 2019 21,800 Year Ending December 31, 2020 21,500 121,400 Less amounts representing interest (19,100 ) Present value of minimum lease payments $ 102,300 Less current maturities 23,100 Non-current leases payable $ 79,200 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Payments under Existing Contractual Agreements | Future payments under existing contractual arrangements are as follows: Year Ending December 31, 2016 $ 1,062,500 Total $ 1,062,500 |
Schedule of Future Minimum Lease Payments for Operating Lease | Future minimum lease payments under these agreements are as follows: Year Ending December 31, 2016 $ 450,900 2017 408,300 2018 338,300 2019 168,700 2020 42,700 $ 1,408,900 |
Related-Party Transactions (Tab
Related-Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
Schedule of Related-Party Transactions | The following table reflects balances outstanding as of December 31, 2015 and 2014 and the value of the transactions with these related parties for the years ended December 31, 2015 and 2014: 2015 2014 TRANSACTIONS Purchases from HUK $ 11,713,300 $ 12,884,700 Expenses reimbursement including interest expenses to HUK 1,081,200 1,355,000 Interest expenses associated with UBA and Catamaran notes $ 172,100 $ 129,700 Borrowing from Catamaran ACCOUNT BALANCES Accounts payable and accrued liabilities to HUK $ 1,669,400 $ 1,802,300 Notes payable to Catamaran 2,119,600 1,038,700 Notes payable to UBA $ 3,680,100 $ 3,588,900 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense (Benefit) | The Companys income tax expense is summarized as follows: 2015 2014 Provision for income taxes US Federal $ - $ - US States 3,800 - Current provision - - Change in deferred income taxes - - Total provision for income taxes $ 3,800 $ - |
Schedule of Difference Between Actual Income Tax Provision and Provision Computed Based on Applying Applicable Tax Rates on Earnings Before Taxes | The difference between the actual income tax provision and the tax provision computed by applying the statutory US federal and United Kingdom income tax rates to earnings before taxes is attributable to the following: 2015 2014 US Federal income tax expense (benefit) at 34% $ (516,700 ) $ (828,000 ) US State income tax expense (benefit) (101,200 ) (136,100 ) United Kingdom income tax expense (benefit) at 20% 75,000 179,100 Nondeductible expenses 13,600 13,300 Expiration of net operating loss carryforwards 29,800 293,500 Other 174,400 147,000 Change in valuation allowance 328,900 331,200 Total $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are as follows: 2015 2014 Benefit of net operating loss carryforwards $ 6,159,300 $ 5,601,600 Depreciation and amortization (1,581,400 ) (1,630,400 ) Other 81,000 358,800 Subtotal 4,658,900 4,330,000 Less valuation allowance (4,658,900 ) (4,330,000 ) Total $ - $ - Change in valuation allowance $ 328,900 $ 331,200 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | A summary of each segment is as follows: Year Ended December 31, 2015 North American Foreign Total Sales $ 11,872,300 $ 19,819,600 $ 31,691,900 Operating income (loss) (1,144,100 ) 491,500 (652,600 ) Identifiable assets 12,426,800 4,609,200 17,036,000 Depreciation and amortization 696,500 529,700 1,226,200 Capital expenditures 125,500 622,500 748,000 Year Ended December 31, 2014 North American Foreign Total Sales $ 12,869,500 $ 21,785,400 $ 34,654,900 Operating income (loss) (1,960,600 ) 1,041,400 (919,200 ) Identifiable assets 13,862,700 4,815,900 18,678,600 Depreciation and amortization 704,700 677,700 1,382,400 Capital expenditures 105,300 790,400 895,700 |
Unrestricted Net Assets (Tables
Unrestricted Net Assets (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Unrestricted Net Assets | |
Condensed Balance Sheets | 2015 2014 Balance Sheets Assets Cash and cash equivalents $ 61,300 $ 61,500 Accounts receivable, net 1,121,300 1,365,000 Inventories 1,490,100 2,047,700 Other current assets 199,800 173,600 Total current assets 2,872,500 3,647,800 Investment in subsidiary 1,225,000 1,225,000 Property and equipment 9,378,500 9,904,500 Intercompany receivable 284,000 421,900 Other assets 175,800 310,400 Total assets $ 13,935,800 $ 15,509,600 Liabilities Line of credit $ 453,100 $ 1,192,900 Accounts payable 2,640,400 2,620,000 Accrued liabilities 1,021,000 1,031,300 Note payable to related party 2,119,600 1,038,700 Subordinated convertible notes to related party 3,680,100 - Current maturities of debt, leases and severance 3,505,900 3,918,900 Total current liabilities 13,420,100 9,801,800 Long-term capital leases 14,000 12,100 Subordinated convertible notes to related party - 3,588,900 Severance payable 678,400 760,100 Total liabilities 14,112,500 14,162,900 Stockholders equity Common stock 15,100,300 15,100,300 Preferred stock 227,600 227,600 Accumulated deficit (15,504,600 ) (13,981,200 ) Total stockholders equity (176,700 ) 1,346,700 Total liabilities and stockholders equity $ 13,935,800 $ 15,509,600 |
Condensed Statement of Operations | 2015 2014 Statement of Operations Net sales $ 11,364,100 $ 12,253,800 Cost of goods sold 9,422,700 10,249,000 Selling, marketing, and retail expenses 1,320,900 1,433,700 General and administrative expenses 1,771,400 2,538,100 Loss from operations (1,150,900 ) (1,967,000 ) Other income and (expense) Interest expenses (481,600 ) (518,500 ) Profit (Loss) on disposal of assets - 3,500 Other income 112,900 46,800 Provision for taxes (3,800 ) - (372,500 ) (468,200 ) Net loss $ (1,523,400 ) $ (2,435,200 ) |
Condensed Statement of Cash Flows | 2015 2014 Statements of Cash Flows Cash flows from operating activities $ 258,000 $ (380,900 ) Cash flow from investing activities Purchase of property and equipment (115,600 ) (105,300 ) Proceeds from sale of equipment - 3,500 Net cash flows from investing (115,600 ) (101,800 ) Cash flow from financing activities Net repayments on line of credit (739,800 ) (324,300 ) Borrowing on note payable 1,000,000 1,000,000 Repayment of long-term debt (534,700 ) (534,700 ) Payment on obligations under capital leases (6,000 ) (5,300 ) Net change in intercompany payable 137,900 294,800 Net cash flows from financing activities (142,600 ) 430,500 Cash, beginning of year 61,500 113,700 Cash, end of year $ 61,300 $ 61,500 |
Description of Operations and38
Description of Operations and Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2015USD ($)Segment$ / shares | Dec. 31, 2014USD ($) | Jun. 30, 2011USD ($) | |
Allowance for doubtful accounts receiveble | $ 69,100 | $ 56,700 | |
Deferred financing costs on borrowings | $ 225,000 | ||
Amortization of deferred financing costs charged to operations | $ 45,000 | $ 45,000 | |
Uncertain tax benfits | |||
Excise taxes on beverages description | For brewers producing less than 2.0 million barrels of beer per calendar year, the federal excise tax is $7 per barrel on the first 60,000 barrels of beer removed for consumption or sale during a calendar year, and $18 per barrel for each barrel in excess of 60,000. | ||
Sales discounts | $ 1,204,400 | $ 1,140,800 | |
Shipping cost | 968,200 | 1,051,300 | |
Advertising expense | $ 903,600 | $ 987,500 | |
Number of business segments | Segment | 2 | ||
First 60,000 Barrels [Member] | |||
Federal excise tax per barrel | $ / shares | $ 7 | ||
Excess Of 60,000 Barrels [Member] | |||
Federal excise tax per barrel | $ / shares | $ 18 | ||
UK [Member] | |||
Percentage of assets located | 27.00% |
Description of Operations and39
Description of Operations and Summary of Significant Accounting Policies - Schedule of Estimated Useful Life of Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2015 | |
Building [Member] | |
Property and equipment, estimated useful life | 40 years |
Machinery And Equipment [Member] | Minimum [Member] | |
Property and equipment, estimated useful life | 3 years |
Machinery And Equipment [Member] | Maximum [Member] | |
Property and equipment, estimated useful life | 40 years |
Vehicles [Member] | Minimum [Member] | |
Property and equipment, estimated useful life | 3 years |
Vehicles [Member] | Maximum [Member] | |
Property and equipment, estimated useful life | 5 years |
Furniture And Fixtures [Member] | Minimum [Member] | |
Property and equipment, estimated useful life | 5 years |
Furniture And Fixtures [Member] | Maximum [Member] | |
Property and equipment, estimated useful life | 10 years |
Description of Operations and40
Description of Operations and Summary of Significant Accounting Policies - Schedule of Basic and Dilutive Net Loss Per Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Net loss | $ (1,148,500) | $ (1,539,500) |
Weighted average common shares outstanding | 12,611,133 | 12,611,133 |
Basic net income (loss) per share | $ (0.09) | $ (0.12) |
Interest expense on convertible notes | ||
Income (loss) for purpose of computing diluted net income per share | $ (1,148,500) | $ (1,539,500) |
Incremental shares from assumed exercise of dilutive securities | ||
Dilutive potential common shares | 12,611,133 | 12,611,133 |
Diluted net earnings (loss) per share | $ (0.09) | $ (0.12) |
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 ($) | Jun. 23, 2011USD ($) | Dec. 31, 2015USD ($)Number | Dec. 31, 2014USD ($) | 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 | (0.28) | |||||||||||
Tangible net worth Required MBC and related party | $ 6,181,400 | |||||||||||
Actual tangible net worth | 3,738,400 | |||||||||||
Cash and cash equivalents | 129,600 | $ 145,100 | $ 324,800 | |||||||||
Accumulated deficit | 17,395,600 | $ 16,247,100 | ||||||||||
Working capital deficit | $ 11,601,700 | |||||||||||
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 ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 628,100 | $ 740,300 |
Work-in-progress | 312,200 | 259,400 |
Finished goods | 541,400 | 1,034,200 |
Merchandise | 65,300 | 84,000 |
Total | $ 1,547,000 | $ 2,117,900 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 1,181,200 | $ 1,337,400 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment [Abstract] | ||
Machinery and equipment | $ 13,068,900 | $ 12,575,600 |
Buildings | 7,218,900 | 7,218,900 |
Equipment under capital lease | 138,200 | 23,000 |
Land | 810,900 | 810,900 |
Leasehold improvements | 1,397,200 | 1,397,200 |
Vehicles | 17,500 | 17,500 |
Furniture and fixtures | 352,500 | 352,500 |
Equipment in progress | 71,500 | 121,500 |
Property, plant and equipment, gross | 23,075,600 | 22,517,100 |
Accumulated depreciation and amortization | (12,487,400) | (11,429,300) |
Property, plant and equipment, net | $ 10,588,200 | $ 11,087,800 |
Secured Lines of Credit (Detail
Secured Lines of Credit (Details Narrative) | Apr. 26, 2005GBP (£) | Jun. 30, 2011 | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Jun. 23, 2011USD ($) |
Maximum amount of facility | $ 10,000,000 | ||||
Inventories | $ 1,547,000 | $ 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 | ||||
Percentage of reduce advance rate for eligible inventory | 2.00% | ||||
Facility interest rate above prime lending rate | 3.00% | ||||
Line of credit, outstanding amount | $ 453,100 | ||||
Account receivables | 1,121,300 | ||||
Inventories | 1,490,100 | ||||
RBS [Member] | |||||
Facility interest rate above prime lending rate | 1.38% | ||||
Line of credit, outstanding amount | $ 1,210,300 | ||||
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% | ||||
RBS [Member] | GBP [Member] | |||||
Maximum amount of facility | £ | £ 1,750,000 |
Notes Payable to Related Party
Notes Payable to Related Party (Details Narrative) - Catamaran Services, Inc. [Member] | Dec. 31, 2015USD ($) |
Note payable to related party | $ 2,119,600 |
Interest accrued | 119,600 |
March 14, 2016 [Member] | |
Note loan in principal amount | 325,000 |
March 30, 2016 [Member] | |
Note loan in principal amount | $ 75,000 |
Subordinated Convertible Note47
Subordinated Convertible Notes Payable to Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Unsecured convertible notes | $ 3,680,100 | $ 3,588,900 |
Accrued interest | $ 1,764,700 | $ 1,673,500 |
13 UBA Notes [Member] | ||
Debt instruments conversion price per share | $ 1.50 | |
One UBA Note [Member] | ||
Debt instruments conversion price per share | $ 1.44 | |
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 but 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 such term. UBA may demand payment within 60 days of the end of the extension period but is precluded from doing so because the notes are subordinated to long-term debt agreements with MB Financial maturing in June 2016. |
Secured Notes Payable - Summary
Secured Notes Payable - Summary of Long-Term Debt (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Long term debt, total | $ 3,378,600 | $ 3,913,300 |
Less current maturities | $ 3,378,600 | $ 3,913,300 |
Long-term debt non-current | ||
MBFinancialBankNotes With 4% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 2,276,200 | $ 2,423,600 |
MBFinancialBankNotes With 3.5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 1,102,400 | $ 1,489,700 |
Secured Notes Payable - Summa49
Secured Notes Payable - Summary of Long-Term Debt (Details) (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 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 Part50
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 Part51
Long-Term Debt - Related Party - Schedule of Related Party Debt (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Less current maturities | $ 491,500 | $ 519,300 |
Non-current loan payable | 519,300 | |
Loan from Heineken UK Limited Notes With 5% Prime Plus Interest Rate [Member] | ||
Long term debt, total | $ 491,500 | 1,038,600 |
Less current maturities | $ 491,500 | 519,300 |
Non-current loan payable | $ 519,300 |
Long-Term Debt - Related Part52
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 ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Loans payable in quarterly installments | $ 122,900 | $ 122,900 |
Interest rate above Prime Rate | 5.00% | 5.00% |
Debt instrument maturity date | Oct. 9, 2016 | Oct. 9, 2016 |
Capital Lease Obligations - Sch
Capital Lease Obligations - Schedule of Future Minimum Lease Payments for Capital Lease Payments (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Capital Lease Obligations [Abstract] | ||
Year Ending December 31, 2016 | $ 28,200 | |
Year Ending December 31, 2017 | 28,100 | |
Year Ending December 31, 2018 | 21,800 | |
Year Ending December 31, 2019 | 21,800 | |
Year Ending December 31, 2020 | 21,500 | |
Capital lease future minimum payment due, total | 121,400 | |
Less amounts representing interest | (19,100) | |
Present value of minimum lease payments | 102,300 | |
Less current maturities | 23,100 | $ 5,600 |
Non-current leases payable | $ 79,200 | $ 12,100 |
Severance Payable (Details Narr
Severance Payable (Details Narrative) | 12 Months Ended |
Dec. 31, 2015USD ($)NumberSegment | |
Number of times on average monthly base salary | Number | 2.5 |
Number of monthly installments | Segment | 20 |
Current employment contract end date | Jun. 30, 2016 |
Severance Payable Long Term [Member] | |
Severance payable | $ | $ 798,100 |
Commitments and Contingencies55
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Demanded payment in legal dispute | $ 500,000 | |
Rent expense charged to operations | $ 310,300 | $ 341,300 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Payments under Existing Contractual Agreements (Details) | Dec. 31, 2015USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Year Ending December 31, 2016 | $ 1,062,500 |
Total | $ 1,062,500 |
Commitments and Contingencies57
Commitments and Contingencies - Schedule of Future Minimum Lease Payments for Operating Lease (Details) | Dec. 31, 2015USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,016 | $ 450,900 |
2,017 | 408,300 |
2,018 | 338,300 |
2,019 | 168,700 |
2,020 | 42,700 |
Total operating lease payments | $ 1,408,900 |
Related-Party Transactions (Det
Related-Party Transactions (Details Narrative) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Related Party Transactions [Abstract] | ||
Directors compensation | $ 137,800 | $ 120,300 |
Related-Party Transactions - Sc
Related-Party Transactions - Schedule of Related-Party Transactions (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
HUK [Member] | ||
Purchases from related party | $ 11,713,300 | $ 12,884,700 |
Expenses reimbursement to related party | 1,081,200 | 1,355,000 |
Accounts payable and accrued liability | 1,669,400 | 1,802,300 |
UBA Convertible Notes [Member] | ||
Interest expenses associated with related party notes | 172,100 | 129,700 |
Notes payable including accrued interest | $ 3,680,100 | $ 3,588,900 |
Borrowing From Catamaran [Member] | ||
Borrowing from Catamaran | ||
Catamaran Notes [Member] | ||
Notes payable including accrued interest | $ 2,119,600 | $ 1,038,700 |
Concentrations and Credit Risk
Concentrations and Credit Risk (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Risks and Uncertainties [Abstract] | ||
Cash deposits UK | $ 68,300 | |
Accounts receivable due from UK customers | $ 2,714,200 | |
Percentage of domestic workforce | 25.00% | |
Gross sales to five major customers during period | $ 4,854,000 | $ 5,466,700 |
Percentage of gross sales from five major customers during period | 15.00% | 16.00% |
Percentage of revenue not exceeded by any other customer individually | 5.00% | 5.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Equity [Abstract] | ||
Preferred stock, Series A, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, no par value | ||
Preferred stock, Series A, shares issued | 227,600 | 227,600 |
Preferred stock, Series A, shares outstanding | 227,600 | 227,600 |
Preferred stock, cash dividends, per share entitlement | $ 1 | |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, no par value | ||
Common stock, shares issued | 12,611,133 | 12,611,133 |
Common stock, shares outstanding | 12,611,133 | 12,611,133 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
US Federal [Member] | |
Operating loss carryforwards | $ 17,021,100 |
Operating loss carryforwards, expiration term | expire beginning 2018 and ending in 2035. |
US State [Member] | |
Operating loss carryforwards | $ 1,547,400 |
Operating loss carryforwards, expiration term | expire beginning in 2016 and ending in 2035. |
UK [Member] | |
Operating loss carryforwards | $ 1,176,900 |
Operating loss carryforwards, expiration term | do not expire. |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Tax Expense (Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Provision for income taxes, US Federal | ||
Provision for income taxes, US States | $ 3,800 | |
Current provision | ||
Change in deferred income taxes | ||
Total provision for income taxes | $ 3,800 |
Income Taxes - Schedule of Dome
Income Taxes - Schedule of Domestic and Foreign Income Tax Rates to Earnings Before Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
US Federal income tax expense (benefit) at 34% | $ (516,700) | $ (828,000) |
US State income tax expense (benefit) | (101,200) | (136,100) |
United Kingdom income tax expense (benefit) at 20% | 75,000 | 179,100 |
Nondeductible expenses | 13,600 | 13,300 |
Expiration of net operating loss carryforwards | 29,800 | 293,500 |
Other | 174,400 | 147,000 |
Change in valuation allowance | $ 328,900 | $ 331,200 |
Total |
Income Taxes - Schedule of Do65
Income Taxes - Schedule of Domestic and Foreign Income Tax Rates to Earnings Before Income Taxes (Details) (Parenthetical) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
US Federal income tax expense (benefit), rate | 34.00% | 34.00% |
United Kingdom income tax expense (benefit), rate | 20.00% | 20.00% |
Income Taxes - Schedule of Temp
Income Taxes - Schedule of Temporary Differences and Carryforwards of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | ||
Benefit of net operating loss carryforwards | $ 6,159,300 | $ 5,601,600 |
Depreciation and amortization | (1,581,400) | (1,630,400) |
Other | 81,000 | 358,800 |
Subtotal | 4,658,900 | 4,330,000 |
Less valuation allowance | $ (4,658,900) | $ (4,330,000) |
Total | ||
Change in valuation allowance | $ 328,900 | $ 331,200 |
Segment Information (Details Na
Segment Information (Details Narrative) - Segment | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of segments | 2 | |
North American Territory Operations [Member] | ||
Percentage of gross sales from different segments | 38.00% | 37.00% |
Foreign Territory Operations [Member] | ||
Percentage of gross sales from different segments | 62.00% | 63.00% |
Segment Information - Schedule
Segment Information - Schedule of Segment Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Sales | $ 31,691,900 | $ 34,654,900 |
Operating income (loss) | (652,600) | (919,200) |
Identifiable assets | 17,036,000 | 18,678,600 |
Depreciation and amortization | 1,226,200 | 1,382,400 |
Capital expenditures | 748,000 | 895,700 |
North American Territory [Member] | ||
Sales | 11,872,300 | 12,869,500 |
Operating income (loss) | (1,144,100) | (1,960,600) |
Identifiable assets | 12,426,800 | 13,862,700 |
Depreciation and amortization | 696,500 | 704,700 |
Capital expenditures | 125,500 | 105,300 |
Foreign Territory [Member] | ||
Sales | 19,819,600 | 21,785,400 |
Operating income (loss) | 491,500 | 1,041,400 |
Identifiable assets | 4,609,200 | 4,815,900 |
Depreciation and amortization | 529,700 | 677,700 |
Capital expenditures | $ 622,500 | $ 790,400 |
Unrestricted Net Assets (Detail
Unrestricted Net Assets (Details Narrative) - UBIUK [Member] | Dec. 31, 2015USD ($) |
Undistributed losses of UBIUK | $ 317,600 |
Minimum Retained Earning required for distributions and other payments to MBC from KBEL | $ 1,528,400 |
Unrestricted Net Assets - Conde
Unrestricted Net Assets - Condensed Balance Sheets of US Operations (Details) - MBC and Releta [Member] - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Cash and cash equivalents | $ 61,300 | $ 61,500 |
Accounts receivable, net | 1,121,300 | 1,365,000 |
Inventories | 1,490,100 | 2,047,700 |
Other current assets | 199,800 | 173,600 |
Total current assets | 2,872,500 | 3,647,800 |
Investment in subsidiary | 1,225,000 | 1,225,000 |
Property and equipment | 9,378,500 | 9,904,500 |
Intercompany receivable | 284,000 | 421,900 |
Other assets | 175,800 | 310,400 |
Total assets | 13,935,800 | 15,509,600 |
Line of credit | 453,100 | 1,192,900 |
Accounts payable | 2,640,400 | 2,620,000 |
Accrued liabilities | 1,021,000 | 1,031,300 |
Note payable to related party | 2,119,600 | $ 1,038,700 |
Subordinated convertible notes to related party | 3,680,100 | |
Current maturities of debt, leases and severance | 3,505,900 | $ 3,918,900 |
Total current liabilities | 13,420,100 | 9,801,800 |
Long-term capital leases | $ 14,000 | 12,100 |
Subordinated convertible notes to related party | 3,588,900 | |
Severance payable | $ 678,400 | 760,100 |
Total liabilities | 14,112,500 | 14,162,900 |
Common stock | 15,100,300 | 15,100,300 |
Preferred stock | 227,600 | 227,600 |
Accumulated deficit | (15,504,600) | (13,981,200) |
Total stockholders’ equity | (176,700) | 1,346,700 |
Total liabilities and stockholders’ equity | $ 13,935,800 | $ 15,509,600 |
Unrestricted Net Assets - Con71
Unrestricted Net Assets - Condensed Statement of Operations of US Operations (Details) - MBC and Releta [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Net sales | $ 11,364,100 | $ 12,253,800 |
Cost of goods sold | 9,422,700 | 10,249,000 |
Selling, marketing, and retail expenses | 1,320,900 | 1,433,700 |
General and administrative expenses | 1,771,400 | 2,538,100 |
Loss from operations | (1,150,900) | (1,967,000) |
Interest expense | $ (481,600) | (518,500) |
Profit (Loss) on disposal of assets | 3,500 | |
Other income | $ 112,900 | $ 46,800 |
Provision for taxes | (3,800) | |
Other income and (expense), total | (372,500) | $ (468,200) |
Net loss | $ (1,523,400) | $ (2,435,200) |
Unrestricted Net Assets - Con72
Unrestricted Net Assets - Condensed Statement of Cash Flows of US Operations (Details) - MBC and Releta [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities | $ 258,000 | $ (380,900) |
Purchase of property and equipment | $ (115,600) | (105,300) |
Proceeds from sale of equipment | 3,500 | |
Net cash flows from investing | $ (115,600) | (101,800) |
Net repayments on line of credit | (739,800) | (324,300) |
Borrowing on note payable | 1,000,000 | 1,000,000 |
Repayment of long-term debt | (534,700) | (534,700) |
Payment on obligations under capital leases | (6,000) | (5,300) |
Net change in intercompany payable | 137,900 | 294,800 |
Net cash flows from financing activities | (142,600) | 430,500 |
Cash, beginning of year | 61,500 | 113,700 |
Cash, end of year | $ 61,300 | $ 61,500 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Apr. 12, 2016NumberSegment | Dec. 31, 2015NumberSegment | Mar. 30, 2016USD ($) | Mar. 14, 2016USD ($) |
Number of times on average monthly base salary | Number | 2.5 | |||
Number of monthly installments | Segment | 20 | |||
Subsequent Event [Member] | Separation and Severance Agreement [Member] | Mahadevan Narayanan [Member] | ||||
Number of times on average monthly base salary | Number | 2.5 | |||
Number of monthly installments | Segment | 20 | |||
Subsequent Event [Member] | Catamaran Services, Inc. [Member] | ||||
Note loan in principal amount | $ | $ 75,000 | $ 325,000 |